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New listing of ADVANCED GRAPHENE PRODUCTS S.A. on NewConnect

ADVANCED GRAPHENE PRODUCTS S.A. was newly listed on the NewConnect market on 29 November 2021.

ADVANCED GRAPHENE PRODUCTS S.A. is the 378^th company listed on NewConnect and the 29^th new listing on NewConnect in 2021.

Key information

* at the reference price

Issuer’s history and business

Advanced Graphene Products sp. z o.o. was founded in 2012 based on an idea for a metallurgical method to produce large-area graphene. On 3 December 2020, the Shareholders’ Meeting of the Issuer decided to transform the company from a limited liability company to a joint stock company.

The first commercial sale of HSMG graphene took place in 2015 while patents for the method of producing graphene on a liquid metal matrix were granted in 2016. A year later, the Company started research and development of graphene composites and process sensors based on HSMG graphene and the development of a proprietary graphene flake production method. In 2016, the Company started its first commercial cooperation with Engineo on the application of graphene in carbon composites. This collaboration continues with the implementation of this technology in Kross bicycles. The Company is currently working with eight commercial partners on four graphene applications, and the Company is independently conducting research and development on two further applications.

The Company has a production plant located in Zielona Góra, which has specialised equipment used to produce graphene. The AGP team consists of more than a dozen people, including specialists in chemistry, material engineering, nanotechnology, electronics and biotechnology.

Currently, the Company is at the stage of completing the investment in increasing its production capacity (the expected completion date is the second half of 2021) and commences first pilot commercialisation projects with selected business partners. The investment will allow the Issuer to increase its annual graphene production capacity approximately fivefold compared with the volume prior to the investment, although the Issuer does not yet have the technological capabilities to achieve a higher production volume. The Company has already concluded contracts or is in the process of preparing to conclude contracts for the development of commercial applications of graphene among others with the following entities: Kross, Ciech, European Space Agency, Frako-Term, GM Color, PolWax, GRM Systems, Pimar Plastics. The Company’s strategy provides for full industrial commercialisation of two or three projects within three to five years in areas such as carbon composites, epoxy resins, 3D printing filaments, anti-corrosion coatings and engine oils.

Until 2020, the Company was financed by the founders (PLN 4 million), issues of shares taken up by financial investors (capital increase in 2019 by approximately PLN 2 million), grants and subsidies (approximately PLN 10.7 million). The Company was also financed with debt and generated cash flows from operating activities in the amount of approximately PLN 1.5 million. The Company plans to finance further development with funds raised in the issue of series C shares, grants, cash flows generated from operating activities, and debt.

The Company’s share capital is PLN 4,994,000 and is divided into 4,994,000 series A-C shares with a nominal value of PLN 1 each, including:

• 4,088,750 series A shares;
• 87,500 series B shares;
• 817,750 series C shares;

The application for introduction covers all issued shares of the Company.

Public Offering of series C shares

The Public Offering of series C shares was conducted from 4 May 2021 to 28 May 2021 on the basis of the information memorandum prepared pursuant to Article 37b(1) of the Public Offering Act. As a result of the offering, 817,750 series C shares of the Issuer were taken up by 53 investors at the issue price of PLN 9 per share, including 20 persons who subscribed for series C shares in the large investor tranche and 33 persons who subscribed for series C shares in the small investor tranche. The average reduction rate of subscriptions in the small investor tranche was 23.23%.

The Issuer raised a total of PLN 7,359,750 from the issue of series C shares.

Selected financial data of the Issuer:

The company generated annual sales revenues of approximately PLN 300-700 thousand per year in 2018-2020, mainly from the sale of graphene to universities for research and development. Revenues from product sales amounted to PLN 41 thousand in H1 2021.

Currently, the Company’s revenues are mainly due to the changes in inventories. The significant increase of changes in inventories in 2021 was due to a change in accounting policy from the beginning of 2021 when the method of recording research and development expenses was modified. From 2021 onwards, such expenses are a cost category associated with an increase in accrued expenses, which also significantly impacts the level of the Issuer’s liabilities.

The auditor who audited the Issuer’s 2020 financial statements prepared an audit opinion without comments or reservations.

The Issuer stated in the Information Document that its working capital is sufficient to cover its needs within 12 months from the date of the Information Document.

Shareholding structure of the Company

• Piotr Zawistowski - 2,679,150 shares representing 53.65% of the capital and votes at the General Meeting;
• Bartosz Klinowski - 449,100 shares representing 8.99% of the capital and votes at the General Meeting;
• Maciej Gałązka - 276,600 shares representing 5.54% of the capital and votes at the General Meeting;
• Other related shareholders - 282,800 shares representing 5.66% of the capital and votes at the General Meeting;
• Other unrelated shareholders - 1,306,350 shares representing 26.16% of the capital and votes at the General Meeting;

Lock-up agreements

Shareholders of the Company holding series A and series B shares and the Company concluded lock-up agreements which cover in total 100% of series A shares and series B shares of the Company. Limitations in disposal of shares of the Issuer on the basis of lock-up agreements with the main shareholders of the Issuer, i.e., Maciej Gałązka, Piotr Zawistowski, Bartosz Klinowski, and Iwona Klinowska, are in force for a period of 24 months from the date of the first listing of series C shares; in the case of the other holders of series A and B shares, the lock-up period is 6 months from the date of the first listing of series C shares on NewConnect.

Financial instruments newly listed on NewConnect:

• 4,088,750 series A shares;
• 87,500 series B shares;
• 817,750 series C shares;