Camgraphic EIS – shareholders' resolution

The deadline to submit the vote has now passed (26 May 2023)

From the Company 16 May 2023

Dear Shareholder,

Further to our last update (February 2023) we are pleased to report that we continue to make progress with our Round 3 fundraising. We are now able to disclose the identity of the potential investor we have been in discussions with regarding this Round.

Mubadala is the sovereign wealth fund managing a diverse portfolio of assets for the United Arab Emirates (UAE). While investment has not yet been finalised or agreed, encouraging progress has been made. Next week the Directors of Camgraphic will travel to Abu Dhabi to progress discussions around both equity investment and the conclusion of a non-dilutive research funding award of which we have already been notified. Mubadala will also be introducing other local investors to Camgraphic. 

This engagement is particularly relevant as the UAE is the majority owner of Global Foundries, the semiconductor foundry we are working with, and has been a substantial backer of graphene - for example as the primary funder of the Manchester graphene centre. It has also been in the press recently with its national telecoms company entering into a strategic relationship with Vodafone, relevant as our first target market is mobile communications.

Other progress since the last update is summarised below - 

• The negotiation for a license agreement over what we believe is a key industry patent with Berkeley Lab, University of California is nearing conclusion.
• Optimisation of in-house graphene-related fabrication processes (synthesis, transfer, encapsulation) have successfully started (delivering improvement in performances, quality control, scalability).
• New photonic devices (modulators, photodetectors) fabrication with in-house grown graphene started.
• High-speed Demo2 design completed and ready for fabrication. This demo kit will allow the integration of our own driving electronic chips for modulators.
• Agreement with Aixtron for shipping a semi-automated graphene transfer tool to our cleanroom.
• Design of high-speed driving electronics for photodetector started.
• Our industrial traction continues to build and each of Ericsson, Nokia and NVIDIA have been speaking to investors on our behalf, indicative we believe both of the need for the technology and their growing confidence in our progress.
• A new CEO has been identified and will be appointed following the conclusion of Round 3 funding. 

While this is encouraging and there appears to be a strong strategic fit with Mubadala, the fundraising process has taken longer than we had hoped reflecting the difficult current environment.

In order to ensure the Company has sufficient funding, Frontier IP Group Plc (“Frontier”), one of our largest shareholders is proposing to invest £1 million by way of convertible loan. Our other shareholders are also invited to invest on the same terms should they wish to do so.

Please note this is not EIS qualifying and there is no guarantee of Round 3 completing with Mubadala or any other party. 

The principal terms of the loan notes will be as follows:

• the Loan Notes will bear interest at 8% per annum from the date of issue; 
• the Loan Notes are repayable by the Company (so far as not converted) 12 months after completion of a fundraising in which the Company raises new equity of £1million or more;
• the Loan Notes may be converted into shares in the Company on a fundraising of any amount at the option of the Noteholder(s) and with the agreement of the Company. In such circumstances, the Loan Notes would convert into the same class of shares as are issued to investors on the fundraising at the same price paid by investors;
• if the Loan Notes (or some of them) are converted, the Company will issue each Noteholder converting its Loan Notes with a Warrant entitling the Loan Note Holder to subscribe a sum equivalent to 20% of the nominal value of Loan Notes converted for shares in the company. For example, if Frontier convert £500,000 of its loan notes into shares as part of the next fundraising, it will receive a warrant entitling it to subscribe up to a further £100,000 for shares in the Company. The subscription price payable under the Warrant will be the same price per share paid by investors on the fundraising round and the Warrant will be capable of being exercised at any time in the period of 10 years from the date of grant.
• Frontier has indicated its intent to convert the notes it subscribes for into the larger round.

Call to action

In line with the Investment Agreement, the Company requires 70% shareholder approval in order to either (i) take on additional borrowings or (ii) allot further shares or enter an agreement that would grant the right to allot additional shares.

A shareholder consent has been drafted by the Company’s lawyer, ISW Legal. A copy is appended to this update. 

We kindly request that you read the shareholder consent and accompanying documents and register your vote accordingly before 26 May 2023 stating whether you are in favour or not of the Company accepting the additional capital.

Should you wish to participate in the convertible loan note issue alongside Frontier please register your interest with Wealth Club directly before 26 May 2023.

The unaudited consolidated management accounts up to March 2023 are provided separately.

Kind regards,

Neil Crabb
Camgraphic Ltd - Investor Director