BLUGLASS LIMITED — Capital/Financing Update 2014

Jan 20, 2014

Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12

Name of entity

Bluglass Limited

ABN 20 116 825 793

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of +securities issued or to be Issue of unlisted incentive plan Options issued 2 Number of[+] securities issued or to 4,059,000 unlisted incentive plan Options to be be issued (if known) or maximum issued – subject to predetermined vesting number which may be issued criteria 3 Principal terms of the[+] securities (eg, if options, exercise price and Refer to Annexure 2 for key terms, conditions expiry date; if partly paid and predetermined vesting criteria +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

• See chapter 19 for defined terms.

Appendix 3B Page 1

01/08/2012

Appendix 3B New issue announcement

4 Do the[+] securities rank equally in Refer to Annexure 2 for key terms, conditions all respects from the date of and predetermined vesting criteria allotment with an existing[+] class of quoted[+] securities? If the additional securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or consideration Nil 6 Purpose of the issue Issue of unlisted options to Staff and Directors (If issued as consideration for the (as approved at the 2013 AGM) pursuant to the acquisition of assets, clearly Company’s long term option incentive plan identify those assets) 6a Is the entity an[+] eligible entity that Yes has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the[+] securities the subject of this Appendix 3B , and comply with section 6i 6b The date the security holder 25 Nov 2013 resolution under rule 7.1A was passed 6c Number of +securities issued N/A without security holder approval under rule 7.1 6d Number of[+] securities issued with N/A security holder approval under rule 7.1A

• See chapter 19 for defined terms.

Appendix 3B Page 2

01/08/2012

Appendix 3B New issue announcement

6e Number of[+] securities issued with N/A security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of securities issued under 4,059,000 an exception in rule 7.2 6g If securities issued under rule 7.1A, N/A was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the issue date and both values. Include the source of the VWAP calculation. 6h If securities were issued under rule N/A 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining Refer Annexure 1 issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 Dates of entering[+] securities into 21 January 2014 uncertificated holdings or despatch of certificates Number +Class 8 Number and[+] class of all[+] securities 287,748,721 Ordinary Fully Paid quoted on ASX ( including the securities in section 2 if applicable)

• See chapter 19 for defined terms.

Appendix 3B Page 3

01/08/2012

Appendix 3B New issue announcement

Number +Class 9 Number and[+] class of all[+] securities not quoted on ASX ( including the 1,832,666 Incentive Plan Options securities in section 2 if applicable) expiring 18 January 2016, $0.0 exercise price, subject to vesting criteria 4,059,000 Incentive Plan Options expiring 1 December 2016, $0.01 exercise price, subject to vesting criteria

• 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Part 2 - Bonus issue or pro rata issue

==> picture [177 x 272] intentionally omitted <==

----- Start of picture text -----

11 Is security holder approval
required?
12 Is the issue renounceable or non-
renounceable?
13 Ratio in which the [+] securities will be
offered
14 +Class of +securities to which the
offer relates
15 +Record date to determine
entitlements
16 Will holdings on different registers
(or subregisters) be aggregated for
calculating entitlements?
17 Policy for deciding entitlements in
relation to fractions
----- End of picture text -----

• See chapter 19 for defined terms.

Appendix 3B Page 4

01/08/2012

Appendix 3B New issue announcement

18 Names of countries in which the entity has[+] security holders who will not be sent new issue documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations

• See chapter 19 for defined terms.

Appendix 3B Page 5

01/08/2012

Appendix 3B New issue announcement

20	Names of any underwriters
21	Amount of any underwriting fee or
	commission
22	Names of any brokers to the issue
23	Fee or commission payable to the
	broker to the issue
24	Amount of any handling fee payable
	to brokers who lodge acceptances
	or renunciations on behalf of
	+security holders
25	If the issue is contingent on
	+security holders’ approval, the date
	of the meeting
26	Date entitlement and acceptance
	form and prospectus or Product
	Disclosure Statement will be sent to
	persons entitled
27	If the entity has issued options, and
	the terms entitle option holders to
	participate on exercise, the date on
	which notices will be sent to option
	holders
28	Date rights trading will begin (if
	applicable)
29	Date rights trading will end (if
	applicable)
30	How do+security holders sell their
	entitlements_in full_through a
	broker?
31	How do+security holders sell_part_
	of their entitlements through a
	broker and accept for the balance?
32	How do+security holders dispose of
	their entitlements (except by sale
	through a broker)?

• See chapter 19 for defined terms.

Appendix 3B Page 6

01/08/2012

Appendix 3B New issue announcement

33 +Despatch date

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

34 Type of securities ( tick one )

• (a)[Securities described in Part 1 ]

• (b)[All other securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

• 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

• See chapter 19 for defined terms.

Appendix 3B Page 7

01/08/2012

Appendix 3B New issue announcement

Entities that have ticked box 34(b)

38 Number of securities for which +quotation is sought 39 Class of +securities for which quotation is sought 40 Do the[+] securities rank equally in all respects from the date of allotment with an existing[+] class of quoted +securities? If the additional securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another security, clearly identify that other security)

Number +Class 42 Number and[+] class of all[+] securities quoted on ASX ( including the securities in clause 38)

• See chapter 19 for defined terms.

Appendix 3B Page 8

01/08/2012

Appendix 3B New issue announcement

Quotation agreement

• 1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted[+] quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document not available now, will give it to ASX before[+] quotation of the[+] securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

Sign here:

Emmanuel Correia Company secretary

Date: 21 January 2014

Print name: Emmanuel Correia

== == == == ==

• See chapter 19 for defined terms.

Appendix 3B Page 9

01/08/2012

Appendix 3B New issue announcement

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for +eligible entities

Introduced 01/08/12

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

• Insert number of fully paid ordinary securities on issue 12 months before date 285,337,831 of issue or agreement to issue Add the following: • Number of fully paid ordinary securities 2,410,890 (14 Jan 2014) issued in that 12 month period under an exception in rule 7.2 4,059,000 (21 Jan 2014)

• • Number of fully paid ordinary securities issued in that 12 month period with shareholder approval Nil

• • Number of partly paid ordinary securities that became fully paid in that 12 month period Nil

• Note: • Include only ordinary securities here – other classes of equity securities cannot be added

• • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

• • It may be useful to set out issues of securities on different dates as separate line items

• Subtract the number of fully paid ordinary Nil securities cancelled during that 12 month period “A” 291,807,721

Step 2: Calculate 15% of “A”

• See chapter 19 for defined terms.

Appendix 3B Page 10

01/08/2012

Appendix 3B New issue announcement

“B”	0.15 [Note: this value cannot be changed]
Multiply“A” by 0.15	43,771,158
Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used
Insertnumber of equity securities issued or agreed to be issued in that 12 month period_not counting_those issued: • Under an exception in rule 7.2 • Under rule 7.1A • With security holder approval under rule 7.1 or rule 7.4 Note: • This applies to equity securities, unless specifically excluded – not just ordinary securities • Include here (if applicable ) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items
“C”	Nil
Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1
“A” x 0.15 Note: number must be same as shown in Step 2	43,771,158
Subtract“C” Note: number must be same as shown in Step 3	Nil
Total[“A” x 0.15] – “C”	43,771,158 N_ote: this is the remaining placement_ capacity under rule 7.1]

• See chapter 19 for defined terms.

Appendix 3B Page 11

01/08/2012

Appendix 3B New issue announcement

Part 2

Rule 7.1A – Additional placement capacity for eligible entities

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A” 291,807,721 Note: number must be same as shown in Step 1 of Part 1 Step 2: Calculate 10% of “A” “D” 0.10 Note: this value cannot be changed Multiply “A” by 0.10 29,180,772

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

Insert number of equity securities issued Nil or agreed to be issued in that 12 month period under rule 7.1A

Notes:

• This applies to equity securities – not just ordinary securities

• • Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

• • Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

• • It may be useful to set out issues of securities on different dates as separate line items

• “E” Nil

• See chapter 19 for defined terms.

Appendix 3B Page 12

01/08/2012

Appendix 3B New issue announcement

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A	Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A
“A” x 0.10 Note: number must be same as shown in Step 2	29,180,772
Subtract“E” Note: number must be same as shown in Step 3	Nil
Total[“A” x 0.10] – “E”	29,180,772 Note: this is the remaining placement capacity under rule 7.1A

• See chapter 19 for defined terms.

Appendix 3B Page 13

01/08/2012

Appendix 3B New issue announcement

ANNEXURE 2 – TERMS OF INCENTIVE OPTIONS

The terms and conditions of the Incentive Options are as follows and as otherwise provided in the Incentive Option Scheme:

• (a) each Incentive Option entitles the holder, when exercised, to one (1) Share; (b) subject to paragraphs (d) and (e) below, the Incentive Options are exercisable at any time on or prior to 5.00pm (EST) on 1 December 2016 (Expiry Date) by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Incentive Options are exercised to the registered office of the Company;

• (c) the amount payable upon exercise of each Incentive Option will be $0.01 ( Exercise Price ).

• (d) subject to (e) below, the Incentive Options and any Shares issued on the exercise of the Incentive Options will vest in tranches as follows:

• (i) Tranche 1 Vesting Criteria: 67% of an Option holder’s options will vest and be exercisable after achievement of both the following performance milestones:

  • a p-GaN layer using the Company’s RPCVD technology achieving, on a consistent basis, improved characteristics as compared to p-GaN layers produced using MOCVD technology. The p-type characteristics are to be based on electrical properties, light extraction, and i-v (current – voltage) results from quick LED testing of RPCVD p-GaN compared to MOCVD p-GaN both overgrown on blue MQW GaN MOCVD templates; and

  • the Company successfully completing a commercial transaction which directly leads to measureable revenue, the materiality of which is acceptable to the board.

(e)

• (ii) Tranche 2 Vesting Criteria: 33% of an option holder’s options will vest and be exercisable after 24 months continuous service from the date of option issue.

• (iii) Final Vesting Criteria: Once all the above performance milestones are met, the Incentive Options will only vest with board approval.

• in the event: (i) any third party acquires greater than a 50% interest in the Company’s issued shares (by way of takeover, Incentive Option Scheme of arrangement or any other means); or

• (ii) the Company sells a majority of its assets to a third party,

• any unvested Incentive Options or Shares issued on the exercise of the Incentive Options will immediately vest and must be exercised within 90 days thereafter (otherwise they will immediately lapse);

• See chapter 19 for defined terms.

Appendix 3B Page 14

01/08/2012

Appendix 3B New issue announcement

• (f) an Incentive Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Incentive Option can be exercised;

• (g) all Shares allotted upon the exercise of Incentive Options will upon allotment rank pari passu in all respects with other Shares;

• (h) the Incentive Options are not transferable;

• (i) Incentive Options will not be quoted on the ASX. However an application will be made to ASX for official quotation of the Shares allotted pursuant to the exercise of the Incentive Options if the Company’s Shares are listed on ASX at that time;

• (j) there are no participating rights or entitlements inherent in the Incentive Options and Incentive Option holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Incentive Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Incentive Option holders the opportunity to exercise their Incentive Options prior to the date for determining entitlements to participate in any such issue; and

• (k) if at any time the issued capital of the Company is reconstructed, all rights of an Incentive Option holder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

• See chapter 19 for defined terms.

Appendix 3B Page 15

01/08/2012