Eiffage Annual Report 2020

Plain-text annual report

First Graphene Annual Report 2020Suite 39 Hampden RoadNedlands WA 6009P: +61 1300 660 448E: info@firstgraphene.netwww.firstgraphene.netFirst Graphene (UK) LimitedGraphene Engineering and InnovationCentreThe University of ManchesterSackvilleStreetManchester M13 9PLUnited KingdomWelcome to First Graphene’s Annual Report 2020CorporateDirectoryDirectorsWarwick Grigor (Non-Executive Chairman)Craig McGuckin(Managing Director)Peter R. Youd (Executive Director)Dr Andy Goodwin (Non-Executive Director)CompanySecretariesPeter R. YoudNerida SchmidtPrincipal Registered Office inAustralia1 Sepia Close Henderson WA 6166Telephone: +61 1300 660 448 Email: info@firstgraphene.net Website: www.firstgraphene.netStock Exchange ListingsThe Company is listed on the Australian Securities Exchange Limited under the trading code FGR and FGROCThe Company is listed on the Frankfurt Stock Exchange under the trading code FSE:M11.Share RegistryAutomic Registry Services Level 2, 267 St Georges Terrace, Perth WA 6000Allsecurityholder correspondenceto: PO Box 2226, Strawberry Hills, NSW 2012Contact: P: 1300 288 664 (within Australia) P: +61 (0)8 9324 2099 (outside Australia) E: hello@automic.com.au www.automic.com.auAuditorBDO Audit (WA) Pty Ltd 38 Station StreetSubiaco WA 6008Solicitors – AustraliaSteinepreis Paganin Lawyers and Consultants Level 4, The Read Buildings 16 Milligan StreetPerth WA 6000Bankers - AustraliaWestpac Banking Corporation Level 6 109 St Georges TerracePerth WA 6000Contents Chairman’s Report Review of Operations Process Capabilities R & D Capabilities Sales Contracts Composites Polymers Rubber Concrete 2D Fluidics Pty Ltd – Vortex Fluidic Device Energy storage materials Website Upgrade Safety Our Values Directors’ Report Remuneration Report (Audited) Auditor‘s Independence Declaration Notes to the Consolidated Financial Statements 1. Basis of preparation 2. Segment reporting 3. Revenue from contracts with customers 4. Operating income and expense 5. Finance income and expense 6. Income tax 7. Loss per share 8. Cash and cash equivalents 9. Inventories 10. Property, plant and equipment 11. Trade and other payables 12. Financial risk management 13. Issued capital 14. Share based payments 15. Reserves and accumulated losses 16. Statement of cash flow reconciliation 17. Commitments 18. Deconsolidation of Graphene Solutions Pty Ltd 19. Results of the parent company 20. Events since the end of the financial year 02 04 04 06 07 07 10 12 13 17 17 19 19 21 22 26 35 Consolidated Statement of Profit or Loss and Other Comprehensive Income 36 21. Related party transactions 22. Auditors’ remuneration Directors’ Declaration Consolidated Statement of Financial Position 38 Independent Auditor’s Report Consolidated Statement of Changes in Equity Additional Securities 40 Exchange Information Consolidated Statement of Cash Flows 42 Corporate Directory 43 44 51 55 55 57 58 60 61 61 62 64 65 71 72 75 76 77 78 79 80 80 81 82 83 86 89 First Graphene – Annual Report 20202 Introduction Statement from our Company Chairman “We have a colourful, compelling and utterly commercial story to tell - and over the next 12 months, we will be much more proactive in telling it.” Dear Fellow Shareholder, New Agreements If I was to use one word to categorise the last 12 months, it would be “disruptive” – a word with both positive and negative connotations. In November, we secured a global intellectual property licence from the University of Manchester for new graphene-hybrid materials. As a negative, there was only one, and it was entirely beyond all of our control. Of course, I am referring to the coronavirus and it would be imprudent if I did not acknowledge how devastating this pandemic has been for everyone since it emerged in late 2019. Fortunately, for First Graphene, its effect has been minimal. Our Response Prompt action saw us focus on liquidity management, deferring non-essential capital expenditure and reducing operating costs. To lower our costs, employees in Australia and the United Kingdom agreed to a 20 per cent deferment of their income and the senior leadership team led by example, deferring up to 75 per cent of their remuneration. Simultaneously, we maintained continuity across our production and research operations. In November we partnered with the work boot brand, Steel Blue, to produce an iconic new graphene enhanced safety boot that is stronger and longer-lasting than anything else in the market. It was showcased to considerable fanfare at the Polymers in Footwear conference and exhibition in Berlin, and our Steel Blue collaboration continues to go “from strength to strength.” Capital Raising Despite the economic headwinds, business momentum continued in the first half of fiscal year, 2020. We were successful in raising A$3.5m from the early exercise of First Graphene options and the execution of a formal Supply Agreement with another major manufacturer, the wear protection and industrial lining company, newGen Group. First Graphene – Annual Report 20203 Introduction Statement from our Company Chairman (CONTINUED) Demand across the energy, mining, textile and constructions sectors is growing and I am confident that the graphene story will snowball over coming months and years. We have the right team in place across Australia, the United Kingdom and Sri Lanka to make it grow and I thank them for all their efforts. Summary Thank you also, to my fellow directors, Craig McGuckin and Peter Youd for their energy, insight and strategic foresight over the year. Lastly, we welcome Dr Andy Goodwin to the Board as a non-executive director, and Paul Ladislaus as Chief Technology Officer (CTO). These appointments reflect the Company’s ability to set the global graphene benchmark and keep the focus on disruption – in the most positively disruptive way possible. As we have seen over the past year, we are in an era of disruption so we must work with it in all its incarnations. Warwick Grigor Non-Executive Chairman 31 August 2020 In April 2020, the Company initiated a 1:10 entitlement issue to bolster the Company’s cash reserves so we can continue to work on production of PureGRAPH® powders and research new applications. The entitlement issue was successful and closed in early June fully subscribed - a positive endorsement of the Company, its strategies and its innovative Intellectual property (IP). This last point is very significant. PureGRAPH® As the world’s largest manufacturer of graphene products, we have developed a valuable and enviable trademark called PureGRAPH®, an exclusive Intellectual Property registered in six countries – the United States of America, the United Kingdom, the European Union, Australia, China, and New Zealand. The United States registration was accepted in June this year, setting the Company up for a strong entry into that large and lucrative market. PureGRAPH® has allowed First Graphene to substantially de-risk the business so the company is now poised to apply its exclusive alchemy to a raft of industrial product lines. To echo my introduction, that is disruption in its most positive form. Getting the word out The greatest unknown is the speed by which manufacturers embrace graphene, though we are challenging that unknown by ramping up the Company’s communications and marketing abilities, so that more people know about graphene and its multiple manufacturing benefits. We have a colourful, compelling and utterly commercial story to tell - and over the next 12 months, we will be much more proactive in telling it. First Graphene – Annual Report 20204 Review of Operations Mission Statement To be the world’s best provider of high-performance graphene products and the recognised innovation leader in the manufacture of graphene materials, delivering high revenue growth and profitability which differentiates us to the benefit of our customers, investors and employees. During the 2020 fiscal year First Graphene Limited (FGR) made considerable advances in its graphene business. Highlights included: • • • • Execution of sales agreements and commencement of sales of PureGRAPH® products to industry partners. Launched a new platform to support a growing base of international customers and stakeholders https://firstgraphene.net Entry into the energy storage market with a worldwide, exclusive licence for supercapacitor materials. Strengthening of our R&D and process engineering capabilities in both Henderson and Manchester. FGR has successfully continued to concentrate on market areas where higher volumes of graphene powders will be utilised. We are well positioned to provide volume and quality at a price which is attractive to industry participants for adoption. We continue to be the world’s leading graphene company. Process Capabilities The Company has continued to develop its manufacturing process capabilities towards scale-up. This has included implementing several new finishing unit operations which will improve quality, reduce labour costs and increase throughput. Securing and protecting our know-how is a critical part of our business strategy and we continue to carefully manage our intellectual property as the process technologies are developed. Also, as the world’s leading supplier, we have validated our ability to supply consistent products using a robust quality control system which aligns with emerging international standards. We have demonstrated our commitment to this by joining the British Standards Institute (BSI) and ISO Nanotechnologies Technical Committee (ISO/TC229) working groups, which is focussed on the development of internationally recognised graphene characterisation techniques. The key point is these techniques will be relevant and practical in an industrial environment. First Graphene – Annual Report 20205 Review of Operations (CONTINUED) The Company has also used commercial Minitab® software to analyse our manufacturing data, allowing us to produce process control charts for our Henderson Manufacturing site. This enables “voice of our process” understanding through process control charts to confirm we have a stable production platform, delivering a consistent product. An example is the chart below, which shows tight control of the mean particle size of our PureGRAPH® 10 product, measured using a Malvern 3000 Mastersizer (below). It demonstrates how we are able to us industry-leading analytical equipment can be combined with Six Sigma concepts to monitor and control product quality. First Graphene – Annual Report 20206 Review of Operations (CONTINUED) R&D Capabilities We have consolidated our position as a Tier 1 Member of the Graphene Engineering Innovation Centre (GEIC) based at the University of Manchester in the United Kingdom. This has been done through the addition of a Senior Development Chemist to enhance capability within our Research and Development team. We have also further developed our in-house expertise on the use of world-class analytical techniques and processing equipment at the GEIC, including Scanning Electron Microscopy, Raman Spectroscopy, thermal conductivity measurements and thermogravimetric analysis. This has helped us to further understand and characterise our product and, more importantly, to understand and support ongoing work to use |our graphene products in real world applications. We have also concluded a successful 6 month funded program in which a University of Manchester Post-Doctoral Researcher was embedded with the GEIC team to rapidly progress the scale up of novel transition-metal doped materials from the bench-scale to pilot-scale. Over the last 12 months, we have also built relationships with our counterparts in other commercial R&D teams, focussing mainly on polymer masterbatching – this has allowed us to support the commercial introduction of graphene-enhanced thermoplastics. At our Henderson Production Facility, we have added an additional development chemist to the site technical team. He has focussed on generating applications data for our graphene in a range of polymer systems to directly support business development activity. Finally, we have continued to interact with a range of academic institutions and research teams, mainly in the United Kingdom and Australia. We have had very positive engagements, which has consolidated our position within the academic community as an innovative, credible and focussed graphene producer striving for scientific excellence. Adam Smalley (Research Technician) in the foreground carrying out scanning electron microscopy (SEM) and Dr Tom Raine (Senior Development Chemist) in the background using the thermogravimetric analyser (TGA) in the Analytical Lab at the GEIC. First Graphene – Annual Report 20207 Review of Operations (CONTINUED) Sales Contracts During the financial year the Company executed Supply Agreements with several companies, including • • • • Steel Blue safety boots, Aquatic Leisure Technologies, planarTech (Holdings) Limited and newGen These contracts form the basis for an expanding list of potential customers who are trialling PureGRAPH® powders in their applications. Further contracts are expected in the 2021 fiscal year as successful testing is concluded and supply arrangements agreed. PureGRAPH® powders have been provided for customer testing and evaluation; • • • PureGRAPH®5 fabric development, composite materials, energy storage PuregRAPH®10 wear linings, marine applications, thermoplastic materials, bulk materials handling, coatings, composite materials, rubber development PureGRAPH®20 Automotive applications, marine applications, recycled materials, sports equipment, bulk materials handling, coatings, composite materials, wear linings, rubber development, thermoplastic materials, aquaculture, building materials Applications Benefitting from the Addition of PureGRAPH® Composites In early June 2020 FGR was pleased to announce it had executed a Supply Agreement with Aquatic Leisure Technologies Pty Ltd (ALT) for the supply of PureGRAPH®20 in their totally new proprietary construction process which provides the next generation of fibreglass pool technology. ALT and First Graphene had worked together over a two- year period to demonstrate improved flexural strength with the addition of small percentages of PureGRAPH® graphene powders. Immersion testing was completed in accordance with Australian standard ASTM D750 and confirmed reduced sorption curves, which lower the potential for osmotic blistering, extending pool durability. PureGRAPH® graphene is mixed with the polymer resin prior to combination with the fibre reinforcement. Fibre reinforced polymer (FRP) composites are typically used in place of metal structures and components where reduced weight is required. PureGRAPH® graphene has been shown to provide a significant step-up in performance of composite materials compared with many other graphene products. “PureGRAPH® graphene additives in fiberglass laminate – increase strength, reduce weight and improve durability.” First Graphene – Annual Report 20208 Review of Operations (CONTINUED) These GRP laminates are typically used in boat- building, water storage systems and in the case of this study, fibreglass pools. Initial studies were carried out using chopped glass fibre reinforcement and polyester styrene-based resin. Similar results are achievable using vinyl ester resins. PureGRAPH® graphene powders were mixed at low concentrations into polyester styrene resin using standard industrial mixing equipment. No pre-treatment of the graphene additive is required for the PureGRAPH® to disperse well in the resin system. PureGRAPH® graphene additives significantly increase the flexural strength and water resistance of the fibreglass laminates used in swimming pools shells. These enhancements give a stronger, lighter product with improved resistance to water penetration and will potentially simplify the manufacturing process. The global market for swimming pool construction in 2017 was claimed to have reached US$38.2Bn, with annual in-ground pool installations expected to grow at a CAGR of 3.8% to 2028. Traditionally, pools were constructed in concrete or with a vinyl liner. Improvements in glass-fibre materials technology, particularly gel coating systems have led to a growth in the popularity of fibreglass reinforced composite pools. Fibreglass pools have the advantage of short installation times, lower installation costs and typically lower maintenance costs than other systems. For successful installation, the flexural strength of the pool wall must be sufficient to retain shape and withstand the pressure of the external sand and gravel supporting aggregate and also support the weight of water, which is particularly critical during initial filling. Obviously, the swimming pool structure must resist water penetration. The front face is well protected by a high value gelcoat, but the reverse side must also resist ground-water penetration. In poorly performing systems, water diffusion into the composite matrix can lead to hydrolysis and result in osmotic blistering, ultimately leading to failure of the swimming pool structure. A range of strategies have been adopted to reduce water penetration from the reverse side, such as the inclusion of a vinyl ester barrier layer within the laminate structure. First Graphene identified an opportunity to enhance the strength and water resistance of glass-reinforced polymer (GRP) laminates using PureGRAPH® graphene additives in the resin mix. First Graphene – Annual Report 20209 Review of Operations (CONTINUED) GRP composites have many advantages including high mechanical strength, formability and low-cost and are therefore commonly used in marine and leisure applications. However, GRP systems can be susceptible to moisture absorption. They contain reactive groups which will react with absorbed water via hydrolysis, leading to degradation of the matrix structure and osmotic blistering. These failures can degrade the composite system, reducing interlaminate strength and ultimately resulting in mechanical failure. The absorption of water into the matrix is measured by ASTM D570-98 which uses a Fickian-diffusion model to characterize the diffusion of water. The relationship between water absorption, immersion time and sample thickness is given by the equation: Our study focused on improving the flexural strength and water resistance of GRP laminates. We found PureGRAPH® graphene nanoplatelets enhanced the characteristics of the fibreglass laminate compared with standard laminates currently on the market. We demonstrated improvements in: • Flexural strength – enabling lighter laminates • Water resistance – enabling increased laminate durability • Thermal conductivity – enabling even cure in thick sections Flexural strength results presented in Fig. 1 demonstrate a single layer laminate structure based on PureGRAPH® enhanced resin increases flexural strength by >30% and substantially exceeds the international pool standards. Flexural Strength (Mpa) By plotting the ratio of mass of water absorbed at a given time (Mt) to the final mass absorbed (M∞) against the square root of the time at which the mass was taken, the diffusion coefficient (D) can be calculated as the gradient, giving a measure of how easily water is absorbed. A “Sigmoid Curve” is typically observed, suggesting a two-stage process: • • Stage 1: Water absorption into the matrix – kinetically controlled. Stage 2: Hydrolysis of the matrix by absorbed water – thermodynamically. Fig.1 – Flexural Strength Results of Graphene Enhanced Laminates Compared with Industry Standard Specifications – tested in accordance with AS 2132 & ASTM D 790 – 03 First Graphene – Annual Report 2020 10 Review of Operations (CONTINUED) Fig. 2 details how the graphene-enhanced laminate outperforms typical laminates in terms of water absorption. The figure represents the reduced sorption curve of typical commercial pool laminates in the red-zone and reduced water sorption levels which can be achieved with graphene additives in the green zone. Tests were carried out in water at a temperature of 120 °C. Fig.2 – Reduced Sorption Curves from immersion tests, indicating the speed of water diffusion - tested in accordance with ASTM D 570-98 over a 72-hour period at 120°C As a result of the extensive and novel work undertaken FGR filed a patent application Resin Composites – Patent Pending number 2020901689. Polymers Early academic work on graphene enhanced plastics demonstrated significant improvements in performance. Much of this work used solvent dispersion techniques, whereas industrial processing of plastics is typically by mixing in the melt in a twin-screw extruder. As a consequence, property improvements by industrial processing in the melt have not yielded the impressive improvements which are described in the literature. First Graphene – Annual Report 202011 Review of Operations (CONTINUED) As the only entity currently capable of providing industrial quantities of graphene First Graphene continues to work on solving these real-world problems and providing industrial solutions to its expanding customer base in the use of elastomers. Our laboratories, in the UK and Henderson work closely with customers to maximise the improvements they are demanding in their existing materials. Existing applications include wear lining materials for the mining and mineral handling industries and specialist footwear. Additional applications are in Hot Cast polyurethane prepolymers, High-density polyethylene (HDPE), Thermoplastic polyurethane (TPU) and Polycarbonates (PC). The different chemistries of these materials demand on-going research to maximise the mechanical benefits which can be derived from the use of graphene. Working with Hexcyl Systems Pty Ltd and using FGR’s PureGRAPH® products the High-Density Polyethylene (HDPE) showed improvements in strength, wear resistance and longevity. HDPE is a thermoplastic polymer widely used in packaging (cosmetics, food and beverages), corrosion-resistant piping, geomembranes and plastic timbers. The global market for HDPE was estimated at US$59 Billion in 2015, with a CAGR of 4%. Hexcyl HDPE Trial Fig 3: - Test Results showing ultimate tensile improvements (>10%), defined as the stress (MPa) at Moment of rupture and calculated using standard test method for tensile properties of plastics (ASTM D638-14). Yield strength improvements (>60%), defined as the stress (MPa) limit of elastic behaviour and calculated using standard test method for tensile properties of plastics (ASTM D638-14). Abrasion loss reduction (>50%), defined as a volume loss (mm3) under abrasion and calculated using an internal method designed to simulate an accelerated abrasive environment. First Graphene – Annual Report 202012 Review of Operations (CONTINUED) Another use is in polymer wear liners, which are sacrificial and are used to protect the steel equipment parts; the key benefit being the production downtime to replace a polymer liner is relatively short. Hot Cast urethane prepolymers are used in the most rigorous applications where the highest performance is required. Processing of these polyurethane elastomers generally involves heated components and tooling along with a hot post-cure to optimise properties. Hot Cast polyurethanes are used extensively in mining, industrial tires, and metal manufacturing markets. Hot Cast urethane wear linings incorporating PureGRAPH® have seen significant improvements in the performance of the polyurethanes, enabling customers to achieve market growth through product superiority and cost savings for end users. On site trials of graphene enhanced wear liners at major iron ore mining locations have demonstrated the improved performance and extended lifetime delivered with PureGRAPH® additives. In reclaimer wheel buckets, PureGRAPH® enhanced wear liners have been in use for in excess of twelve months without replacement. Hexcyl Systems Pty Ltd HDPE oyster pot Hexcyl Systems Pty Ltd oyster pots in a typical ocean farm Rubber Rubber is composed of long chains of randomly oriented molecules. These long chains are subject to entanglement and cross-linking. The entanglement has a significant impact on the viscoelastic properties such as stress relaxation. FGR has an extensive program underway for the incorporation of graphene into rubber compounds. Rubber compounds are a mixture of base polymer(s), fillers and other chemicals which form a finished rubber material. More precisely, the term 'compound' refers to a specific blend of ingredients tailored for particular characteristics required to optimise performance in some specific service. The basis of compound design is selection of the polymer type. The compounder may add reinforcing agents, such as carbon black, coloured pigments, curing or vulcanizing agents, activators, plasticisers, accelerators, anti-oxidants or antiradiation additives. There may be hundreds of such combinations. At the very least it would require a large design of experiments to map the interactions of a multicomponent system such as this and so much of this knowledge is learned First Graphene – Annual Report 202013 Review of Operations (CONTINUED) by experience and maintained cerebrally. Having such complex chemistries, the inclusion of graphene requires the re-formulation of these compounds. As with most uses of graphene a test program must be developed to ensure the correct application of the graphene to the existing material. Features and benefits of using PureGRAPH® additives in polymers and rubber include: Features Benefits Increased tensile strength of (30-40% improvement possible) Significant step up in performance of polymers in terms of wear, resistance to damage and extended life Increased elongation Improved impact resistance and wear performance over time Increased abrasion resistance (100-500% improvement possible) Substantial improvement in wear properties leading to reduced downtime of plants/machines and reduction in part consumption Increased electrical and thermal conductivity Improvement in conductivity and heat dissipation possible for specific applications Fire retardancy Potential for improved safety in critical polymer applications Concrete Cement is the largest manufactured product on Earth by mass. When combined with water and mineral aggregates it forms concrete which in volume terms, is the most traded material in the world after water. In 2015, the total mass of cement produced was 4.6 billion tonnes. This is equivalent to about 626 kg per capita, a value higher than the amount of human food consumption. With population growth, increased urbanisation and improved living standards of the global population, the demand for concrete products continues to grow at an accelerating rate The manufacture of cement carries a significant CO2 burden which is estimated to be 6% of all CO2 emissions from human activity. The industry faces major challenges, notably the pressure to reduce the carbon footprint (CO2 contribution) of cement-based products. Ordinary Portland Cement (OPC): The traditional form of cement is Ordinary Portland Cement (OPC) which is made from locally available materials, typically a mixture of clay and limestone which require grinding and calcining (heating) to make clinker. The clinker is crushed into a fine powder with gypsum to form OPC. The manufacture of 1 tonne of clinker produces 842 kg of CO2. The heating and processing steps produce ca. 40% of the CO2 with ca. 60% coming from the CaCO3 to CaO transition during calcination of the clinker. First Graphene – Annual Report 202014 Review of Operations (CONTINUED) The cement industry is investigating a range of alternatives to OPC clinker, known as supplementary cementitious materials or SCMs which includes fly ash, blast furnace slag and natural pozzolans. The UN report on Eco-Efficient Cements draws the conclusion the transition to SCMs will be slow due to local availability, low cost and industry confidence in the current OPC based materials. It is therefore important to focus upon more efficient use of OPC concretes in the short term. “Improved strength from the addition of PureGRAPH®” Professor Dusan Losic and co-workers at the University of Adelaide have completed thorough studies, of the performance of pristine graphene (PRG) particles on the compressive and flexural strength of cement-based mortars. Working with PureGRAPH® graphene products supplied by First Graphene Ltd., the university was able to investigate the physicochemical, microstructural and mechanical performance of OPC cement mortars versus the physical characteristics of the PRG platelets. The PRG particles were dispersed in water with an industrial plasticizer to aid dispersion and blended into the concrete mix as part of the water addition. Initial studies at the University of Adelaide showed compressive strength is increased by 34.3% and tensile strength by 26.9% when PureGRAPH® is added to cement mortar at very low levels of 0.07%w/w in the cement paste (equivalent to ca. 0.01%w/w in concrete). In a new study; the earlier results were further validated with improvements in compressive strength of 34.3% and tensile strength of 38.6% being recorded. In this study, the researchers investigated the impact of platelet dimensions and confirmed ultra-large PureGRAPH® platelets with average lateral size 56 ± 12µm deliver the largest benefits. The increases in strength were attributed to improved hydration of calcium silicate hydrate gels and increased frictional adhesion between the platelets and cement gels. “PureGRAPH® reduces water permeability” Further studies have been completed in the laboratories of Prof. Yong Wang and Dr. Meini Su at the School of Mechanical, Aerospace and Civil Engineering, University of Manchester, UK to investigate the impact of PureGRAPH® graphene additives on the performance of concrete systems. PureGRAPH® graphenes with average lateral size 56 ± 12µm supplied by First Graphene Ltd. were incorporated into cement mixtures by dispersion in plasticiser solution prior to incorporation in the cement mixture. The cement was prepared and tested in accordance with industry standards (BS 1881-108:1983 Method for making test cubes from fresh concrete) and the water permeability tested by a soaking methodology. The results are presented in Fig. 4. Fig.4 - Water permeability of cement pastes containing PureGRAPH® graphene additives First Graphene – Annual Report 202015 Review of Operations (CONTINUED) A 0.2%w/w loading of PureGRAPH® gives a reduction in water permeability of approximately 40%. Reducing water penetration is thought to prevent the alkali–silica reaction (ASR), a swelling reaction which results in serious cracking and critical structural problems. The reduction in permeability is derived from the enhanced formation of nucleation sites for the C-S-H hydration crystals and the high surface area of graphene to form a denser network of interlocked cement crystals. This enhances the mechanical properties and also forms an effective barrier against water penetration. PureGRAPH® for Electrical Conductivity Dr. Su also examined the impact of PureGRAPH® concrete additives on the electric conductivity of cement materials. PureGRAPH® graphene was incorporated into cement at concentrations of up to 0.2%w/w. The electrical conductivity was subsequently measured by embedding stainless steel wire mesh (electrodes) along the length of the cement mould at the casting stage. Sample blocks of on 60 mm x 25 mm x 18 mm were cured for 28 days prior to measurement. The inner two electrodes act as a voltage measuring unit and the outer two are used for inducing current. The results are presented in Fig.5. ) - m Ω k ( y t i v i t s i s e R 180 160 140 120 100 80 60 40 20 0 0.00 0.05 0.10 0.15 0.20 0.25 Graphene loading in cement (%w/w) Fig.5 - Electrical Resistivity (kΩm) of cement containing PureGRAPH® graphene additives. A significant increase in the electrical conductivity of the cement is observed when the graphene dopant level exceeds ca. 0.05 w/w. The researchers propose the significant reduction in electrical resistivity above 0.08%w/w graphene in cement is due to the formation of a continuous conductive path in the cement structure. Recycled Aggregate Concrete with PureGRAPH® In addition to the production and use of cement- based products, recycling and effective use of demolished concrete aggregate represents an opportunity for further environmental benefits to the construction industry. In the UK alone more than 50 million tonnes of concrete aggregate is re- claimed every year. Effective re-use of this material as an aggregate in new concrete is limited by the reduced performance (compressive strength, tensile strength and Young’s modulus) and the workability of the composite. In a PhD study by Robert Ataria of the School of Mechanical, Aerospace and Civil Engineering, University of Manchester, UK the impact of graphene additives upon the performance of Recycled Aggregate Concrete (RAC) was investigated. PureGRAPH® graphene concrete additives were dispersed with plasticiser in water to prepare a cement mortar and then RAC concrete prepared. The researcher identified enhancements in RAC performance was achieved by washing the recycled aggregate and doping the cement mortar with 0.01%w/w of PureGRAPH® graphene additives. The compressive and tensile strengths of the resulting RAC were enhanced by 43.9% and 24.1% respectively to reach values of 39.14MPa and 3.76MPa which are similar to those of C40 NAC a standard concrete manufactured with fresh materials. First Graphene – Annual Report 2020 16 Review of Operations (CONTINUED) Graphene Enhanced Concrete Products In summary, published literature demonstrates graphene concrete additives clearly have the potential to deliver benefits for concrete manufacture. • • The incorporation of small amounts of graphene concrete additives delivers improvements in compressive and tensile strength in concrete, enabling the use of thinner, lighter concrete elements reducing the mass of concrete required for construction projects and simultaneously reducing the CO2 contribution of the industry. PureGRAPH® concrete additives also enable the use of recycled concrete aggregate in new concrete structures, as low addition levels can raise the performance of recycled aggregate concretes. • Multiple studies have validated that the large platelet size and high aspect ratio which are accessible with electrochemically exfoliated PureGRAPH® concrete additives are critical for strength enhancement. • • PureGRAPH® concrete additives produce a reduction in water and ion permeability which are expected to extend the durability of concrete structures by reducing re-bar corrosion and the alkali–silica reaction, a swelling reaction that can result in serious cracking. PureGRAPH® concrete additives produce additional properties and benefits including electrical conductivity when used at higher loading levels. These materials will enable development of new smart concrete with built-in sensors to report physical condition, cracks and loading, provide integrated resistive heating and the potential for wireless charging of electric vehicles. Features and benefits of using PureGRAPH® additives in mortar and concrete are as follows: Features Benefits Disperses well in water-based formulations Easy to use and can be added with currently used concrete admixtures. Stronger and lighter concrete structures New architectural designs now possible. Potential for reduction of total build cost. Reduction in material usage and carbon footprint caused by cement-based products Reduced consumption of earth’s resources per m3 of build. Reduced carbon footprint. Potential increase in longevity of concrete structures Extended life of reinforced concrete structures through reduction in corrosion of steel reinforcements over time. First Graphene – Annual Report 202017 Review of Operations (CONTINUED) First Graphene’s Developing New Technologies. 2D Fluidics Pty Ltd – Vortex Fluidic Device First Graphene, through its subsidiary, 2D Fluidics Pty Ltd, has developed a more benign approach for the fabrication of oxidised graphene or graphene oxides. The objective is to functionalise the surface with sufficient oxygen functional groups to allow easier dispersibility in water and other aqueous mediums. In addition, the method delivers a tuneable route for the synthesis of graphene oxides that have tailored oxidation levels for specific applications. As part of its long-standing research collaboration with Flinders University, 2D Fluidics researchers have progressed the development of potential applications for a proprietary range of breakthrough carbon nanomaterials. This work utilised the chemical transformation abilities of the Vortex Fluidic technology, invented and developed by Professor Colin Raston at Flinders University, to produce proprietary Green Graphene Oxide (gGO™) nanomaterials with precise specifications depending on the industrial application. Continuing to build on earlier results, the 2D Fluidics team, led by world-class graphene chemist Dr Kasturi Vimalanathan, has deployed a range of Green Graphene Oxide nanomaterials in demonstrations of industrial applications. The team has successfully completed initial tests of 2D Fluidics’ proprietary gGO™ nanomaterials in a range of applications which include the use in transistors for biosensing, increasing the efficiency of organic photovoltaics, the use in photoluminescence sensors and optoelectronic devices, and improving photocatalytic activity. For example, the conventional GO (Hummers method) typically shows no fluorescence where as gGO™ provides controllability of surface oxidation and exhibits potential use in devices, while avoiding the need for a reduction step in the production step. Energy Storage Materials During the year First Graphene acquired the licence for a new series of graphene-hybrid materials. The licence granted exclusive rights to patented technology for the manufacture of metal oxide decorated graphene materials using a proprietary electrochemical process. These new graphene-hybrid materials offer the makers of supercapacitors a new class of high-performance capacitor materials. Supercapacitors offer high power-density energy storage, with the possibility of multiple charge/ discharge cycles and short charging times. The market for supercapacitor devices is forecast to grow at 20% per year reaching a revenue value of ca. A$3.1 billion by 2022. As with batteries, growth of the supercapacitor market is challenged by the supply of the right, high-performing materials which is dominated today by the use of microporous carbon nanomaterials with typical electrical capacity of 50 to 150 Farads/g. Earlier research by The University of Manchester demonstrated very high capacitance materials of up to 500 Farads/g are now possible which outperform existing materials. The manufacturing process to be employed builds on the Company’s existing electrochemical processing expertise at First Graphene’s manufacturing site at Henderson, WA. Research published by Prof. Robert Dryfe and Prof. Ian Kinloch of The University of Manchester revealed how high capacity, microporous materials can be manufactured by the electrochemical First Graphene – Annual Report 202018 Review of Operations (CONTINUED) processing of graphite raw materials and decorated with transition metal ions leading to metal oxide decorated graphene materials which have very high capacitance of up to 500 Farads/g. These materials can be manufactured at scale using the Company’s established expertise in electrochemical materials processing. As the materials are grown in-situ through electrochemical processing they have significant advantages over previous solutions which employed simple mixing of graphene and metal oxide materials. Prof. Dryfe secured funding from the UK EPSRC (Engineering and Physical Sciences Council) for the further optimisation of the metal oxide / graphene materials. Two high value product groups can be synthesised using this approach. Firstly, metal oxide decorated materials with high capacitance for applications in supercapacitors and catalysis and secondly, pristine graphene products with tightly controlled specifications for applications in electrical and thermal conductivity. First Graphene built a pilot scale capability in its laboratories within the GEIC and successfully transferred the technology to its laboratories in Manchester, UK and also completed two successful pilot trials at its manufacturing facility in Henderson, WA. Specifically, the Company has demonstrated the following • • Synthesis of metal oxide decorated hybrid graphenes at litre scale in FGR laboratories. Synthesis of pristine (zero-oxygen) graphene materials at litre scale in FGR laboratories. • Manufacture of metal oxide decorated hybrid graphenes at multi-kg scale. • Manufacture of pristine (zero-oxygen) graphene materials at multi-kg scale. The structure of the new materials was confirmed by Raman analysis and Scanning Electron Microscopy (SEM). A typical image of metal oxide decorated graphene is shown in Fig. 6, which shows the nanostructured metal oxides on the surface of an exfoliated graphene platelet. Fig.6 - Metal Oxide decorated graphene surface – crystalline metal oxide nanostructures grown directly onto the graphene platelet. Considered to be an ideal structure for capacitance and catalysis. The Company tested the performance of these materials in energy storage and catalysis applications. Initial tests showed prototype supercapacitor devices (coin cell) can be manufactured with these materials. Additional testing was delayed due to restricted access to test facilities during the COVID-19 restrictions. Testing of prototype supercapacitor devices is now underway with a world leading energy storage research institute. First Graphene – Annual Report 202019 Review of Operations (CONTINUED) Website Upgrade A new website platform was launched in July 2019 to support a growing base of international customers and stakeholders. The new website firstgraphene.net is an opportunity for visitors to develop a deeper understanding of the potential of graphene and its applications. With a clean design and vibrant imagery, the content reflects not only the First Graphene brand but provides insight into the real potential for graphene with their range of high-quality PureGRAPH® products. This new domain replaces the previous firstgraphene.com.au domain. With the launch of firstgraphene.net the company also adopted a more active profile on social media with ASX announcements being accompanied by news item and associated postings on Twitter and LinkedIn. The Company’s Commercial Graphene Production facility has met the environmental standards set down by the Government of Western Australia’s Department of Environment Regulation. The Company is actively working to establish a method of production for Graphene Oxide which will be environmentally less harmful than the existing Hummers and modified Hummers methods. Safety Employment and Training Program All potential full-time employees must undergo a Company funded full medical examination prior to commencing employment. All employees are also required to complete a Company funded safety first training course at the commencement of employment and annual refresher courses. In 2020, the firstgraphene.net website was further upgraded as the company transitioned to a new higher speed hosting service and partnered with a new agency to improve the effectiveness of the site. A training register is maintained, and employees are trained in all aspects of the Company’s operations prior to being signed off as trained to operate the equipment. Further work is ongoing to improve search and inbound lead acquisition, alongside planned integrated marketing campaigns. Weekly safety meetings are held, and all new tasks have a Job Hazard Assessment (JHA) completed and signed off prior to being undertaken. New CRM System A new Customer Relationship Management (CRM) system has been implemented to manage the high number of customer enquiries and enable the First Graphene team to identify key prospects and customers and focus our resources on these to drive projects through the development funnel to commercial sales. The safety and welfare of all employees is of paramount importance. COVID-19 The Company continues to monitor developments and has established the following approach to keeping our people safe: Business Travel Environment and Sustainability The Directors and management are conscious of ensuring all activities are undertaken with a view to achieving the highest environmental standards which are practically possible. First Graphene has placed a moratorium on any international business travel until further notice. We also asked staff to minimise domestic travel to ‘business-essential only’ and look for other ways to collaborate, such as via Zoom and MS Teams. First Graphene – Annual Report 202020 Review of Operations (CONTINUED) Personal Travel Working From Home The Company strongly encouraged all staff to take laptops (if applicable) home each day. If they feel unwell or are required to stay out of the office, they will be equipped to work from home (if well enough). If they needed some support to set up from home, they were encouraged to contact our IT support provider to assist them to be operational. Clients Many clients enacted their own COVID-19 policies. The Company ensured we were aware of any policies with which we must comply with when on-site. If employees have any concerns about visiting a client’s premises, they were asked to raise them with the Company Secretary. General Precautions Our approach is aimed at safeguarding the health and safety of our people and doing our part to minimise the risk of COVID-19 spreading within the community. Staff have been asked to reconsider their need to travel internationally at this time. Flu Shot The flu season could exacerbate the spread and effect of COVID-19. While the flu vaccine won’t combat COVID-19, it will help reduce the severity and spread of flu, which can lower a person’s immunity. The Company recommended all staff consider a flu shot for these reasons. Hygiene Health authorities advise to protect themselves and others from infection, practice good hand and respiratory hygiene including: • • • • • Cleaning hands with soap and water or alcohol-based hand rubs; Covering their nose and mouth with a tissue or flexed elbow when coughing or sneezing; Avoiding contact with anyone who has symptoms such as fever, a cough, sore throat, fatigue, and shortness of breath; Staying home if they are unwell and encouraging others to do the same; and Trying to stay at least 1.5 metres away from people coughing or sneezing. First Graphene – Annual Report 202021 Review of Operations (CONTINUED) OUR VALUES Authenticity and Trust We honour our commitments and care about delivering reliable solutions to our customers. We are honest and transparent in our interactions with customers, investors, suppliers and research partners. Excellence We are world leaders in the science and engineering of graphene technologies; with highly skilled colleagues working with the best suppliers and research partners. Team Spirit and Collaboration We are open, flexible, pro-active, inclusive and responsive. Ethics and Integrity We care about our staff, our customers and our environment. We create products and solutions which have a positive impact on people and our planet. Innovation We seek out innovative solutions for our customers. We are open to close collaboration with our customers and suppliers to create novel, value adding products and service. First Graphene – Annual Report 202022 Directors’ Report The directors present their report together with the financial report of First Graphene Limited (‘Company’) and the entities it controlled (‘Consolidated Entity’ of ‘Group’) for the year ended 30 June 2020. Directors The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows. The Directors were in office for this entire period unless otherwise stated. Warwick Grigor BEc. LLB, MAusIMM, FAICD Non-Executive Chairman Mr Grigor is a highly respected and experienced mining analyst, with an intimate knowledge of all market related aspects of the mining industry. He is a graduate of the Australian National University having completed degrees in law and economics. His association with mining commenced with a position in the finance department of Hamersley Iron, and from there he moved to Sydney to become a mining analyst with institutional stockbrokers. Mr Grigor left County NatWest Securities in 1991 to found Far East Capital Limited which was established as a specialist mining company financier and corporate adviser, together with Andrew "Twiggy" Forrest. In 2008, Far East Capital Limited sponsored the formation of a stockbroking company, BGF Equities, and Mr Grigor assumed the position of Executive Chairman. This was re-badged as Canaccord Genuity Australia Limited when a 50% stake was sold to Canaccord Genuity Group Inc. Mr Grigor retired from Canaccord in October 2014, returning to Far East Capital Limited. Other Current Directorships None. Former Directorships in the Last 3 Years None. Interests in Shares and Options Ordinary shares 18,883,772 Options 11,854,951 Craig McGuckin Dip. Minsurv Class 1, Dip Surfmin Managing Director Mr McGuckin is a qualified mining professional with 34 years’ experience in the mining, drilling, petroleum and graphene industries. He has held senior positions including Senior Planning Engineer, Mine Manager and Managing Director of private and publicly listed companies. Other Current Directorships None. Former Directorships in the Last 3 Years None Interests in Shares and Options Ordinary shares 8,597,092 Options 3,715,852 Peter Youd B Bus (Accounting), AICA Executive Director Mr Youd is a Chartered Accountant and has extensive experience within the resources and oil and gas services, industries. For the last 31 years Mr Youd has held a number of senior management positions and directorships for publicly listed and private companies in Australia and overseas. Other Current Directorships None. Former Directorships in the Last 3 Years Non-executive director Haranga Resources Limited Interests in Shares and Options Ordinary shares 7,162,674 Options 3,703,244 First Graphene – Annual Report 202023 Directors’ Report (CONTINUED) Dr Andy Goodwin Ph.D. (Polymer Chemistry) Non-Executive Director Company Secretaries Andy has a successful track record in innovation and technology development roles within the speciality chemicals industry. Andy has extensive leadership experience with Sanofi, Dow Corning Corporation and Thomas Swan & Co. Ltd He has a PhD in polymer chemistry and an MTE Diploma from the IMD Business School in Lausanne, Switzerland. Andy has been actively involved in the development of the graphene materials industry since 2012. He joined First Graphene Limited in 2017 and is based in Manchester, UK. Appointed 1 July 2020 Other Current Directorships None. Former Directorships in the Last 3 Years None Interests in Shares and Options Ordinary shares 2,008,993 Options 3,108,993 Peter Youd B Bus (Accounting), AICA Nerida Schmidt B Com, CPA, F Fin (GDipAFin), ACIS (GDip CSP) Ms Schmidt has 29 years’ professional experience as the CFO and company secretary of a number of ASX, TSX and AIM listed companies in a variety of industries and has consulted to a number of listed and unlisted entities providing corporate, company secretarial and financial services. She holds a Bachelor of Commerce from the University of Western Australia, is a Certified Practising Accountant and a Fellow of Finsia. She is also a Chartered Secretary and holds a Graduate Diploma in Company Secretarial Practice. Results and Dividends The Group result for the year was a loss of $5,366,149 (2019: loss of $6,986,738). No final dividend has been declared or recommended as at 30 June 2020 or as at the date of this report (2019: $ nil). No interim dividends have been paid (2019: nil). Principal Activities During the financial year the principal continuing activities of the Consolidated Entity was as the leading supplier of high-performing graphene products with a robust manufacturing platform and an established 100 tonne/year graphene production capacity. PureGRAPH® graphene is easy to use and is enhancing the properties of customers’ products and materials across industries and applications worldwide. First Graphene Limited has a primary manufacturing base in Henderson, near Perth, WA. The company is incorporated in the UK as First Graphene (UK) Ltd and is a Tier 1 partner at the Graphene Engineering and Innovation Centre (GEIC), Manchester, UK. First Graphene – Annual Report 202024 Directors’ Report (CONTINUED) Events Since the End of the Financial Year On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operations during FY2021. Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2021 financial year. Although the Group cannot fully estimate the length or gravity of the COVID-19 effect, from its initial assessment, it is expecting to be able to continue as a going concern. years, other than as mentioned in the Chairman’s Statement and Review of Operations, as the Directors have reasonable grounds to believe the nascent nature of the graphene market makes it impractical to forecast future profitability and other material financial events. Directors’ and Other Officers’ Emoluments Details of the remuneration policy for Directors and other officers are included in the Remuneration Report (page 26) and the Corporate Governance Report lodged separately on ASX on the same day as this report is lodged. Details of the nature and amounts of emoluments for each Director of the Company and Executive Officers are included in the Remuneration Report. Environmental Regulations The Group’s graphene production and sales operations are subject to regulation In Australia by the National Industrial Chemicals Notification and Assessment Scheme (NICNAS) and by the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) in the European Union and United Kingdom. The Company’s Commercial Graphene Production facility has been approved as meeting the environmental standards set down by the Government of Western Australia’s Department of Environment Regulation. Significant Changes in State of Affairs Proceedings on Behalf of Company There were no significant changes in the state of affairs of the consolidated entity during the financial year. Likely Developments and Expected Results of Operations The Directors have excluded from this report any further information on the likely developments in the operations of the Group and the expected results of those operations in future financial No person has applied to the Court under Section 237 of the Corporations Act for leave to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. First Graphene – Annual Report 202025 Directors’ Report (CONTINUED) Share Options At the date of this report, First Graphene Limited has the following options exercisable into ordinary shares in First Graphene Limited. Listed Grant Date Date of Expiry Exercise Price Share option Various 8 August 2021 $0.25 each, if exercised after 8 August 2020 but on or before 8 August 2021. Unlisted Grant Date Date of Expiry Exercise Price Share option 6 February 2019 26 February 2022 $0.18 each, if exercised on or before 26 February 2022 Director Share option Other Share option 8 November 2019 8 November 2023 $0.25 each, if exercised on or before 8 November 2023 6 January 2020 8 November 2023 $0.25 each, if exercised on or before 8 November 2023 Number under option 107,445,242 Number under option 5,000,000 9,000,000 1,000,000 Directors’ meetings The number of meetings of Directors held during the year and the number attended by each Director was as follows: Directors' Meetings Meetings Attended Entitled to Attend Warwick Grigor Craig McGuckin Peter Youd 5 5 5 5 5 5 Indemnification and insurance of officers and auditors Under the Company’s constitution and subject to Section 199A of the Corporations Act 2001, the Company indemnifies each of the directors, the company secretary and every other person who is an officer of the Company and its wholly- owned subsidiaries. The above indemnity is a continuing indemnity and applies in respect of all acts done by a person while an officer of the Company or its wholly-owned subsidiaries even though the person is not an officer at the time the claim is made. The Company has entered into a Deed of Indemnity, Access and Insurance (“Deed”) with each current and former officer of the Company and its subsidiaries, including each director and company secretary and persons who previously held those roles. During the financial year, the Company has paid a premium in respect of insuring the directors and officers of the Company and the Group. The insurance contract prohibits disclosure of the premium or the nature of liabilities insured against under the policy. No indemnity or insurance is in place in respect of the auditor. First Graphene – Annual Report 202026 Renumeration Report (Audited) The information provided in this Remuneration Report has been audited as required by Section 308(3C) of the Corporations Act 2001. This report outlines the remuneration arrangements in place for Directors of First Graphene Limited and Executives of the Group. Key Management Personnel disclosed in this report: The remuneration policy is designed to encourage superior performance and long-term commitment to FGR. At this stage of the Company’s development there is no contractual performance based remuneration. Executive Directors do not receive any fees for being Directors of FGR or for attending Board meetings. Mr Craig McGuckin Managing Director Mr Peter Youd Executive Director Dr Andy Goodwin Non-Executive Director (appointed 1st July) Mr Warwick Grigor Non-Executive Chairman Remuneration Policy Emoluments of Directors and Senior Executives are set by reference to payments made by other companies of similar size and industry, and by reference to the skills and experience of the Directors and Executives. Details of the nature and amounts of emoluments of each Director of the Company are disclosed annually in the Company's annual report. Directors and Senior Executives are prohibited from entering into transactions or arrangements which limit the economic risk of participating in unvested entitlements. There has been no direct relationship between the Group’s financial performance and remuneration of key management personnel over the previous 5 years. Executive Director Remuneration Executive pay and reward consist of a base fee and short term performance incentives. Long term performance incentives may include options granted at the discretion of the Board and subject to obtaining the relevant approvals. The grant of options is designed to recognise and reward efforts as well as to provide additional incentive and may be subject to the successful completion of performance hurdles. Executives are offered a competitive level of base pay at market rates (for comparable companies) and are reviewed annually to ensure market competitiveness. All Executive Directors, Non-Executive Directors and responsible executives of FGR are entitled to an Indemnity and Access Agreement under which, inter alia, they are indemnified as far as possible under the law for their actions as Directors and officers of FGR. Non-Executive Director Remuneration The Company's policy is to remunerate non-executive Directors at a fixed fee for time, commitment and responsibilities. Remuneration for Non-Executive Directors is not linked to individual performance. Given the Company is at its early stage of development and the financial restrictions placed on it, the Company may consider it appropriate to issue unlisted options to Non-Executive Directors, subject to obtaining the relevant approvals. This Policy is subject to annual review. All of the Directors' option holdings are fully disclosed. From time to time the Company may grant options to non-executive Directors. The grant of options is designed to recognise and reward efforts as well as to provide Non-Executive Directors with additional incentive to continue those efforts for the benefit of the Company. Non-Executive Directors are remunerated for their services from the maximum aggregate amount (currently $300,000 per annum) approved by shareholders for this purpose. They receive a base fee which is currently set at $25,000 per annum per non-executive Director and $30,000 per annum for the non-executive Chairman. There are no termination payments to non-executive Directors on their retirement from office. The Company’s policy for determining the nature and amounts of emoluments of Board members and Senior Executives of the Company is set out below: First Graphene – Annual Report 2020 27 Renumeration Report (Audited) (CONTINUED) Setting Remuneration Arrangements The Company does not have a separate Remuneration Committee. Given the current size and composition of the Board, the Board believes there would be no efficiencies gained by establishing a separate Remuneration Committee. Accordingly, the Board performs the role of the Remuneration Committee. When the Board convenes as the Remuneration Committee it carries out those functions which are delegated to it in the Company’s Remuneration Committee Charter. Executive Officer Remuneration, including Executive Directors The remuneration structure for Executive Officers, including Executive Directors, is based on a number of factors, including length of service, the particular experience of the individual concerned, and the overall performance of the Company. The contracts for service between the Company and specified Directors and Executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement Executive Directors and Executives are paid employee benefit entitlements accrued to the date of retirement. As an incentive, the Company has adopted an employee share option plan. The purpose of the plan is to give employees, directors and officers of the Company an opportunity, in the form of options, to subscribe for shares. The Directors consider the plan will enable the Company to retain and attract skilled and experienced employees, board members and officers, and provide them with the motivation to make the Company more successful. First Graphene – Annual Report 202028 Renumeration Report (Audited) (CONTINUED) e c n a m r o f r e p d e t a e r l f o e u a V l n o i t a r e n u m e r s i i h c h w l a t o T s t n e m y a p s t n e m e l t i t n E s t c a r t n o c ) i i i ( e r a h S d e s a b - t s o P s u n o B t n e m y a p t n e m l y o p m E r e p s a y r a a S l s ’ r o t c e r i D i l e c h e V s e e f e c n a w o l l a e s a B g n i t l u s n o c e e f % $ A $ A $ A $ A $ A $ A $ A $ A 0 2 0 2 e n u J 0 3 : s w o l l o f s a s a w r a e y e h t g n i r u d p u o r G e h t f o s e v i t u c e x e t n e m e g a n a m y e k d n a r o t c e r i D h c a e r o f n o i t a r e n u m e r e h T 0 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f n o i t a r e n u m e r f o s l i a t e D s t fi e n e b r e h t o & s e v i t n e c n i m r e t t r o h S 4 4 6 . 8 4 7 . , 7 7 7 6 7 7 2 5 3 6 1 2 , 0 1 1 , 8 6 6 2 5 3 6 1 2 , – 2 6 4 9 5 4 , 7 0 7 3 6 , – – – 0 0 0 0 5 , 0 0 0 0 5 , – – – , 5 5 7 5 9 3 – – – 0 0 0 2 1 , , 5 2 4 8 9 4 ) i ( i n k c u G c M i g a r C 0 0 0 2 1 , , 8 5 7 9 8 3 ) i ( d u o Y r e t e P l e n n o s r e P t n e m e g a n a M y e K r e h t O s r o t c e r i D e v i t u c e x E – – – – s r o t c e r i D e v i t u c e x E - n o N ) i i ( i n w d o o G y d n A r D k c w i r a W r o g i r G 7 5 2 1 . 2 5 6 . 2 5 7 7 9 3 , 2 5 3 6 1 2 , 0 0 4 , 1 1 0 0 0 0 5 , 0 0 0 0 9 , 0 0 0 0 3 , e v i t u c e x e - n o n a s a d e t n o p p a s a w n w d o o G i i r D . 0 2 0 2 e n u J f o d n e e h t t a n o i t i s o p e m i t - l l u f s i h m o r f d e n g i s e r n w d o o G i r D . 0 2 0 2 y l u J 1 n o r o t c e r i d . 9 1 0 2 n i e c n a m r o f r e p e r a h s r o f i s t c a r t n o c t n e m t n o p p a r e d n u e u d s t n e m e l t i t n e s t c e fl e r t n e m y a p s u n o B . i i i r i e h t h t i w e c n a d r o c c a n i d e t a s n e p m o c e r a r e v e w o h s e e f s ’ r o t c e r i d e v i e c e r t o n o d d u o Y r e t e P r i M d n a n k c u G c M g a r C r i M . r a e y l a c s fi 0 2 0 2 e h t g n i r u d r e c fi f O y g o o n h c e T f e h C s a n o i t a r e n u m e r l i ’ i s n w d o o G r D s t c e fl e r n o i t a r e n u m e r e v o b a e h T . t n e m e e r g a t n a t l u s n o c e v i t c e p s e r . i . i i 1 0 1 , 2 0 3 , 2 3 6 7 2 1 7 , 0 0 4 , 1 1 0 0 0 0 5 1 , , 5 5 7 5 8 4 0 0 0 0 3 , 0 0 0 4 2 , 3 8 1 , 8 8 8 l a t o T First Graphene – Annual Report 2020 Renumeration Report (Audited) (CONTINUED) 29 f o e u a V l n o i t a r e n u m e r s i i h c h w e c n a m r o f r e p d e t a e r l - t s o P s u n o B l a t o T t n e m l y o p m E s a t n e m y a p y r a a S l s t n e m e l t i t n E s t c a r t n o c r e p s ’ r o t c e r i D i l e c h e V s e e f e c n a w o l l a e s a B g n i t l u s n o c e e f % $ A $ A $ A $ A $ A $ A $ A 9 1 0 2 e n u J 0 3 s r o t c e r i D e v i t u c e x E : s w o l l o f s a s a w r a e y e h t g n i r u d p u o r G e h t f o s e v i t u c e x e t n e m e g a n a m y e k d n a r o t c e r i D h c a e r o f n o i t a r e n u m e r e h T 9 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o f n o i t a r e n u m e r f o s l i a t e D s t fi e n e b r e h t o & s e v i t n e c n i m r e t t r o h S – – – – – – , 7 9 5 8 8 4 , 9 1 9 3 3 4 7 0 6 6 6 3 , – – – – – 0 5 9 2 2 1 , 0 5 4 0 1 , , 3 7 0 2 1 4 , 1 0 5 4 0 1 , – – – – – – – – 8 0 8 7 5 2 , – – – – – 0 0 5 2 8 , 0 0 0 0 3 , 0 0 0 2 1 , 7 9 5 6 7 4 , ) i ( i n k c u G c M g a r C i 0 0 0 2 1 , 9 1 9 , 1 2 4 ) i ( d u o Y r e t e P – – – l e n n o s r e P t n e m e g a n a M y e K r e h t O 9 9 7 8 0 1 , i n w d o o G y d n A r D s r o t c e r i D e v i t u c e x E - n o N – – r o g i r G k c w i r a W ) i i ( r e v r a C e v i l C 8 0 3 0 4 3 , 0 0 0 0 3 , 0 0 0 4 2 , , 5 1 3 7 0 0 , 1 l a t o T r i e h t h t i w e c n a d r o c c a n i d e t a s n e p m o c e r a r e v e w o h s e e f s ’ r o t c e r i d e v i e c e r t o n o d d u o Y r e t e P r i M d n a n k c u G c M g a r C r i M . 9 1 0 2 y r a u r b e F 4 n o d e n g i s e r d n a 8 1 0 2 r e b o t c O 2 2 n o d e t n o p p a s a w i r e v r a C r M . t n e m e e r g a t n a t l u s n o c e v i t c e p s e r . i . i i First Graphene – Annual Report 2020 30 Renumeration Report (Audited) (CONTINUED) The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. The Group is in the early development phase of its operations, and due consideration is made of developing long term shareholder value. The Board has regard to the following indices in respect of the current financial year to facilitate the long-term growth of the Consolidated Group: Item 2020 2019 Sales revenue $ 289,773 22,771 2018 7,180 2017 2016 – – Loss before tax $ (5,366,149) (6,986,738) (7,024,612) (4,259,9600) (4,677,224) Basic loss per shares (cents) Increase/(decrease in share price (%) (1.11) (1.78) (1.65) (1.32) (1.86) (45.1) 134.2 275.3 (57.5) 226.4 Relationship between remuneration and company performance There is not a connection between the profitability of the Company and remuneration as the Company. Name Craig McGuckin Peter Youd Warwick Grigor Dr Andy Goodwin % Fixed remuneration % Short Term Incentive % Long Term Incentive 65.71 60.14 33.04 86.14 6.44 7.48 12.57 – 27.85 32.38 54.39 13.86 Service agreements Remuneration and other terms of employment for the Executives are formalised in service agreements. These agreements specify the components of remuneration benefits and notice periods. The material terms of service agreements with the Executive Directors and Key Management Personnel are noted as follows: First Graphene – Annual Report 202031 Renumeration Report (Audited) (CONTINUED) Name Craig McGuckin Peter Youd Dr Andy Goodwin Term of agreement and notice period Base fee Base salary Termination payment(4) No fixed term; 12 months(1) No fixed term; 12 months(1) No fixed term; 3 months $510,425(2) $401,758(2) – – – £212,000(3) None None None 1. 2. 3. 4. The twelve-month notice period applies only to the Company. The executive is required to give three months’ notice. Base fee quoted is for the year ended at 30 June 2020 and includes vehicle allowance. Reflects Dr Goodwin’s salary for the year ended at 30 June 2020. He has subsequently retired as a full-time employee and is a non-executive director. Notice period of termination benefit in lieu of notice (on behalf of the Company), other than for gross misconduct. There are no other service agreements in place. Share-based compensation Shares issued as part of remuneration for the year ended 30 June 2020 No shares were issued to directors and other key management personnel as part of compensation during the year. Options issued as part of remuneration for the year ended 30 June 2020 Options were issued to directors and other key management personnel as part of compensation during the year. Using the Black Scholes option pricing model and based on the assumptions set out below, the Director Options were ascribed the following value: Using the Black Scholes option pricing model and based on the assumptions set out below, the Senior Management Options were ascribed the following value: Assumptions Assumptions Valuation date Exercise price Expiry date (length of time from issue) Risk free interest rate Market price of shares $0.16 Market price of shares 8 November 2019 Valuation date 6 January 2020 8 November 2023 – 4.0 years Expiry date (length of time from issue) 8 November 2023 – 3.84 years $0.25 Exercise price 0.73% Risk free interest rate Volatility 75% Volatility Indicative Value of Director Option (cents) Total Value of Director Options - $ 0.0721 649,056 Indicative Value of Senior Management Option (cents) Total Value of Senior Management Options - $ $0.15 $0.25 0.725% 75% 0.0637 63,707 First Graphene – Annual Report 2020 32 Renumeration Report (Audited) (CONTINUED) If a Director resigns within 12 months of the date of issue of the Options, then 1/3 of that Director’s unexercised Options will automatically lapse at the time of resignation, with the outgoing Director retaining the 2/3 balance of unexercised Options. Options and rights holdings held by key management personnel Directors Balance 01.07.19 Granted Exercised Other Balance 30.06.20 Total vested 30.06.20 Vested & exercisable 30.06.20 Vested & un- exercisable 30.06.20 Craig McGuckin – 3,000,000 Peter Youd 52,091 3,000,000 7,138,244 3,000,000 Warwick Grigor Dr Andy Goodwin – – – 715,852 3,715,852 2,715,852 2,715,852 651,153 3,703,244 2,703,244 2,703,244 1,716,707 11,854,951 10,854,951 10,854,951 – – – – 2,000,000 1,000,000 (450,000) 558,993 3,108,993 2,775,660 2,775,660 Shareholdings held by key management personnel Balance 01.07.19 Granted Exercise of options Acquired(i) Other Directors Craig McGuckin Peter Youd 7,881,240 6,511,521 Warwick Grigor 17,105,946 Dr Andy Goodwin 1,000,000 – – – – – – – 715,852 651,153 1,777,826 450,000 558,993 Balance 30.06.20 8,597,092 7,162,674 18,883,772 2,008,993 – – – – (i) Shares were acquired through acceptance of entitlements First Graphene – Annual Report 202033 Renumeration Report (Audited) (CONTINUED) Transactions with other related parties During the reporting period, placement fees were paid to Far East Capital Limited, a company of which Mr Grigor is a Director, for equity raisings during fiscal 2020 totalling $170,425 (2019: $197,868). There were no other payments to related parties. There were no loans or other transactions with key management personnel. No remuneration consultants were utilised at this point in the Company’s development. Voting rights At the 2019 Annual General Meeting held on 8 November 2019 there were 8.43% of the votes against the adoption of the remuneration report. End of audited Remuneration Report First Graphene – Annual Report 202034 Directors’ Report (CONTINUED) Auditor’s independence The Directors received the independence declaration from the auditor of First Graphene Limited as stated on page 35. Auditor’s independence The Directors received the independence declaration from the auditor of First Graphene Non-audit services Limited as stated on page 23. Non-audit services During the period BDO Corporate Tax (WA) Pty Ltd was paid $33,794 for the provision of taxation services (2019: $27,038). BDO Corporate Tax (WA) Pty Ltd is an affiliate member of BDO Audit (WA) Pty Ltd Refer to Note 22 for further details. During the period BDO Corporate Tax (WA) Pty Ltd was paid $27,038 for the provision of taxation services (2018: $23,829). BDO Corporate Tax (WA) Pty Ltd is an affiliate member of BDO Audit (WA) Pty Ltd. Refer to Note 23 for further details The board of directors has considered the position and is satisfied the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied the provision of non-audit services by the auditor, as set out in Note 23, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: The board of directors has considered the position and is satisfied the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied the provision of non-audit services by the auditor, as set out in Note 23, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the board to ensure they do not impact • • the impartiality and objectivity of the auditor all non-audit services have been reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants Signed in accordance with a Resolution of the Directors. Signed in accordance with a Resolution of the Directors. Craig McGuckin Craig McGuckin Managing Director Managing Director Dated at Perth this 31st day of August 2020 Dated at Perth this 30th day of August 2019 . Corporate Governance Statement Corporate Governance Statement The Company's full Corporate Governance Statement is available on the Company's website, www.firstgraphene.net/corporate/corporate-governance.html. The Company's full Corporate Governance Statement is available on the Company's website, www.firstgraphene.net/corporate/corporate-governance.html A completed Appendix 4G and the full Corporate Governance Statement have been lodged A completed Appendix 4G and the full Corporate Governance Statement have been lodged with the Australian Securities Exchange as required under Listing Rules 4.7.3 and 4.7.4. with the Australian Securities Exchange as required under Listing Rules 4.7.3 and 4.7.4. Annual General Meeting The Company’s Annual General Meeting will be held on Friday, 9th October 2020 at the Celtic Club, 48 Ord Street, West Perth, Western Australia commencing at 3:30pm AWST. A Notice of Meeting will be issued in due course. FIRST GRAPHENE LIMITED ANNUAL REPORT 2019 First Graphene – Annual Report 2020 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 35 Auditor's Independence Declaration As lead auditor of First Graphene Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF FIRST GRAPHENE LIMITED 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia This declaration is in respect of First Graphene Limited and the entities it controlled during the period. DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF FIRST GRAPHENE LIMITED As lead auditor of First Graphene Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: Jarrad Prue 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and Director 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of First Graphene Limited and the entities it controlled during the period. BDO Audit (WA) Pty Ltd Perth, 31 August 2020 Jarrad Prue Director BDO Audit (WA) Pty Ltd Perth, 31 August 2020 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. First Graphene – Annual Report 2020 36 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2020 Note 2020 A$ 2019 A$ Continuing operations Revenue from contracts with customers 3 Cost of goods sold Gross profit/(loss) Other income Research & development Selling & marketing Mining asset maintenance General & administrative Operating loss Finance income Finance expense Loss from continuing operations before tax Income tax (expense)/benefit 4(a) 4(b) 4(c) 4(d) 4(e) 5(a) 5(b) 6 289,773 (262,896) 26,877 1,444,990 (3,229,900) (290,548) (252,562) (3,048,724) 22,771 (30,112) (7,341) 1,684,458 (3,195,475) (181,647) (2,308,424) (3,039,791) (5,349,867) (7,048,220) 7,337 (23,619) 107,284 (45,802) (5,366,149) (6,986,738) – – Loss for the year (5,366,149) (6,986,738) Other comprehensive income Items which may be reclassified to profit or loss Exchange differences arising on translation of foreign operations Other comprehensive income for the year 26,609 26,609 9,385 9,385 Total comprehensive loss for the year (5,339,540) (6,977,353) First Graphene – Annual Report 2020Consolidated Statement of Profit or Loss and Other Comprehensive Income (CONTINUED) For the year ended 30 June 2020 37 Note 2020 A$ 2019 A$ Continuing operations Loss for the year attributed to: Owners of First Graphene Limited Non-Controlling Interests Total comprehensive loss for the year attributed to: Owners of First Graphene Limited Non-Controlling Interests Loss per share for the year attributed to the owners of First Graphene Limited Basic (loss) per share (cents per share) Diluted (loss) per share (cents per share) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes (5,239,650) (7,364,644) (126,499) 377,906 (5,366,149) (6,986,738) (5,213,041) (7,355,259) (126,499) 377,906 (5,339,540) (6,977,353) 7 7 (1.11) (1.11) (1.78) (1.78) First Graphene – Annual Report 202038 Consolidated Statement of Financial Position For the year ended 30 June 2020 Assets Current assets Cash and cash equivalents Inventories Trade and other receivables Other current assets Total current assets Non-current assets Property, plant and equipment Right of use asset Inventories Intangible assets Financial Assets at FVPL Total non-current assets Total assets Liabilities Current liabilities Note 2020 A$ 2019 A$ 8 9 10 9 8,053,134 1,601,522 65,568 332,495 3,664,137 1,005,641 182,250 377,841 10,052,719 5,229,869 2,314,167 219,067 1,009,200 294,811 215,102 4,052,347 14,105,066 1,627,502 – – 250,000 – 1,877,502 7,107,371 Trade and other payables 11 1,569,670 1,019,622 Employee liabilities Lease liabilities Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities Net Assets 63,221 72,791 – – 1,705,682 1,019,622 152,999 152,999 1,858,681 12,246,385 – – 1,019,622 6,087,749 First Graphene – Annual Report 2020Consolidated Statement of Financial Position (CONTINUED) 39 Equity Issued capital Reserves Accumulated losses Capital and reserves attributable to owners of First Graphene Limited Note 2020 A$ 2019 A$ 13 15 95,778,819 85,068,406 5,887,471 5,148,099 (89,531,680) (84,292,030) 12,134,610 5,924,475 Non-controlling interest Total equity 111,775 12,246,385 163,274 6,087,749 The above consolidated statement of financial position should be read in conjunction with the accompanying notes First Graphene – Annual Report 202040 Consolidated Statement of Changes in Equity For the year ended 30 June 2020 $ A $ A $ A $ A $ A $ A $ A $ A l a t o T - n o N g n i l l o r t n o c s t s e r e t n i l d e t a u m u c c A s e s s o l r e h t O e v r e s e R n o i t a l s n a r T e v r e s e r n o i t p O e v r e s e r d e s a b e r a h S s t n e m y a p e v r e s e r d e u s s I l a t i p a C , 5 8 3 6 4 2 , 2 1 2 3 8 2 8 1 , ) 0 8 6 , 1 3 5 9 8 ( , ) 7 5 0 , 1 7 ( 2 0 1 , 4 2 0 2 7 6 4 , 7 6 1 , 6 1 4 5 , , 9 1 8 8 7 7 5 9 , , 6 9 6 8 2 6 6 , , 7 9 9 0 4 3 4 , – – ) , 0 8 2 9 5 2 ( 3 6 7 2 1 7 , – – 0 0 0 5 7 , 7 5 0 6 4 1 , – – – – – , 9 4 7 7 8 0 6 , 4 7 2 3 6 1 , ) 9 4 1 , 6 6 3 5 ( , ) 9 9 4 6 2 1 ( , ) , 0 5 6 9 3 2 5 ( , , ) 0 3 0 2 9 2 4 8 ( , 9 0 6 6 2 , – – ) 0 4 5 9 3 3 , , 5 ( ) 9 9 4 6 2 1 ( , , ) 0 5 6 9 3 2 5 ( , – – – – – – – – ) 7 5 0 , 1 7 ( – 9 0 6 6 2 , 9 0 6 6 2 , – – – – – – – – – – – – – ) 7 0 5 , 2 2 ( 2 0 2 7 6 4 , – – – – – – – , 4 0 4 3 0 7 4 , – – – , 6 0 4 8 6 0 5 8 , 9 1 0 2 y l u J 1 t a s A r a e y e h t r o f s s o L y c n e r r u c n g e r o F i n o i t a l s n a r t e v i s n e h e r p m o c l a t o T r a e y e h t r o f s s o l s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T 3 6 7 2 1 7 , – , 6 9 6 8 2 6 6 , , 7 9 9 0 4 3 4 , – ) , 0 8 2 9 5 2 ( s t n e m e c a p e r a h S l r a e y e h t g n i r u d g n i l l o r t n o c - n o n n i e g n a h C d e u s s i s e r a h S i l g n d o h t s e r e t n i t n e m y a p d e s a b e r a h S s n o i t c a s n a r t s t s o c e u s s i e r a h S 0 2 0 2 e n u J 0 3 First Graphene – Annual Report 2020 Consolidated Statement of Changes in Equity (CONTINUED) 41 $ A $ A $ A $ A $ A $ A $ A $ A l a t o T - n o N g n i l l o r t n o c s t s e r e t n i l d e t a u m u c c A s e s s o l r e h t O e v r e s e R n o i t a l s n a r T e v r e s e r n o i t p O e v r e s e r d e s a b e r a h S s t n e m y a p e v r e s e r d e u s s I l a t i p a C , ) 9 8 3 7 3 4 6 7 ( , , ) 7 9 9 9 8 4 ( ) 2 9 8 , 1 3 ( 2 0 2 7 6 4 , 8 2 6 8 6 3 , , 4 8 2 1 , 4 0 1 , 9 7 8 1 0 2 y l u J 1 t a s A 5 8 3 9 , – – , 5 4 2 0 0 9 6 , , ) 8 3 7 6 8 9 6 ( , ) 5 3 4 0 8 ( , 6 0 9 7 7 3 , , ) 4 4 6 4 6 3 7 ( , , ) 3 5 3 7 7 9 6 ( , , 0 0 0 0 5 9 4 , – , 1 1 0 3 6 3 , 1 – – – 6 0 9 7 7 3 , – – , ) 4 4 6 5 6 3 7 ( , – – – – – , ) 7 9 9 9 8 4 ( , 7 9 9 9 8 4 – , ) 3 3 7 8 4 3 ( 6 7 7 4 3 3 , – – – ) 7 9 1 , 4 3 1 ( ) 7 9 1 , 4 3 1 ( – – – – , 9 4 7 7 8 0 6 , 4 7 2 3 6 1 , , ) 0 3 0 2 9 2 4 8 ( , – – – – – – 5 8 3 9 , 5 8 3 9 , – – – – – – – – – – – – – – – – – ) 7 0 5 , 2 2 ( 2 0 2 7 6 4 , – – – – – – – – – s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T – – – e v i s n e h e r p m o c l a t o T r a e y e h t r o f s s o l r a e y e h t r o f s s o L y c n e r r u c n g e r o F i n o i t a l s n a r t , 0 0 0 0 5 9 4 , s t n e m e c a p e r a h S l r a e y e h t g n i r u d , 1 1 0 3 6 3 , 1 d e u s s i s e r a h S – l d e t a u m u c c a o t r e f s n a r T s e s s o l 6 7 7 4 3 3 , , 4 0 4 3 0 7 4 , ) , 0 8 2 9 5 2 ( - n o n f o n o i t i n g o c e r - e D t s e r e t n i g n i l l o r t n o c , ) 3 3 7 8 4 3 ( s t s o c e u s s i e r a h S – – , 6 0 4 8 6 0 5 8 , e h t g n i r u d d o s l s n o i t p O r a e y t n e m y a p d e s a b e r a h S s n o i t c a s n a r t 9 1 0 2 e n u J 0 3 e t o n g n i y n a p m o c c a e h t h t i w n o i t c n u n o c n j i d a e r e b d u o h s l y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c e v o b a e h T First Graphene – Annual Report 2020 42 Consolidated Statement of Cash Flows For the year ended 30 June 2020 Cash flows from operating activities Revenue from sales Payments to suppliers and employees Interest received Interest paid R&D and grant funding received Other income Net cash outflows from operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for intellectual property Payments for investment in third party Note 2020 A$ 2019 A$ 448,161 22,771 (6,758,025) (6,866,333) 7,337 (13,460) 1,397,112 179,521 14,031 (48,837) 1,142,172 408,602 (4,739,354) (5,327,594) (1,122,133) (889,244) 1,864 20,845 (49,850) (215,102) – – 16 10 Deconsolidation of subsidiary, net of cash – (191,568) Net cash outflows from investing activities (1,385,221) (1,059,967) Cash flow from financing activities Proceeds from placement of shares Proceeds from the exercise of options Payment of share issue/capital raising costs Proceeds from non-controlling interest Repayments of borrowing Finance lease payments 13 13 13 6,424,171 4,333,967 (259,280) 75,000 – (68,385) 4,957,031 1,335,811 (464,893) – (533,419) (87,525) Net cash inflows from financing activities 10,505,473 5,207,005 Net increase/(decrease) in cash and cash equivalents 4,380,898 (1,180,556) Cash and cash equivalents at beginning of the year 3,664,137 4,838,929 Effect of exchange rate fluctuations on cash held 8,099 5,764 Cash and cash equivalents at end of the year 8 8,053,134 3,664,137 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes First Graphene – Annual Report 2020Notes to the Consolidated Financial Statements 1. Basis of preparation 2. Segment reporting 3. Revenue from contracts with customers 4. Operating income and expense 5. Finance income and expense 6. Income tax 7. Loss per share 8. Cash and cash equivalents 9. Inventories 10. Property, plant and equipment 11. Trade and other payables 12. Financial risk management 13. Issued capital 14. Share based payments 15. Reserves and accumulated losses 16. Statement of cash flow reconciliation 17. Commitments 18. Deconsolidation of Graphene Solutions Pty Ltd 19. Results of the parent company 20. Events since the end of the financial year 21. Related party transactions 22. Auditors’ remuneration 43 44 51 55 55 57 58 60 61 61 62 64 65 71 72 75 76 77 78 79 80 80 81 First Graphene – Annual Report 202044 Notes to the Consolidated Financial Statements 1. Basis of Preparation First Graphene Limited (“First Graphene” or the “Company”) is a for-profit company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange. Its registered office and principal place of business is: First Graphene Limited 1 Sepia Close Henderson WA 6166 A description of the nature of operations and principal activities of FGR and its subsidiaries (collectively, the “Group”) is included in the Directors’ Report, which is not part of these financial statements. The financial statements were authorised for issue in accordance with a resolution of the directors on 31 August 2020. The financial report is a general-purpose financial report which: • has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); • has been prepared on a historical cost basis except for assets and liabilities and share- based payments which are required to be measured at fair value. The basis of measurement is discussed further in the individual notes; is presented in Australian dollars; • • presents reclassified comparative information where required for consistency with the current year’s presentation; • adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or after 1 July 2019; • adopted Accounting Standards and Interpretations which have been issued or amended including consequential amendments to other standards which was adopted on 1 July 2019. Accounting policies New standards, interpretation and amendments adopted by the Group The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 30 June 2019, except for the adoption of new accounting standards and interpretations effective for annual periods beginning 1 July 2019. The effective of the adoption of these new accounting standards and interpretations did not have a material impact on the annual consolidated financial statements of the Group, the nature and effect of which is discussed below. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. First Graphene – Annual Report 2020 45 Notes to the Consolidated Financial Statements AASB 16 Leases Effective 1 July 2019, AASB 16 has replaced AASB 17 Leases and IFRIC 4 Determining whether an Arrangement Contains a Lease. AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 17, with the distinction between operating leases and finance leases being retained. The Group does not have significant leasing activities acting as a lessor. (a) Transition Method and Practical Expedients Utilised The Group adopted AASB 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. The Group elected to apply the practical expedient to not reassess whether a contract is, or contains, a lease at the date of initial application. Contracts entered into before the transition date which were not identified as leases under AASB 17 and IFRIC 4 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019. AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Group applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 17: • Apply a single discount rate to a portfolio of leases with reasonably similar characteristics; • Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date; • Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 36 as at the date of initial application; and • Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application. As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less. On adoption of AASB 16, the Group recognised right-of-use assets and lease liabilities in relation to leases of the Henderson graphene facility, which had previously been classified as operating leases. The lease liability was measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate as at 1 July 2019. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 5.0%. The right-of-use assets were measured as follows: (a) Henderson graphene facility: Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. First Graphene – Annual Report 2020 46 Notes to the Consolidated Financial Statements The following table presents the impact of adopting AASB 16 on the statement of financial position as at 1 July 2019: Right-of-use-assets Lease liabilities Net impact on accumulated losses 1 July 2019 $ 294,175 (294,175) - Included in profit or loss for the period are $75,109 of amortisation of right-of-use assets and $13,460 of finance expense on lease liabilities. Short-term or low-value leases included in profit or loss for the period was $119,426. The following table reconciles the minimum lease commitments disclosed in the Group’s 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019: Minimum operating lease commitment at 30 June 2019 Less: short term or low value leases not recognised under AASB 16 Undiscounted lease payments Less: effect of discounting using the incremental borrowing rate as at date of initial application Lease labilities recognised at 1 July 2019 (b) Significant Accounting Policies subsequent to Transition 1 July 2019 $ 400,106 (75,363) 324,743 (30,568) 294,175 All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • • Leases of low value assets; and Leases with a term of 12 months or less. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: • • • amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option; and any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: • • • lease payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset. First Graphene – Annual Report 2020 47 Notes to the Consolidated Financial Statements Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right- of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate or when there is a change in the assessment of the term of any lease. AASB Interpretation 23 Uncertainty over Income Tax Treatment The Interpretation clarifies the application of the recognition and measurement criteria in AASB 112 Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following: • Whether an entity considers uncertain tax treatments separately • • • The assumptions an entity makes about the examination of tax treatments by taxation authorities How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates How an entity considers changes in facts and circumstances An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to be followed. The Group applies significant judgement in identifying uncertainties over income tax treatments. The Group assessed whether the Interpretation had an impact on its consolidated financial statements. Upon adoption of the Interpretation, the Group concluded that there were no uncertain tax positions and therefore the interpretation does not have an impact on the consolidated financial statements of the Group. Going Concern The financial report is a general purpose financial report which has been prepared on a going concern basis and in accordance with Australian Accounting Standards, the Corporations Act 2001 and other authoritative pronouncements of the Australian Accounting Standards Board. Statement of compliance The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board. The financial report also complies with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The following Standards and Interpretations have been issued by the AASB, are relevant to the Group, but are not yet effective and have not been adopted by the Group for the period ending 30 June 2020. Unless otherwise stated, the Group has yet to fully assess the impact of these Standards and Interpretations when applied in future periods. Amendment to Conceptual Framework for Financial Reporting The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. It is arranged in eight chapters, as follows: • Chapter 1 – The objective of financial reporting • Chapter 2 – Qualitative characteristics of useful financial information • Chapter 3 – Financial statements and the reporting entity • Chapter 4 – The elements of financial statements • Chapter 5 – Recognition and derecognition First Graphene – Annual Report 202048 Notes to the Consolidated Financial Statements • Chapter 6 – Measurement • Chapter 7 – Presentation and disclosure • Chapter 8 – Concepts of capital and capital maintenance AASB 2019-1 has also been issued, which sets out the amendments to Australian Accounting Standards, Interpretations and other pronouncements in order to update references to the revised Conceptual Framework. The changes to the Conceptual Framework may affect the application of accounting standards in situations where no standard applies to a particular transaction or event. In addition, relief has been provided in applying AASB 3 and developing accounting policies for regulatory account balances using AASB 108, such that entities must continue to apply the definitions of an asset and a liability (and supporting concepts) in the Framework for the Preparation and Presentation of Financial Statements (July 2004), and not the definitions in the revised Conceptual Framework. The amendments apply prospectively on or after 1 January 2020, with no material effect to the Group. Amendments to AASB 3: Definition of a Business In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine whether an acquired set of activities and assets is a business or not. They clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing any missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test. New illustrative examples were provided along with the amendments. Since the amendments apply prospectively to transactions or other events that occur on or after the date of first application, the Group will not be affected by these amendments on the date of transition. Amendments to AASB 101: Definition of Material This Standard amends AASB 101 Presentation of Financial Statements and AAS 108 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. The amendments apply prospectively on or after 1 January 2020, with no material effect to the Group. Amendments to IAS 1: Presentation of Financial Statements This Standard aims to improve presentation in financial statements by clarifying the criteria for the classification of a liability as either current or non-current. This amendment is to: • Clarify that the classification of a liability as either current or non-current is based on the entity’s rights at the end of the reporting period • Clarify the link between the settlement of the liability and the outflow of resources from the entity The amendments apply prospectively on or after 1 January 2022, with no material effect to the Group. First Graphene – Annual Report 2020 49 Notes to the Consolidated Financial Statements Basis of consolidation The consolidated financial statements comprise the financial statements of First Graphene Limited and its subsidiaries as at 30 June 2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: • Power over the investee (i.e. existing rights that give the current ability to direct the relevant activities of the investee); • Exposure, or rights, to variable returns from its involvement with the investee; and • The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other voting holders of the investee • • Rights arising from other contractual arrangements • The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • De-recognises the assets (including goodwill) and liabilities of the subsidiary • De-recognises the carrying amount of any non-controlling interests • De-recognises the cumulative translation differences recorded in equity • Recognises the fair value of the consideration received • Recognises the fair value of any investment retained’ • Recognises any surplus or deficit in profit or loss • Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities Foreign currency translation The financial report is presented in Australian dollars, which is First Graphene Limited’s functional and presentation currency. First Graphene – Annual Report 202050 Notes to the Consolidated Financial Statements Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. OTHER ACCOUNTING POLICIES Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. Where possible, wording has been simplified to provide clearer commentary on the financial report of the Group. Accounting policies determined non-significant are not included in the financial statements. There have been no changes to the Group’s accounting policies that are no longer disclosed in the financial statements. KEY ESTIMATES AND JUDGEMENTS In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are found in the following notes. COVID Impact Judgement has been exercised in considering the impacts the Coronavirus (COVID-19) pandemic has had, or may have, on the company based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain and staffing. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the company unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID- 19) pandemic. Note 9 Note 10 Note 18 Inventories Useful life of assets Deconsolidation of Graphene Solutions Pty Ltd 61 62 78 Share Based Payment Estimates Judgement has been exercised in calculating the value of share based payments. The closing price of shares sales on the day of the award of the share based payment is used for calculating the fair value of the payment. First Graphene – Annual Report 2020 51 Notes to the Consolidated Financial Statements Control over 2D Fluidics Pty Ltd The directors have concluded the Group controls 2D Fluidics Pty Ltd even though it holds less than 100% of the voting rights in this subsidiary. This is because the Group exercises the management of the company and has board control. THE NOTES TO THE FINANCIAL STATEMENTS The notes include information which is required to understand the financial statements and is material and relevant to the operations and the financial position and performance of the Group. Information is considered relevant and material if, for example: • • • • the amount is significant due to its size or nature; the amount is important for understanding the results of the Group; it helps to explain the impact of significant changes in the Group’s business; or it relates to an aspect of the Group’s operations that is important to its future performance. The notes are organised into the following sections: • Performance for the year; • Operating assets and liabilities; • Capital structure and risk; • Other disclosures. A brief explanation is included under each section. Performance For the Year This section focuses on the results and performance of the Group. This covers both profitability and the resultant return to shareholders via earnings per share combined with cash generation. 2. Segment reporting Identification of reportable segments The Group has identified its operating segments based on the internal reports which are reviewed and used by the Board (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The existing operating segments are identified by management based on the way the Group’s operations were carried out during the financial year. Discrete financial information about each of these operating businesses is reported to the Board on a monthly basis. The reportable segments are based on aggregated operating segments determined by the similarity of the asset base and revenue or income streams, as these are the sources of the Group’s major risks and have the most effect on the rates of return. The Group’s segment information for the current reporting period is reported based on the following segments: Graphene production The Board has defined a new reportable segment for the current year, being graphene production from the Henderson facility. As the Company expands its graphene production and inventory, the Board monitors the Company based on actual verses budgeted expenditure incurred. First Graphene – Annual Report 2020 52 Notes to the Consolidated Financial Statements Research and development As the Company expands its research inhouse and in conjunction with third parties, the Board monitors the Company based on actual verses budgeted expenditure incurred. Corporate services This segment reflects the overheads associated with maintaining the ASX listed FGR corporate structure, identification of new assets and general management of an ASX listed entity. Mining Asset Maintenance Although the Company has suspended its mineral exploration and development in Sri Lanka the Board monitors the Company based on actual verses budgeted expenditure incurred. First Graphene – Annual Report 2020l a t o T $ 9 1 0 2 0 2 0 2 9 1 0 2 t e s s A g n n M i i e c n a n e t n a M i $ 0 2 0 2 9 1 0 2 0 2 0 2 9 1 0 2 0 2 0 2 9 1 0 2 0 2 0 2 m o r f e u n e v e R $ $ i s e c v r e S e t a o p o C r r l t n e m p o e v e D & h c a e s e R r n o i t c u d o r P e n e h p a G r $ t n e m g e S s s e n i s u B s t n e m e a t S t l i a c n a n i F d e a d t i l o s n o C e h t o t t s e o N - - - - - - 1 7 7 2 2 , 3 7 7 , 9 8 2 - - - - 1 3 0 4 1 , 7 3 3 , 7 9 8 7 1 , - - - - - - - - - - - - - - - - - 0 3 6 , 1 1 7 3 3 , 7 2 1 6 - - - - - 1 7 7 , 2 2 3 7 7 9 8 2 , - - - - - - - 3 7 7 9 8 2 , t n e m g e s - r e t n I s r e m o t s u c s e u n e v e r l r a n e t x e e m i t n i i t n o P e m i t r e v O e u n e v e r r t s e e t n I , ) 8 3 7 6 8 9 6 ( , ) 9 4 1 , 6 6 3 , 5 ( , ) 3 9 7 0 9 2 2 ( , ) 2 6 5 , 2 5 2 ( ) 4 5 1 , 4 1 1 , 3 ( ) 2 6 6 , 7 1 3 , 3 ( ) 9 4 4 , 4 7 5 , 1 ( ) 8 3 4 , 3 9 7 , 1 ( ) 2 4 3 , 7 ( ) 7 8 4 2 ( , s s o l g n i t r a e p O 8 9 8 9 7 4 , 3 6 0 , 8 6 7 5 2 1 4 3 1 , 0 0 9 , 4 4 4 7 4 , 8 5 1 2 , 2 2 9 9 2 , 7 3 3 0 5 0 , 8 7 1 4 4 7 4 1 , 9 0 1 , 5 7 4 4 7 4 1 , 4 1 5 , 3 1 - 7 2 6 , 7 - 7 9 9 , 9 1 , 1 7 3 7 0 1 7 , , 2 2 6 9 1 0 1 , 6 6 0 , 5 0 1 , 4 1 4 3 1 4 6 , 5 8 6 , 8 1 5 8 4 , 2 9 8 , 3 8 7 0 , 7 7 3 , 8 2 5 7 , 0 5 1 , 3 2 9 1 , 3 4 0 , 3 1 8 6 , 8 5 8 , 1 9 0 7 2 1 , 6 1 3 , 6 0 1 7 , 1 5 7 7 6 0 , 9 8 4 , 1 3 0 2 , 5 5 2 8 0 3 , 6 6 1 - - - - 8 9 8 2 2 5 , 1 7 9 3 3 , n o i t a s i t r o m A e s n e p x e e s n e p x e n o i t i a c e p e D r , 1 1 1 6 6 6 2 , 0 9 9 6 9 1 , s t e s s a t n e m g e S t n e m g e S s e i t i l i b a i l d e s i r m o p a f o l o r t n o c i s n a b o t r e m o t s u c e h t e s u a c e b s i s i h T . a i r e t i r c e m i t n i i t n o p e h t g n i s u , 5 1 S R F I r e d n u e u n e v e r s e s i n g o c e r r p u o G e h T : o t d e t i m i l t o n e a r t u b , e d u c n l i s n o i t r a e d i s n o C . n o i t a g i l b o e c n a m o r f r e p a s e i f s i t a s y t i t n e e h t d n a t e s s a 53 t e s s a e h t f i o p h s r e n w o f r o s d a w e r d n a s k s i r t n a c i f i n g i s e h t s a h r e m o t s u c e h T . t e s s a e h t d e t p e c c a s a h r e m o t s u c e h T r e m o t s u c e h t o t t e s s a e h t f o n o i s s e s s o p l a c i s y h p d e r r e f s n a r t s a h y t i t n e e h T t e s s a e h t r o f t n e m y a p o t t h g i r r t n e s e p a s a h y t i t n e e h T t e s s a e h t o t e l t i t l a g e l s a h r e m o t s u c e h T • • • • • First Graphene – Annual Report 2020 54 Notes to the Consolidated Financial Statements Geographical areas In presenting the information on the basis of geographical areas, segment revenue is based on the geographical location of operations. Segment assets are based on the geographical location of the assets. Geographical segments Australia United Kingdom Sri Lanka Total 2020 $ 2019 $ Revenue Total Assets Revenue Total Assets 285,784 3,989 - 289,773 13,974,972 113,112 16,982 14,105,066 20,701 2,070 - 22,771 7,027,171 29,724 50,476 7,107,371 Reconciliation of segment assets and liabilities to the Statement of financial Position Reconciliation of segment assets to the Statement of Financial Position Total segments assets Inter-segment elimination Total assets per statement of financial position 2020 $ 21,832,721 (7,727,655) 14,105,066 Reconciliation of segment liabilities to the Statement of Financial Position Total segments liabilities Inter-segment elimination Total liabilities per statement of financial position 2020 $ 17,421,874 (15,563,193) 1,858,681 2019 $ 8,613,843 (1,506,472) 7,107,371 2019 $ 7,655,421 (6,635,799) 1,019,622 First Graphene – Annual Report 2020 55 Notes to the Consolidated Financial Statements 3. Revenue from contracts with customers Accounting Policy The Group accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable. Revenues from product sales are recognised when an identified performance obligation is satisfied, and the customer obtains and accepts control of the Company’s product. Sales of product generally occur at a point in time, typically upon delivery to the customer. Taxes collected from customers relating to product and service sales and remitted to governmental authorities are excluded from revenues. The Company expenses incremental costs of obtaining a contract as and when incurred because the expected amortisation period of the asset that the Company would have recognised is one year or less. Types of goods Sale of graphene Total revenue from contracts with customers 4. Operating income and expenses Accounting Policy 2020 $ 289,773 289,773 2019 $ 22,771 22,771 All revenue is stated net of the amount of goods and services tax (GST). Other revenue includes R&D credits received from the Australian tax government. Government Grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group satisfies all attached conditions. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, the fair value is credited against the asset and is released to the Statement of Profit or Loss and Other Comprehensive Income over the expected useful life of the relevant asset by equal annual instalments. Where a grant is received in relation to the tax benefit of research and development costs, the grant shall be credited to other income in the Statement of Profit or Loss and Other Comprehensive Income in the year of receipt. This includes JobKeeper and cash boost income received due to COVID-19 during the year which has been presented as other income. First Graphene – Annual Report 2020 56 Notes to the Consolidated Financial Statements 4. Operating income and expenses (continued) Depreciation Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment 3-10 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Other revenue and expenses from continuing operations: (a) Other income R&D and grant income Government grants related to COVID19 Profit on sale of property, plant & equipment Miscellaneous income Research & development Employee expenses (b) Consultant and research programs Legal and taxation expenses Depreciation Amortisation Impairment of inventory Rent of premises Other Selling & marketing (c) Employee expenses Advertising & promotion (d) (e) Mining lease maintenance Employee expenses Depreciation Amortisation Rent of premises Impairment Other General & administrative Employee expenses Director, finance & company secretarial fees Legal & other professional fees ASX listing, share registry and other corporate costs AIM listing and new business expenses Depreciation Amortisation Share based payment expense Option expenses Rent of premises Insurances Loss on deconsolidation of subsidiary Other Notes 2020 $ 2019 $ 1,263,583 1,666,528 179,521 1,886 - 1,444,990 1,013,331 1,338,571 154,444 178,050 19,997 46,800 - 478,707 3,229,900 115,642 174,906 290,548 40,473 44,900 - 50,785 - 116,404 252,562 299,193 576,107 571,446 145,592 - 22,215 7,627 52,500 712,763 62,942 105,613 - 492,726 3,048,724 - 16,790 1,140 1,684,458 891,007 952,386 207,931 337,299 - - 178,761 628,091 3,195,475 55,901 125,746 181,647 80,760 97,118 51,751 63,210 1,856,109 159,476 2,308,424 110,771 634,186 212,300 131,520 655,839 8,474 - 27,200 334,776 48,870 37,895 57,513 780,447 3,039,791 14 18 First Graphene – Annual Report 2020 57 Notes to the Consolidated Financial Statements 5. Finance income and expense Accounting Policy Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Finance income (a) Interest income on bank deposits Foreign exchange (loss)/gain - realised Finance benefit/(cost) of Traxys liability Finance expense (b) Interest expense Foreign exchange (loss)/gain - unrealised Notes 2020 $ 7,337 - - 7,337 (13,460) (10,159) (23,619) 2019 $ 14,031 5,764 87,489 107,284 (45,802) - (45,802) First Graphene – Annual Report 2020 58 Notes to the Consolidated Financial Statements 6. Income tax Accounting Policy Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The major components of income tax expense are: A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: Income Tax Expense Income tax expense / (benefit) (a) Current tax Deferred tax Under/(over) provision in prior years Total income tax expense (b) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity. Current tax Deferred tax (c) Reconciliation of income tax expense to prima facie tax payable - Loss before income tax from all activities - Prima facies tax benefit on loss before income tax at 30% (2019:30%) - entertainment - share-based payments - non-assessable income - other permanent differences - previously unrecognised deferred tax assets now brought to account - deferred tax assets not brought to account Income tax expense/(benefit) The applicable weighted average effective tax rates (d) Deferred tax liability Prepaid expenditure PPE Other temporary differences Off-set of deferred tax assets Net deferred tax liability recognised Consolidated 2020 $ Consolidated 2019 $ - - - - - (155,061) (155,061) - - - - - - - (5,366,254) (1,609,876) (7,009,962) (2,102,989) 1,972 229,579 (220,832) 190,825 - 1,408,332 - 0% 94,110 - 31,026 125,136 (125,136) - 2,111 108,593 (500,048) 731,849 33,851 1,726,633 - 0% 111,240 29,314 26,664 167,218 (167,218) - First Graphene – Annual Report 2020 59 Notes to the Consolidated Financial Statements 6. Income tax (continued) Income Tax Expense (e) Unrecognised deferred tax asset Tax losses Capital losses PPE & Leases Other temporary differences Off-set of deferred tax liabilities Net deferred tax assets unrecognised Consolidated 2020 $ Consolidated 2019 $ 5,962,227 8,772,623 14,520 388,722 15,138,092 (125,136) 15,012,956 5,468,080 8,772,623 - 200,485 14,441,188 (167,218) 14,273,970 The Group has Australian revenue losses from previous years for which no deferred tax assets have been recognised. The availability to utilise these losses in future periods is subject to review in the relevant jurisdictions. First Graphene – Annual Report 2020 60 Notes to the Consolidated Financial Statements 7. Loss per share 2020 $ 2019 $ Number of shares Number of shares Weighted average ordinary shares used in calculating basic loss per share 474,147,509 414,654,396 Weighted average ordinary shares used in calculating diluted loss per share 474,147,509 414,654,396 Basic loss per share - cents per share Diluted loss per share - cents per share (1.11) (1.11) (1.78) (1.78) Accounting Policy Loss per share (“LPS”) is the amount of post-tax loss attributable to each share. The Group presents basic and diluted LPS data for ordinary shares. Basic LPS is calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted LPS takes into account the dilutive effect of all potential ordinary shares, being unlisted employee share options on issue. Loss attributable to the owners of First Graphene used in calculating basic loss per share 2020 $ 2019 $ (5,239,650) (7,364,644) Loss attributable to the owners of First Graphene used in calculating diluted loss per share (5,239,650) (7,364,644) There have been no transactions involving ordinary shares between the reporting date and the date of completion of these financial statements which would impact on the above LPS calculations. First Graphene – Annual Report 2020 61 Notes to the Consolidated Financial Statements 8. Cash and cash equivalents Accounting Policy Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand. Cash at bank earns interest at floating rates based on daily bank deposit rates. For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise the following at the end of the reporting period: Cash at bank and in hand 2020 $ 8,053,134 8,053,134 2019 $ 3,664,137 3,664,137 The Group’s maximum exposure to financial risk is disclosed in Note 12. OPERATING ASSETS AND LIABILITIES This section shows the assets used to generate the Group’s trading performance and the liabilities incurred as a result. Liabilities relating to the Group’s financing activities are addressed in the capital structure and finance costs section on page 64. 9. Inventories Accounting Policy Raw material, work in progress, finished goods and consumables are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Inventories expected to be sold (or consumed in the case of stores) within 12 months after the Statement of financial position date are classified as current assets, all other inventories are classified as non-current. Key estimates and assumptions NET REALISABLE VALUE OF INVENTORIES Net realisable value tests are performed at each reporting date and represent the estimated future sales price of the product based on prevailing spot metals process at the reporting date, less estimated costs to complete production and bring the product to sale. Inventory held at 30 June 2020 relates to raw material, work in progress and finished goods and is held at net realisable value, resulting in a write off of $46,800. The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of any provision is assessed by considering recent sales experience, the ageing of inventories, damaged, obsolete, slow moving inventories and other factors that affect inventory obsolescence. First Graphene – Annual Report 2020 62 Notes to the Consolidated Financial Statements 9. Inventories (continued) Total Inventories Raw materials Work in progress Finished goods Inventories Gross Less: Provision for impairment Carrying amount Disclosed as: Current Non-current Total inventory 2020 $ 1,328,904 272,618 1,056,000 2,657,522 (46,800) 2,610,722 1,601,522 1,009,200 2,610,722 2019 $ 1,005,641 - - 1,005,641 - 1,005,641 - 1,005,641 1,005,641 10. Property, plant and equipment Accounting Policy Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure which is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows: Plant and equipment 3-7 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to the profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained losses. Key estimates and assumptions USEFUL LIFE OF ASSETS The estimation of useful lives, residual values and depreciation methods require significant management judgements and are regularly reviewed. If they need to be modified, the depreciation and amortisation expense is accounted for prospectively from the date of the assessment until the end of the revised useful life (for both the current and future years). First Graphene – Annual Report 2020 63 l t a o T , 3 4 3 9 2 2 1 , 2 7 9 , 7 2 9 ) 0 1 8 , 4 7 ( 5 0 6 , 6 4 ) 3 9 9 , 6 ( ) 5 1 6 , 4 9 4 ( , 2 0 5 7 2 6 1 , - 7 5 4 ) 3 6 0 8 6 7 ( , , 7 6 1 4 1 3 2 , l t a o T , 2 0 5 7 2 6 1 , , 1 7 2 4 5 4 1 , l i s e c h e v r o o M t e c i f f O - - 2 6 4 1 3 , 8 1 2 1 4 9 1 1 , ) 9 3 7 9 1 ( , 2 3 0 7 8 , 7 9 6 5 , 4 6 4 9 3 2 , ) 9 6 3 3 ( , ) 1 9 0 3 3 2 ( , t n e m p u q e i i l s e c h e v r o o M t e c i f f O - - 5 0 1 2 3 , 2 1 5 , 0 2 ) 9 4 6 , 1 ( ) 6 0 5 , 9 1 ( 2 6 4 1 3 , 0 0 9 7 0 1 , 9 4 9 , 5 9 1 ) 8 8 2 , 6 3 ( 9 7 1 , 2 1 ) 5 3 9 , 9 3 ( ) 1 4 3 ( 4 6 4 9 3 2 , t n e m p u q e i d n a t n a P l t n e m p u q e i ) 1 1 ( 4 3 5 , 6 2 3 , 1 4 7 5 , 8 4 4 , 1 1 9 0 , 3 3 2 ) 5 6 6 , 4 1 7 ( 3 2 5 , 3 9 2 , 2 d n a t n a P l t n e m p u q e i 3 3 8 , 4 4 9 1 1 5 1 1 7 , ) 2 2 5 8 3 ( , 6 2 4 , 4 3 ) 5 0 4 , 1 ( ) 9 0 3 4 2 3 ( , 4 3 5 , 6 2 3 , 1 0 2 0 2 e n u J 0 3 $ l d o h e s a e L - - - - - - 9 1 0 2 e n u J 0 3 $ l d o h e s a e L t n e m e v o p m r i - - - 6 6 5 , 5 4 - ) 1 0 0 2 ( , ) 5 6 5 3 4 ( , t n e m e v o p m r i n o i t l r a o p x E - - - 8 4 2 ) 0 9 2 , 0 3 ( 2 4 0 , 0 3 t n e m p u q e i n o i t l r a o p x E - - - ) 7 9 5 1 ( , ) 0 0 3 7 6 ( , 2 4 0 , 0 3 9 3 9 , 8 9 t n e m p u q e i r a e y f i o g n n n g e b i t a t n u o m a g n y r r i a C s n o i t i d d A s r e f s n a r T e g n a h c x e n g e o r i f o t e u d t n e m e v o M r a e y f o d n e t a t n u o m a g n y r r i a C r a e y f i o g n n n g e b i t a t n u o m a g n y r r i a C l d o s i t n e m p u q e d n a t n a p l f o t s o C s n o i t i d d A n o i t i a c e p e D r l d o s t n e m p u q e i f o n o i t a s i t r o m a d e t a u m u c c A l e g n a h c x e n g e o r i f o t e u d t n e m e v o M r a e y f o d n e t a t n u o m a g n y r r i a C n o i t i a c e p e D r : w o e b l t u o t e s s i i t n e m p u q e d n a t n a p l , y t r e p o p r f l o s s a c h c a e r o f l e u a v g n y r r i a c e h t f o s n o i t a i l i c n o c e R s t n e m e a t S t l i a c n a n i F d e a d t i l o s n o C e h t o t t s e o N ) d e u n i t n o c ( i t n e m p u q e d n a t n a p l , y t r e p o r P . 0 1 First Graphene – Annual Report 2020 64 Notes to the Consolidated Financial Statements 11. Trade and other payables Accounting Policy Trade and other payables represent the liabilities for goods and services received by the Group which remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Current Trade and other payables Customer deposits 2020 $ 1,372,680 196,990 1,569,670 2019 $ 1,019,622 - 1,019,622 CAPITAL STRUCTURE, FINANCIAL INSTRUMENTS AND RISK This section outlines how the Group manages its capital, related financing costs and its exposure to various financial risks. It explains how these risks affect the Group’s financial position and performance and what the Group does to manage these risks. The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an efficient capital structure to reduce the cost of capital. The Board’s policy in relation to capital management is to regularly and consistently monitor future cash flows against expected expenditures for a rolling period of up to 12 months in advance. The Board determines the Group’s need for additional funding by way of either share issues or loan funds depending on market conditions at the time. The Board defines working capital in such circumstances as its excess liquid funds over liabilities, and defines capital as being the ordinary share capital of the Company, plus retained earnings, reserves and net debt. In order to maintain or adjust the capital structure, the Board may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirement. First Graphene – Annual Report 2020 Notes to the Consolidated Financial Statements 65 12. Financial Risk Management (a) Financial risk management The Group’s principal The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (currency risk and interest rate risk). financial trade and other liabilities comprise payables. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as trade and other receivables, deposits with banks, local money market instruments and short-term investments. The accounting policy with respect to these financial instruments is described in the respective notes. Financial risk management structure: Board of Directors The Board is ultimately responsible for ensuring there are adequate policies in relation to risk oversight and management and internal control systems. The Group’s policies are designed to ensure financial risks are identified, assessed, addressed and monitored to enable achievement of the Group’s business objectives. (b) Financial risks Credit risk Credit risk refers to the risk a counterparty will default on its contractual obligation resulting in financial loss to the Group. Credit risk is managed on a group basis and structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty or group of counterparties. The significant no concentrations of credit risk. Group has It is the Group’s policy to place funds generated internally and from deposits with clients with high quality financial institutions. The Group does not employ a formalised internal ratings system for the assessment of credit exposures. Amounts due from and to clients and dealers represents receivables sold and payables for securities purchased which have been contracted for but not yet settled on the reporting date, respectively. The majority of these transactions are carried out on a delivery versus payment basis, which results in securities and cash being exchanged within a very close timeframe. Settlement balances outside standard terms are monitored on a daily basis. Exposure to credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at the reporting date to recognised financial assets, is the carrying amount, net of any provision for impairment of those assets, as disclosed in the statement of financial position and the notes to the financial statements. The Group does not have any material credit risk exposure to any single receivable or financial receivables under group of instruments entered into by the Group. The Group’s maximum exposure to credit risk without taking account of any collateral or other credit enhancements at the reporting date was $8,053,134 (2019: $3,664,137). The Company banks with Westpac Banking Corporation (Westpac). Westpac’s long term credit ratings are A+ (Fitch Ratings), Aa3 (Moody's Investors Service) and AA- (Standard & Poor's). Group 2020 $ 2019 $ Cash and cash equivalents 8,053,134 3,664,137 8,053,134 3,664,137 First Graphene – Annual Report 2020 66 Notes to the Consolidated Financial Statements Impairment of financial assets The group holds trade receivables that are subject to the expected credit loss model. While cash and cash equivalents are also subject to the impairment requirements of AASB 9, their was no loss. Trade receivables The group applies the AASB 9 simplified approach to measuring the expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The expected credit losses have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 30 June 2020 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward- looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the expected credit loss allowance as at 30 June 2020 was determined to be nil. Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group and failure to make contractual payments for a period of greater than 120 days past due. Impairment losses on trade receivables are presented as expected credit loss allowances within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. For the purposes of the Group’s disclosures regarding credit quality, its financial assets have been analysed as follows: Neither Past Due nor individually impaired $ Past due but not individually impaired Individually impaired $ $ Total $ Expected Credit Loss $ Total carrying amount $ Consolidated 30 June 2020 Trade receivables Consolidated 30 June 2019 Trade receivables 55,388 55,388 12,448 12,448 - - - - - - 55,388 55,388 - - 12,448 12,448 - - - - 55,388 55,388 12,448 12,448 Financial assets past due but not individually impaired For the purpose of this analysis an asset is considered past due when any payment due under the contractual terms is received one day past the contractual due date. The majority of these transactions are carried out on a delivery versus payment basis, which results in securities and cash being exchanged within a very close timeframe. Settlement balances outside standard First Graphene – Annual Report 2020 67 Notes to the Consolidated Financial Statements terms are monitored on a daily basis. Credit risk is also mitigated as securities held for the counterparty by the Group can ultimately be sold should the counterparty default. There were no renegotiated financial assets during the year. Collateral pledged or held There is no collateral held as security by the Group or its controlled entities. First Graphene – Annual Report 2020 68 Notes to the Consolidated Financial Statements Liquidity risk Liquidity risk is the risk the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by monitoring forecast cash requirements and cash flows. The primary objective of the Group is to manage short-term liquidity requirements in such a way as to minimise financial risk. The Group maintains sufficient cash resources to meet its obligations, cash deposits are repayable on demand. The tables below present the cash flows receivable and payable by the Group under financial assets and liabilities by remaining contractual maturities at the reporting date. The amounts disclosed are the contractual, undiscounted cash flows. Floating interest rate Fixed interest Non-interest bearing Weighted average effective interest rate % Within one year $ Within one year $ 1-5 years $ Within one year $ 1-5 years $ Total $ 30 June 2020 Financial assets Cash equivalents and cash Trade and other receivables Total Financial assets at 30 June 2020 Financial liabilities Trade and other payables Lease liabilities Total financial liabilities at 30 June 2020 30 June 2019 Financial assets Cash equivalents and cash Trade and other receivables Total Financial assets at 30 June 2019 Financial liabilities Trade and other payables Total financial liabilities at 30 June 2019 0.47 8,053,134 - 65,568 8,118,702 - - - 0.55 3,664,137 - 182,250 3,846,387 - - - - - - - - - - - - - - - - - - - - - - - - 8,053,134 65,568 8,118,702 1,569,670 - 1,569,670 72,791 152,999 225,790 - 1,642,461 152,999 1,795,460 - - - - - - - 1,019,622 - 1,019,622 - - - - - 3,664,137 182,250 3,846,387 1,019,622 1,019,622 First Graphene – Annual Report 2020 69 Notes to the Consolidated Financial Statements Trade and other payables and borrowings are expected to be paid as follows: Less than 1 year $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ 30 June 2020 Trade and other payables (refer Note 11) 1,569,669 30 June 2019 Trade and other payables (refer Note 11) 1,019,622 1,569,669 1,019,622 - - - - - - - - - - - - Market Risk Market risk is the risk the fair value of future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. (i) Foreign exchange risk The consolidated entity undertakes certain transactions denominated in foreign currency and are exposed to foreign currency risk through foreign exchange fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency which is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group’s profitability can be significantly affected by movements in the $US/$A and the GBP/$A exchange rates, and to a lesser degree, though movements in the Sri Lankan Rupee verses the Australian dollar. Through reference to industry standard practices, and open market foreign currency trading patterns within the past 12 months, the group set the level of acceptable foreign exchange risk. The Group seeks to manage this risk by holding foreign currency in $US, GBP£ and Sri Lankan Rupee. Sensitivity analysis The following table does not include intra group financial assets and liabilities. It summaries the sensitivity of the Group’s financial assets and liabilities to external parties at 30 June 2020 to foreign exchange risk, based on foreign exchange rates as at 30 June 2020 and sensitivity of +/-5%: 30 June 2020 rate (cents) 0.6854 0.5579 127.62 US$/A$ GBP/A$ LKR/A$ First Graphene – Annual Report 2020 70 Notes to the Consolidated Financial Statements Foreign exchange risk 2020 $ (100,732) 100,732 2019 $ (22,012) 22,012 (100,732) 100,732 (22,012) 22,012 Change in profit/loss due to: Improvement in AUD by 5% Decline in AUD by 5% Change in equity due to: Improvement in AUD by 5% Decline in AUD by 5% (ii) Interest rate risk Group The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash position. A change of 100 basis points in interest rates at the reporting date would result in a change of profit or loss by the amounts shown below. This analysis assumes all other factors remain constant. Profile At reporting date the interest rate profile of the Group’s financial instruments was: Floating rate instruments Cash at bank Floating rate instruments Cash at bank 2020 $ -10bps Profit Equity Profit Equity +10bps Interest rate risk 8,053,134 8,053,134 (7,830) (7,830) 2019 $ 3,664,137 3,664,137 (3,427) (3,427) - - - - 7,830 7,830 3,427 3,427 - - - - First Graphene – Annual Report 2020 71 Notes to the Consolidated Financial Statements (c) Net fair values Fair value versus carrying amount Fair value of financial instruments Set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments which are carried in the financial statements. Methodologies and assumptions For financial assets and liabilities which are liquid or have short term maturities it is assumed the carrying amounts approximate to their fair value. Note 30 June 2020 30 June 2019 Carrying amount $ 65,568 65,568 Net fair value $ 65,568 65,568 Carrying amount $ 182,250 182,580 Net fair value $ 182,250 182,580 11 1,569,670 1,569,670 1,569,670 1,569,670 1,019,622 1,019,622 1,019,622 1,019,622 Assets carried at amortised cost Trade and other receivables Total financial assets Liabilities carried at amortised cost Trade and other payables Total Financial Liabilities Fair value hierarchy The Group classified the fair value of the financial instruments according to the fair value hierarchy based on the amount of observable inputs used to value the instruments: • • • Level 1 – values based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 – values based on inputs, including quoted prices, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 3 – values based on prices or valuation techniques that are not based on observable market data. 13. Issued capital Accounting Policy Ordinary shares are classified as equity. Transaction costs directly attributable to the issue of shares or options are recognised as a deduction from equity, net of any related income tax effects. First Graphene – Annual Report 2020 72 Notes to the Consolidated Financial Statements 13. Issued capital (continued) (a) Ordinary shares Issued and fully paid 2020 $ 95,778,819 2019 $ 85,068,406 2020 Number 525,667,829 2019 Number 445,849,952 Movements in shares on issue At the beginning of the period Exercise of options at $0.15 Exercise of options at $0.20 Shares issued to employees Entitlement issue Share issue costs Placement to investors December 2018 Placement to investors April 2019 At the end of the period 85,068,406 4,337,748 3,750 52,500 6,575,695 (259,280) - - 95,778,819 79,104,128 1,335,811 - 27,200 - (348,733) 1,450,000 3,500,000 85,068,406 445,849,952 28,866,379 19,250 350,000 50,582,248 - - - 525,667,829 403,784,541 8,905,407 - 160,000 - - 9,666,670 23,333,334 445,849,952 2020 Number 85,774,779 50,582,248 (28,885,129) 107,471,898 2019 Number 91,180,186 3,500,000 (8,905,407) 85,774,779 2020 Number 2019 Number 5,000,000 10,000,000 - 15,000,000 500,000 5,000,000 (500,000) 5,000,000 Share options (b) Listed share options At the beginning of the year Options issued Options exercised At the end of the year Share options (c) Unlisted share options At the beginning of the year Options issued Options expired At the end of the year Refer Note 14 for further details 14. Share based payments Accounting Policy The value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options (the vesting period), ending on the date on which the relevant employees become fully entitled to the option (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of: • The grant date fair value of the option; First Graphene – Annual Report 2020 73 Notes to the Consolidated Financial Statements 14. Share based payments (continued) • • The current best estimate of the number of options that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and The expired portion of the vesting period. Until an option has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. The fair value determination is calculated using the Black-Scholes option pricing model.Share based payment expense The Group recognised total share-based payment expenses as follows: Shares issued to employees Options issued to Foster Stockbroking Option issued to employees Options issued to directors Total Shares Issued to Employees 2020 $ 52,500 - 63,707 649,056 765,263 2019 $ 27,200 305,658 29,118 - 361,976 On 6 January 2020 the Company issued 350,000 shares at a nominal price of $0.15 per share to various employees. The total of $52,500 has been expensed. Share Option Plan The Company provides directors, certain employees and advisors with share options. The options are exercisable at set prices and the vesting and exercisable terms varied to suit each grant of options. 2020 2019 Number of Options 27,500,000 10,000,000 (450,000) - 37,050,000 Weighted average exercise price (cents) 15.5 25.0 15.0 21.1 Number of Options 19,500,000 8,500,000 - (500,000) 27,500,000 Weighted average exercise price (cents) 14.9 16.8 - 15.0 15.5 Outstanding 1 July Issued Exercised Lapsed Outstanding 30 June First Graphene – Annual Report 2020 74 Notes to the Consolidated Financial Statements 14. Share based payments (continued) The table below summarises options granted to directors, employees and consultants under the Share Option Plan: Grant Date Expiry Date Exercise price Balance at start of the year Granted during the year Exercised during the year Expired/ lapsed during the year Balance at the end of the year Vested and exercisable during the year Unlisted options: 26 Feb 2019 26 Feb 2022 8 Nov 2019 6 Jan 2020 8 Nov 2023 8 Nov 2023 Listed options: Number Number Number Number Number Number $0.18 5,000,000 - $0.25 - 9,000,000 Various - 1,000,000 - - - - - - 5,000,000 5,000,000 9,000,000 9,000,000 1,000,000 1,000,000 Various 2,000,000 - (450,000) - 1,550,000 2,000,000 8 Aug 2021 8 Aug 2021 8 Aug 31 Oct 2017 24 Nov 2017 23 May 2018 14 May 2019 Various 17,000,000 2021 Various 3,000,000 8 Aug 2021 Various 500,000 - - - - - - - 17,000,000 17,000,000 - - 3,000,000 3,000,000 500,000 500,000 The weighted average remaining contractual life of the options is 1.79 years (2019: 2.21 years). Using the Black Scholes option pricing model and based on the assumptions set out below, the Director Options were ascribed the following value: Assumptions: Valuation date Market price of shares Exercise price 8 November 2019 $0.16 $0.25 Expiry date (length of time from issue) 8 November 2023 – 4.0 years Risk free interest rate Volatility Indicative Value of Director Option (cents) Number of options issued Total Value of Director Options - $ 0.73% 75% 0.0721 9,000,000 649,056 If a Director resigns within 12 months of the date of issue of the Options, then 1/3 of that Director’s unexercised Options will automatically lapse at the time of resignation, with the outgoing Director retaining the 2/3 balance of unexercised Options. Using the Black Scholes option pricing model and based on the assumptions set out below, the Senior Management Options were ascribed the following value: First Graphene – Annual Report 2020 Notes to the Consolidated Financial Statements 14. Share based payments (continued) Assumptions: Valuation date Market price of shares Exercise price 75 6 January 2020 $0.15 $0.25 Expiry date (length of time from issue) 8 November 2023 – 3.84 years Risk free interest rate Volatility Indicative Value of Senior Management Option (cents) Number of options issued Total Value of Senior Management Options - $ 0.725% 75% 0.0637 1,000,000 63,707 If a Senior Manager resigns within 12 months of the date of issue of the Options, then 1/3 of that Senior Manager’s unexercised Options will automatically lapse at the time of resignation, with the outgoing Senior Manager retaining the 2/3 balance of unexercised Options. 15. Reserves and accumulated losses Accounting Policy The share based payments reserve holds the directly attributable cost of services provided pursuant to the options issued to corporate advisors, directors, employees and past directors of the Group. The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. First Graphene – Annual Report 2020 76 Notes to the Consolidated Financial Statements 16. Statement of cash flow reconciliation (a) Reconciliation of net loss after tax to net cash flows from operations Net Loss Adjusted for: Depreciation Amortisation Impairment of exploration and evaluation asset Impairment of inventory (Gain)/loss on sale of property, plant and equipment Share based payments expensed Options expensed Shares issued to employees as payment for deferred salaries Loss on deconsolidation of controlled entity Finance income recognised as financing activity Finance cost recognised as financing activity Foreign exchange loss/(gains) Changes in assets/liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in inventory (Increase)/decrease in prepayments (Increase)/decrease in other assets Increase/(decrease) in trade and other payables Net cash (used in) operating activities 2020 $ 2019 $ (5,366,149) (6,986,738) 245,165 27,624 - 46,800 (1,886) 52,500 712,763 152,025 - - - 10,049 116,682 (1,034,700) (66,177) - 365,950 (4,739,354) 471,424 14,744 1,856,109 - 16,970 27,200 334,776 - 57,513 (87,489) 79,269 (22,127) 37,179 (434,632) (297,285) 17,040 (411,547) (5,327,594) (b) Non-cash investing and financing activities There were no non-cash investing and financing activities during the reporting year. First Graphene – Annual Report 2020 77 Notes to the Consolidated Financial Statements 17. Commitments Operating lease commitments – Group as lessee Lease expenditure commitments Operating leases (non-cancellable) Within one year Later than one year and not later than five years Total operating leases (non-cancellable) 2020 (1) $ - - - 2019 $ 132,039 259,244 391,283 (1) No activity is reported in 2020 as modified retroactive approach has been adopted in line with AASB 16 Leases – refer Note 1. Finance lease commitments – Group as lessee The Group had two hire purchase contracts for equipment used at the Henderson Commercial Graphene Facility. The hire purchases were finalised in June 2019. Within one year Later than one year and not later than five years - - Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Included in the financial statements as: Current interest-bearing liabilities Non-current interest-bearing liabilities 2020 $ - - - - - - - - 2019 $ 43,184 52,709 95,893 (8,567) 87,326 76,369 10,957 87,326 First Graphene – Annual Report 2020 78 Notes to the Consolidated Financial Statements 18. Deconsolidation of Graphene Solutions Pty Ltd As of 21 January 2019, the loss of effective control of Graphene Solutions Pty Ltd (“GSPL”) was recognised by the Group due to the Company having no power to govern the financial and operating policies of GSPL. Accordingly, the Company’s investment was reclassified to an investment accounted for using the equity method effective from 21 January 2019. Key estimates and assumptions LOSS OF CONTROL OF GSPL In May 2018, the Company earned a 30% equity interest in Graphene Solutions Pty Ltd (GSPL), with an option to increase the shareholding to 70%, resulting in FGR having control and GSPL being consolidated into the FGR group. Management have deemed the date of loss of control over the financial and operating policies under AASB 10 of GSPL to be the 21st January 2019. The option to earn the additional 40% interest in GSPL has also now expired. Details of net assets deconsolidated on loss of control: Fair value of GSPL’s net assets/(liabilities) Cash and cash equivalents Trade and other receivables GSPL net assets Loss on deconsolidation of subsidiary: Fair value of equity held in GSPL at 21 January 2019 Less 30% equity interest held in GSPL Non-controlling interest Loss recognised on deconsolidation of subsidiary to owners of parent entity 21 January 2019 $ 191,659 51 191,710 - (191,710) 134,197 (57,513) Cashflow impact of deconsolidation GSPL had a cash balance of $191,569 as at 21 January 2019. As a result of the deconsolidation of GSPL, the Company derecognised cash of $191,569 in cash and cash equivalents in the Consolidated Statement of Financial Position which represents the movement during the period. This impact is shown as an outflow of cash in Consolidated Cash Flow Statement under the category Cash Flows from Investing Activities. Reclassification of investment The Company’s 30% equity interest in GSPL was reclassified to an investment in associate as at 21 January 2019, however the fair value of the investment was deemed to be nil on deconsolidation, therefore the carrying value of the investment in associate at 30 June 2020 is nil. Control over 2D Fluidics The directors have concluded the Group controls 2D Fluidics Pty Ltd even though it holds less than 100% of the voting rights in this subsidiary. This is because the group exercises the management of the company and has board control. First Graphene – Annual Report 2020 Notes to the Consolidated Financial Statements 19. Results of the parent company Current Assets Cash and cash equivalents Trade and other receivables Inventory Other current assets Total current assets Non-current assets Lease liability Property, plant and equipment Right or use asset Intercompany loans receivable Investment in subsidiaries Investment Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Employee liabilities Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities 2020 $ 7,621,249 55,388 1,601,522 320,742 9,598,901 1,009,201 2,264,084 219,067 - 650,000 215,102 4,357,454 13,956,355 1,408,068 63,221 72,791 1,544,080 152,999 152,999 1,697,079 79 2019 $ 3,498,503 147,486 958,841 377,841 4,982,671 - 1,532,890 216,744 250,000 - 1,999,634 6,982,305 898,511 - - 898,511 - - 898,511 Net Assets 12,259,276 6,083,794 Equity Issued capital Share based payments reserve Other reserves Accumulated losses Total equity Results of the parent entity: Loss for the period 95,778,818 5,416,167 467,202 (89,402,911) 12,259,276 85,075,437 4,703,404 467,202 (84,162,249) 6,083,794 (5,240,662) (5,240,662) (6,537,749) (6,537,749) First Graphene – Annual Report 2020 80 Notes to the Consolidated Financial Statements 20. Events since the end of the financial year On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operations during FY2021. Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2021 financial year. Although the Group cannot fully estimate the length or gravity of the COVID-19 effect, from its initial assessment, it is expecting to be able to continue as a going concern. 21. Related party transactions Compensation for key management personnel The key management personnel compensation included in employee benefits expense (Note 4) and share-based payments (Note 13), is as follows: Short term employee benefits Share based payments Transactions with other related parties 2020 $ 1,589,338 712,763 2,302,101 2019 $ 1,412,073 - 1,412,073 During the reporting period, placement fees were paid to Far East Capital Limited, a company of which Mr Grigor is a Director, for equity raisings during fiscal 2020 totalling $170,425 (2019: $197,868). There were no other payments to related parties. There were no loans to/from related parties in 2020 (2019: Nil) Subsidiaries The consolidated financial statements include the financial statements of First Graphene Limited and the subsidiaries listed in the following table: Principal activity in the year Proportion of voting rights and shares held 2019 2020 Class of shares held Place of Incorporation First Graphene (UK) Ltd Graphene sales and R&D 100% 100% Ordinary England & Wales MRL Investments (Pvt) Ltd Holding company 100% 100% Ordinary Sri Lanka MRL Graphene (Pvt) Ltd 2D Fluidics Pty Ltd (1) Graphene Mining and exploration Development and sale of VFD, TTF and other 2D devices and materials 100% 100% Ordinary Sri Lanka 66.67% 50% Ordinary Australia 2D Fluidics Pty Ltd has been fully consolidated in the Group due to the effective control exercised by First Graphene Limited. In fiscal 2020 First Graphene increased its shareholding in 2D Fluidics Pty Ltd from 50% to 66.67% First Graphene – Annual Report 2020 81 Notes to the Consolidated Financial Statements 22. Auditors’ remuneration Services provided by the Group’s auditor (in tenure as auditor) and associated firms. During the year, the Group (including its overseas subsidiaries) obtained the following services from BDO Audit (W.A.) Pty Ltd as detailed below: Auditors’ remuneration Remuneration of the auditor of the Group for: Audit services – BDO Audit (WA) Pty Ltd - Taxation services – BDO Corporate Tax (WA) Pty Ltd - 2020 $ 44,583 33,794 78,377 2019 $ 36,253 27,038 63,291 First Graphene – Annual Report 2020 82 Directors’ Declaration The Directors declare: 1. the financial statements and notes, as set out on pages 36 to 81 are in accordance with the Corporations Act 2001 and: a. Auditor’s independence comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and The Directors received the independence declaration from the auditor of First Graphene Limited as stated on page 23. give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on this date of the consolidated group; b. Non-audit services 2. the Chief Executive Officer and Chief Finance Officer have each declared: a. the financial records of the consolidated group for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; During the period BDO Corporate Tax (WA) Pty Ltd was paid $27,038 for the provision of taxation services (2018: $23,829). BDO Corporate Tax (WA) Pty Ltd is an affiliate member of BDO Audit (WA) Pty Ltd. Refer to Note 23 for further details the financial statements, and the notes for the financial year comply with the accounting standards; and b. c. the financial statements and notes for the financial year give a true and fair view; and The board of directors has considered the position and is satisfied the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied the provision of non-audit services by 3. the auditor, as set out in Note 23, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: 4. in the directors’ opinion, there are reasonable grounds to believe the consolidated group will be able to pay its debts as and when they become due and payable. the consolidated group has included in the notes to the financial statements an explicit • all non-audit services have been reviewed by the board to ensure they do not impact and unreserved statement of compliance with the International Financial Reporting Standards. the impartiality and objectivity of the auditor 5. • none of the services undermine the general principles the remuneration disclosures set out in the Directors’ Report on pages 26 to 33 (as the audited Remuneration Report) comply with section 300A of the Corporations Act 2001. independence as set out in APES 110 Code of Ethics for Professional Accountants relating to auditor Signed in accordance with a resolution of the directors made pursuant to section 295 (5) of the Corporations Act 2001. Signed in accordance with a Resolution of the Directors. On behalf of the Directors Craig McGuckin Craig McGuckin Managing Director Managing Director 31 August 2020 Dated at Perth this 30th day of August 2019 . Corporate Governance Statement The Company's full Corporate Governance Statement is available on the Company's website, www.firstgraphene.net/corporate/corporate-governance.html. A completed Appendix 4G and the full Corporate Governance Statement have been lodged with the Australian Securities Exchange as required under Listing Rules 4.7.3 and 4.7.4. FIRST GRAPHENE LIMITED ANNUAL REPORT 2019 First Graphene – Annual Report 2020 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 83 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia Independent Auditor’s Report INDEPENDENT AUDITOR'S REPORT To the members of First Graphene Limited INDEPENDENT AUDITOR'S REPORT Report on the Audit of the Financial Report Opinion To the members of First Graphene Limited We have audited the financial report of First Graphene Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement Report on the Audit of the Financial Report of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ Opinion declaration. We have audited the financial report of First Graphene Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its (i) to the financial report, including a summary of significant accounting policies and the directors’ financial performance for the year ended on that date; and declaration. Complying with Australian Accounting Standards and the Corporations Regulations 2001. (ii) In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Basis for opinion Act 2001, including: We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its those standards are further described in the Auditor’s responsibilities for the audit of the Financial financial performance for the year ended on that date; and Report section of our report. We are independent of the Group in accordance with the Corporations Complying with Australian Accounting Standards and the Corporations Regulations 2001. (ii) Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) Basis for opinion that are relevant to our audit of the financial report in Australia. We have also fulfilled our other We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under ethical responsibilities in accordance with the Code. those standards are further described in the Auditor’s responsibilities for the audit of the Financial We confirm that the independence declaration required by the Corporations Act 2001, which has been Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s given to the directors of the Company, would be in the same terms if given to the directors as at the APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) time of this auditor’s report. that are relevant to our audit of the financial report in Australia. We have also fulfilled our other We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis ethical responsibilities in accordance with the Code. for our opinion. We confirm that the independence declaration required by the Corporations Act 2001, which has been Key audit matters given to the directors of the Company, would be in the same terms if given to the directors as at the Key audit matters are those matters that, in our professional judgement, were of most significance in time of this auditor’s report. our audit of the financial report of the current period. These matters were addressed in the context of We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide for our opinion. a separate opinion on these matters. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. First Graphene – Annual Report 2020 84 Independent Auditor’s Report Valuation of Inventory Key audit matter How the matter was addressed in our audit The Group’s inventory, as disclosed in Note 9 to the financial report, was a key audit matter as the inventory costing and net realisable value (“NRV”) calculations require significant estimates and judgements. The determination of NRV of the inventory requires management’s judgement in relation to estimating future selling prices, future processing costs and related selling costs. Our audit procedures included, but were not limited to: · · · · assessing the NRV of inventory against the requirements of the Australian Accounting Standards, including comparing managements estimated future selling prices to supply contracts in place at year end; testing on a sample basis, the reasonableness of the costs capitalised into inventory against the requirements of Australian Accounting Standards; observing the year end stocktake process and undertaking our own test counts; and assessing the adequacy of the related disclosures in Note 9 to the financial report. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. First Graphene – Annual Report 2020 Independent Auditor’s Report 85 In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 26 to 33 of the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of First Graphene Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Jarrad Prue Director Perth, 31 August 2020 First Graphene – Annual Report 2020 86 Additional Securities Exchange Information (note, this information does not form part of the audited financial statements) Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. This information is complete as at 12 August 2020. a) Distribution of Shareholdings – Fully Paid Ordinary Shares: Size of Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Number of Shareholders 139 977 874 2,122 591 4,703 Equity Security Fully Paid ordinary shares Options Quoted 525,693,985 107,445,242 Number of Share 28,114 3,504,748 6,796,504 77,763,528 437,601,091 525,693,985 Unquoted - 15,000,000 First Graphene – Annual Report 2020 Additional Securities Exchange Information b) Top 20 Security Holders – Fully Paid Ordinary Shares (FGR) at 12 August 2020 87 Name of Holder J P Morgan Nominees Australia Pty Limited Twynam Investments Pty Ltd IPS Holdings Building On The Rock Limited 1 2 3 4 5 Gregorach Pty Ltd 6 7 Citicorp Nominees Pty Limited Debt Management Asia Corporation Mr Craig Robert McGuckin & Mrs Lee Ann McGuckin 8 9 Ginga Pty Ltd 10 Hallidaf Management Ltd 11 William Taylor Nominees Pty Ltd 12 Sunset Capital Management Pty Ltd 13 HSBC Custody Nominees (Australia) Limited 14 Bissapp Software Pty Ltd 15 Mr Kie Chie Wong 16 Ms Fadillah Burhan Hasibuan 17 Mr Ryan Jehan Rockwood 18 Mr Richard Hopetoun Bitcon 19 Pavarai Pty Ltd 20 Mrs Gayle Teresa Crabbe Total Total issued capital Number of Shares 90,972,317 24,013,177 16,888,011 16,666,667 16,396,541 12,947,427 10,813,267 7,874,365 7,854,854 6,704,274 4,465,959 4,000,000 3,919,503 3,535,056 % 17.31 4.57 3.21 3.17 3.12 2.46 2.06 1.50 1.49 1.28 0.85 0.76 0.75 0.67 0.60 3,141,552 0.59 3,089,230 0.57 3,000,000 0.54 2,860,000 0.53 2,789,000 0.52 2,708,500 244,639,700 46.54 525,693,985 100.00 Shareholders with less than a marketable parcel At 12 August 2020, there were 702 shareholders holding less than a marketable parcel of shares ($0.13 cents on this date) in the Company totalling 1,639,691 ordinary shares. This represented 0.31% of the issued capital. First Graphene – Annual Report 2020 88 Additional Securities Exchange Information c) Top 20 Security Holders – Options (FGROC) at 12 August 2020 Name of Holder J P Morgan Nominees Australia Pty Limited 1 Mrs Gayle Teresa Crabbe 2 Gregorach Pty Ltd 3 Gregorach Pty Ltd 4 5 Ms Fadillah Burhan Hasibuan 6 Mr Christopher James Bellew 7 8 9 Mr Gregory John Keir 10 Mr Alan Wesley Patterson-Kane Thirty Sixth Vilmar Pty Ltd 11 12 Bolam Materials Research Ltd IPS Holdings Pavarai Pty Ltd 13 BNP Paribas Nominees Pty Ltd 14 Beirne Trading Pty Ltd 15 Geo Ban Consulting Pty Ltd 16 Ginga Pty Ltd 17 Mr Shaun Phillip Van Dyk 18 CS Third Nominees Pty Limited 19 Mrs Terri Frances Youd 20 Debt Management Asia Corporation Total Total issued options Number of Shares 6,531,388 5,253,612 3,353,839 2,905,440 2,850,979 2,784,788 2,375,829 2,033,750 2,010,000 2,000,000 1,684,615 1,550,000 1,540,233 1,507,635 1,459,091 1,392,555 1,376,131 1,160,762 % 6.08 4.89 3.12 2.70 2.65 2.59 2.21 1.89 1.87 1.86 1.57 1.44 1.43 1.40 1.36 1.30 1.28 1.08 1,085,343 1,027,805 45,883,795 1.01 0.96 42.70 107,445,242 100.00 d) Licence Position as at 12 August 2020 All granted licences are in good standing and comply with the reporting requirements of the relevant licence. Licence Number IML/A/HO/9405/R/2 IML/A/HO/8416/R4 EL/225/R3 EL/228/R3 EL/243/R3 EL/321/R1 EL/227/R3 EL/262/R2 EL/325/R1 EL/326/R1 FGR Interest - % 100 100 100 100 100 100 100 100 100 100 Status Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted General Location Central Western Central Central Central Central South Central Central Central Central First Graphene – Annual Report 2020 Welcome to First Graphene’s Annual Report 2020CorporateDirectoryDirectorsWarwick Grigor (Non-Executive Chairman)Craig McGuckin (Managing Director)Peter R. Youd (Executive Director)Dr Andy Goodwin (Non-Executive Director)Company SecretariesPeter R. YoudNerida SchmidtPrincipal Registered Office in Australia1 Sepia Close Henderson WA 6166Telephone: +61 1300 660 448 Email: info@firstgraphene.net Website: www.firstgraphene.netStock Exchange ListingsThe Company is listed on the Australian Securities Exchange Limited under the trading code FGR and FGROCThe Company is listed on the Frankfurt Stock Exchange under the trading code FSE:M11.Share RegistryAutomic Registry Services Level 2, 267 St Georges Terrace, Perth WA 6000All securityholder correspondence to: PO Box 2226, Strawberry Hills, NSW 2012Contact: P: 1300 288 664 (within Australia) P: +61 (0)8 9324 2099 (outside Australia) E: hello@automic.com.au www.automic.com.auAuditorBDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008Solicitors – AustraliaSteinepreis Paganin Lawyers and Consultants Level 4, The Read Buildings 16 Milligan Street Perth WA 6000Bankers - AustraliaWestpac Banking Corporation Level 6 109 St Georges Terrace Perth WA 6000First Graphene Annual Report 2020Suite 3 9 Hampden Road Nedlands WA 6009P: +61 1300 660 448 E: info@firstgraphene.netwww.firstgraphene.netFirst Graphene (UK) LimitedGraphene Engineering and Innovation CentreThe University of ManchesterSackville Street Manchester M13 9PLUnited Kingdom

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