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Annual Report 2023

Plain-text annual report

ANNUAL REPORT 2023 FIRSTGRAPHENE.NET 2 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE FGR ANN UAL R EPO RT F Y20 22/24 3 CONTENTS Chairman’s Report ................................................................................... 4 CEO Report ............................................................................................ 6 Operations/QHSE Report .......................................................................... 10 Common & Emerging Applications.............................................................. 13 R&D Technology Report ............................................................................ 15 CFO Report ............................................................................................. 20 Annual Financial Report ........................................................................... 22 Corporate Directory ................................................................................. 87 4 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE CHAIRMAN’S REPORT The 2022/23 year was yet another challenging one for companies operating in the innovative end of industry. Continuing geopolitical uncertainties festered a “risk averse” mentality in industrial equity markets while rising interest rates drained surplus investable capital in a predictable fashion. Inflation ran away from many central banks that were There are a number tardy in anticipating the return of supply constraints and of other product lines in their impact on prices throughout the economy. It has not testing and design stages; been a good time for stock market investors with share any one of which could lead Warwick Grigor Chairman prices falling as funds were redeployed elsewhere. Yet, to profitability in the foreseeable future. Interestingly, we real businesses continue to grow. Notwithstanding the backdrop, First Graphene made steady progress through the financial year as it reaffirmed itself as a world leader in the manufacture and commercialisation of graphene, the wonder nanomaterial of the future. Among our significant progress was the advancement of graphene trials in the cement and concrete sector, with industrial-scale programs commencing with the largest cement manufacturing company in the UK. We continue to undertake more are experiencing more enquiries from companies that have undertaken their own research on the benefits of using graphene and have approached us because of our reputation for high product quality and application knowhow. They still have to do their test work on our specific graphene products and go through a period of product qualification with the benefit of our expertise, but the trend is positive. Graphene continues to be an important nanomaterial of the future. Our objective is to bring the future forward, closer to today. detailed test work to optimise trial outcomes, working closely with that company as part of the qualification In the meantime, we continue to sell PureGRAPH® to a range of consistent customers with annual sales process. Success on this front will be a game-changer exceeding the AUD$1 million mark for the first time. We for First Graphene, with many other cement companies continue to expect strong sales growth across a range of around the world watching closely for corroboration of product lines. carbon emission reductions achieved from the use of graphene. Everyone wants results yesterday, but that is unrealistic. FGR ANN UAL R EPO RT F Y20 23/24 5 Developing new technology is just the start of it. The next step is commercialisation by developing a growing customer base. That is where First Graphene currently finds itself. We know we have a game-changing, superior product; we just have to get it out the door and into an expanding the marketplace, generated by reputation and expertise. The ball is already rolling, taking us along a growth curve that I foresee will go on for many decades. The Board and I are grateful for the continued support of First Graphene shareholders, and we appreciate your patience. We are confident that it will be well rewarded. “First Graphene made steady progress through the financial year as it reaffirmed itself as a world leader in the manufacture and commercialisation of graphene, the wonder nanomaterial of the future.” ASX: FGR l 6 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE CEO REPORT Momentum gains in strong year for graphene The 2023 financial year saw First Graphene gain more traction with world-leading trials and commercialisation opportunities in a range of industries, from cement to energy storage. Boosting the market We also hit a major financial milestone with our revenue surpassing AUD$1 million for the first time. This positive momentum will only continue as we solidify our reputation in global markets as a leading supplier of graphene and advanced materials technology player. Our commercialisation strategy is well and truly underway, with a range of global partnerships in place to put graphene products into the market. We continue A milestone order of approximately 1.2 tonnes of PureGRAPH® was supplied to Breedon Group, the UK’s largest cement and concrete producer, to supplement to target high growth and high demand sectors, with cement used in real world demonstrations by leading multiple industries realising the benefits graphene British construction company, Morgan Sindall Group. provides to sustainable engineering solutions and achieving decarbonisation goals. This is an outstanding achievement for the Company, and for the wider graphene industry. To our knowledge, the The cement and concrete sector remains the core quantity of graphene-enhanced cement produced in this commercial focus for the Company, driven by the major trial ranks among the largest ever tested globally. offtake volume opportunity and increasing industry demand for sustainable material solutions to address the sector’s significant carbon emissions contribution. Collaborating with major industry players and facilitating a trial of this scale highlights the credibility of First Graphene’s products and underscores our unique The Company reached a significant milestone with the commencement of world-leading graphene-enhanced position to demonstrate the potential of green cement, powered by PureGRAPH®. cement trials in the UK. The trial aims to validate industrial scale manufacturing of graphene-enhanced cement and impart the environmental and material benefits that come with adding PureGRAPH® to the cement production process. With the green cement market poised for strong growth, and results of these trials expected soon, First Graphene is well positioned to become a leading supplier to this high growth industry. FGR ANN UAL R EPO RT F Y20 23/24 7 patent allowing us to advance research and development with a view of up-scaling to meet industry demand, as the supercapacitor market is forecast to grow to USD$720 million by 2025. Together, these research opportunities could revolutionise cell-based energy transfer capabilities, providing an alternative solution to lithium batteries, which are in high-demand with low supply. As Europe and the UK dealt with the ongoing energy crisis this year, particularly a depletion of natural gas supplies, we signed a JDA with ZEBCO Heating Ltd to develop a unique heating device using PureGRAPH®. The enhanced device can utilise either natural gas or hydrogen gas fuels and is capable of being retrofitted to existing heaters as well as new products. It is has the potential to reduce natural gas usage by up to 30% and lower nitrogen oxide emissions in hydrogen fuelled systems. This year, the partnership achieved a proof-of- concept system compatible with both natural gas and hydrogen fuel sources, which could be a game-changer “To our knowledge, the quantity of graphene-enhanced cement produced in this trial ranks among the largest ever tested globally.” The Company continues to establish a foothold across other core commercial segments and attract the attention of emerging growth opportunities. As global demand for electric vehicles increases further, for addressing the energy crisis in Europe. First Graphene boosted its research capabilities to investigate graphene-enhanced batteries and energy storage solutions. We secured an AUD$65,000 grant with the University of Manchester to further research commercialising supercapacitors containing graphene- metal-oxide slurry. This research will contribute to a separate project looking at the development of low-cost electrocatalysts for hydrogen production. First Graphene secured a grant equivalent to more than AUD$169,000 to support this project, which will further expand our capacity in the energy generation and storage space. The Company has made headway with the commercialisation of graphene-enhanced perovskite solar cell (PSC) technology, to provide a large-scale renewable energy solution for industry. Thanks to graphene’s exceptional electrical conductivity and thermal properties, this development would be transformational for the solar cell industry, with PSC being one of the most effective forms of ultra-low cost – and potentially ultra-low light – solar power generation. Essentially, this research has the potential to enhance large-scale solar cell efficiencies and make them more First Graphene was also granted an exclusive worldwide affordable. license for novel supercapacitor technology, with the US Growth milestones The 2023 financial year saw remarkable revenue growth This revenue earnings achievement by First Graphene performance, with First Graphene recording a Company- is not just a major step for the Company but also for the first annual revenue of AUD$1 million. This represents wider graphene industry. It provides proof of the strong a 39% increase to the year prior and is testament to demand for a commercial graphene product, scalable the hard work of our dedicated team, which continues in size. While this reinforces First Graphene’s position to deliver our commercialisation milestones while as a leader in the graphene industry, it also invokes accelerating our pre-eminence as a global material confidence for all companies striving for success in the technology company. market. ASX: FGR l 8 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Strong growth numbers produced during this financial Queensland University of Technology to commercialise year is a result of increasing global demand for graphene products, positive results from research and trials ultra-low cost, flexible perovskite solar cells using PureGRAPH® as a primary enabler. converting into product commercialisation and sales, and First Graphene’s ongoing reputation as a leader in the graphene market. The company’s forward-looking pipeline is already at a value of circa $550,000, representing more than 50% of 2023 financial year sales result. This order pipeline First Graphene received a number of grants to help fund places the company in a strong and confident position research and development this financial year, including for revenue growth to keep trending north throughout AUD$900,000 in tax credits from both the Australian and 2024 as the Company continues to maximise commercial United Kingdom tax authorities. opportunities on multiple fronts. Other grants include AUD$2.03 million jointly received for a collaboration with lead partner Halocell Energy and “This revenue earnings achievement by First Graphene is not just a major step for the Company but also for the wider graphene industry. It provides proof of the strong demand for a commercial graphene product, scalable in size.” Big improvements First Graphene continues to refine our world-leading distribution profile. products to provide the most cost-effective solution for industry, delivered in the shortest timeframe. First Graphene conducted trials to produce a much cheaper and less resource intensive grade, called PureGRAPH 7, which will be supplied to downstream customers for testing and product evaluation. The aim is to provide an alternative to PureGRAPH 5, the smallest yet highest- performing grade of graphene we produce. To reduce the time and cost it takes to produce PureGraph 5, First Graphene’s Operations and Research and Development team worked to make subtle changes to the existing processing conditions to drive down the cost of this superior product. A trial batch was made, focusing on optimising process conditions while maintaining product quality. This successfully achieved a 45% reduction in processing time and improved some of the product’s properties, including the particle size As the Company continues to push graphene technology into new areas and markets, we are actively investigating the modification of existing graphene materials to impart more or new functionalities using in-house expertise. This research includes determining new, sustainable and safer methods of creating graphene oxide without the need for hazardous and harmful chemicals. The Company continues to strategically invest in refining our world-class manufacturing facility processes and procedures, supporting our broader optimisation and cost reduction objectives. Towards the end of the 2023 financial year, First Graphene commissioned a new Retsch mill from Germany, with preliminary results demonstrating considerable improvements to our manufacturing process and efficiencies. The mill reduces labour intensity and can mill FGR ANN UAL R EPO RT F Y20 23/24 9 higher volumes of graphene at faster rates than previous world-leading processes and technology allows methods. The Company also looks forward to reporting on further results from our second phase of optimisation trials, set to reduce power consumption and support further cost reductions to our bottom line. While First Graphene’s commercial quantities of our product to be aggressively priced, there is a need to continue reducing costs and optimising processes to further develop the broader graphene market. Strong results on the horizon The 2024 financial year has already started strongly, with As more industries seek alternative solutions to emissions initial results from the world-leading cement trials in the reduction and energy optimisation capabilities, we are UK expected to be released soon. primed with a viable, cost-effective product to meet their We expect the commercialisation of graphene-enhanced needs. cement to grow significantly following the release of I look forward to releasing further results over the next these results, as the construction industry embraces the year, in lockstep with the Company’s growth as a leading supplier of graphene products to meet rising global demand. use of graphene technology. We anticipate this will only increase the demand for PureGRAPH® as we validate and showcase the industrial scale adoption and success of the solution. As we move through the 2024 financial year, First Graphene will continue to solidify its position in the Industrial Materials sector as we expand and validate the uses of our versatile product portfolio. The Company is actively exploring strategic partnerships with organisations best suited to bolster our profile within the industry and advance our evolution as a global company specialising in material technology. Michael Bell Managing Director and CEO “As more industries seek alternative solutions to emissions reduction and energy optimisation capabilities, we are primed with a viable, cost- effective product to meet their needs.” ASX: FGR l 10 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE OPERATIONS/ QHSE REPORT Health and Safety The safety and wellbeing of our team is paramount for taken. As a Company, we immediately implemented the First Graphene. As a standard, we maintain our focus on recommended changes to make sure our operations streamlining and improving the Company’s systems and continued to have a strong safety record. procedures, to create and foster a safe environment for our staff, customers and stakeholders. I am pleased to report that our QHSE KPI results for the year are exceptional, reinforcing our team’s dedication to During the previous financial year, a comprehensive best practices in these areas, with no Lost Time Incidents, third-party assessment of our manufacturing premises no Medical Treatment Incidents, and no Environmental determined only minor corrective actions needed to be Incidents. Mitigation of Business Risks First Graphene understands the need to mitigate a range of risks to the business, which could potentially impact our ability to achieve strategic goals, and the consistent delivery of value to all stakeholders and shareholders. Some of the risks identified and recognised by the Company include: Regulation of Nanomaterials regulation exists, however this is mitigated through consistent monitoring and adoption of best practices in The Company continues to actively monitor any changes the commercialisation of novel materials. to the regulations regarding nanomaterials and continues to be an active REACH consortium member for substance registration in Europe. Regulations around the safe use and handling of nanomaterials is widely established and generally accepted globally. We are in a strong position, with existing regulatory approvals for PureGRAPH products in Australia, the EU and the UK, where we have successfully passed the required occupational health and environmental testing. We have also initiated the regulatory approval process for US markets. The risk of changes to nanomaterial During the fourth quarter of FY23, optimisation trials were run to investigate the yield of graphene from the electro-chemical cells by modifications to both the cell and electrode design. Initial results are promising, with both an increase in the rate of graphene production and a corresponding reduction in electricity usage per kilogram of graphene produced. FGR ANN UAL R EPO RT F Y20 23/24 11 Consistent commercialisation Safety and wellbeing of staff As an early-stage business, First Graphene requires First Graphene’s people are a priority and maintaining funding periodically and our key investors remain a safe and healthy work environment is key to the majority shareholders. Global demand for the use of Company’s operations. The Company’s Health, Safety, next generation materials, including our product, is and Environmental Policy details how we develop and increasing, and many industries are realising graphene continually improve systems to reduce risks to our has a large role to play in solving key environmental staff, our facilities, and the environment. We maintain issues impacting their business. The consistent interest strict regulatory compliance, with the Henderson from the cement industry and growing demand from manufacturing plant complying with occupational health other sectors mitigates the risk of impacts to ongoing and safety obligations of WorkSafe WA, as well as Western liquidity. Management also continues to accelerate the Australian Government and Australian Government process of commercialisation of our product, as well as regulations. working to increase investor confidence. Retaining skilled workforce Environmental risk The Company has sufficient procedure and controls First Graphene is a technically advanced and research in place to manage environmental risks. This includes driven business, requiring specialist, highly skilled staff relevant Western Australian Government and Australian who appreciate the need to develop commercially Government approvals required for waste and water relevant solutions for various industrial sectors. management in our production facility and annual testing Acknowledging this, the Company has implemented by authorities to ensure compliance. Correct handling strong equity-based retention plans to mitigate the risk of by-products also remains a priority for the Company. of losing key workers, while also taking steps to protect Recent optimisation trials were designed to reduce the Company’s Intellectual Property through robust the overt reliance on power supply, and we continue employee contracts. First Graphene’s strong connections to progress these trials to further enhance production to research organisations has also helped maintain efficiencies. a healthy pipeline of skilled staff to bolster creativity and innovation along with high levels of employee engagement. We are confident in our risk management framework and First Graphene’s ability to adapt to new and emerging risks to the business. Transportation and supply With a heavy reliance on global supply chains to transport its product, First Graphene is committed to mitigating any potential risk posed by disruption or delays to logistics. The Company ensures sufficient stock of key raw materials remains on site to maintain consistent feedstock for the manufacturing plant, should issues occur with haulage and shipping pathways. We also have several alternatives available for transporting products via air, road, and sea. From previous experience with global events impacting transportation pathways, delays have not slowed down demand or execution of projects. The Company also has insurance in place to mitigate any loss or damage to products or the business. ASX: FGR l 1 2 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE The new grinding mill is poised to enhance our manufacturing capacity and capability, offering substantial productivity gains by expediting the processing of larger volumes of PureGRAPH® product. Providing a more user-friendly system, this new addition will also reduce labour intensity and material handling, while vastly accelerating graphene milling rates. Together with the improvements to our product, this investment will further solidify First Graphene’s position as a world-leading graphene supplier, opening new opportunities for commercial advantage and success. First Graphene has renegotiated a lease renewal for the main office and manufacturing facility in Henderson, Western Australia, supporting our broader growth strategy and securing our established headquarters in Perth until mid-2028. Further reducing the Company’s cash burn, the lease of the second warehouse has been discontinued. The graphite feedstock stored there will be relocated to a nearby, more cost-effective storage solution. Looking ahead, First Graphene continues to progress our second phase of Electrochemical Cell optimisation trials. Building upon the successes of our initial trials, we anticipate further advancements in production rates and power efficiency, further solidifying our world leading capacity and competitive advantage. Manufacturing This fiscal year saw First Graphene’s facility in Western Australia hit a major milestone when we completed manufacture and shipment of our largest-ever single order, surpassing one metric tonne of PureGRAPH® 50 product. This was a significant achievement for the Company, as the order was completed in a short timeframe and helped validate our manufacturing process at scale. It also emphasised the substantial demand volume and further offtake potential from the cement and concrete sector. The Company efficiently and effectively fulfilled numerous other substantial orders for our clients worldwide, across the ever-broadening number of industries we supply to. The Company continues to refine and enhance its world- class manufacturing capability and capacity using readily scalable technology to cater for growing demand. During the 2023 financial year, we commenced optimisation trials at the Henderson facility, which resulted in further refining of our production processes, improved energy saving outcomes and overall cost reduction. First Graphene made a significant investment during the March quarter to improve our manufacturing processes, by procuring and commissioning a cutting-edge grinding mill from world-renowned German manufacturer Retsch. Initial results show improvements in particle size distribution for the finer grades of PureGRAPH® powders, ultimately setting the stage for superior product performance and enhanced uniform quality. This will also support specialised material applications, particularly in the energy storage and power generation sectors that require increased particle surface area. David Bennett General Manager Process Operations FGR ANN UAL R EPO RT F Y20 23/24 13 COMMON & EMERGING APPLICATIONS CONSTRUCTION & INFRASTRUCTURE » Cement and Concrete – lower CO2 emissions » Cladding - foam panels for insulation, sound and in cement manufacturing, improved physical and vibration control products functional performance with enhanced durability » Upcycling - enabling use and icnreased » Asphalt - stronger, more flexible, longer lasting performance of recycled/secondary raw materials road and carpark surfaces (e.g. recycled aggregate) » Cement and mortar - increased performance in » Coatings - smart/conductive coatings to detect harsh conditions (eg wastewater treatment) leaks in roof panels, storage vessels, pipework; fire- » Smart coatings - real-time leak detection retardant coatings ENERGY & STORAGE » Battery anode coatings - vastly improved » Solar thermal roof panels - for energy efficient storage capacity and performance internal heating » Hydrogen production and storage – cleaner, » Solar panels - improved energy conversion, low-cost and improved methods durability and functionality in reduced daylight; » Wind turbine blades - for greater strength, and enabling lower cost manufacture durability and longer functional life » Battery and supercapacitor technology - better performance of electric vehicles INDUSTRIAL MATERIALS » Thermally conductive polymers – optimised » Vehicle components - tyres, body panels, wear heat transfer systems for data processing and components, reinforcement, protective coatings automotive applications » Elastomers – improved fire retardancy, increased » Fibreglass/resins – improved mechanical strength, durability, thermal and acoustic performance, wear resistance and reduced performance properties permeability ASX: FGR l 1 4 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE INTERIOR FITTINGS & EQUIPMENT » Perovskite solar cells - to convert ambient light » Anti-bacterial/anti-microbial foams, coatings to energy for equipment and appliances - for mattresses, benchtops » “Smart” textiles - (e.g. clothing, bedding) to » Personal protective equipment - anti-puncture monitor vital health data gloves, strengthened safety glasses ENERGY & STORAGE INTERIOR FITTINGS & EQUIPMENT CONSTRUCTION INFRASTRUCTURE TRANSPORT FGR ANN UAL R EPO RT F Y20 23/24 15 R&D TECHNOLOGY REPORT Research and development driving commercial success The primary focus of First Graphene’s research and development activities has been on investigating and more than 20 years’ experience delivering material science and development projects. First Graphene UK also extended its Tier 1 membership with the Graphene Engineering Innovation Centre (GEIC), creating solutions that present major reaching a 5-year milestone. This partnership allows us commercial opportunities, as well as to continue utilising the unique facilities and leverage the prominent academic ecosystem to improve our product supporting the global push for more offerings. sustainable processes. Early in the 2023 financial year, the team welcomed Ian Martin as Research and Development Manager, taking on the Company’s research and development pipeline responsibilities. Based in the UK, Ian brings extensive scientific and industry knowledge to the Company, with First Graphene received several grants this year, including circa AUD 900,000 in tax credits from the Australian and United Kingdom tax authorities. This funding was used to fuel research and development opportunities across our key segments. Cementing graphene’s potential in the concrete industry The Company is actively working with over 30 global These trials focused on validating at scale graphene- cement and concrete partners and this segment remains enhanced cement’s ability to reduce carbon emissions at the forefront of the Company’s commercial focus, with by 10 to 20% and increase the longevity and strength of the in-demand and high-volume green cement market cement. The results and anticipated success of these poised for strong growth, reinforcing the upside potential vanguard trials will solidify First Graphene’s unique for First Graphene’s worldclass graphene solutions. position as a world-leading graphene supplier with a With the cement sector responsible for producing 8% of global carbon emissions, according to Australian research proven track record of implementing its solutions at industrial scale. body Beyond Zero Emissions, addressing the industry’s Separately during the financial year, First Graphene significant carbon footprint has been a major focus for First Graphene. One of the most significant projects was a collaboration with Breedon Group, Morgan Sindall continued to make headway with leading building materials supplier Cemex. PureGRAPH® additives were successfully used in trials with Cemex and UK- Construction and the University of Manchester to conduct based Manufacturing Technology Centre to improve world-leading trials of graphene-enhanced cement in the UK. compressive strength and reduce porosity of concrete- ASX: FGR l 16 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE using recycled aggregate. The consortium is now aiming cement and concrete producers that graphene has been to expand into larger scale trials, supporting Cemex’s loaded correctly to achieve optimal performance. pathway to net zero by 2050. First Graphene also secured AUD$13,000 from Innovate This financial year also saw advancements in UK’s Analysis for Innovators (A4I) Competition to develop measurement techniques to confirm the presence of similar solutions to measure dispersion of graphene in graphene in cement products at a commercial scale. cement without waiting 28 days for results. Development The National Physical Laboratory - a subset of the of these tools and methodologies will only strengthen our UK’s National Metrology Institute - initiated a project to leadership within the cement and concrete industry. develop indicators which would provide reassurance to “The results and anticipated success of these vanguard trials will solidify First Graphene’s unique position as a world-leading graphene supplier with a proven track record of implementing its solutions at industrial scale.” Creating sustainable energy solutions Our research and development and hydrogen as fuel sources. team joined the global focus to find alternative solutions for energy supply, storage, and innovation across a variety of industries. One of the problems becoming more prominent is the UK and Europe energy crisis, as the war in Ukraine continues to constrict critical gas supplies. First Graphene continued to make progress with joint development partner, ZEBCO Heating, on researching and developing unique devices that can provide low-cost and low-emission domestic heating systems. In the UK, 78% of homes use gas-fired heating, and this graphene- enhanced device could potentially reduce natural gas consumption in heating by up to 30%. This collaboration also achieved a significant milestone in developing a proof-of-concept system compatible with both natural gas We were joint beneficiaries of AUD$2.03 million in funding for research led by Australian solar panel manufacturer Halocell Energy, which is using First Graphene’s PureGRAPH® powder as a primary enabler in perovskite solar cells. The three-year collaborative project aims to commercialise ultra-low cost, flexible perovskite solar cells. The Company also continued to work with Senergy Innovations in the UK to develop a range of thermally conductive polymers and to test graphene-enhanced solar roof tiles for their efficacy of harnessing heat from sunlight. This research aims to not only reduce the weight of solar heating panels but also deliver low-carbon, energy efficient heating solutions. An Innovate UK project looking into metal oxide-doped graphene for the catalytic production of green hydrogen through water splitting, received equivalent to more than AUD$169,000 in funding, also wrapped up this year. These nanomaterials have the potential to reduce costs and the dependence on increasingly scarce precious and rare earth metals, aligning well with Government FGR ANN UAL R EPO RT F Y20 23/24 17 critical minerals strategies both in the UK and Australia. and 300% improvement to capacitance than typical Additionally, these materials can also be applied to carbon cells. Our team also secured an AUD$65,000 supercapacitor technologies for energy storage and the grant in conjunction with the University of Manchester to production of enhanced conductive coatings or inks fund the joint AKT2I Supercapacitor Slurry Optimisation for flexible electronics or photovoltaics. Results from Project. Both supercapacitor research opportunities the project will support future funding applications to provide exciting developments for industry as results advance commercialisation of this technology in the have the potential to revolutionise cell-based energy energy generation sector. transfer capabilities. This year, our team secured an exclusive patent for As the world demands more sustainable solutions for our novel technology used to produce metal oxide electric vehicles (EV), it was timely for First Graphene decorated products for supercapacitors. Granted in to be involved in the study of graphene-based September 2022, the patent complements previous work electrothermal heaters, conducted by the Queensland on high-energy, high-power density, commercial-scale supercapacitor cells using PureGRAPH®-based materials. Testing showed an 85% improvement in energy density University of Technology. This partnership allowed us to better understand graphene-based conductive inks and how it can be applied to the EV industry. Endless opportunities for graphene products Getting back to basics, First Graphene secured additional Expanding into the housing industry, First Graphene Analysis for Innovators (A4I) grant funding to map commenced work with UK residential home developer the topography and functionalisation of the surface of PureGRAPH®. The six-month collaborative project with the National Physics Laboratory and the Welsh Vector Homes to develop a HDPE masterbatch for use in structural beams in their modular sustainable smart homes. The graphene-enhanced material is showing universities of Cardiff and Swansea will provide valuable highly beneficial fire retardancy, increased strength, detailed information about the surface chemistry of our PureGRAPH® material, which will fundamentally improve understanding of our products and allow us to develop customised solutions for our customers across various commercial sectors. durability, thermal and acoustic performance properties, which aims to improve the structural integrity of housing for the future. We also continue to make promising headway with existing clients and partners progressing applications One of those commercial sectors is footwear, and 2023 and trials for Electrostatic Discharge (ESD) floor marked the start of discussions with a high-profile coatings, sustainable cold cure ceramic tiles, and European brewer that expressed interest in ordering a high-performance lubricants. Rubber compounders significant number of graphene-enhanced safety footwear. have also shown interest in utilising graphene’s thermal This presented an opportunity to build on established conductivity and antioxidant behaviour to enhance commercial partnerships and to capitalise on the high- thermal management and improve longevity to develop profile brand of the brewing company. Separately, First new sustainable products. Graphene was engaged by a branded golf shoe partner to help develop a range of next-generation designs. ASX: FGR l 18 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Alternative solutions for a sustainable future In both Australia and abroad, the appetite for alternative solutions to meet emission reduction targets and increase energy optimisation is gaining momentum. This has resulted in more approaches to First Graphene from industry, universities, and potential customers to work hand-in-glove to create, test and deliver viable, cost-effective, market-ready products. This collaborative approach to research also provides a strong foundation for additional, sustained growth in product volume orders in the future. Andy Goodwin Non-Executive Director “By continually reviewing our research and development opportunities through a commercial lens, we are ensuring graphene-enhanced products are fast-tracked from scientific theory and curiosity to practical reality, and to make a real positive societal impact on the global stage.” Ian Martin R&D Manager FGR ANN UAL R EPO RT F Y20 23/24 19 ASX: FGR l 20 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE CFO REPORT First Graphene has powered through the 2022/23 financial year to deliver a full year revenue of AUD$1 million for the first time in the Company’s history. The growing cement and concrete segment enabled First Graphene to achieve this commercial milestone, as well as the expanding project services section of the business. Some of the key highlights for FY23 include: +39% SALES REVENUE: +9% OPERATING PROFIT: FY23: AUD 1.00m FY22: AUD 0.72m FY23: AUD - 4.18m FY22: AUD - 4.61m +23% OPERATING & INVESTING CASHFLOW FY23: -3.54m FY22: -4.50m Commercial momentum gathers speed Coming off the back of a strong FY22, First Graphene has seen revenue grow 39% during FY23. This steady increase is largely due to growth in the cement and concrete segment and the uptake of new customers across the globe. The continual purchasing power from early adopters of the Company’s product in Western Australia has also helped maintain a rise in revenue. As depicted in the adjacent graphs, First Graphene’s sales trajectory continues in a positive direction, while cash “The fiscal performance during FY23 has placed the Company in a confident position as it ventures into FY24.” FGR ANN UAL R EPO RT F Y20 23/24 outflow has decreased for a consecutive year. This is a direct result of the Company’s responsible fiscal management, with a primary focus on cost reduction methods. These include consolidation of storage and manufacturing facilities in WA, reduction in spend on third party consultants and ongoing non-cash long term incentives for First Graphene’s employees. Supplying Performance Rights to the Company’s hard-working staff as an incentive not only drives further commercial success but also invokes commitment from First Graphene’s employees. Together, this helps the business develop as it expands into new and emerging markets. These measures have allowed First Graphene to become more effective with its spending while continuing to reward its employees. The reduction in spend will also help the Company move closer to breakeven, via revenue increase and responsible cost management. 21 $1.00 Sales ($million) $0.72 $0.29 $0.34 $0.02 2019 2020 2021 2022 2023 Operating & Investing Cash-Outflow ($million) $8.60 $6.40 $6.10 $4.50 $3.54 2024 outlook 2019 2020 2021 2022 2023 First Graphene continues to go from financial strength to strength, and the 2024 financial year is expected to be no different. The fiscal performance during FY23 has placed the Company in a confident position as it ventures into FY24. The Company’s forward-looking order book already has a pipeline of work adding to approximately AUD$550,000, accounting for more than 50% of the FY23 sales figures. This robust order pipeline sets the stage for even greater achievements in FY24, building upon our established track record of success. With strong ongoing interest in the concrete and cement segment, and expansion of sales into other high growth and in-demand sectors, First Graphene will continue to accelerate its commercialisation strategy and position as a global material technology company. Aditya Asthana CFO and Company Secretary ASX: FGR l 22 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2023 (INCORPORATING INFORMATION PURSUANT TO ASX LISTING RULE 4.3A) FGR ANN UAL R EPO RT F Y20 23/24 23 Directors’ Report The directors present their report together with the financial report of First Graphene Limited (‘First Graphene” or ‘Company’) and the entities it controlled (‘Consolidated Entity’ or ‘Group’) for the year ended 30 June 2023. 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 NNoonn--EExxeeccuuttiivvee CChhaaiirrmmaann 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 establish Far East Capital Limited which was founded 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. OOtthheerr CCuurrrreenntt DDiirreeccttoorrsshhiippss FFoorrmmeerr ddiirreeccttoorrsshhiippss IInntteerreessttss iinn sshhaarreess iinn tthhee llaasstt 33 yyeeaarrss aanndd ooppttiioonnss West Wits Mining Limited Nagambie Resources Aguia Resources Limited None Ordinary shares 19,083,772 Options 3,000,000 Performance Rights 400,000 Dr Andy Goodwin Ph.D. (Polymer Chemistry) NNoonn--EExxeeccuuttiivvee DDiirreeccttoorr 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 in 2017 and is based in Manchester, UK. OOtthheerr CCuurrrreenntt DDiirreeccttoorrsshhiippss None Michael Quinert NNoonn--EExxeeccuuttiivvee DDiirreeccttoorr FFoorrmmeerr ddiirreeccttoorrsshhiippss IInntteerreessttss iinn sshhaarreess iinn tthhee llaasstt 33 yyeeaarrss aanndd ooppttiioonnss iinn FFGGRR None Ordinary shares 2,008,993 Options 1,000,000 Performance Rights 450,000 Mr Quinert is a founding partner of QR Lawyers which was established in July 2009. He has over 30- years’ experience as a commercial and corporate lawyer, including three years with ASX and over 21 years as a partner in a Melbourne law firms. ASX: FGR l 24 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Mr Quinert has extensive experience assisting and advising companies on IPO’s, capital raising, cross border transactions, regulatory compliance and has regularly advised publicly listed mining companies. Michael is a Non-Executive Chairman of West Wits Mining Limited OOtthheerr CCuurrrreenntt DDiirreeccttoorrsshhiippss FFoorrmmeerr ddiirreeccttoorrsshhiippss IInntteerreessttss iinn sshhaarreess iinn tthhee llaasstt 33 yyeeaarrss aanndd ooppttiioonnss iinn FFGGRR West Wits Mining Limited First Au Limited Ordinary shares 80,000 Options Performance Rights 200,000 - Michael Bell MMaannaaggiinngg DDiirreeccttoorr aanndd CChhiieeff EExxeeccuuttiivvee OOffffiicceerr Mr Bell has over 21 years’ experience in engineering and business management and significant international experience driving business growth. He was with ST Engineering Group where he served as Senior Vice-President. Mike has also held roles as Director for Navman Wireless, a global Telematics company, and as General Manager with Singapore-based shipbuilder Strategic Marine. OOtthheerr CCuurrrreenntt DDiirreeccttoorrsshhiippss None FFoorrmmeerr ddiirreeccttoorrsshhiippss IInntteerreessttss iinn sshhaarreess iinn tthhee llaasstt 33 yyeeaarrss aanndd ooppttiioonnss iinn FFGGRR None Ordinary shares 1,163,979 Options 5,000,000 Performance Rights - Results and Dividends The Group result for the year was a loss of $5,422,321 (2022: loss of $$5,033,108). No final dividend has been declared or recommended as at 30 June 2023 or as at the date of this report (2022: $ nil). No interim dividends have been paid (2022: 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. Events Since the End of the Financial Year No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years. FGR ANN UAL R EPO RT F Y20 23/24 25 Significant Changes in State of Affairs 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 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 10) 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 Australian Industrial Chemicals Introduction Scheme (AICIS) 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. Mitigation of Business Risks First Graphene understands the need to mitigate a range of risks to the business, which could potentially impact our ability to achieve strategic goals, and the consistent delivery of value to all stakeholders and shareholders. Some of the risks identified and recognised by the Company include: RReegguullaattiioonn ooff NNaannoommaatteerriiaallss The Company continues to actively monitor the development of regulatory requirements for new nanomaterials in our target markets. We are in a strong position, with existing regulatory approvals for PureGRAPH products in Australia, the EU and the UK where we have successfully passed the required occupational health and environmental testing. We have also initiated the regulatory approval process for USA markets. The risk of changes to nanomaterial regulations exists but is mitigated through consistent monitoring and adoption of best practices in the commercialisation of novel materials. CCoonnssiisstteenntt ccoommmmeerrcciiaalliissaattiioonn As an early-stage business, First Graphene requires funding periodically and our key investors remain majority shareholders. Global demand for the use of next generation materials, including our product, is increasing, and many industries are realising graphene has a large role to play in solving key environmental issues impacting their business. The consistent interest from the cement industry and growing demand from other sectors mitigates the risk of impacts to ongoing liquidity. ASX: FGR l 26 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Management also continues to accelerate the process of commercialisation of our product, as well as working to increase investor confidence. RReettaaiinniinngg sskkiilllleedd wwoorrkkffoorrccee First Graphene is a technically advanced and research driven business, requiring specialist, highly skilled staff that appreciate the need to develop commercially relevant solutions for various industrial sectors. Acknowledging this, the Company has implemented strong equity-based retention plans to mitigate the risk of losing key workers, while also taking steps to protect the Company’s Intellectual Property through robust employee contracts. First Graphene’s strong connections to research organisations has also helped maintain a healthy pipeline of skilled staff to bolster creativity and innovation along with high levels of employee engagement. TTrraannssppoorrttaattiioonn aanndd ssuuppppllyy With a heavy reliance on global supply chains to transport its product, First Graphene is committed to mitigating any potential risk posed by disruption or delays to logistics. The Company ensures sufficient stock of key raw materials remains on site to maintain consistent feedstock for the manufacturing plant, should issues occur with haulage and shipping pathways. We also have several alternatives available for transporting products via air, road, and sea. From previous experience with global events impacting transportation pathways, delays have not slowed down demand or execution of projects. The Company also has insurance in place to mitigate any loss or damage to products or the business. SSaaffeettyy aanndd wweellllbbeeiinngg ooff ssttaaffff First Graphene’s people are a priority and maintaining a safe and healthy work environment is key to the Company’s operations. The Company’s Health, Safety, and Environmental Policy details how we develop and continually improve systems to reduce risks to our staff, our facilities, and the environment. We maintain strict regulatory compliance, with the Henderson manufacturing plant complying with occupational health and safety obligations of WorkSafe WA, as well as Western Australian Government and Australian Government regulations. EEnnvviirroonnmmeennttaall rriisskk The Company has sufficient procedure and controls in place to manage environmental risks. This includes relevant Western Australian Government and Australian Government approvals required for waste and water management in the production facility and biannual testing to ensure consistency. Correct handling of by-products also remains a priority for the Company. Recent optimisation trials were designed to reduce the overt reliance on power supply, and we continue to progress these trials to further enhance production efficiencies. We are confident in our risk management framework and First Graphene’s ability to adapt to new and emerging risks to the business. Proceedings on behalf of company 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. FGR ANN UAL R EPO RT F Y20 23/24 27 Share Options At the date of this report, First Graphene Limited has the following options exercisable into ordinary shares in First Graphene Limited. Unlisted Grant Date Date of Expiry Exercise Price Share option 8 November 2019 8 November 2023 $0.25 each, if exercised on or before 8 November 2023 Number under option 15,000,000 Directors’ meetings The number of meetings of Directors held during the year and the number attended by each Director was as follows: Warwick Grigor Dr Andy Goodwin Michael Quinert Michael Bell Directors’ Meetings Meetings Attended Entitled to Attend 8 8 8 8 8 8 8 8 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. ASX: FGR l 28 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Remuneration 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 (‘KMP’) disclosed in this report: Mr Warwick Grigor Dr Andy Goodwin Mr Michael Bell Mr Aditya Asthana Mr Michael Quinert 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. The remuneration policy is designed to encourage superior performance and long-term commitment to First Graphene. 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 First Graphene or for attending Board meetings. All Executive Directors, Non-Executive Directors and responsible executives of First Graphene 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 First Graphene. 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 FGR ANN UAL R EPO RT F Y20 23/24 29 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 $35,000 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: 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. ASX: FGR l 30 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE 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 %% 6 3 9 0 5 5 1 3 1 $$ AA l a t o T $$ AA s 8 9 2 , 6 9 5 8 0 8 , 4 1 2 0 0 5 , 4 4 1 ) i i ( 0 0 5 , 2 1 5 9 4 , 5 7 2 4 2 , 1 4 0 0 5 , 7 3 0 5 2 , 6 3 1 0 , 6 2 3 6 1 0 , 1 4 8 4 5 , 3 8 1 , 1 4 7 0 , 2 1 3 $$ AA - - - - - $$ AA - 0 0 0 2 1 , - - 1 8 0 7 2 , 1 8 0 , 9 3 e r a h S d e s a b - t s o P t n e m y a p n o i t a n m r e T i t n e m y o p m E l s u n o B t n e m y a p r e p s a s ’ r o t c e r i D l i e c h e V e s a B g n i t l u s n o c s t i f e n e b r e h t o & s e v i t n e c n i m r e t t r o h S : s w o l l o f s a s a w r a e y e h t g n i r u d p u o r G e h t f o s e v i t u c e x e t n e m e g a n a m y e k d n a r o t c e r i D h c a e r o f n o i t a r e n u m e r e h T 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f n o i t a r e n u m e r f o s l i a t e D t n e m y a P s t n e m e l t i t n E s t c a r t n o c y r a a S l $$ AA $$ AA s e e f $$ AA e c n a w o l l a $$ AA e e f $$ AA s r o t c e r i D e v i t u c e x E 33 22 00 22 ee nn uu JJ 00 33 - - - - - - , 0 9 4 1 8 3 - 0 0 0 0 9 , - - 0 0 0 0 3 , 5 9 9 7 3 , 2 9 9 4 3 , , 6 1 9 7 5 2 - 6 0 4 , 9 2 7 7 8 9 , 2 0 1 - - - - - - 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 - - ) i i ( a n a h t s A a y t i d A ll aa tt oo TT - - - - 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 ) i i ( r o g i r G k c w r a W i ) i i ( ) i ( l l e B l e a h c M i ) i i ( t r e n u Q i l e a h c M i e h h c h w i , 1 2 0 2 r a e y l i a c n a n i f e h t n i l l e B l i e a h c M o t d e t n a r g s n o i t p o 0 0 0 0 0 0 5 e h t , , f o e s n e p x e e u a v r i a f e h t l s t n e s e r p e r h c h w i , , 1 1 9 0 8 $ s e d u c n i t n e m y a p d e s a b - e r a h s e h T y n a p m o c e h t o t e r a h s . i r e p 5 2 0 $ g n y a p y b e s i c r e x e o t e s o o h c n a c s e s n e p x e t n e m y a p d e s a b - e r a h s e h t g n i t a u c a c n l l i d e s u s n o i t p m u s s a r o f 5 1 e g a P o t r e f e r e s a e P l . i . i i FGR ANN UAL R EPO RT F Y20 23/24 31 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 %% e r a h S d e s a b - t s o P t n e m y a p n o i t a n m r e T i t n e m y o p m E l s u n o B t n e m y a p r e p s a s ’ r o t c e r i D i l e c h e V e s a B g n i t l u s n o c s t i f 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 : 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 2 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 $$ AA l a t o T $$ AA 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 y r a a S l $$ AA $$ AA s e e f $$ AA e c n a w o l l a $$ AA e e f $$ AA s r o t c e r i D e v i t u c e x E 22 22 00 22 ee nn uu JJ 00 33 % 2 4 6 7 9 , 4 6 6 2 0 6 , 1 8 2 - - - 0 0 0 , 2 3 1 2 2 6 , 8 5 1 2 9 9 , 4 3 - - - % 3 3 8 3 , 4 6 2 7 6 5 , 9 3 7 9 , 4 5 2 , 1 9 6 1 , 1 9 2 $$ AA - - - - - - $$ AA - 0 0 0 2 1 , 3 3 5 0 1 , - 5 6 1 3 2 , 8 9 6 , 5 4 - - - - - - , 4 7 3 3 8 3 - 0 0 0 0 9 , , 9 8 0 3 2 1 - , 1 5 6 1 3 2 4 1 1 , 8 2 8 0 0 0 0 3 , 0 0 0 5 2 , 2 9 9 4 3 , - 2 9 9 , 9 8 - - - - - - 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 - - a n a h t s A a y t i d A ll aa tt oo TT - - - - s r o t c e r i D e v i t u c e x E - n o N i n w d o o G y d n A r D r o g i r G k c w r a W i ) i i i ( ) i i ( ) i ( l l e B l e a h c M i t r e n u Q i l e a h c M i . i r e p 5 2 0 $ g n y a p y b e s i c r e x e o t e s o o h c n a c e h h c h w i , 2 2 0 2 e n u J o t p u l l e B l i e a h c M o t d e t n a r g s n o i t p o 0 0 0 0 0 0 5 e h t , , l f o e u a v r i a f e h t s t n e s e r p e r t n e m y a p d e s a b e r a h s e h T . i i i . y n a p m o c e h t o t e r a h s y b e s i c r e x e o t e s o o h c n a c e h h c h w i , 1 2 0 2 r a e y l i a c n a n i f e h t n i l l e B l i e a h c M o t d e t n a r g s n o i t p o 0 0 0 0 0 0 5 e h t , , . 1 2 0 2 y u J l 1 n o r o t c e r i i D g n g a n a M d e t n o p p a s a w i l l e B l e a h c M i l f o e s n e p x e e u a v r i a f e h t s t n e s e r p e r t n e m y a p d e s a b e r a h s e h T y n a p m o c e h t o t e r a h s . r e p 5 2 0 $ g n y a p i . i . i i ASX: FGR l 32 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE 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 22002233 22002222 22002211 2020 2019 Sales revenue $ 1,003,424 723,323 341,869 289,773 22,771 Loss before tax $ (5,422,321) (5,033,108) (6,284,757) (5,366,149) (6,986,738) Basic loss per shares (cents) Increase/(decrease) in share price % (0.96) (0.91) (1.19) (1.11) (1.78) (40.0) (60.34) 133.1 (45.1) 134.2 Relationship between Remuneration and Company Performance There is not a connection between the profitability of the Company and remuneration as the Company is not generating profits. Name Warwick Grigor Dr Andy Goodwin Michael Quinert Michael Bell Aditya Asthana % Fixed remuneration % Short Term Incentive % Long Term Incentive 91% 50% 85% 64% 87% - - - - - 9% 50% 15% 36% 13% Contractual Arrangements with KMP Remuneration and other terms of employment for Key Management Personnel are formalised in service agreements. These agreements specify the components of remuneration benefits and notice periods. The material terms of service agreements with the Key Management Personnel are noted as follows: Name Base Salary Michael Bell 350,000 Duration of Service Agreement Ongoing Notice Period By Executive By Company 3 months 3 months Aditya Asthana 260,000 Ongoing 3 months 3 months There are no other service agreements in place. Severance Payment Entitlement No entitlement No entitlement FGR ANN UAL R EPO RT F Y20 23/24 33 Share-based compensation Shares issued as part of remuneration for the year ended 30 June 2023 2,395,490 performance rights were issued to key management personnel, of which 1,795,490 of the performance have vested in FY 23. 1,345,490 Performance Rights were converted to shares. Options issued as part of remuneration for the year ended 30 June 2023 No options were issued to key management personnel as part of compensation during the year. Options issued as part of remuneration in prior years Using the Black Scholes option pricing model and based on the assumptions set out below, the CEO Options were ascribed the following value: AAssssuummppttiioonnss:: Valuation date Market price of shares Exercise price Expiry date (length of time from issue) Risk free interest rate Volatility Indicative Value of CEO Option (cents) Total Value of CEO Options 17 December 2020 $0.245 $0.250 8 November 2023 – 2.89 years 0.25% 75% 0.1158 $579,069 Options holdings held by key management personnel Directors Balance 01.07.22 Granted Exercised Other Balance 30.06.23 Total vested 30.06.23 Vested & exercisable 30.06.23 Vested & un- exercisable 30.06.22 Warwick Grigor Dr Andy Goodwin Michael Quinert Michael Bell Aditya Asthana 3,000,000 1,000,000 - 5,000,000 - - - - - - - - - - - - - - - - 3,000,000 1,000,000 - 5,000,000 - - - - - - - - - - - - - - - - ASX: FGR l 3 4 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Performance rights issued as part of remuneration for the year ended 30 June 2023 Performance rights holdings held by key management personnel Directors Warwick Grigor Dr Andy Goodwin Michael Quinert Michael Bell Aditya Asthana i. Balance 01.07.22 Granted Vested Other (i) Balance 30.06.23 Grant Date Share Price A$ - - - - - 400,000 100,000 450,000 300,000 200,000 50,000 - - - 400,000 01/08/2023 0.13 450,000 01/08/2023 0.13 200,000 01/08/2023 0.13 1,029,979 1,029,979 (1,029,979) 315,511 315,511 (315,511) - - 01/08/2023 0.13 01/08/2023 0.13 Performance Rights converted to shares by KMP Under the Company’s Incentive Award Plan, Performance Rights (PR) are granted to employees following the release of the Company’s full financial year results starting October 2022 till December 2024. The employees have an option to convert each right to a fully paid ordinary share in the company, up to 2 years following the allocation. At the time of allotment of the PRs the Company recognises an employee expense, with a corresponding increase in reserves. When the employee chooses to convert the rights to ordinary shares the company recognises an increase in equity with a corresponding decrease in reserves previously recognised. Over financial year ended 30 June 2023, the company has issued 3,682,784 PRs to Directors, employees and Key Management Personnel. The above includes 1,050,000 Performance Rights issued to its Non-Executive Directors as announced to the ASX in the Company’s Notice of Meeting for its 2022 Annual General Meeting. 450,000 of these 1,050,000 PRs have already vested, for which the Company has recognised an employee expense, with a corresponding increase in reserve. PPeerrffoorrmmaannccee rriigghhttss iissssuueedd ttoo NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss VVeessttiinngg CCoonnddiittiioonnss Share Price1 Sales (AUD)2 NED Name Andrew Goodwin Michael Quinert Warwick Grigor TToottaall Notes: Tranche 1 Tranche 2 Tranche 3 Vested Unvested Unvested $0.45 $0.35 $2 million $5 million Number of Number of Rights Rights 100,000 50,000 100,000 50,000 200,000 100,000 440000,,000000 220000,,000000 Nil Nil Number of Rights 300,000 50,000 100,000 445500,,000000 Total 450,000 200,000 400,000 11,,005500,,000000 1. 25% of the Performance Rights will be measured against the 20 day VWAP Share price at 30 June of the applicable financial year (Tranche 2: FY23; Tranche 3: FY24). These rights were valued using a hybrid share option pricing model with the following inputs: Grant date Spot price Tranche 2 Tranche 3 17/10/22 17/10/22 $0.110 $0.110 Expiry date 17/10/26 17/10/27 Volatility 75% 75% Risk free rate 3.35% 3.35% Value per right $0.021 $0.035 2. 40% of the Performance Rights will be measured against the sales revenue received FGR ANN UAL R EPO RT F Y20 23/24 35 during the applicable financial year (Tranche 2: FY23; Tranche 3: FY24) based on audited accounts. These rights have been valued at the share price on the grant date. These rights were valued using a hybrid share option pricing model with the same inputs used above in Note 1. In addition, vesting of each Tranche (excluding Tranche 1) is subject to: • 10% of the Performance Rights will be subject to the achievement by a Director of their personal KPI for an applicable financial year as determined by the Board; and • 25% of the Performance Rights will be subject to the Director remaining a director of the Company. • No valuation assumptions required as these are non-financial targets The Performance Rights have expiry dates as follows: Tranche 1: 3 years from grant; Tranche 2: 4 years from grant; Tranche 3: 5 years from grant. Management have determined the probability of the rights vesting to be 100%. PPeerrffoorrmmaannccee rriigghhttss iissssuueedd ttoo EEmmppllooyyeeeess && KKMMPPss ((eexxcclluuddiinngg NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss)) The following performance rights were granted to employees & KMP: Number of Performance Rights Date of Grant Share Price A$ Vesting Date Employees KMP * 1,287,294 1,345,490 01/08/2022 01/08/2022 0.13 0.13 02/09/2022 02/09/2022 22,,663322,,778844 *These KMP rights have been converted to shares during the period. - Michael Bell – 1,029,979 - Aditya Asthana – 315,511 VVeessttiinngg ccoonnddiittiioonnss ffoorr PPeerrffoorrmmaannccee RRiigghhttss iissssuueedd ttoo eemmppllooyyeeeess ((eexxcclluuddiinngg NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss)):: 1. Share Price Target: $0.30 2. Total Revenue Target: $1 million 3. Continued employment with the company on date of issue of Performance Rights 4. Completion of personal KPIs 5. If the Share Price or Total Revenue Vesting Condition is partially met, a proportionate percentage of Performance Rights in the applicable Tranche will vest. For example, if FY22 Sales Revenue was $500,000, 20% of the Performance Rights in Tranche 1 will vest (being 50% of 40%). The weighting applied to each KPI for individual employees is dependent on their role and their impact on the KPIs. ASX: FGR l 36 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Shareholdings held by key management personnel Directors Warwick Grigor Dr Andy Goodwin Michael Quinert Michael Bell Aditya Asthana i. Balance 01.07.22 19,083,772 2,008,993 80,000 134,000 60,000 Granted Exercise of options Acquired Other - - - - - - - - - - - - - - - Balance 30.06.23 19,083,772 2,008,993 80,000 - - - 1,029,979 (i) 1,163,979 315,511 (i) 375,511 Shares issued upon vesting of performance rights in the year. Transactions with other related parties There were no remuneration consultants were utilised at this point in the Company’s development. loans or other transactions with key management personnel. No Voting Rights At the 2022 Annual General Meeting held on 17 October 2022 there were 6.4% of the votes against the adoption of the remuneration report. End of audited Remuneration Report FGR ANN UAL R EPO RT F Y20 23/24 37 Auditor’s independence The Directors received the independence declaration from the auditor of First Graphene Limited as stated on page 19. Non-audit services During the period BDO Corporate Tax (WA) Pty Ltd was paid $56,873 for the provision of taxation services (2022: $50,668). BDO Corporate Tax (WA) Pty Ltd is an affiliate member of BDO Audit (WA) Pty Ltd. Refer to Note 22 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 22, 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 • 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. Michael Bell Managing Director and Chief Executive Officer Dated at Perth this 22nd day of September 2023 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. Annual General Meeting The Company’s Annual General Meeting will be held on 20th November 2023. Details will be included in the Annual report and the Notice of Meeting, which will be issued in due course. ASX: FGR l 3 8 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Auditor’s Independence Declaration 19 | P a g e FGR ANN UAL R EPO RT F Y20 23/24 39 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2023 Continuing operations Revenue from contracts with customers Cost of goods sold Gross profit/(loss) Other Operating Income Research & development Selling & marketing Mineral lease maintenance General & administrative Loss from continuing operations before tax expense and finance Non-Operating Income/Expense Other Non-Operating income Share Based Payment expense Finance income Finance expense Note 2023 $ 2022 $ 3 1,003,424 723,323 (561,990) 441,434 (555,648) 167,675 934,947 900,116 (1,598,159) (568,952) (126,237) (3,264,231) (1,599,816) (875,857) (98,902) (3,098,274) (4,181,199) (4,605,059) - (477,673) 39,755 (803,204) 341,825 (463,839) 2,377 (308,413) 4(a) 4(b) 4(c) 4(d) 4(e) 16 5(a) 5(b) Loss before tax expense Income tax (expense)/benefit 6 (5,422,321) - (5,033,108) - Loss after tax (5,422,321) (5,033,108) Other comprehensive income Items which may be reclassified to profit or loss Foreign currency translation difference on foreign operations TToottaall ccoommpprreehheennssiivvee lloossss ffoorr tthhee yyeeaarr AAttttrriibbuuttaabbllee ttoo tthhee oowwnneerrss ooff FFiirrsstt GGrraapphheennee LLiimmiitteedd 14,438 (102,940) (5,407,883) (5,136,048) ASX: FGR l 4 0 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Consolidated Statement of Profit or Loss and Other Comprehensive Income (continued) Note 2023 $ 2022 T$ For the year ended 30 June 2023 Loss for the year attributable to: Owners of First Graphene Limited Non-Controlling interests Total comprehensive loss for the year attributable to: Owners of First Graphene Limited Non-Controlling interests Loss per share for the year attributable to the owners of First Graphene Limited: Basic (loss) per share (cents per share) Diluted Loss per share (cents per share) 7 7 (5,421,710) (611) (5,017,487) (15,621) (5,422,321) (5,033,108) (5,407,272) (611) (5,120,427) (15,621) (5,407,883) (5,136,048) (0.94) (0.94) (0.91) (0.91) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes FGR ANN UAL R EPO RT F Y20 23/24 41 Consolidated Statement of Financial Position At 30 June 2023 Note 2023 $ 2022 $ 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 Other assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Employee liabilities Financial liabilities Lease liabilities Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Capital and reserves attributable to owners of First Graphene Limited Non-controlling interest Total equity 8 9 10 11 24 9 12 13 24 3,225,954 1,759,014 346,495 726,064 7,004,724 1,821,713 167,744 225,801 6,057,527 9,219,982 2,479,526 579,151 2,215,237 151,701 229,244 5,654, 859 2,854,654 162,179 2,851,875 118,155 211,908 6,198, 770 11,712,386 15,418,752 435,832 276,118 3,622,000 530,656 4,864,606 585,702 139,189 6,135,251 178,489 7,038,631 - - - - 4,864,608 7,038,631 6,847,780 8,380,121 15 16 106,378,130 6,095,513 102,845,907 5,738,367 (105,811,650) (100,389,940) 6,661,993 8,194,334 185,787 185,787 6,847,780 8,380,121 The above consolidated statement of financial position should be read in conjunction with the accompanying notes ASX: FGR l 4 2 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE 1 2 1 , 0 8 3 , 8 9 1 1 , 7 1 1 ) 0 1 7 1 2 4 , , 5 ( ) 0 9 5 , 4 0 3 , 5 ( l a t o T $ - - - - 1 8 3 , 2 3 3 , 3 ) 4 0 8 , 7 3 ( 3 7 6 , 7 7 4 - - - - - - - - - - - - - - - - - - ) 0 1 7 1 2 4 , , 5 ( ) 0 1 7 , 1 2 4 , 5 ( - - - - - - - - - - 7 8 7 , 5 8 1 ) 0 4 9 , 9 8 3 , 0 0 1 ( ) 6 6 9 6 7 ( , g n i l l o r t n o c - n o N l d e t a u m u c c A s t s e r e t n i $ s e s s o l $ r e h t O e v r e s e R $ - - - - - - - , ) 0 3 5 6 1 1 ( $ - 0 2 1 , 7 1 1 , 0 2 1 7 1 1 n o i t a l s n a r T e v r e s e r 0 8 7 , 7 4 8 , 6 7 8 7 , 5 8 1 ) 0 5 6 , 1 1 8 , 5 0 1 ( ) 6 6 9 6 7 ( , 9 8 5 5 9 7 , 3 2 2 , 9 ) 4 6 6 , 0 4 1 ( ) 8 0 1 3 3 0 , , 5 ( ) 3 7 7 , 3 7 1 , 5 ( l a t o T $ - - 0 0 0 , 0 0 5 , 1 - 7 8 1 , 0 1 2 , 2 ) 3 2 9 , 8 1 ( 9 3 8 , 8 3 6 - 3 9 2 , 0 7 1 ) 1 3 7 , 5 1 ( ) 1 3 7 , 5 1 ( - - 5 2 2 , 1 3 - - - - ) 2 0 9 , 1 6 3 , 5 9 ( ) 1 5 8 5 4 ( , - - - - - - - ) 0 5 5 , 0 1 ( ) 7 8 4 7 1 0 , , 5 ( ) 7 3 0 , 8 2 0 , 5 ( - 0 1 1 0 1 1 - - ) 5 2 2 , 1 3 ( - - - - g n i l l o r t n o c - n o N l d e t a u m u c c A s t s e r e t n i $ s e s s o l $ r e h t O e v r e s e R $ - - - - - - - 0 9 5 3 1 , - ) 1 2 1 , 0 3 1 ( , ) 1 2 1 0 3 1 ( $ n o i t a l s n a r T e v r e s e r 1 2 1 , 0 8 3 , 8 7 8 7 , 5 8 1 ) 0 4 9 , 9 8 3 , 0 0 1 ( ) 6 6 9 6 7 ( , , ) 0 3 5 6 1 1 ( 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 $ 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 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F - - - - - - - - - 7 2 0 , 0 4 2 - - - - - - - 1 8 3 , 2 3 3 , 3 ) 4 0 8 , 7 3 ( 6 4 6 , 7 3 2 , 2 6 8 1 3 9 5 , , 6 0 9 5 4 8 2 0 1 , , 9 8 8 1 7 1 6 , , 0 3 1 8 7 3 6 0 1 , 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 $ , 3 2 6 9 3 6 5 , , 2 4 0 8 0 8 8 9 , - - - - - - - 9 3 8 , 0 1 3 - ) 0 0 6 , 8 1 ( - - - 0 0 0 , 0 0 5 , 1 - 7 8 1 , 0 1 2 , 2 ) 3 2 9 , 8 1 ( 0 0 0 , 8 2 3 - 0 0 6 , 8 1 , 2 6 8 1 3 9 5 , , 6 0 9 5 4 8 2 0 1 , r a e y e h t g n i r u d s t n e m e c a p e r a h S l r o f s s o l e v i s n e h e r p m o c l a t o T n o i t a l s n a r t y c n e r r u c n g e r o F i r a e y e h t 2 2 0 2 y u J l 1 t a s A r a e y e h t r o f s s o L d e u s s i s e r a h S g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T s n o i t c a s n a r t t n e m y a p d e s a b e r a h S s t s o c e u s s i e r a h S t s e r e t n i s e s s o l l d e t a u m u c c a o t r e f s n a r T s t h g i r e c n a m r o f r e p f o g n i t s e V 3 2 0 2 e n u J 0 3 r a e y e h t g n i r u d s t n e m e c a p e r a h S l r o f s s o l e v i s n e h e r p m o c l a t o T n o i t a l s n a r t y c n e r r u c n g e r o F i r a e y e h t 1 2 0 2 y u J l 1 t a s A r a e y e h t r o f s s o L d e u s s i s e r a h S s n o i t c a s n a r t t n e m y a p d e s a b e r a h S s t s o c e u s s i e r a h S t s e r e t n i s e s s o l l d e t a u m u c c a o t r e f s n a r T s t h g i r e c n a m r o f r e p f o g n i t s e V 2 2 0 2 e n u J 0 3 g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T i e t o n g n 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 l d a e r e b d u o h s 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 FGR ANN UAL R EPO RT F Y20 23/24 43 Consolidated Statement of Cash Flows For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid R&D and grant funding received Other income Note 2023 $ 2022 $ 726,673 (5,070,777) 40,195 - 606,947 (6,250,674) 2,377 - 901,609 1,241,941 - - Net cash outflows from operating activities 19 (3,402,301) (4,399,409) Cash flows from investing activities Payments for property, plant and equipment (94,291) (44,576) Proceeds from sale of property, plant and equipment Payments for intellectual property - - (45,512) (46,000) Net cash outflows from investing activities (139,803) (90,576) 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 convertible note Finance lease payments Net cash inflows / (outflows) from financing activities - - (37,804) - (198,862) (236,666) - 1,617,372 (18,923) 3,000,000 (180,808) 4,417,641 Net decrease in cash and cash equivalents (3,778,770) (72,344) Cash and cash equivalents at beginning of the year Effect of exchange rate fluctuations on cash held 7,004,724 7,076,580 - 488 Cash and cash equivalents at end of the year 8 3,225,954 7,004,724 The above consolidated statement of cash flows should be read in conjunction with the accompanying note ASX: FGR l 44 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE 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 Chief Executive Officer’s 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 22 September 2023 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; 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 2023, except for the adoption of new accounting standards and interpretations effective for annual periods beginning 1 July 2022 The effect 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. FGR ANN UAL R EPO RT F Y20 23/24 45 Notes to the Consolidated Financial Statements Going Concern For the year ended 30 June 2023 the entity recorded a loss of $5,422,321 (2022: $5,033,108) and had net cash outflows from operating activities of $3,402,301 (2022: $4,399,409). The ability of the entity to continue as a going concern is dependent on securing additional funding through the sale of equity securities to either existing or new shareholders to continue to fund its operational and marketing activities. These conditions indicate a material uncertainty which may cast a significant doubt about the entity’s ability to continue as a going concern and, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements have been prepared on the basis the entity is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for the following reasons: • The entity expects to receive additional funds via the issue of equity securities to either existing or new shareholders; and • In the event of further funds not being raised, the entity’s activities would be wound back to a sustainable level. Should the entity not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts which differ from those stated in the financial statements and the financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities which might be necessary should the entity not continue as a going concern. Statement of compliance The financial report complies with Australian Accounting Standards as issued by the financial report also complies with Australian Accounting Standards Board. The 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 2023. Unless otherwise stated, the Group has yet to fully assess the impact of these Standards and Interpretations when applied in future periods. Basis of consolidation The consolidated financial statements comprise the financial statements of First Graphene Limited and its subsidiaries as at 30 June 2023 (the Group). 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. ASX: FGR l 4 6 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 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. 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 FGR ANN UAL R EPO RT F Y20 23/24 47 Notes to the Consolidated Financial Statements 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. 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. 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. Share Based Payments Estimates The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the binomial or black-scholes model taking into account the terms and conditions upon which the instruments were granted. The ASX: FGR l 48 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to note 16 or further information. Services Revenue Judgement has been exercised in calculating and recognition of Service Revenue. This applies to estimating percentage of work completed on each project that is being under taken. Convertible notes carried at fair value On initial recognition, the value of the convertible notes was calculated based on the proceeds received. At the reporting date, the fair value of the conversion options within the convertible loan has been assessed to be nil and credit risk has not changed from inception of the loan. 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 2023 relates to raw material, work in progress and finished goods and is held at net realisable value. 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. FGR ANN UAL R EPO RT F Y20 23/24 49 Notes to the Consolidated Financial Statements 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 As the Company expands its graphene production and inventory, the Board monitors the Company based on actual verses budgeted expenditure incurred. 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. ASX: FGR l 5 0 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE l a t o T $ 2 2 0 2 6 2 1 , 3 0 5 3 2 0 2 6 6 9 , 8 9 5 7 9 1 , 0 2 2 9 5 4 , 4 0 4 3 2 3 , 3 2 7 4 2 4 , 3 0 0 , 1 - - - - - - - - - - - - 2 2 0 2 e c n a n e t n a M i $ 3 2 0 2 2 2 0 2 3 2 0 2 $ , 7 9 1 0 2 2 9 5 4 , 4 0 4 - - - 2 2 0 2 $ - 3 2 0 2 2 2 0 2 , 6 2 1 3 0 5 3 2 0 2 6 6 9 , 8 9 5 $ , 7 9 1 0 2 2 9 5 4 , 4 0 4 , 6 2 1 3 0 5 6 6 9 , 8 9 5 ) 9 5 0 , 5 0 6 , 4 ( ) 9 9 1 , 1 8 1 , 4 ( ) 2 0 9 , 8 9 ( ) 7 3 2 , 6 2 1 ( ) 5 8 1 1 6 8 , , 2 ( ) 9 8 3 , 3 4 7 , 2 ( ) 3 5 6 6 7 1 , , 1 ( ) 5 8 2 , 3 1 9 ( ) 8 1 3 , 8 6 4 ( ) 8 8 2 , 8 9 3 ( e u n e v e R t c u d o r P ) e m i t n i i t n o P ( e u n e v e R e c v r e S i ) e m i t r e v O ( ee uu nn ee vv ee RR ll aa tt oo TT ss nn oo ii tt aa rr ee pp oo gg nn uu nn ii tt nn oo CC ii mm oo rr ff )) ss ss oo LL (( // tt ii ff oo rr PP t e s s A g n n M i i i s e c v r e S e t a r o p r o C l t n e m p o e v e D & h c r a e s e R n o i t c u d o r P e n e h p a r G 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 4 1 1 , 8 5 4 8 8 5 , 3 7 4 6 3 1 , 2 7 1 7 5 0 , 4 3 1 - - - - 6 6 2 5 4 , 6 6 2 , 4 5 9 0 7 1 3 , 4 4 5 , 1 3 , 9 3 1 1 8 3 8 7 7 , 7 8 3 e s n e p x E n o i t a c e r p e D i , 0 3 9 2 1 1 6 4 4 , 3 8 0 5 5 7 2 , 6 2 1 , 3 7 5 6 4 3 , 5 8 4 , 7 4 e s n e p x E n o i t a s i t r o m A 1 5 7 , 8 1 4 , 5 1 0 9 3 , 2 1 7 , 1 1 7 6 4 , 4 4 9 9 , 9 2 , 5 0 8 4 7 2 , 7 4 6 1 , 5 9 2 , 3 , 6 4 1 0 4 3 , 3 8 1 0 , 8 9 9 , 3 , 2 3 3 9 9 7 , 4 4 1 2 , 9 8 3 , 4 s t e s s a t n e m g e S ) 1 3 6 , 8 3 0 , 7 ( ) 9 0 6 , 4 6 8 , 4 ( ) 2 2 8 , 2 ( ) 6 5 9 , 1 ( ) 9 4 0 7 7 6 , , 6 ( ) 5 4 0 , 3 4 3 , 4 ( ) 0 5 5 , 4 8 1 ( ) 8 9 3 , 5 4 3 ( ) 0 1 2 , 4 7 1 ( ) 0 1 2 , 4 7 1 ( s e i t i l i b a i l t n e m g e S . i e u n e v e R e c v r e S r o f a i r e t i r c e m i t r e v o d n a e u n e v e R t c u d o r P r o f 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 p u o r G e h T t n e m p o e v e d l / s r e m o t s u c d e n g i s s t c a r t n o c n o d e s a b s i i s e c v r e S m o r f e u n e v e R d e s i m o r p a f o l i o r t n o c s n a t b o r e m o t s u c e h t , e u n e v e R t c u d o r P r o F . s r e n t r a p . n o i t a g i l b o e c n a m r o 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 s t e s s a e h t s e c n a h n e p u o r G e h t s a e m i t r e v o d e l l i f l u f s i n o i t a g i l b o e c n a m r o f r e p e h T s a h d n a e s u e v i t a n r e t l a o n s a h p u o r G e h t h c h w i r o f , s l o r t n o c r e m o t s u c e h t h c h w i . e t a d o t d e n r a e e c n a m r o f r e p r o f t n e m y a p o t t h g i r a n o d e s a b n o i t a g i l b o e c n a m r o f r e p h c a e s s o r c a d e t a c o l l a s i e c i r p n o i t c a s n a r t e h T . s e c i r p d e t c a r t n o c . d e r e d n e r e r a s e c v r e s h c h w n i i i d o i r e p g n i t n u o c c a e h t n i d e s i n g o c e r s i e u n e v e R n o d e s a b d e t a u c a c s i l l t a h t t n u o m a n a r o f d e c o v n i i l a r e n e g n i e r a s r e m o t s u C s m r e t t c a r t n o c d e e r g a • • • 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 t n e s e r 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 f o s d r 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 t e s s a e h t i f o p h s r e n w o r e m o t s u c e h t • • • • • : o t d e t i m i l t o n e r a t u b , e d u c n l i s n o i t a r e d i s n o C FGR ANN UAL R EPO RT F Y20 23/24 51 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 2023 $ Revenue 1,003,424 - - 1,003,424 Total Assets 10,660,460 1,021,932 29,994 11,712,386 2022 $ Revenue 723,323 - - 723,323 Total Assets 14,856,052 558,232 4,467 15,418,751 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 2023 $ 17,905,755 (6,193,369) 11,712,386 2022 $ 20,787,048 (5,368,297) 15,418,751 Reconciliation of segment liabilities to the Statement of Financial Position Total segments liabilities Inter-segment elimination Total liabilities per statement of financial position 2023 $ 23,418,468 (18,553,852) 4,864,606 2022 $ 23,086,033 (16,047,402) 7,038,631 ASX: FGR l 5 2 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE 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. Revenue from Services is based on contracts signed customers / development partners. The transaction price is allocated across each performance obligation based on contracted prices. The performance obligation is fulfilled over time as the Group enhances the assets which the customer controls, for which the Group has no alternative use and has a right to payment for performance earned to date. Revenue is recognised in the accounting period in which services are rendered. Customers are in general invoiced for an amount that is calculated based on agreed contract terms in accordance with stand-alone selling prices for each performance obligation. 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 Goods Sales of Services Total revenue from contracts with customers Notes 2023 $ 2022 $ 598,966 404,459 1,003,424 503,126 220,197 723,323 4. Operating expenses and other income Accounting Policy All revenue is stated net of the amount of goods and services tax (GST). Other revenue includes R&D credits received from the Australian & UK 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. FGR ANN UAL R EPO RT F Y20 23/24 53 Notes to the Consolidated Financial Statements 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. 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 3-15 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: Not es (a) Other income R&D and grant income (b) Research & development Employee expenses Consultant and research programs Legal and taxation expenses Depreciation Amortisation Impairment of inventory Other (c) Selling & marketing Employee expenses Advertising & promotion Depreciation Other (d) Mining lease maintenance Employee expenses Rent of premises Other 2023 $ 934,947 934,947 658,993 457,140 20,426 31,544 3,126 - 447,356 1,598,159 419,862 - 2,880 146,210 568,952 36,915 54,107 35,215 126,237 2022 $ 900,116 900,116 , 535,053 707,202 9,531 31,709 27,550 - 288,770 1,599,816 562,780 139,554 2,437 171,087 875,857 32,842 41,279 24,781 98,902 (e) General & administrative Employee expenses Director, finance & company secretarial fees Legal & other professional fees Share registry, listing and other corporate costs Depreciation Amortisation Rent of premises Insurances Other 1,616,123 56,698 301,636 108,041 51,386 83,446 - 51,541 988,405 3,264,231 1,543,352 47,189 505,377 148,510 42,830 112,930 - 79,270 618,817 3,098,274 ASX: FGR l 5 4 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE 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. Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting. Finance income (a) Interest income on bank deposits Finance expense ((bb)) Finance Cost (i) Interest – Right of use Asset Foreign exchange (loss)/gain - unrealised Notes 2023 $ 39,755 39,755 (819,130) (9,230) 25,157 (803,204) 2022 $ 2,377 2,377 (282,934) (13,817) (11,662) (308,413) (i) Finance Cost noted above is in accordance to the terms of the Share Placement Agreement with Specialty Materials Investments, LLC that the Company entered into on the 27th of May 2021 (Note 13). The expense recognises the value of the additional shares to be issued ($480,000 over the life of the contract) and the issuance shares at a discount to the prevailing market price per the terms of the agreement. Additional Shares to be issued 4,761,905 shares issued @ 10.5c 9,523,810 shared issued @ 10.5c 5,000,000 shared issued @ 10c 2,222,222 shared issued @ 9c 6,666,667 shared issued @ 7.5c Share price on issue date 14c 13.5c 12c 9.9c 8.4c 2023 $ 186,749 166,667 285,714 100,000 20,000 60,000 819,130 2022 $ 282,934 - - - - - 282,934 FGR ANN UAL R EPO RT F Y20 23/24 55 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 ((bb)) 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 in equity Current tax Deferred tax (c) Reconciliation of income tax expense to prima facie tax payable Loss before income tax from all activities - - Prima facie income tax benefit on loss before income tax at 30% (2022:30%) - Entertainment - Share based payments - Non-assessable income - Other permanent differences - 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 2023 $ - - - - - - - - 2022 $ - - - - - - - - (5,409,046) (5,017,488) (1,352,261) (1,254,372) 2,206 117,581 (228,525) 54,299 1,308,164 - 0% 4,553 115,960 (211,978) 40,830 85,518 - 0% - - - - - - - - - - - - ASX: FGR l 5 6 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 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 2023 $ 2022 $ 7,683,730 7,310,519 (12,124) 105,997 15,088,122 (42,703) 15,045,419 6,734,869 7,310,519 4,078 127,569 14,177,034 (110,890) 14,066,145 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. 7. Loss per share Accounting Policy Loss per share (“LPS”) is the amount of post-tax profit attributable to each share. The group presents basic and diluted LPS data for ordinary shares. Basic LPS is calculated by dividing the profit or 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. Weighted average ordinary shares used in calculating basic earnings per share Weighted average ordinary shares used in calculating diluted earnings per share Basic loss per share - cents per share Diluted loss per share - cents per share Loss attributable to the owners of First Graphene used in calculating basic loss per share Loss attributable to the owners of First Graphene used in calculating diluted loss per share Number of shares 2023 Number of shares 2022 579,228,053 552,630,533 579,228,053 552,630,533 (0.94) (0.94) 2023 $ (0.91) (0.91) 2022 $ (5,421,710) (5,017,487) (5,421,710) (5,017,487) FGR ANN UAL R EPO RT F Y20 23/24 57 Notes to the Consolidated Financial Statements 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 EPS calculations. 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 2023 $ 3,225,954 3,225,954 2022 $ 7,004,724 7,004,724 The Group’s maximum exposure to financial risk is disclosed in note 15. 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 41. 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. ASX: FGR l 58 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 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 10. Other assets Prepayments Total other assets 2023 $ 2,057,681 99,159 1,859,532 4,016,371 (42,120) 3,974,251 1,759,014 2,215,237 3,974,251 2023 $ 726,064 726,064 2022 $ 1,987,200 316,598 2,411,910 4,715,708 (42,120) 4,673,588 1,821,713 2,851,875 4,673,588 2022 $ 225,801 225,801 11. 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 (excluding land) over their expected useful lives as follows: Plant and equipment 3-15 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 profits. FGR ANN UAL R EPO RT F Y20 23/24 59 Notes to the Consolidated Financial Statements Property, plant and equipment (continued) 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). “Capital work in progress is projects of a capital nature which usually relates to the construction/installation of buildings, plant or equipment. Upon completion (when ready for use) capital work in progress is transferred to the relevant asset category. Capital work in progress is not depreciated.” Reconciliations of the carrying value for each class of property, plant and equipment is set out below: Capital Work in Progress 625,125 Plant and equipmen t 2,176,724 Office equipmen t 45,050 Motor vehicles Total 7,756 2,854,655 68,467 111,245 - - - (453,250) (16,645) (1,760) Transfers (542,702) 542,702 - (83,258) - 72 - - 179,172 (471,655) - (83,186) 30 June 2023 Carrying amount at beginning of year Additions Depreciation Movement due to foreign exchange Carrying amount at end of year 30 June 2022 Carrying amount at beginning of year Additions Depreciation Movement due to foreign exchange Carrying amount at end of year 150,890 2,294,163 28,477 5,996 2,479,526 Capital Work in Progress - Plant and equipmen t 2,600,832 Office equipmen t 56,442 Motor vehicles Total 9,369 2,666,643 625,125 17,543 5,031 - (440,181) (16,320) (1,613) 647,699 (458,114) - - (1,471) 625,125 2,176,724 (103) 45,050 - 7,756 (1,573) 2,854,655 ASX: FGR l 6 0 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 12. Trade and other payables Accounting Policy Trade and other payables represent the liabilities for goods and services received by the entity 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 13. Financial liabilities Accounting Policy 2023 $ 261,622 174,210 435,832 2022 $ 411,492 174,210 585,702 Convertible notes were issued by the Group which include embedded derivatives. Convertible notes are initially recognised as financial liabilities at fair value. On initial recognition the fair value of the convertible notes equated to the proceeds received and subsequently the convertible note is measured at fair value. The movements are recognised in profit and loss as finance costs except to the extent the movement is attributed to changes in the group’s own credit risk status in which case, it is recognised in Other Comprehensive Income. Terms and Conditions The Company entered into a Share Placement Agreement with Specialty Materials Investments, LLC (the Investor) on the 27th of May 2021. Initial deposit shares issued: 2,800,000 shares at $0.235 per share • Total AUD amount that can be drawn down: $8,000,000 • • Fee paid: 1,021,276 shares at $0.235 per share • Final AUD value of shares to be issued: $8,480,000 (“subscription amount”) • Other Terms: • The final number of shares to be issued by the Company will be determined by applying the Purchase Price (as set out below) to the subscription amount. The Purchase Price will initially be equal to $0.30 per share and will reset after 10 August 2021 to the average of the five daily volume-weighted average prices selected by the Investor during the 20 consecutive trading days immediately prior to the date of the Investor’s notice to issue shares, rounded down to the next half a cent if the share price is at below 50 cents and whole cent if the share price is at above 50 cents, with no discount applicable to this formula. To the extent that Placement Shares are issued after six months, or 12 months, the Investor will receive a discount of, respectively, 3% or 6% to the foregoing Purchase Price formula. • The Purchase Price will be the subject of a Floor Price of $0.16. If the Purchase Price formula were to result in a purchase price that is less than the Floor Price, the Company may refuse to issue shares and instead opt to repay the relevant subscription amount in cash (with a 5% premium), subject to the Investor’s right to FGR ANN UAL R EPO RT F Y20 23/24 61 Notes to the Consolidated Financial Statements receive Placement Shares at the Floor Price in lieu of such cash repayment. The Purchase Price will not be the subject of a cap. • The Company will issue the Placement Shares in relation to all or part of each of the above investments on the Investor’s request, during the period ending 24 months after the date of the investment. • The Company has retained the right (but has no obligation) to repay the subscription amount in cash in lieu of issuing shares by way of a repayment of the subscription amount together with the difference between the market price of the shares and the Purchase Price (if any) in relation to the shares that would otherwise have been issued. In October 2022, the agreement was varied thereby extending the term over which the shares are to be issued by another 12 months. • Current Convertible liabilities Opening Balance at 1st Jul 21 Finance Charge Funds Received - Placement 2 2,941,176 Shares at an issue price of $0.17 per Share on 10 February 2022 3,225,807 Shares at an issue price of $0.155 per Share on 25 March 2022 3,225,807 Shares at an issue price of $0.155 per Share on 8 April 2022 Closing Balance at 30th Jun 2022 / Opening Balance 1 July 2022 Finance Charge 4,761,905 Shares at an issue price of $0.105 per Share on 25 July 2022 9,523,810 Shares at an issue price of $0.105 per Share on 29 July 2022 5,000,000 Shares at an issue price of $0.10 per Share on 22 November 2022 2,222,222 Shares at an issue price of $0.09 per Share on 2 March 2023 6,666,667 Shares at an issue price of $0.075 per Share on 24 May 2023 Closing Balance at 30 June 2023 2023 $ 3,622,000 3,622,000 2022 $ 6,135,251 6,135,251 4,342,000 293,251 3,000,000 (500,000) (500,000) (500,000) 6,135,251 186,749 (500,000) (1,000,000) (500,000) (200,000) (500,000) 3,622,000 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 ASX: FGR l 6 2 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 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, issue new shares or reduce debt. 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. 14. Financial Risk Management (a) Financial risk management 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). The Group’s principal financial liabilities comprise trade and other 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 note 1. 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 Group has no significant concentrations of credit risk. 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 FGR ANN UAL R EPO RT F Y20 23/24 63 Notes to the Consolidated Financial Statements 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 group of receivables under financial 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 $3,225,954 (2022: $7,004,724). 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). Cash and cash equivalents Group 2023 $ 2022 $ 3,225,954 7,004,724 3,225,954 7,004,724 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, the identified impairment loss was immaterial. 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 2021 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 loss allowance as at 30 June 2023 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 net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. ASX: FGR l 64 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 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 $ $ Impairment allowance Total carrying amount $ $ Total $ Consolidated 30 June 2023 Trade receivables 346,495 346,495 Consolidated 30 June 2022 Trade receivables 167,744 167,744 - - - - - - - - 346,495 346,495 167,744 167,744 - - - - 346,495 346,495 167,744 167,744 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 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. 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. FGR ANN UAL R EPO RT F Y20 23/24 65 Notes to the Consolidated Financial Statements 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. WWeeiigghhttee dd aavveerraaggee eeffffeeccttiivvee iinntteerreesstt rraattee %% FFllooaattiinngg iinntteerreesstt rraattee FFiixxeedd iinntteerreesstt NNoonn--iinntteerreesstt bbeeaarriinngg WWiitthhiinn oonnee yyeeaarr $$ WWiitthhiinn oonnee yyeeaarr $$ 11--55 yyeeaarrss $$ WWiitthhiinn oonnee yyeeaarr $$ 11--55 yyeeaarrss $$ TToottaall $$ 3300 JJuunnee 22002233 Financial assets Cash and cash equivalents TToottaall FFiinnaanncciiaall aasssseettss aatt 3300 JJuunnee 22002233 Trade and other payables Financial liabilities Lease Liabilities TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess aatt 3300 JJuunnee 22002233 3300 JJuunnee 22002222 Financial assets Cash and cash equivalents TToottaall FFiinnaanncciiaall aasssseettss aatt 3300 JJuunnee 22002222 Trade and other payables Financial liabilities Lease Liabilities TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess aatt 3300 JJuunnee 22002222 0.01 3,225,954 3,225,954 - - - 0.01 7,004,724 7,004,724 - - - - - - - - - - - - - - - - - - - 435,832 3,622,000 - - - - 3,225,954 3,225,954 435,832 3,622,000 530,656 530,656 - 4,057,832 530,656 4,588,488 - - - - - - 585,702 6,135,251 178,489 - 6,899,442 - - - - - 7,004,724 7,004,724 585,702 6,135,251 178,489 6,899,442 ASX: FGR l 6 6 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements Trade and other payables and borrowings are expected to be paid as follows: 30 June 2023 Trade and other payables (refer note 12) Financial liabilities (refer note 13) 30 June 2022 Trade and other payables (refer note 12) Financial liabilities (refer note 13) Less than 1 year $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ 435,832 3,622,000 4,057,832 585,702 6,135,251 6,720,953 - - - - - - - - - - - - - - - - - - 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 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 $US GBP£ and Sri Lankan Rupee. Sensitivity analysis The following table does not include intra group financial assets and liabilities. It summaries the sensitivity of the Group’s financial assets and liabilities to external parties at 30 June 2023 to foreign exchange risk, based on foreign exchange rates as at 30 June 2023 and sensitivity of +/-5%: 30 June 2023 rate (cents) US$/A$ GBP/A$£ LKR/A$ 0.6655 0.5234 205.01 FGR ANN UAL R EPO RT F Y20 23/24 67 Notes to the Consolidated Financial Statements Foreign exchange risk 2023 $ (74,476) 74,476 2022 $ (66,017) 66,017 (74,476) (66,017) 74,476 66,017 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 10 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 2023 $ -10bps +10bps Profit Equity Profit Equity Interest rate risk 3,225,954 3,225,954 (2,614) (2,614) 2022 $ 7,004,724 7,004,724 (6,462) (6,462) - - - - 2,614 2,614 6,462 6,462 - - - - (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. ASX: FGR l 6 8 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements Note 30 June 2023 30 June 2022 Carrying amount $ Net fair value $ Carrying amount $ Net fair value $ 346,495 346,495 346,495 346,495 167,744 167,744 167,744 167,744 13 14 435,832 3,622,000 4,057,832 435,832 3,622,000 4,057,832 585,702 6,135,251 6,720,953 585,702 6,135,251 6,720,953 Assets carried at amortised cost Trade and other receivables Total financial assets Liabilities carried at amortised cost Trade and other payables Financial liabilities Total Financial Liabilities Fair value hierarchy The Group classified the fair value of the financial instruments in the table below 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. Fair value measurement using: Note Total $ Level 1 $ Level 2 $ Level 3 $ Financial liabilities measured at fair value - 2023 Convertible liabilities Total financial assets 13 3,622,000 3,622,000 - - 3,622,000 3,622,000 - - There were no transfers between Level 1, Level 2 and Level 3 during 2022. Financial liabilities measured at fair value - 2022 Convertible liabilities Total financial assets Note Fair value measurement using: Total $ Level 1 $ Level 2 $ Level 3 $ 13 6,135,251 6,135,251 - - 6,135,251 6,135,251 - - FGR ANN UAL R EPO RT F Y20 23/24 69 Notes to the Consolidated Financial Statements 15. 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. 2023 2022 2023 2022 $ 102,845,906 $ 102,845,906 Number 590,205,277 Number 539,900,237 (a) Ordinar y shares Issued and fully paid Movements in shares on issue At the beginning of the year Exercise of performance rights Shares issued to employees Entitlement issue(i) Shares issued to third party Share issue costs At the end of the year (i) 102,845,906 98,808,042 560,033,776 539,900,237 237,646 2,210,187 1,996,896 9,120,749 - 18,600 - 120,000 3,332,381 1,500,000 28,174,605 9,392,790 - 328,000 (37,803) (18,923) - - 1,500,000 - 106,378,131 102,845,906 590,205,277 560,033,776 Repayment of borrowings as per the share placement agreement – Refer Note 13. Share options (b) Listed share options At the beginning of the year Options issued Options exercised Options expired At the end of the year Share options (c) Unlisted share options At the beginning of the year Options issued Options exercised Options expired At the end of the year 2023 Number - 2022 Number 100,955,266 - - - - - (8,120,749) (92,834,517) - 2023 Number 2022 Number 15,000,000 17,000,000 - - - 15,000,000 - (1,000,000) (1,000,000) 15,000,000 ASX: FGR l 70 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements Performance rights (d) UUnnlliisstteedd ppeerrffoorrmmaannccee rriigghhttss At the beginning of the year Performance rights issued Performance rights converted AAtt tthhee eenndd ooff tthhee yyeeaarr 2023 Number 2022 Number 60,000 3,682,784 (1,996,896) 1,745,888 120,000 60,000 (120,000) 60,000 Refer note 16 for further details on performance rights issued. 16. Share based payments Accounting Policy The value of options granted to employees is recognised as an employee expense, with a corresponding 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). increase 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; • 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. Share based payment expense The Group recognised total share-based payment expenses as follows: Shares issued to employees Shares issued to Advisors Options issued to directors Performance rights issued to employees Performance rights issued to KMPs Performance Rights issued to non-exec directors Total 2023 $ - - 80,911 165,598 174,914 56,250 477,673 2022 $ - 153,000 281,602 29,237 - - 463,839 FGR ANN UAL R EPO RT F Y20 23/24 71 Notes to the Consolidated Financial Statements 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. 2023 2022 Number of Options 15,000,000 - - - - 15,000,000 Weighted average exercise price (cents) 25.0 - - - - 25.0 Number of Options 37,630,904 - (1,000,000) - (21,630,904) 15,000,000 Weighted average exercise price (cents) 21.6 - 0.18 - 24.8 25.0 Outstanding 1 July Issued Exercised Traded / Sold Lapsed Outstanding 30 June Share-based payments – Options issued 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 Number Number Number Number Number Number Unlisted options: 8 Nov 2019 6 Jan 2020 17 Dec 2020 8 Nov 2023 8 Nov 2023 8 Nov 2023 $0.25 9,000,000 $0.25 1,000,000 $0.25 5,000,000 - - - - - - - - - 9,000,000 9,000,000 1,000,000 1,000,000 5,000,000 5,000,000 The weighted average remaining contractual life of the options is 0.25 years (2022: 1.25 years). Share-based payments – Performance rights issued Under the Company’s Incentive Award Plan, Performance Rights (PR) are granted to employees following the release of the Company’s full financial year results starting October 2022 till December 2024. The employees have an option to convert each right to a fully paid ordinary share in the company, up to 2 years following the allocation. At the time of allotment of the PRs the Company recognises an employee expense, with a corresponding increase in reserves. When the employee chooses to convert the rights to ordinary shares the company recognises an increase in equity with a corresponding decrease in reserves previously recognised. Over financial year ended 30 June 2023, the company has issued 3,682,784 PRs to Directors, employees and Key Management Personnel. ASX: FGR l 72 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements The above includes 1,050,000 Performance Rights issued to its Non-Executive Directors as announced to the ASX in the Company’s Notice of Meeting for its 2022 Annual General Meeting. 450,000 of these 1,050,000 PRs have already vested, for which the Company has recognised an employee expense, with a corresponding increase in reserves. PPeerrffoorrmmaannccee rriigghhttss iissssuueedd ttoo NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss Tranche 1 Tranche 2 Tranche 3 Vested Unvested Unvested $0.45 $0.35 $5 million $2 million Number of Number of Rights Rights 100,000 50,000 100,000 50,000 200,000 100,000 440000,,000000 220000,,000000 Nil Nil Number of Rights 300,000 50,000 100,000 445500,,000000 Total Total 450,000 200,000 400,000 11,,005500,,000000 VVeessttiinngg CCoonnddiittiioonnss Share Price1 Sales (AUD)2 NED Name Andrew Goodwin Michael Quinert Warwick Grigor TToottaall Notes: 1. 25% of the Performance Rights will be measured against the 20 day VWAP Share price at 30 June of the applicable financial year (Tranche 2: FY23; Tranche 3: FY24). These rights were valued using a hybrid share option pricing model with the following inputs: Grant date Spot price Tranche 2 Tranche 3 17/10/22 17/10/22 $0.110 $0.110 Expiry date 17/10/26 17/10/27 Volatility 75% 75% Risk free rate 3.35% 3.35% Value per right $0.021 $0.035 2. 40% of the Performance Rights will be measured against the sales revenue received during the applicable financial year (Tranche 2: FY23; Tranche 3: FY24) based on audited accounts. These rights have been valued at the share price on the grant date. These rights have been valued at the share price on the grant date. These rights were valued using a hybrid share option pricing model with the same inputs used above in Note 1. In addition, vesting of each Tranche (excluding Tranche 1) is subject to: • 10% of the Performance Rights will be subject to the achievement by a Director of their personal KPI for an applicable financial year as determined by the Board; and • 25% of the Performance Rights will be subject to the Director remaining a director of the Company. • No valuation assumptions required as these are non-financial targets The Performance Rights have expiry dates as follows: Tranche 1: 3 years from grant; Tranche 2: 4 years from grant; Tranche 3: 5 years from grant. Management have determined the probability of the rights vesting to be 100%. FGR ANN UAL R EPO RT F Y20 23/24 73 Notes to the Consolidated Financial Statements PPeerrffoorrmmaannccee rriigghhttss iissssuueedd ttoo EEmmppllooyyeeeess && KKMMPPss ((eexxcclluuddiinngg NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss)) The following performance rights were granted to employees & KMP: Number of Performance Rights Date of Grant Share Price A$ Vesting Date Employees KMP * 1,287,294 1,345,490 01/08/2022 01/08/2022 0.13 0.13 02/09/2022 02/09/2022 22,,663322,,778844 *These KMP rights have been converted to shares during the period. - Michael Bell – 1,029,979 - Aditya Asthana – 315,511 VVeessttiinngg ccoonnddiittiioonnss ffoorr PPeerrffoorrmmaannccee RRiigghhttss iissssuueedd ttoo eemmppllooyyeeeess ((eexxcclluuddiinngg NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss)):: 1. Share Price Target: $0.30 2. Total Revenue Target: $1 million 3. Continued employment with the company on date of issue of Performance Rights 4. Completion of personal KPIs 5. If a Share Price or a Total Revenue Vesting Condition is partially met, a proportionate percentage of Performance Rights in the applicable Tranche will vest. For example, if FY22 Sales Revenue was $500,000, 20% of the Performance Rights in Tranche 1 will vest (being 50% of 40%). The weighting applied to each KPI for individual employees is dependent on their role and their impact on the KPIs. 17. 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. ASX: FGR l 74 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 18. 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 intangible asset Write back/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 Foreign exchange loss/(gains) Changes in assets/liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in inventory (Increase)/decrease in prepayments Decrease in other assets (Decrease)/increase in trade and other payables Net cash (used in) operating activities (b) Non-cash investing and financing activities ROU Asset recognised Performance Rights issued to employees Non-cash investing and financing activities 19. Commitments 2023 $ 2022 $ (5,422,321) (5,033,108) 473,588 27,249 - - - 477,673 819,130 - 248,480 22,802 - - - 463,839 - - 25,157 (11,662) (178,751) 850,836 (478,262) - 3,400 (3,402,301) (81,729) 382,311 (11,690) - (378,652) (4,399,409) 2023 $ 551,029 240,026 2022 $ - 292,239 791,055 292,239 The Group has no commitments which are not recorded on the statement of financial position as at 30 June 2023. (2022: Nil).. FGR ANN UAL R EPO RT F Y20 23/24 75 Notes to the Consolidated Financial Statements 20. 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 Property, plant and equipment Right of use asset Inventory Investment in subsidiaries Investment Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Employee liabilities Lease Liabilities Total current liabilities Non-current liabilities Lease Liabilities Total non-current liabilities Total liabilities 2023 $ 2,559,762 346,495 1,759,014 171,158 4,836,429 2,476,171 579,151 2,215,238 650,000 229,244 6,149,804 10,986,233 3,807,648 178,953 530,656 4,517,257 - - 4,517,257 2022 $ 6,415,391 125,744 1,821,713 102,449 8,465,297 2,837,379 162,179 2,851,875 650,000 211,906 6,713,338 15,178,636 6,539,994 132,776 178,489 6,851,259 - - 6,851,259 Net Assets 6,468,974 8,327,377 Equity Issued capital Share based payments reserve Other reserves Accumulated losses Total equity RReessuullttss ooff tthhee ppaarreenntt eennttiittyy:: Loss for the period 106,378,129 6,171,889 - (106,081,044) 6,468,974 102,845,906 5,931,862 - (100,450,391) 8,327,377 (5,630,655) (5,630,655) (5,338,462) (5,338,462) ASX: FGR l 76 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Notes to the Consolidated Financial Statements 21. Events since the end of the financial year No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years. 22. 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 17), is as follows: Short term employee benefits Share based payments Transactions with other related parties There were no loans to/from related parties in 2023 (2022: Nil) Subsidiaries 2023 $ 871,474 312,074 1,183,548 2022 $ 963,804 290,602 1,254,406 The consolidated financial statements include the financial statements of First Graphene Limited and the subsidiaries listed in the following table: First Graphene (UK) Ltd MRL Investments (Pvt) Ltd MRL Graphene (Pvt) Ltd 2D Fluidics Pty Ltd Principal activity in the year Proportion of voting rights and shares held Class of shares held Place of Incorporation Graphene sales and R&D 2023 100% 2022 100% Ordinary England & Wales Holding company 100% 100% Ordinary Sri Lanka Graphene Mining and exploration Development and sale of VFD, TTF and other 2D devices and materials 100% 100% Ordinary Sri Lanka 66.67% 66.67% Ordinary Australia FGR ANN UAL R EPO RT F Y20 23/24 77 Notes to the Consolidated Financial Statements 23. 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 - 2023 $ 74,346 56,873 131,219 2022 $ 62,294 50,668 112,962 24. Right of Use (ROU) - Asset 30 June 2023 Carrying amount at beginning of year ROU Asset (a) ROU Accum. Dep (b) Total ROU Asset (a) + (b) ROU Liability (c) 579,169 (416,990) 162,179 178,489 Net ROU Assets (a) + (b) – (c) (16,311) Additions 551,029 551,029 551,029 - Depreciation - (134,057) (134,057) (198,863) 64,806 Carrying amount at end of year 1,130,199 (551,047) 579,151 530,656 48,495 The addition of 551,029 for both the Right of use asset and liabilities refers to the renewal of lease for the manufacturing plant at 1 Sepia close, Henderson for another 5 years. Calculation for the lease liability and asset was done in accordance to AASB 16 ASX: FGR l 78 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Directors’ Declaration The Directors declare: 1. the financial statements and notes, as set out on pages 19 to 54 are in accordance with the Corporations Act 2001 and: a. b. comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and give a true and fair view of the financial position as at 30 June 2023 and of the performance for the year ended on this date of the consolidated group; 2. the Chief Executive Officer and Chief Finance Officer have each declared: a. b. c. 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; the financial statements, and the notes for the financial year comply with the accounting standards; and the financial statements and notes for the financial year give a true and fair view; and 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 and unreserved statement of compliance with the International Financial Reporting Standards the remuneration disclosures set out in the Directors’ Report on pages 10 to 16 as the audited Remuneration Report) comply with section 300A of the Corporations Act 2001; 3. 4. 5. Signed in accordance with a resolution of the directors made pursuant to section 295 (5) of the Corporations Act 2001. On behalf of the Directors Michael Bell Managing Director 22 September 2023 FGR ANN UAL R EPO RT F Y20 23/24 79 Independent Auditor’s Report ASX: FGR l 80 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE FGR ANN UAL R EPO RT F Y20 23/24 81 ASX: FGR l 82 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE FGR ANN UAL R EPO RT F Y20 23/24 83 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 15 August 2023. 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 181 1,446 1,087 2,305 471 5,490 Equity Security Fully Paid ordinary shares Options Quoted 590,205,277 0 Number of Share 33,549 4,950,700 8,529,794 80,547,558 496,143,676 590,205,277 Unquoted 0 15,000,000 ASX: FGR l 84 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE Additional Securities Exchange Information b) Top 20 Security Holders – Fully Paid Ordinary Shares (FGR) at 15 August 2023 Position Holder Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 14 15 16 17 18 19 20 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD TWYNAM INVESTMENTS PTY LTD GREGORACH PTY LTD BUILDING ON THE ROCK LIMITED IPS Holdings HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED DEBT MANAGEMENT ASIA CORPORATION GINGA PTY LTD WILLIAM TAYLOR NOMINEES PTY LTD MR RICHARD HOPETOUN BITCON IPS NOMINEES LIMITED MR ADAM O'DONNELL FERRIS MR RYAN JEHAN ROCKWOOD BNP PARIBAS NOMINEES PTY LTD GREGORACH PTY LTD BISSAPP SOFTWARE PTY LTD MR MICHAEL ALAN ANTOSKA & MRS ELISA ANTOSKA GINGA PTY LTD MRS TERRI FRANCES YOUD Total Holding 164,951,679 % 27.95% 33,495,447 25,158,918 21,659,589 15,685,946 14,685,000 13,828,400 13,420,734 12,357,146 5,858,664 4,465,959 2,860,000 2,759,611 2,500,000 2,500,000 2,327,639 5.68% 4.26% 3.67% 2.66% 2.49% 2.34% 2.27% 2.09% 0.99% 0.76% 0.48% 0.47% 0.42% 0.42% 0.39% 2,187,826 0.37% 2,149,496 0.36% 2,054,710 0.35% 1,783,509 0.30% 1,770,500 0.30% 348,460,773 59.04% Total issued capital - selected security class(es) 590,205,277 100.00% Shareholders with less than a marketable parcel At 15 August 2023, there were 1,893 shareholders holding less than a marketable parcel of shares ($0.08 cents on this date) in the Company totalling 6,552,431 ordinary shares. This represented 1.1% of the issued capital. FGR ANN UAL R EPO RT F Y20 23/24 85 Additional Securities Exchange Information c) Licence Position as at 24 August 2023 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/R4 EL/228/R4 EL/321/R2 EL/262/R3 EL/325/R2 EL/326/R2 FGR Interest - % 100 100 100 100 100 100 100 100 Status Granted Granted Granted Granted Renewal Renewal Renewal Renewal General Location Central Western Central Central Central Central Central Central ASX: FGR l 86 TH E WOR L D’S LA RG EST PROD UC ER OF PUR E GR APHENE FGR ANN UAL R EPO RT F Y20 23/24 87 CORPORATE DIRECTORY Directors Warwick Grigor (Non-Executive Chairman) Dr Andy Goodwin (Non-Executive Director) Michael Quinert (Non-Executive Director) Michael Bell (Managing Director & CEO) Company Secretary Adifya Asthana Pricipal Registered Office in Australia     1 Sepia Close Henderson WA 6166 +61 1300 6600 448 info@firstgraphene.net www.firstgraphene.net Stock Exchange Listings The Company is listed on the Australian Securities Exchange under the trading code FGR. The company is quoted on the Frankfurt Stock Exchange under the trading code FSE:M11. The Company is quoted on the OTCQ8 market in the USA under the trading code FGPHF. Share Registry Automatic Registry Services  Level 2, 267 St Georges Terrace Perth WA 6000 All security holder correspondence to:  PO Box 2226 Strawberry Hills NSW 2021 Contact:  1300 288 664 (within Australia) +61 (0)8 9324 2099 (outside Australia)  hello@automatic.com.au  www.automatic.com.au Auditor BDO Audit (WA) Pty Ltd  38 Station Street Subiaco WA 6000 Solicitors - Australia EMK Lawyers  Suite 1, 519 Stirling Hwy Cottesloe WA 6011  PO Box 103 Cottesloe WA 6011 Bankers - Australia  Westpac Banking Corporation Level 6, 109 St Georges Terrace Perth WA 6000 ASX: FGR l Contacts EUROPE Global R&D & Marketing  Graphene Engineering & Innovation Centre The University of Manchester Sackville Street, Manchester M13 9PL, United Kingdom  +44 (0)161 826 2350  info@firstgraphene.net AUSTRALIA Corporate Headquarters & Manufacturing Plant   1 Sepia Close Henderson WA 6166 +61 1300 660 448  info@firstgraphene.net FIRSTGRAPHENE.NET 

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