First Graphene Ltd. — Interim / Quarterly Report 2019

Feb 26, 2019

==> picture [275 x 194] intentionally omitted <==

ACN 007 870 760 ABN 50 007 870 760

INTERIM FINANCIAL REPORT

For the Half Year Ended

31 December 2018

Corporate Directory

Directors

Share Registry

Warwick Grigor (Non-executive Chairman)

Craig McGuckin (Managing Director) Peter R. Youd (Executive Director)

Company Secretaries

Peter R. Youd

Nerida Schmidt

Automic Level 2, 267 St Georges Terrace, Perth WA 6000

All securityholder correspondence to:

PO Box 2226, Strawberry Hills, NSW 2012

Contact: P: 1300 288 664 (within Australia) P: +61 (0)8 9324 2099 (outside Australia) E: hello@automic.com.au www.automic.com.au

Principal Registered Office in Australia

1 Sepia Close Henderson WA 6166

Telephone: +61 1300 660 448

Email: info@firstgraphene.com.au Website: www.firstgraphene.com.au

Stock Exchange Listing

The Company is listed on the Australian Securities Exchange Limited under the trading codes FGR and FGROC

The Company is listed on the Frankfurt Stock Exchange under the trading code FSE:M11

Auditor

BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008

Solicitors

Steinepreis Paganin Lawyers and Consultants Level 4, The Read Buildings 16 Milligan Street Perth WA 6000

Bankers

Westpac Banking Corporation Level 6 109 St Georges Terrace Perth WA 6000

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 2

Contents

Corporate Directory .................................................................................................................. 2
Contents ...................................................................................................................................... 3
Directors’ Report ........................................................................................................................ 4
Auditors Independence Declaration ...................................................................................... 6
Consolidated Statement of Profit or Loss and Other Comprehensive Income ................. 7
Consolidated Statement of Financial Position ....................................................................... 9
Consolidated Statement of Changes in Equity ................................................................... 10
Consolidated Statement of Cash Flows ................................................................................ 12
Notes to the Consolidated Financial Statements ................................................................ 13
1. Basis of Preparation of half-year financial statements ........................................ 13
2. Other income ............................................................................................................ 16
3. Administrative expenses .......................................................................................... 16
4. Inventory .................................................................................................................... 16
5. Property, plant and equipment .............................................................................. 16
6. Trade and other payables ...................................................................................... 18
7. Issued Capital ............................................................................................................ 18
8. Dividends ................................................................................................................... 18
9. Listed Options ............................................................................................................ 19
10. Segment reporting ................................................................................................... 19
11. Subsequent events after Reporting Date .............................................................. 22
12. Commitments ............................................................................................................ 22
13. Contingent Liabilities and Contingent Assets ....................................................... 22
Director’s Declaration ............................................................................................................. 23
Independent Auditors Report ................................................................................................ 24
Independent Auditors Report ................................................................................................ 25
Additional Securities Information ........................................................................................... 26
Additional Securities Information ........................................................................................... 27

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 3

Directors’ Report

Your Directors present their report on the consolidated entity (referred to hereafter as the “Group”) consisting of First Graphene Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2018.

DIRECTORS

The following persons were Directors of First Graphene Limited during the half-year and up to the date of this report:

• Warwick Grigor

• Craig Robert McGuckin

• Peter Richard Youd

• Clive Carver (Appointed 22 October 2018, resigned 4 February 2019)

REVIEW AND RESULTS OF OPERATIONS

Operating Results

Net operating loss after tax for the half-year ended 31 December 2018 was $2,169,793 (2017: $2,948,419).

Review of Operations and Changes in State of Affairs

The key areas of activity during the half-year were:

• Tier 1 participation in the Graphene Engineering Innovation Centre (GEIC) at the University of Manchester.

• Release of the PureGRAPH™ range of graphene products and the supporting Product Information Sheet.

• Receipt of a commercial order for 2,000kg of PureGRAPH™ products from industrial partner, newGen Group.

Events since the end of the period

In January 2019 the Group entered into a lease agreement with the University of Manchester for facilities at the Graphene Engineering Innovation Centre (GEIC) at Manchester. The lease is for a three year period and has an annual commitment of £200,000, paid in quarterly instalments.

There are no other known subsequent events of a material nature.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 4

Directors’ Report

AUDITORS INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 6.

Signed in accordance with a resolution of Directors and on behalf of the Directors by:

==> picture [123 x 81] intentionally omitted <==

Craig McGuckin

Managing Director

Henderson, 27 February 2019

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 5

Tel: +61 8 6382 4600 38 Station Street Fax: +61 8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

==> picture [77 x 30] intentionally omitted <==

DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF FIRST GRAPHENE LIMITED

As lead auditor for the review of First Graphene Limited for the half-year ended 31 December 2018, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 relation to the review; and

2. No contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of First Graphene Limited and the entities it controlled during the period.

==> picture [73 x 49] intentionally omitted <==

Jarrad Prue Director

BDO Audit (WA) Pty Ltd

Perth, 27 February 2019

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 6

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Half-Year Ended 31 December 2018

Note Continuing operations Revenue from contracts with customers Cost of Goods Sold Gross profit Other income 2 Insurance Legal expenses Employee benefit expenses Occupancy expenses Communication costs Project assessment expense Development costs Depreciation and amortisation Share based payment expense Administrative expenses 3 Loss from continuing operations before tax expense and finance Finance Income Finance Expense Loss from continuing operations before tax expense Income tax benefit/(expense) Loss after tax from continuing operations Other comprehensive income Items which may be reclassified to the profit or loss Foreign currency translation difference on foreign operations Total comprehensive loss for the period attributable to the owners of First Graphene Limited Loss for the period attributable to: Owners of First Graphene Limited Non-controlling interests	Half-Year
	2018 $ 2017 $
	8,461 6,680 (5,680) -
	2,781 6,680
	626,836 451,507 (33,102) (21,606) (41,748) (37,533) (25,483) (26,114) (53,560) (35,275) (60,714) (65,807) (182,544) (2,143) (1,173,230) (1,109,472) (215,771) (94,702) - (638,679) (1,040,346) (1,358,841)
	(2,196,881) (2,931,985) 27,088 4,495 - (20,929)
	(2,169,793) (2,948,419) - - (2,169,793) (2,948,419)
	25,489 6,565
	(2,144,304) (2,941,854)
	(2,593,934) (2,948,419) 424,141 -
	(2,169,793) (2,948,419)

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 7

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Half-Year Ended 31 December 2018

Total comprehensive loss for the period attributable to: Owners of First Graphene Limited Non-controlling interests Loss per share for the period attributable to the owners of First Graphene Limited: Basic loss per share (cents per share) Diluted loss per share (cents per share)	Note	Half-Year 2018 $ 2017 $
		(2,568,445) (2,941,854) 424,141 -
		(2,144,304) (2,941,854)
		(0.64) (0.80) (0.64) (0.80)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 8

Consolidated Statement of Financial Position

As at 31 December 2018

Note Current Assets Cash and cash equivalents Inventories 4 Trade and other receivables Other current assets Total Current Assets Non-Current Assets Exploration and evaluation assets Property, plant and equipment 5 Intangible assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 6 Borrowing Lease liabilities Total Current Liabilities Non-Current Liabilities Lease liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 7 Reserves Accumulated losses Capital and reserves attributable to the owners of First Graphene Limited Non-controlling interest Total Equity	31 December 2018 $ 30 June 2018 $ 3,205,848 4,838,929 828,370 571,008 6,028 219,429 51,878 97,597
	4,092,124 5,726,963
	1,880,458 1,824,117 1,530,833 1,229,343 250,000 250,000
	3,661,291 3,303,423
	7,753,415 9,030,423
	998,245 1,501,015 567,215 541,638 63,304 76,477
	1,628,764 2,119,130
	4,266 11,048
	4,266 11,048
	1,633,030 2,130,178
	6,120,385 6,900,245
	80,468,572 79,104,128 4,339,430 4,313,941 (79,031,323) (76,437,389)
	5,776,679 6,980,680 343,706 (80,435) 6,120,385 6,900,245

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 9

Consolidated Statement of Changes in Equity For the Half-Year Ended 31 December 2018

As at 1 July 2018 Profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners Shares issued Shares issued from the exercise of options Share issue costs Balance at 31 December 2018	Issued capital Share based payments reserve Options reserve Translation reserve Other reserve Accumulated losses Non- controlling interest Total equity 79,104,128 4,368,628 467,202 (31,892) (489,997) (76,437,389) (80,435) 6,900,245 - - - - - (2,593,934) 424,141 (2,169,793) - - - 25,489 - - - 25,489
	- - - 25,489 - (2, 593,934) 424,141 (2,144,304) 1,450,000 - - - - - - 1,450,000 10,019 - - - - - - 10,019 (95,575) - - - - - - (95,575) 80,468,572 4,368,628 467,202 (6,403) (489,997) (79,031,323) 343,706 6,120,385

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 10

Consolidated Statement of Changes in Equity For the Half-Year Ended 31 December 2018

As at 1 July 2017 Profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners Shares issued to satisfy contract Shares issued from the exercise of options Share issue costs Options sold during the period Options issued as share based payments Balance at 31 December 2017	Issued capital Share based payments reserve Options reserve Translation reserve Other reserve Accumulated losses Non- controlling interest Total equity 73,091,669 3,279,949 - (51,041) - (70,233,219) - 6,087,358 - - - - - (2,948,419) - (2,948,419) - - - 6,565 - - - 6,565
	- - - 6,565 - (2,948,419) - (2,941,854) 170,000 - - - - - - 170,000 690,000 - - - - - - 690,000 (30,836) - - - - - - (30,836) - - 467,202 - - - - 467,202 - 863,679 - - - - - 863,679 73,920,833 4,143,628 467,202 (44,476) - (73,181,638) - 5,305,549

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 11

Consolidated Statement of Cash Flows For the Half-Year Ended 31 December 2018

Cash flows from operating activities Revenue from sales Payments to suppliers and employees Interest received Interest expense Other income – R&D credit received Other income Net cash outflows from operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from the sale of property, plant and equipment Advance to third party Net cash outflows from investing activities Cash flow from financing activities Proceeds from the placement of shares Proceeds from exercise of options Proceeds from the sale of options Payment for share issue costs Finance lease payments Net cash inflows from financing activities Net decrease in cash and cash equivalents Exchange rate adjustments Cash and cash equivalents at beginning of the period Cash at the end of the period	Half-Year
	2018 $ 2017 $
	8,461 6,680 (2,993,976) (3,152,590) 6,693 4,495 (1,288) (16,221) 461,515 436,108 37,364 -
	(2,481,231) (2,721,528)
	(482,367) (383,902) 13,090 58,650 - (313,823)
	(469,277) (639,075)
	1,450,000 - 10,019 690,000 - 435,558 (150,150) (2,803) (12,837) (39,607)
	1,297,032 1,083,148
	(1,653,476) (2,277,455) 20,394 (20,930)
	4,838,930 4,175,133 3,205,848 1,876,748

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 12

Notes to the Consolidated Financial Statements

1. Basis of Preparation of half-year financial statements

This interim consolidated financial report for the half-year reporting period ended 31 December 2018 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This interim consolidated financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Annual Financial Statements of First Graphene Limited as at 30 June 2018 and any public announcements made by First Graphene Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

These interim financial statements were authorised for issue in accordance with a resolution of directors on 27 February 2019.

Accounting policies

New standards, interpretation and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed 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 2018, except for the adoption of new standards effective as of 1 July 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applies, for the first time, AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments that do not require restatement of previous financial statements. As required by AASB 134, the nature and effect of these changes are disclosed below.

Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the interim condensed consolidated financial statements of the Group.

Revised Revenue policy

Revenues from graphene sales are recognised when an identified performance obligation is satisfied and the customer obtains and accepts control of the Company’s product. Sales of graphene generally occur at a point in time, typically upon delivery of the product to the customer.

Taxes collected from customers relating to product and service sales and remitted to governmental authorities are excluded from revenues. The Company expenses incremental costs of obtaining a contract as and when incurred because the expected amortisation period of the asset that the Company would have recognised is one year or less.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 13

Notes to the Consolidated Financial Statements

AASB 9 Financial Instruments

AASB 9 Financial Instruments replaces the provisions of AASB 139 Financial Instruments: Recognition and Measurement that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.

The adoption of AASB 9 Financial Instruments from 1 July 2018 did not give rise to any material transitional adjustments. The new accounting policies (applicable from 1 July 2018) are set out below.

In accordance with the transitional provisions in AASB 9(7.2.15) and (7.2.26), comparative figures have not been restated.

Classification and measurement

Except for certain trade receivables the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

Under AASB 9 financial assets are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group’s business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’).

The new classification and measurement of the Group’s financial assets are, as follows:

• Debt instruments at amortised cost, for financial assets which are held within a business model with the objective to hold the financial assets in order to collect contractual cash flows that meet the ‘SPPI criterion’. This category includes the Group’s trade and other receivables.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows meet the SPPI criterion.

On transition to AASB 9 the assessment of the Group’s business models was made as of the date of initial application, 1 July 2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

Impairment of financial assets

AASB 9 replaces the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (“ECL”) model. The new impairment model is applied to financial assets measured at amortized cost, contract assets and debt investments at Fair Value Through Other Comprehensive Income (“FVOCI”), but not to investments in equity instruments.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 14

Notes to the Consolidated Financial Statements

Under AASB 9, loss allowances are measured on either of the following bases:

• 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

• Lifetime ECL: these are ECLs that result from all possible default events over the expected life of a financial instrument.

ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash shortfalls (I.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

The Group has adopted a simplified approach for trade receivables on the initial transaction date (1 July 2018) with an amount equal to the full ECL to be recognized. As the ECL assessment has resulted in an immaterial credit loss, no impairment allowance has been recognized by the Group.

Going Concern

For the period ended 31 December 2018 the entity recorded a loss of $2,169,793 and had net cash outflows from operating activities of $2,481,231.

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 that may cast a significant doubt about the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

Subsequent to period end the entity expects to receive additional funds via the issue of equity securities to either existing or new shareholders

The financial statements have been prepared on the basis that 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 reason:

• 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 that differ from those stated in the financial statements and that the financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the entity not continue as a going concern.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 15

Notes to the Consolidated Financial Statements

2. Other income Research & Development Grants and tax incentives Profit on sale of property, plant and equipment Other income Total other income 3. Administrative expenses Contractors and consulting fees ASX listing and share registry fees AIM listing and new business expenses Financial administration and other consultancy expenses Other expenses Total administrative expenses Notes to the Consolidated Financial Statements 4. Inventory Opening balance Inventory purchased Total inventories 5. Property, plant and equipment Exploration equipment: Carrying amount at beginning of period Depreciation Movement due to foreign exchange Carrying amount at period end		31 December 2018 $ 31 December 2017 $ 614,935 451,507 11,268 - 634 - 626,837 451,507 308,255 1,008,527 44,418 87,731 361,617 - 120,399 81,875 205,657 180,708 1,040,346 1,358,841 31 December 2018 $ 30 June 2018 $ 571,008 328,295 257,362 242,713 828,370 571,008 31 December 2018 $ 30 June 2018 $ 98,939 167,365 (33,655) (68,011) (2,811) (415)
		62,473 98,939

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 16

Notes to the Consolidated Financial Statements

5 Property, plant and equipment ( continued )

Leasehold improvement Carrying amount at beginning of period Depreciation Movement due to foreign exchange Carrying amount at period end Plant & equipment: Carrying amount at beginning of period Additions Cost of plant & equipment sold Accumulated amortisation of plant & equipment sold Transfer to office equipment Depreciation Movement due to foreign exchange Carrying amount at period end Office equipment: Carrying amount at beginning of period Additions Cost of office equipment sold Accumulated amortisation of office equipment sold Transfer from Plant and equipment Depreciation Movement due to foreign exchange Carrying amount at period end Motor vehicles: Carrying amount at beginning of period Additions Depreciation Movement due to foreign exchange Carrying amount at period end Leased Motor Vehicles Carrying amount at beginning of period Cost of motor vehicle sold Accumulated amortisation of vehicle sold Amortisation Movement due to foreign exchange Carrying amount at period end Total carrying amount at period end	45,566 91,853 (21,021) (45,566) (3,524) (721)
	21,021 45,566
	944,833 87,189 465,888 941,956 (17,909) - 15,876 - (3,941) (129,960) (79,862) (2,476) (509)
	1,276,252 944,833
	107,900 16,793 45,226 101,871 (1,619) - 1,598 - - 3,941 (22,471) (14,551) (598) (154)
	130,036 107,900
	- 193 20,512 (899) (191) - (2)
	19,613 -
	32,105 98,982 - (67,734) - 23,753 (7,765) (21,990) (2,902) (906)
	21,438 32,105
	1,530,833 1,229,343

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 17

Notes to the Consolidated Financial Statements

6. Trade and other payables

Trade payables Accrued liabilities Employee liabilities Other liabilities Total trade and other payables 7. Issued Capital Issued and Paid-Up Capital Opening Ordinary shares, fully paid Movements in ordinary share capital At beginning of the period Placement to Kremford (Vic) Pty Ltd August 2017 Issues to investors July to December through exercise of options Placement to institutional investors Issues to investors July to December through exercise of options Share issue costs At end of the period

31 December 2018 $ 30 June 2018 $ 591,207 1,201,312 224,254 233,897 97,258 22,205 85,526 43,601 998,245 1,501,015 31 December 2018 Number of Shares 30 June 2018 Number of Shares 31 December 2018 $ 30 June 2018 $ 413,518,002 403,784,541 80,468,572 79,104,128 31 December 2018 Number of Shares 31 December 2017 Number of Shares 31 December 2018 $ 31 December 2017 $ 403,784,541 364,261,237 79,104,128 73,091,669 - 2,000,000 - 170,000 - 7,500,000 - 690,000 9,666,670 - 1,450,000 - 66,791 - 10,019 - - (95,575) (30,836)

413,518,002 373,761,237 80,468,572 73,920,833

8. Dividends

No dividends have been paid or declared during the period.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 18

Notes to the Consolidated Financial Statements

9. Listed Options

(a) Share options Listed share options At the beginning of the period Options exercised during theperiod At the end of the period (b) Share options Unlisted share options At the beginning of the period Options exercised during the period Options expired At the end of the period	31 December 2018 30 June 2018 Number Number 91,180,186 91,214,601 (66,791) (34,415)
	91,113,395 91,180,186
	31 December 2018 30 June 2018 Number Number 500,000 11,000,000 - (7,500,000) - (3,000,000)
	500,000 500,000

10. 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 monthly.

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:

The Board has determined the Company has the following reportable segments:

Mining and exploration activities

The Company historically has been focused mineral exploration and development in Sri Lanka. The Board monitors the Company based on actual verses budgeted exploration expenditure incurred by area of interest.

Graphene production

This segment reflects the research and development activity in relation to graphene extraction and production.

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.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 19

Notes to the Consolidated Financial Statements

10. Segment reporting (continued)

Business	Mining and	Mining and		Graphene	Production	Corporate	Corporate		Total	Total
Segment	Exploration					Services
	6 months	6 months to		6 months	6 months	6 months	6 months		6 months to	6 months to
	to 31		31	to 31	to 31	to 31		to 31	31	31
	December	December		December	December	December	December		December	December
	2018		2017	2018	2017	2018		2017	2018	2017
	$		$	$	$	$		$	$	$
Revenue
from external
customers	-		-	8,491	6,680	-		-	8,491	6,680
Interest
revenue	247		695	423	-	6,022		3,800	6,693	4,495
Operating
loss	(242,528)	(1,005,623)		(692,597)	(781,567)	(1,234,668)	(1,161,229)		(2,196,793)	(2,948,419)
Depreciation
expense	69,914	79,992		137,082	-	1,010		1,343	208,006	81,334
Amortisation
expense	7,765	13,367		-	-	-		-	7,765	13,367
	31			31		31			31
	December	30	June	December	30 June	December	30	June	December	30 June
	2018		2018	2018	2018	2018		2018	2018	2018
	$		$	$	$	$		$	$	$
Segment
assets	2,053,117	2,214,419		2,847,804	1,990,396	2,852,493	4,825,608		7,753,415	9,030,422
Segment
liabilities	34,682	34,522		107,392	520,953	1,490,956	1,574,704		1,633,030	2,130,179

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 20

Notes to the Consolidated Financial Statements

10. Segment reporting (continued)

Geographical areas

In presenting the information based on geographical areas, segment revenue is based on the geographical location of operations. Segment assets are based on the geographical location of the assets.

of the assets.
Geographical segments Australia United Kingdom Sri Lanka Total	6 months to 31 December 2018 31 December 2018 6 months to 31 December 2017 30 June 2018 Revenue Total Assets Revenue Total Assets $ $ $ $ 886,109 7,620,554 461,987 8,714,548 - 4,021 - - 247 128,840 695 315,875
	886,356 7,753,415 462,682 9,030,423

Reconciliation of segment assets and liabilities to the Statement of financial Position Reconciliation of segment assets to the Statement of Financial Position

	31 December	30 June
	2018	2018
	$	$
Total segments assets	8,817,084	10,222,216
Inter-segment elimination	(1,063,669)	(1,191,793)
Total assets per statement of financial position	7,753,415	9,030,423
Reconciliation of segment liabilities to the Statement of Financial Position
	31 December	30 June
	2018	2018
	$	$
Total segments liabilities	7,960,806	9,025,748
Inter-segment elimination	(6,327,777)	(6,895,570)
Total liabilities per statement of financial position	1,633,029	2,130,178

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 21

Notes to the Consolidated Financial Statements

11. Subsequent events after Reporting Date

In January 2019 the Group entered into a lease agreement with the University of Manchester for facilities at the Graphene Engineering Innovation Centre (GEIC) at Manchester. The lease is for a three year period and has an annual commitment of £200,000, paid in quarterly instalments.

There are no other known subsequent events of a material nature.

12. Commitments

There have been no other changes to commitments since 30 June 2018.

13. Contingent Liabilities and Contingent Assets

There has been no material change to contingent liabilities and contingent assets since 30 June 2018.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 22

Director’s Declaration

In the Directors’ opinion:

• a) The financial statements and notes set out on pages 7 to 22 are in accordance with the Corporations Act 2001, including:

• a. Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• b. Giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2018 and of its performance for the half-year ended on that date, and

• b) There are reasonable grounds to believe First Graphene Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

==> picture [123 x 82] intentionally omitted <==

Craig McGuckin Managing Director

Henderson, 27 February 2019

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 23

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au

==> picture [77 x 30] intentionally omitted <==

INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of First Graphene Limited

Report on the Half-Year Financial Report

Conclusion

We have reviewed the half-year financial report of First Graphene Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the halfyear then ended, notes comprising a statement of accounting policies and other explanatory information, and the directors’ declaration.

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 including:

• (i) Giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its financial performance for the half-year ended on that date; and

• (ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

Emphasis of matter – Material uncertainty relating to going concern

We draw attention to Note 1 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our conclusion is not modified in respect of this matter.

Directors’ responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Group’s financial position as at 31 December 2018 and its financial performance for the half-year ended on that date and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees

Page 24

==> picture [77 x 30] intentionally omitted <==

As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor’s review report.

BDO Audit (WA) Pty Ltd

==> picture [70 x 68] intentionally omitted <==

Jarrad Prue

Director

Perth, 27 February 2019

Page 25

Additional Securities Information

Additional information not shown elsewhere in this report is as follows. This information is complete as at 22 February 2019.

a) Distribution of Shareholdings – Fully Paid Ordinary Shares:

Size of Holding	Number of Shareholders Number of Share
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	111 19,737 575 2,138,875 652 5,211,657 1,630 63,637,305 435 342,671,428
	3,403 413,679,002
Equity Security	Quoted
Fully Paid ordinary shares Options	413,679,002 91,112,395

b) Top 20 Security Holders – Fully Paid Ordinary Shares (FGR)

Name of Holder	Number of Shares %
1 J P Morgan Nominees Australia Pty Limited 2 Twynam Agricultural Group Pty Ltd 3 IPS Nominees Limited 4 Gregorach Pty Ltd 5 Building On The Rock Limited 6 Citicorp Nominees Pty Limited 7 Debt Management Asia Corporation 8 Mr Craig Robert McGuckin &Mrs Lee Ann McGuckin 9 Hallidaf Management Ltd 10 BNP Paribas Nominees Pty Ltd Retail Client DRP> 11 Ginga Pty Ltd 12 HSBC Custody Nominees (Australia) Limited 13 Mr Ryan Jehan Rockwood 14 Emerpus Asia Ltd 15 Sunset Capital Management Pty Ltd Superfund A/C> 16 Bissapp Software Pty Ltd Account> 17 William Taylor Nominees Pty Ltd 18 Pavarai Pty Ltd 19 Ms Fadillah Burhan Hasibuan 20 SDG Nominees Pty Ltd A/C> Total Total Issued Capital	46,397,843 11.22 21,063,177 5.09 16,781,465 4.06 14,905,946 3.60 11,111,111 2.69 9,204,329 2.23 8,724,232 2.11 6,908,513 1.67 6,094,794 1.47 5,648,773 1.37 5,140,776 1.24 4,796,805 1.16 4,500,000 1.09 4,166,667 1.01 4,000,000 0.97 3,540,700 0.86 3,184,962 0.77 3,150,000 0.76 3,089,230 0.75 3,000,000 0.73
	185,409,323 44.82 413,679,002 100.00

At 22 February 2019, there were 404 shareholders holding less than a marketable parcel of shares ($0.14 cents on this date) in the Company totalling 879,097 ordinary shares amounting to 0.21% of the issue capital.

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 26

Additional Securities Information

c) Licence Position as at 22 February 2019

All granted licences are in good standing and comply with the reporting requirements of the relevant licence.

Licence Number	FGR Interest - %	Status	General Location
IML/A/HO/9405	100	Granted	Central
IML/A/HO/8416/LR2	100	Granted	Western
EL/225	100	Granted	Central
EL/226	100	Granted	Central
EL/228	100	Granted	Central
EL/243	100	Granted	Central
EL/318	100	Granted	Central
EL/321	100	Granted	Central
EL/227	100	Granted	South Central
EL/322	100	Granted	South Central
EL/231	100	Granted	South West
EL/244	100	Granted	South West
EL/262	100	Granted	Central
EL/325	100	Granted	Central
EL/326	100	Granted	Central

First Graphene Limited Consolidated Interim Financial Report – December 2018

Page 27