First Graphene Ltd. — Interim / Quarterly Report 2021

Feb 17, 2021

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FIRST GRAPHENE LIMITED

ABN 50 007 870 760

INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2020

First Graphene Limited ABN 50 007 870 760 ASX Half-year information – 31 December 2020

Lodged with the ASX under Listing Rule 4.2A This information should be read in conjunction with the 30 June 2020 Annual Report

First Graphene Limited For the half-year ended 31 December 2020

Results for announcement to the market

				$
	Revenue from ordinary activities	Up	12%	92,372
	Loss from continuing ordinary activities after tax attributable to members	Down	30%	2,045,478
	Net loss for the period attributable to members	Down	30%	2,045,478
	Dividends
	No dividendshave beenpaid ordeclared during	the period
		31 December		31 December
			2020	2019
			Cents	Cents
	Net tangible asset backing per share		1.89	1.67
Explanation of results

Full details of these activities are included further on in this report.

Corporate Directory

Directors

Share Registry

Warwick R. Grigor (Non-Executive Chairman) Peter R. Youd (Executive Director) Dr Andy Goodwin (Non-Executive Director)

Joint Company Secretaries

Peter R. Youd

Nerida L. Schmidt

Principal & Registered Office in

Australia

1 Sepia Close Henderson WA 6166

Telephone: +61 1300 660 448

Email: info@firstgraphene.net Website: http://firstgraphene.net

Stock Exchange Listing

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

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

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

The Company’s securities are traded on the Frankfurt Stock Exchange under the trading code FSE:M11

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

The Company’s securities are traded in the USA under the trading code FGPHF

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Contents

Corporate Directory .................................................................................................................. 4
Contents ................................................................................................................................ 5
Directors’ Report ........................................................................................................................ 6
Auditor’s Independence Declaration ................................................................................... 14
Consolidated Statement of Profit or Loss and Other Comprehensive Income ............... 15
Consolidated Statement of Financial Position ..................................................................... 17
Consolidated Statement of Changes in Equity ................................................................... 18
Consolidated Statement of Cash Flows ................................................................................ 20
Notes to the Consolidated Financial Statements ................................................................ 21
1. Basis of preparation of half-year financial statements ........................................ 21
2. Other income ............................................................................................................ 22
3. Expenses .................................................................................................................... 23
4. Inventory .................................................................................................................... 24
5. Other current assets ................................................................................................. 24
6. Property, plant, and equipment ............................................................................. 25
7. Issued capital ............................................................................................................ 26
8. Dividends ................................................................................................................... 26
9. Earnings per share .................................................................................................... 26
10. Options ....................................................................................................................... 27
11. Share based payments ............................................................................................ 27
12. Segment reporting ................................................................................................... 28
13. Subsequent events after Reporting Date .............................................................. 32
14. Commitments ............................................................................................................ 32
15. Contingent liabilities and contingent assets ......................................................... 32
16. Related Party Transactions ...................................................................................... 32
Director’s Declaration ............................................................................................................. 33
Independent Auditor’s Report ............................................................................................... 34
Independent Auditor’s Report ............................................................................................... 35
Additional Securities Information ........................................................................................... 36
Additional Securities Information ........................................................................................... 37

First Graphene Limited Consolidated Interim Financial Report – December 2020

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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 2020.

DIRECTORS

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

• Warwick Robert Grigor

• Craig Robert McGuckin (retired 8 January 2021)

• Peter Richard Youd

• Dr Andy Goodwin

(appointed 1 July 2020)

REVIEW AND RESULTS OF OPERATIONS

Operating Results

Net operating loss after tax for the half-year ended 31 December 2020 was $2,045,478 (2019: $2,902,650).

Review of Operations and Changes in State of Affairs

The key points:

Significant events announced during the half year included.

• Appointment of Dr Andy Goodwin as non-executive director.

• Appointment of Michael Bell as Chief Executive Officer in December 2020.

• Significant progress shown in incorporation of PureGRAPH[®] in High Density Polyethylene (HDPE).

• Concrete tests in cement-based mortars improve compressive strength 34.3% and flexural strength 26.9%.

• PureGRAPH[®] significantly improves rubber polymers used in the mining sector.

• Continued validation of PureGRAPH[®] Product Quality through NPL collaboration.

• Continued to advance the commercialisation of its PureGRAPH[®] product range.

• Accelerated its involvement in the development of several products and materials which could significantly improve energy storage devices and alternative energy sources.

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

Overview

In July 2020 it was announced Dr Andy Goodwin had been appointed as a Non-Executive Director and was transitioning to Senior Scientific Advisor. Dr Goodwin had become Chief Technology Officer (CTO) in September 2018 and had led the launch of the Company’s PureGRAPH[®] products, established the UK R&D and marketing capabilities and supported multiple customer engagements.

In December 2020 the Company announced the appointment of Michael Bell as Chief Executive Officer replacing Managing Director Craig McGuckin, who was to retire in January 2021 after eight years with the Company.

With more than 20 years’ experience in engineering and business management, Mr Bell has significant international experience driving business growth. He comes to First Graphene from Singapore-based ST Engineering Group where he served as Senior VicePresident.

Mr Bell has also held roles as Director for Navman Wireless, a global Telematics company which was acquired by the Danaher Corporation, and as General Manager with Singapore-based shipbuilder Strategic Marine.

Mr Bell took up his position on 11 January 2021.

PureGRAPH[®] in HDPE

FGR’s PureGRAPH[®] products were incorporated into a High-Density Polyethylene (HDPE) masterbatch and demonstrated improvements in strength, wear resistance and longevity. Laboratory trials confirmed PureGRAPH[®] graphene products successfully enhanced the performance of HDPE materials in industrial applications. This was an important milestone in the Company’s strategy to develop additives for various thermoplastic materials. Low dosages of less than one per cent of PureGRAPH[®] have generated an increase in yield strength of more than 60 per cent, when compared to the base HDPE product. Hexcyl oyster baskets are currently being field trialled in Tasmanian waters.

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Typical Hexcyl Oyster Basket

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

Improved strength in cement mortar with PureGRAPH[®]

In August 2020 FGR released a technical update on the application of its proprietary PureGRAPH[®] graphene as an additive in cement grouts and concrete. The study showed graphene admixtures increase strength, reduce materials usage (reducing carbon footprint), and potentially increase longevity of products. This analysis is noteworthy since cement is estimated to amount to 6% of all CO2 emissions from human activity. Cement is the most manufactured and traded product globally after water, and the industry is under significant pressure to reduce the carbon footprint of cement based materials.

The Company’s PureGRAPH[®] graphene products were successfully investigated by the ARC Graphene Research Hub at the University of Adelaide. The study, led by Professor Dusan Losic, assessed the influence of dosages and particle (platelets) size of PureGRAPH[®] graphene on physicochemical, microstructural, and mechanical performance of Ordinary Portland Cement (OPC) cement mortars.

The results show the compressive strength increased by 34.3% and tensile strength by 26.9% when PureGRAPH[®] is added to cement mortar at very low levels of 0.07%w/w in the cement paste (equivalent to ca. 0.01%w/w in concrete), further validating earlier studies by Professor Losic.

In a subsequent paper published in RSC Advances , researchers at the University of Adelaide have validated the mechanism of compressive strength enhancement in concrete materials through the addition of high performing PureGRAPH[®] concrete additives supplied by First Graphene.

In the publication the researchers confirmed the statistical significance of earlier studies and further investigated the mechanism for increased strength in cement mortars. Extensive analysis showed the reinforcing mechanism of the graphene additive is based upon denser interfacial zones between the cementitious gel and aggregate particles, leading to more effective stress distribution and inhibition of crack propagation. Pristine graphene platelets with a high aspect ratio and average (volume) lateral size of 56 microns, gave the best performance. These materials are uniquely manufactured by electrochemical exfoliation at First Graphene and supplied as PureGRAPH[®] concrete additives.

The PureGRAPH[®] additives were introduced to the cement mortar as an aqueous dispersion within a plasticiser solution which is widely used in the construction industry. All testing was carried out using international standard test methods.

This research confirms the ability of high-quality pristine platelets to increase both the compressive and tensile strength of cementitious composites and concretes. The mechanism of strengthening has been fully validated in the laboratory.

The researchers conclude “The results of this study have not only provided a better understanding of incorporating pristine graphene platelets (PRG) into cementitious composites, but they have also shown the great potential for low-cost industrially produced PRG materials for improving the performance of cement-based construction materials.”

A copy of the research paper is currently available online at: http://rsc.li/34l0Mzv.

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

PureGRAPH[®] in Rubber

FGR has commenced work on the incorporation of PureGRAPH[®] powders into long-chain rubber polymers.

To leverage customer interest, FGR has concentrated on the rubbers most commonly used in the mining screen media market, which has the potential to adapt the findings into other sacrificial wear-liner rubber materials across the industry.

The work has been conducted in conjunction with an experienced rubber consultant in Perth and an established rubber processor in Ipoh, Malaysia.

Initial Science

Rubber compounds vary considerably depending on their use. Screening tests were completed on 35 compounds using formulation variations and compounded on a laboratory scale two-roll mill.

The two-roll mill allowed for multiple small batches of rubber to be produced with adjusted PureGRAPH[®] concentration and rubber chemistry. A range of mechanical testing was carried out on each batch to evaluate performance and produce the following data displayed in Figure 1.

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Figure 1: Bubble chart demonstrating mechanical performance of various graphene enhanced rubber formulations. Y axis represents tear strength, X axis represents tensile strength and the bubble diameter shows abrasion loss.

A production scale run of this material was then compounded using the Malaysian partner’s commercial production process line, both with and without the addition of PureGRAPH[®] . The compounded rubber was then moulded into large prototype parts and test sheets for mechanical testing.

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

The following table outlines the improvements achieved from the incorporation of PureGRAPH[®] 20 in the base material used for mining screen or wear media compounds.

Ultimate Tensile Strength, AS1683	Die C tear resistance, ASTM D624	Trouser tear, ASTM D624	Abrasion Loss (FGR test), Internal Method	Abrasion Loss – taber, ASTM D4060
+20.3%	+25.8%	+12.1%	-5.3%	-66.0%

Table 1 – PureGRAPH[®] enhanced rubber compared to base compound.

The improvement in abrasion resistance (i.e., decrease in abrasion wear over the base material) and tear strength is of particular importance for improved performance and longevity of screen media.

As detailed in Table 1, both abrasion resistance and tear strength can be significantly improved through a low addition rate of PureGRAPH[®] into the rubber compound.

Several client compounded PureGRAPH[®] enhanced rubber screens are currently in field trials in the mining industry in Western Australia.

National Physical Laboratory (NPL) Collaboration

The Company was awarded UK government funding through the National Physical Laboratory (NPL) UK to refine test methods for PureGRAPH[®] graphene products.

The assurance of product quality and consistency is vital for the successful adoption of graphene additives by downstream customers. FGR has always maintained a strong focus on product quality with its PureGRAPH[®] graphene product range. Implementing state of the art analytical methods, participating in establishing international standards (ISO/TC229) and use of 6-sigma approaches to control manufacturing processes have all contributed to establishing PureGRAPH[®] as the leading brand for quality in the industry[1] .

World-leading measurement solutions are critical to business and government, accelerating research and innovation, improving quality of life, and enabling trade. Following the COVID-19 crisis the NPL with the support of National Measurement Laboratory partners launched the Measurement for Recovery (M4R)[2] programme, to support UK companies. First Graphene has successfully secured a place on the programme to study the Specific Surface Area of PureGRAPH[®] products.

Specific Surface Area is an important parameter of graphene platelets, which may impact dispersion and polymer wetting, and a critical parameter for regulatory authorities to enable them to categorise new substances and compare toxicology and environmental fate profiles. Specific Surface Area of powders is typically characterised by the BET (Brunauer-Emmett-Teller) method which uses nitrogen gas adsorption to characterise the surface area. In recent work by NPL[3] , researchers investigated factors impacting upon BET measurements including the pristine nature of the graphene platelets.

1 https://firstgraphene.net/leading-the-industry-in-graphene-product-quality/

2 https://www.npl.co.uk/measurement-for-recovery

3 Sofia Marchesini, Piers Turner, Keith R. Paton, Benjamen P. Reed, Barry Brennan, Krzysztof Koziol, Andrew J. Pollard, Carbon 167 (2020) 585-595

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

In the collaborative M4R project, NPL researchers determined the BET specific surface area of a range of PureGRAPH[®] products and intermediates. From this work, the company has an excellent understanding of the surface area characteristics which is essential for application development and meeting regulatory standards.

Safety and People

Employment and Training Program

All potential full-time employees must undergo a Company funded full medical examination prior to commencing employment. All employees are also required to complete a Company funded safety first training course at the commencement of employment and annual refresher courses. A training register is maintained, and employees are trained in all aspects of the Company’s operations prior to being signed off as trained to operate the equipment.

Weekly safety meetings are held, and all new tasks have a Job Hazard Assessment (JHA) completed and signed off prior to being undertaken.

The safety and welfare of all employees is of paramount importance.

COVID-19

The Company continues to monitor developments and has established the following approach to keeping our people safe:

Business travel

First Graphene has placed a moratorium on any international business travel until further notice.

We also asked staff to minimise domestic travel to ‘business-essential only’ and look for other ways to collaborate, such as via Zoom and MS Teams.

Personal travel

Staff have been asked to reconsider their need to travel internationally at this time.

Flu shot

While the flu vaccine won’t combat COVID-19, it will help reduce the severity and spread of flu, which can lower a person’s immunity. The Company recommended all staff consider a flu shot for these reasons.

Hygiene

Health authorities advise to protect themselves and others from infection, practice good hand and respiratory hygiene including:

• Cleaning hands with soap and water or alcohol-based hand rubs;

• Covering their nose and mouth with a tissue or flexed elbow when coughing or sneezing;

• Avoiding contact with anyone who has symptoms such as fever, a cough, sore throat, fatigue, and shortness of breath;

• Staying home if they are unwell and encouraging others to do the same; and

• Trying to stay at least 1.5 metres away from people coughing or sneezing.

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

Working from home

The Company strongly encouraged all staff to take laptops (if applicable) home each day. If they feel unwell or are required to stay out of the office, they will be equipped to work from home (if well enough). If they needed some support to set up from home, they were encouraged to contact our IT support provider to assist them to be operational.

Clients

Many clients enacted their own COVID-19 policies. The Company ensured we were aware of any policies with which we must comply with when on-site. If employees have any concerns about visiting a client’s premises, they were asked to raise them with the Company Secretary.

General precautions

Our approach is aimed at safeguarding the health and safety of our people and doing our part to minimise the risk of COVID-19 spreading within the community.

Events since the end of the period

On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID19 outbreak) and the risks to the international community as the virus spread globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic.

The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact the pandemic will have on its financial condition, liquidity, and future results of operations during FY2021.

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Directors’ Report

Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2021 financial year.

Although the Group cannot fully estimate the length or gravity of the COVID-19 effect, from its initial assessment, it is expecting to be able to continue as a going concern.

On 15 January 2021 the Company advised that founding director and Chief Financial Officer, Peter Youd, would be retiring.

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

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 14.

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

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Peter R. Youd Director

Henderson, 18 February 2021

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Auditor’s Independence Declaration

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First Graphene Limited Consolidated Interim Financial Report – December 2020

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Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Half-Year Ended 31 December 2020

ncome or the Half-Year Ended 31 December 2020
Note Continuing operations Revenue from contracts with customers Cost of goods sold Gross profit Other income 2 Research & development 3(a) Selling & marketing 3(b) Mineral lease maintenance 3(c) General & administrative 3(d) 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
	2020 $ 2019 $
	92,372 82,831 (61,119) (81,131)
	31,253 1,700
	873,041 865,325 (1,124,062) (1,783,755) (222,163) (143,483) (156,722) (122,254) (1,433,727) (1,721,972)
	(2,032,380) (2,904,439) 1,433 8,793 (14,531) (7,004)
	(2,045,478) (2,902,650) - - (2,045,478) (2,902,650)
	(6,789) 4,185
	(2,052,267) (2,898,465)
	(2,057,531) (2,912,158) 12,053 9,508
	(2,045,478) (2,902,650)

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Half-Year Ended 31 December 2020

ncome or the Half-Year Ended 31 December 2020
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 2020 $ 2019 $
		(2,064,320) (2,907,973) 12,053 9,508
		(2,052,267) (2, 898,465)
		(0.39) (0.62) (0.39) (0.62)

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 2020

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Consolidated Statement of Financial Position

As at 31 December 2020

Note Current Assets Cash and cash equivalents Inventories 4 Trade and other receivables Other current assets 5 Total Current Assets Non-Current Assets Property, plant, and equipment 6 Inventories 4 Intangible assets Right of use asset Financial assets at FVPL Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Lease liabilities Employee liabilities Total Current Liabilities Lease liabilities Total 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 2020 $ 30 June 2020 $ 4,032,846 8,053,134 1,893,220 1,601,522 45,715 65,568 668,429 332,495
	6,640,210 10,052,719
	2,515,226 2,314,167 1,886,957 1,009,200 329,603 294,811 431,962 219,067 212,282 215,102
	5,376,030 4,052,347
	12,016,240 14,105,066
	1,207,375 1,569,670 173,950 72,791 89,616 63,221
	1,470,941 1,705,682
	269,955 152,999
	269,955 152,999
	1,740,896 1,858,681
	10,275,344 12,246,385
	95,844,497 95,778,819 5,825,155 5,887,471 (91,589,211) (89,531,680)
	10,080,441 12,134,610 194,903 111,775
	10,275,344 12,246,385

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

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Consolidated Statement of Changes in Equity For the Half-Year Ended 31 December 2020

As at 1 July 2020 Profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners Shares issued Share issue costs Transactions with non- controlling interest Share based payment Balance at 31 December 2020	Issued capital Share based payments reserve Options reserve Translation reserve Other Reserve Accumulated losses Non- controlling interest Total equity 95,778,819 5,416,167 467,202 4,102 (71,057) (89,531,680) 182,832 12,246,385 - - - (2,057,531) 12,053 (2,045,478) - - - (6,789) - - - (6,789)
	- - - (6,789) - (2, 057,531) 12,053 (2,052,267) 72,706 - - - - - - 72,706 (7,028) - - - - - - (7,028) - - - - (18) - 18 - - 15,548 - - - - - 15,548
	95,844,497 5,431,715 467,202 (2,687) (71,075) (91,589,211) 194,903 10,275,344

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 2020

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Consolidated Statement of Changes in Equity For the Half-Year Ended 31 December 2019

As at 1 July 2019 Profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners Shares issued Option based payment transactions Balance at 31 December 2019	Issued capital Share based payments reserve Options reserve Translation reserve Accumulated losses Non- controlling interest Total equity 85,068,406 4,703,404 467,202 (22,507) (84,292,030) 163,275 6,087,749 - - - - (2,912,158) 9,508 (2,902,650) - - - 4,185 - - 4,185
	- - - 4,185 (2,912,158) 9,508 (2,898,465) 4,338,497 - - - - - 4,338,497 - 649,056 - - - - 649,056
	89,406,903 5,352,460 467,202 (18,322) (87,204,188) 172,783 8,176,838

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 2020

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Consolidated Statement of Cash Flows For the Half-Year Ended 31 December 2020

Cash flows from operating activities Revenue from sales Payments to suppliers and employees Interest received Interest expense Other income – R&D credit received 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 Payments for intellectual property Net cash outflows from investing activities Cash flow from financing activities Proceeds from exercise of options Payment for share issue costs Proceeds received from third party Payments of lease liabilities Net cash inflows/(outflows) 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
	2020 $ 2019 $ 118,706 62,885 (4,082,106) (3,903,779) 1,433 5,638 (9,890) (7,004) 873,042 999,582
	(3,098,815) (2,842,678)
	(813,204) (554,135) - 1,864 (44,224) -
	(857,428) (552,271)
	5,331 4,331,466 (5,106) - - 75,000 (66,880) (33,766)
	(66,655) 4,372,700
	(4,022,898) 977,751 2,610 3,154
	8,053,134 3,664,137
	4,032,846 4,645,042

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

First Graphene Limited Consolidated Interim Financial Report – December 2020

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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 2020 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 2020 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 18 February 2021.

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 2020, except for the adoption of new standards effective as of 1 July 2020. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Several other amendments and interpretations applied for the first time in 2020, but do not have an impact on the interim condensed consolidated financial statements of the Group.

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Notes to the Consolidated Financial Statements

Going Concern

For the period ended 31 December 2020 the entity recorded a loss of $2,045,478 (2019:$2,902,650) and had net cash outflows from operating activities of $3,098,815 (2019:$2,842,678).

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.

2. Other income

. Other income
Research & Development grants and tax incentives Profit on sale of property, plant, and equipment Total other income	31 December 2020 $ 31 December 2019 $ 873,041 863,461 - 1,864
	873,041 865,325

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Notes to the Consolidated Financial Statements

3. Expenses

(a) Research & development expenses Employee expenses Consultants and research programs Legal and other professional fees Depreciation Amortisation Other (b) Selling & marketing Employee expenses Advertising & promotions Other (c) Mining Lease maintenance Employee expenses Depreciation Amortisation Other (d) General & administrative Employee expenses Finance & company secretarial fees Legal and other professional fees ASX listing, share registry and other corporate costs Depreciation Amortisation Share based payment expense Option expense (non-cash) Other expenses Total administrative expenses	398,535 531,885 494,118 446,902 12,756 - 37,852 140,028 11,138 17,912 169,663 647,028
	1,124,062 1,783,755
	57,716 55,800 153,203 84,903 11,244 2,780
	222,163 143,483
	30,604 8,486 - 20,145 - 10,324 126,118 83,299
	156,722 122,254
	179,224 108,394 396,212 256,426 431,517 205,548 86,138 77,020 9,942 22,215 3,813 3,814 67,375 - 15,548 649,056 243,958 399,499
	1,433,727 1,721,972

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Notes to the Consolidated Financial Statements

4. Inventory

Raw materials Finished goods Work in progress Less: Provision for impairment Carrying amount Disclosed as: Current Non-current Total inventory 5. Other current assets Prepayments Deposits paid Total other current assets	31 December 2020 $ 30 June 2020 $ 1,504,557 1,328,904 2,045,673 1,056,000 276,747 272,618
	3,826,977 2,657,522 (46,800) (46,800)
	3,780,177 2,610,722
	1,893,220 1,601,522 1,886,957 1,009,200
	3,780,177 2,610,722
	31 December 2020 $ 30 June 2020 $ 661,389 325,455 7,040 7,040
	668,429 332,495

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 24

Notes to the Consolidated Financial Statements

6. Property, plant, and equipment

	31 December 2020
	Exploration equipment Plant and equipment Office equipment Motor vehicles Total
Carrying amount at beginning of period Additions Depreciation Movement due to foreign exchange Carrying amount at end of period	- 2,293,523 8,703 11,941 2,314,167 - 544,873 19,019 - 563,892 - (357,362) (3,070) (1,933) (362,365) - (459) (9) - (468)
	- 2,480,575 24,643 10,008 2,515,226

	30 June 2020
	Exploration equipment Plant and equipment Office equipment Motor vehicles Total
Carrying amount at beginning of period Additions Transfers Depreciation Movement due to foreign exchange Carrying amount at end of period	30,042 1,326,534 107,90239,4640 31,462 2,314,167 - 1,448,574 5,697 - 1,454,271 - 233,091 (233,091) - - (30,290) (714,665) (3,369) (19,739) (768,063) 248 (11) 2 218 457
	- 2,293,523 8,703 11,941 2,314,167

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 25

Notes to the Consolidated Financial Statements

7. Issued capital

. Issued capital
Issued and Paid-Up Capital Opening ordinary shares, fully paid Movements in ordinary share capital At beginning of the period Issues to investors July to December through exercise of options Shares issued to employees Share issue costs At end of the period	31 December 2020 Number of Shares 30 June 2020 Number of Shares 31 December 2020 $ 30 June 2020 $ 525,968,985 525,667,829 95,844,497 95,778,819 31 December 2020 Number of Shares 31 December 2019 Number of Shares 31 December 2020 $ 31 December 2019 $ 525,667,829 445,849,952 95,778,819 85,068,406 26,156 28,870,129 5,331 4,338,497 275,000 - 67,375 - - - (7,028) -
	525,968,985 474,720,081 95,844,497 89,406,903

8. Dividends

No dividends have been paid or declared during the period. (2019: Nil)

9. Earnings per share

	2020	2019
	A$	A$
Loss attributable to the owners of First
Graphene used in calculating basic and	(2,045,478)	(2,902,650)
diluted loss per share
	Number of	Number of
	shares	shares
Weighted average ordinary shares used in
calculating basic and diluted earnings per	525,708,798	469,429,435
share
Basic and diluted loss per share - cents per	(0.39)	(0.62)
share

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 26

Notes to the Consolidated Financial Statements

10. Options

0. Options
(a) Share options Listed share options At the beginning of the period Options issued Options exercised during the period At the end of the period (b) Share options Unlisted share options At the beginning of the period Options issued At the end of the period	31 December 2020 30 June 2020 Number Number 107,471,898 85,774,779 - 50,582,248 (26,656)(28,885,129)
	107,445,242 107,471,898
	31 December 2020 30 June 2020 Number Number 15,000,000 5,000,000 5,000,000 10,000,000
	20,000,000 15,000,000

11. Share based payments

Shares Issued to Employees

On 23 December 2020, the Company issued 275,000 shares at a nominal value of $0.245 per share to various employees. The total of $67,375 has been expensed.

Share Option Plan

The value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options (the vesting period), ending on the date on which the relevant employees become fully entitled to the option (the vesting date).

The Group recognised total share-based payment expense in the half-year as follows:

	Half Year
	2020 2019
Options issued to directors Total	15,548 649,056
	15,548 649,056

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 27

Notes to the Consolidated Financial Statements

11. Share based payments (continued)

The issue of unlisted options to the Chief Executive Officer (CEO Options) was approved at the Board of Directors on 17 December 2020.

Using the Black Scholes option pricing model and based on the assumptions set out below, the CEO Options were ascribed the following value:

Assumptions:
Valuation date	17 December 2020
Market price of shares	$0.245
Exercise price	$0.250
Expiry date (length of time from issue)	8 November 2023 – 2.89 years
Risk free interest rate	0.25%
Volatility	75%
Indicative Value of Director Option (cents)	0.11581
Number of options issued	5,000,000
Total Value of Director Options - $	579,069
Vested to date	15,548
To vest	563,521

2,000,000 of the options will vest on the first anniversary of employment and 3,000,000 of the options will vest on the second anniversary of employment, subject to the CEO remaining in the employ of First Graphene Limited or any entity associated with First Graphene Limited.

12. 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:

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 28

Notes to the Consolidated Financial Statements

12. Segment reporting (continued)

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 and exploration activities

Although the Company has suspended its mineral exploration and development in Sri Lanka the Board monitors the Company based on actual verses budgeted exploration expenditure incurred.

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 29

Notes to the Consolidated Financial Statements

12. Segment reporting (continued)

Business	Graphene	Production	Production	Research &	Development	Corporate Services	Corporate Services	Mining Asset	Mining Asset		Total	Total
Segment								Maintenance
	6 months to	6	months to	6 months to	6 months to	6 months to	6 months to	6 months to	6 months to		6 months to	6	months to
	31		31	31	31	31	31	31		31	31		31
	December	December		December	December	December	December	December	December		December	December
	2020		2019	2020	2019	2020	2019	2020		2019	2020		2019
	A$		A$	A$	A$	A$	A$	A$		A$	A$		A$
Revenue from
external
customers	92,372		82,831	-	-	-	-	-		-	92,372		82,831
Interest
revenue	-		-	-	-	1,433	5,641	-		-	1,433		5,641
Operating loss	33,037		1,700	(300,018)	(812,243)	(1,655,824)	(1,878,635)	(122,673)	(124,841)		(2,045,478)		2,902,650
Depreciation
expense	314,503		163,165	37,852	131,854	10,011	30,375	-	28,090		362,365		353,455
Amortisation
expense	66,201		15,828	11,138	17,913	3,813	3,814	-		-	81,152		37,554
Business	Graphene Production			Research &	Development	Corporate Services		Mining Asset			Total
Segment								Maintenance
	31			31		31		31			31
	December		30 June	December	30 June	December	30 June	December	30	June	December		30 June
	2020		2020	2020	2020	2020	2020	2020		2020	2020		2020
Segment assets	3,788,811		2,666,111	3,348,609	3,043,192	4,845,770	8,377,078	33,050	18,685		12,016,240		14,105,066
Segment liabilities	176,571		196,990	169,261	166,308	1,392,871	1,489,067	2,193		6,316	1,740,896		1,858,681

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 30

Notes to the Consolidated Financial Statements

12. 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.

	6 months to 31 31 6 months to 31
	December December December 30 June
	2020 2020 2019 2020
Geographical segments	Revenue Total Assets Revenue Total Assets
	$ $ $ $
Australia United Kingdom Sri Lanka Total	92,372 11,691,945 82,831 13,974,972 - 291,245 - 113,112 - 33,050 - 16,982
	92,372 12,016,240 82,831 14,105,066

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
	2020 2020
	$ $
Total segments assets Inter-segment elimination Total assets per statement of financial position	19,157,299 21,832,721 (7,141,059) (7,727,655)
	12,016,240 14,105,066

Reconciliation of segment liabilities to the Statement of Financial Position

	31 December 30 June
	2020 2020
	$ $
Total segments liabilities Inter-segment elimination Total liabilities per statement of financial position	17,431,248 17,421,874 (15,690,353) (15,563,193)
	1,740,896 1,858,681

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 31

Notes to the Consolidated Financial Statements

13. Subsequent events after Reporting Date

On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus spread globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic.

The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact the pandemic will have on its financial condition, liquidity, and future results of operations during FY2021.

Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2021 financial year.

Although the Group cannot fully estimate the length or gravity of the COVID-19 effect, from its initial assessment, it is expecting to be able to continue as a going concern.

On 15 January 2021 the Company advised that founding director and Chief Financial Officer, Peter Youd, would be retiring.

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

14. Commitments

There have been no other changes to commitments since 30 June 2020.

15. Contingent liabilities and contingent assets

There has been no material change to contingent liabilities and contingent assets since 30 June 2020.

16. Related Party Transactions

There has been no change to related party transactions other than the issue of options disclosed in note 11.

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 32

Director’s Declaration

In the Directors’ opinion:

• a) The financial statements and notes set out on pages 15to 32 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 2020 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 on 18 February 2020.

==> picture [126 x 98] intentionally omitted <==

Peter R Youd Director

Henderson, 18 February 2021

First Graphene Limited Consolidated Interim Financial Report – December 2020

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Independent Auditor’s Report

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First Graphene Limited Consolidated Interim Financial Report – December 2020

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Independent Auditor’s Report

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First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 35

Additional Securities Information

(Note this information does not form part of the audit reviewed financial statements)

Additional information not shown elsewhere in this report is as follows. This information is complete as at 16 February 2021.

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	149 29,585 1,364 4,630,607 1,016 8,009,013 2,129 74,522,106 541 446,326,279
	5,199 533,517,590
Equity Security	Quoted Unquoted
Fully paid ordinary shares Options	533,517,590 - 103,136,637 17,000,000

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 Investments Pty Ltd 3 Citicorp Nominees Pty Limited 4 IPS Holdings 5 Building On The Rock Limited 6 Gregorach Pty Ltd 7 Debt Management Asia Corporation 8 Ginga Pty Ltd 9 Hallidaf Management Ltd 10 Mr Craig Robert McGuckin & Mrs Lee Ann McGuckin " 11 Merrill Lynch (Australia) Nominees Pty Limited 12 HSBC Custody Nominees (Australia) Limited 13 BNP Paribas Noms Pty Ltd 14 William Taylor Nominees Pty Ltd 15 BNP Paribas Nominees Pty Ltd Retail client DRP> 16 Bissapp Software Pty Ltd Account> 17 Ms Fadillah Burhan Hasibuan 18 Mr Richard Hopetoun Bitcon 19 Mr Ryan Jehan Rockwood 20 Mr Michael Alan Antoska & Mrs Elisa Antoska Total Total issued capital	113,051,947 21.19 22,777,082 4.27 21,152,245 3.96 16,888,011 3.17 16,666,667 3.12 15,905,946 2.98 11,263,267 2.11 7,000,000 1.31 6,704,274 1.26 6,474,365 1.21 6,391,691 1.20 4,812,350 0.90 4,669,098 0.88 4,465,959 0.84 4,323,313 0.81 3,335,056 0.63 3,089,230 0.58 2,860,000 0.54 2,500,000 0.47 1,844,710 0.35
	276,175,211 51.76 533,517,590 100.00

At 16 February 2021, there were 185 shareholders holding less than a marketable parcel of shares ($0.30 cents on this date) in the Company totalling 84,323 ordinary shares amounting to 0.02% of the issued capital.

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 36

Additional Securities Information

c) Top 20 Security Holders – Options (FGROC) at 16 February 2020

Name of Holder	Number of Shares %
1 Gregorach Pty Ltd 2 Mrs Gayle Teresa Crabbe 3 Gregorach Pty Ltd 4 Mr Christopher James Bellew 5 Mr Gregory John Keir 6 IPS Holdings 7 Pavarai Pty Ltd 8 Mr Alan Wesley Patterson-Kane 9 J P Morgan Nominees Australia Pty Limited 10 Thirty Sixth Vilmar Pty Ltd 11 Mr Shaun Phillip Van Dyk 12 Bolam Materials Research Ltd 13 Debt Management Asia Corporation 14 Mr Tigere Maxwell Machonisa 15 Geo Ban Consulting Pty Ltd 16 Ms Fadillah Burhan Hasibuan 17 Ginga Pty Ltd 18 BNP Paribas Nominees Pty Ltd Retail Client DRP> 19 Jetosea Pty Ltd 20 CS Third Nominees Pty Limited <HSBC Cust Nom Au Ltd 13 A/C Total Total issued options	5,253,612 5.09 4,756,388 4.61 3,353,839 3.25 3,224,521 3.13 2,450,000 2.38 2,375,829 2.30 2,033,750 1.97 2,000,000 1.94 1,736,556 1.68 1,684,615 1.63 1,566,190 1.52 1,550,000 1.50 1,527,805 1.48 1,500,000 1.45 1,459,091 1.41 1,451,979 1.41 1,392,555 1.35 1,383,933 1.34 1,191,463 1.16 1,185,061 1.15
	43,077,187 41.77 103,136,647 100.00

First Graphene Limited Consolidated Interim Financial Report – December 2020

Page 37