Preliminary Results

Graphene NanoChem plc

(the "Company" or the "Group")

Preliminary unaudited results for the twelve months ended 31 December 2013

Graphene NanoChem (AIM: GRPH), the nanochemicals, performance chemicals and advanced materials company, is pleased to announce its unaudited Preliminary results for the 12 months ended 31 December 2013. These results relate to the business conducted by the Group, trading as Graphene NanoChem plc (the "Company" or the "Group").

Financial Highlights

· Revenue increased to £31.6million (2012: £26.0 million) with sales up by 21.5%

· Adjusted* loss before tax of £9.4 million (2012: £5.4 million)

· Loss before tax of £10.2 million (2012: £5.4 million)

· Loss per share of 11.1p per share (2012: (174.9)p)

· Healthy cash balance of £7.4 million

· Strong balance sheet with Net Assets of £32.2 million and Net Tangible Assets of £21.0 million

· Increase in working capital facility with Malaysian Debt Ventures Berhad from £7.4 million to £14.8 million**

*after adjusting for amortisation arising from the reverse acquisition

**further increase to £20.4 million in May 2014

Other Highlights

Successful RTO

· Completed the acquisition of Platinum Nanochem Group through a reverse takeover.

Robust Operational Performance

· Domestic and international contracts with tier-1 oil and gas customers extended to 2015 and 2016.

· Completed the upgrade of the Senawang Chemicals Facility for increased production capacity and production margin improvement. The benefits of the plant upgrade will be fully realized in Q3 2014.

· Re-commissioned the Lahad Datu refinery with planned expansion to convert the refinery into an integrated biorefinery hub finalised.

· Completed the installation of the second reactor for the graphene nanomaterials facility, doubling its production capacity (December 2013).

Strategic Joint Venture for Oilfield Chemicals

· Formalized a 50/50 joint venture with Scomi Oiltools Sdn Bhd ("Scomi") a 45,000 tonne multi-facilities manufacturing hub for oilfield chemicals will be constructed in Port Klang. The manufacturing hub will include a 30 tonne per year graphene nanomaterials facility to service the joint venture. The Group will license its production technology to the joint venture and the production output of the plant will be purchased by Scomi. The multi-facilities hub is expected to come online by Q2 2016 (April 2014).

· A US$21 billion market, the Oilfields Chemicals segment is the natural step-up expansion for the Group into high value, high margin products.

Regulatory Approval

· Successful registration of PlatClear, the Group's waste-based chemicals with the US Environmental Protection Agency, effectively opening the US market for the Group's Fuel Additives products (September 2013).

Strategic Technology Acquisition

· Acquisition of the production technology for a range of biobased specialty chemical additives from Yong Hong Chemicals (December 2013).

· Acquisition of technology for the production of carbon nanotubes from Dr. Yinan Jin, (December 2013).

Graphene Applications Focus

· Entered into a joint venture agreement with the Malaysian national Innovation Agency, a national agency established under the Malaysia Prime Minister's Office, to develop a graphene hub for the country (December 2013).

· Executed a heads of agreement with Emery Oleochemicals Sdn Bhd, the world's largest oleochemical company, to explore potential collaboration on three key application areas: Rubber, Plastic Additives and Polymers

Continued Progress in Product and Process Deployment

· 12 products formulated for oilfield chemicals market

· Delays in customer adoption of PlatDrill grapheme-enhanced drilling fluid impacted 2013 results

· Successful end-user trials of PlatDrill completed in August 2013

· First sales expected within 2014

· Joint venture with Scomi demonstrates marketing partner's confidence and commitment to the product

· Plat Confi Poly AC, used in oil reservoir drill-in fluids, was introduced to the market and deployed downhole in Turkmenistan this year.

· SimPlat 5, the proprietary fluid dispersion technology developed by the Group, was commercially used to produce nano-emulsions for Scomi to improve well productivity during the drilling process (May 2014). A scaled-up 2,500 tonne per month unit is currently being fabricated and expected to be completed by July 2014 for oilfield chemicals applications.

Innovation Drive

· SimPlat 4 patent application, (the process upgrade implemented at the Senawang Facility) was filed in 16 April 2014.

· Developed two new catalyst formulations for the production of carbon nanomaterial products which adds to the Group's graphene nanomaterials product portfolio (February 2014).

· Developed an integrated graphene dispersion technology, a one-step process for graphene dispersion for liquid matrices and solutions.

Commenting on the results, Jespal Deol, Chief Executive Officer, said:

"Our journey to date has shown significant progress and the Company is materially more advanced than at the point of the reverse takeover last year. We have reinforced our existing business whilst diversifying our product portfolio into attractive growth areas. We have raised our capacity to drive continuous productivity and improve our economies of scale. We have invested in innovation as well as develop and acquire assets that allowed us to develop solutions for our targeted growth markets. We strengthened our "go to market" channels through innovative partnerships with market leaders. With confidence in the long-term growth of our chosen industry, our plans remained focus on expansion and growth.

"What we have achieved so far is considerable. We are an exciting company with a strong foundation and opportunity for growth."

Annual Report and Accounts and Annual General Meeting

The Company's annual report and accounts will shortly be sent to shareholders once finalised and made available on the Company's website. The Company's annual general meeting will be held at 9.30 a.m. on 30 June 2014 at the offices of Buchanan, 107 Cheapside, London EC2V 6DN.

For further information:

Chairman's Statement

The Group's progress shows how our strategy continues to be implemented. We maintain our focus and commitment to innovation and to building a sustainable long-term business in existing and new marketplaces to drive future growth.

During 2013, Graphene Nanochem plc ("Group") continued its focus on the realignment of its businesses and the strengthening of its business foundation for growth, investing to increase productivity and diversify our product portfolio to capture future opportunities in niche markets.

Our business strategy is simple - drive growth to achieve sustainable earnings through development of technology and product innovation, and move up the value chain to achieve higher margins for profitability.

Despite a few setbacks, overall, 2013 was a good year for the Group. We progressed very well in fuel additives with contracts with our tier-1 oil and gas customers being renewed on a long terms basis whilst also adding new customers. We expect to continue to be a dominant player for this market segment where our focus will continue to be in improving profit margins. We invested in upgrading our Senawang Facility to increase production capacity and enhance its processes to improve our margins and I am pleased to report that the upgrade was successfully implemented and completed in the first quarter of this year. The upgrade has enabled capacity to increase to 120,000 tonnes per annum from 80,000 tonnes of which 80% is already forward sold up to 2015.

Within our oilfield chemicals portfolio, there has been a delay in the deployment of PlatDrill, our first graphene-enhanced chemical, previously targeted for market before the end of 2013. We are, however, confident in the marketplace for PlatDrill which we will supply through Scomi Oiltools Sdn Bhd ("Scomi"), a globally renowned oil and gas service provider, and we firmly believe that it is now purely a timing issue as the setback has been due to the additional requirement for customized formulations and delays in onsite testing. A testament to our continued acceleration in penetrating the oilfield chemicals market is our recently announced formal joint venture with Scomi to set up a 45,000 tonne per annum production chemical facilities for oilfield chemicals in Port Klang, Selangor in which the Group will be licensing its technology and Scomi will be providing the offtake for the production output. This reflects the continued confidence of both parties in the future growth of this market segment.

Our Lahad Datu plant (acquired as part of the reverse takeover of Biofutures) remains a critical element of our biobased chemicals expansion strategy due to its strategic location within the Palm Oil Industrial Cluster in Lahad Datu, Sabah, which is in close proximity to the port as well as being equipped with complete logistical infrastructure. In 2013, the Group re-commissioned the previously dormant Lahad Datu plant, and has recently completed the plan for the upgrade of the Lahad Datu plant into a fully integrated biobased chemicals hub.

We have also continued to enhance our Advanced Materials division by investing in people and technology including the acquisition of new catalysts to produce a broader range of nanomaterials to suit the right applications. We have doubled the capacity of the facility but ultimately our objective is to maximise value from applications, as evidenced by our oilfield chemicals segment strategy. Graphene-enhanced chemicals have been the initial focus of our Advanced Materials division and one of the significant milestones achieved is the development of our proprietary liquid base graphene dispersion technology that enables dispersion of graphene for liquid host materials. We believe this could be game changing and would enable a wider range of graphene applications in chemicals and lubricants.

The Group has also completed its phase I collaboration with Malaysia's National Innovation Agency on the creation of a national graphene hub in Malaysia in which 5 strategic application areas for commercialization have been identified. Work will continue in exploring opportunities in these areas. The Group has also recently tied-up with Emery Advanced Materials to explore graphene applications for the plastics additives, biolubricants and rubber industries, which have a combined market potential of more than US$100 billion.

One of the cornerstones of our growth strategy for the Advanced Materials Division is innovation. While we continue to develop new technologies within the organisation, we have also invested in new intellectual property that we see pertinent to our strategy to achieve higher value product diversification. We believe this will drive significant growth in the next three years.

Director Changes

I would also like to mention the departure of two of our board members, Mr. David John Long and Dr. Joe Wong Kai Fatt, on 19 February 2014 and 17 April 2014 respectively. Both Mr. Long and Dr. Joe had been the original directors of Biofutures International plc ("Biofutures"), who had remained as directors post the reverse takeover exercise completed in March 2013, in order to facilitate the order transition of the Group's business to the new management team which was completed in Q1 2014. The Board and I thank Mr. Long and Dr. Joe Wong for their dedicated services to the Group over the years and wish them well in their new endeavours.

In April 2014, we announced the appointment of Dato' Sallehuddin Bin Othman as a Non-Executive Director with effect from 17 April 2014. Dato' Sallehuddin, a chartered accountant, has spent more than 20 years in C-level management and brings with him a wealth experience in corporate and financial experience. Dato' Sallehuddin has also be appointed as Chairman of the Audit Committee, replacing Mr. Long.

Strategic Report

We are also pleased to highlight a new format for our Annual Report and Accounts, which includes the Strategic Report, implemented following changes to legislation. The Strategic Report, comprising of this statement and the CEO's Strategic Review, describes our business and operating model, our business strategy and our progress these objectives.

Conclusion

Going forward, we will continue to make strategic investments in resources and infrastructure that will ensure growth and sustainable earnings. We are confident that the Group is now well positioned to capitalise on growth opportunities and we will remain prudent in managing resources while focusing on the successful commercialisation of the Group's differentiated technologies and products base.

Tan Sri Dato' Sri Abi Musa Asa'ari bin Mohamed Nor

Non-Executive Chairman

CEO's REVIEW

Further to the strategic review undertaken post the reverse takeover of Biofutures International plc in March 2013, 2013/2014 has been identified as the period to consolidate and restructure the operations of the enlarged Graphene Nanochem plc ("GNC" or "the Group") to achieve two key objectives:

· realignment of the cost base in our core markets and provide the base for profitable growth; and

· to position ourselves with the capability to meet anticipated demand in our targeted growth markets.

Since then, it has been a busy period for the Group as we continue to execute the building blocks mapped against our strategy and growth ambitions.

Our journey to date has shown significant progress. We have reinforced our existing business whilst diversifying our product portfolio into attractive growth areas. We have raised our capacity to drive continuous productivity and improve our economies of scale. We have invested in innovation as well as develop and acquire assets that allow us to develop solutions for our targeted growth markets. We strengthened our "go to market" channels through innovative partnerships with market leaders. With confidence in the long-term growth of our chosen industry, we remain focused on expansion and growth. 

Fundamental to our development is a continued focus on our long-term growth strategy, which is to deliver innovative, high-value high-margin products in attractive growth areas that will ensure sustained global growth in the years ahead which we expect to translate to improved earnings for our shareholders.

In executing our strategy, the Group is expanding resources in products, technology and end-market diversification efforts to enhance our portfolio offerings and market access. The Group is focused on positioning assets and resources to capture opportunities where we have niche advantages and growth is strongest.

No doubt, we have had our fair share of operational challenges. We have worked hard to adapt and overcome them, making great progress in achieving strategic milestones for the business as we continue to remain focus in building our upward trajectory for long-term growth.

Successful listing on AIM - Significant Milestone

The acquisition of Platinum Nanochem Sdn Bhd in March 2013 through a reverse takeover marked a significant milestone for the Group in establishing an enlarged group with a portfolio of integrated technologies that enables the production of advanced renewable chemicals and advanced materials for broad-based industries.

Proceeds from the listing have enabled the Group to strengthen its business foundation, invest in innovation, resources and infrastructure as well as expand its business portfolio. With the investment made, the Group has strengthened and reinforced its business foundation. The Group has executed its market diversification strategy to expand from low margins to high-value, high-margin products and applications for its chemicals platform and drive innovation efforts for its advanced materials platform as well as pursue developmental opportunities in strategic applications areas.

The Business Platforms In Which We Operate

The Group operates two commercial platforms:

· the Advanced Chemicals division: Our core, revenue generating platform where our key target is sustainable growth through product innovation, capacity expansion and market diversification; and

· the Advanced Materials division: Our growth enabler platform where we focus on strategic developmental innovation work on graphene nanomaterial applications to drive future business growth.

Both business platforms are at different stages of growth and each offers different value propositions with distinct business models. The Advanced Materials division is a mature stage manufacturing platform poised for growth and expansion, deriving revenue from manufacturing activities whereas the Advanced Materials division is at a developmental stage where further investment is needed and progress is measured by continued innovation and technological achievement. We believe innovation breakthroughs could provide exceptional growth for this platform, including opportunities to expand into other industries beyond the chemicals market.

Advanced Chemicals

The Advanced Chemicals division is currently focused on three market segments: Fuel Additives, Oilfield Chemicals and Home Care.

Fuel Additives. Our Fuel Additives segment generated revenue of £31.6m in 2013 which is 21.5% increase from 2012, and we expect a further increase of revenue in 2014 pursuant to the increase in the capacity of the plant post the plant upgrade. The upgrade was completed in Q1 2014 and we are continuing to ramp up production operations to. We fully expect to see the benefits of the upgrade in the third quarter of 2014. Production capacity is fully contracted up to 2015 with tier-1 oil and gas customers. 

Oilfield Chemicals. We tailored our expansion plan with our strategy in creating high value innovative products in attractive growth areas. A US$21 bn market, the Oilfield Chemicals segment is the natural step-up expansion for the Group in executing our roadmap towards end-market diversification into high-value, high-margin products and I am proud to say that we have made tremendous progress in this market segment. We invested in developing the resources to be a major player in this industry and spent close to three years identifying market opportunities, developing relationships within the industry whilst at the same time strengthening our product portfolio base through development and acquisition of new intellectual properties.

The Advanced Materials platform is a critical component for the Oilfield Chemicals business, particularly in enhancing the performance of our products for applications into the oilfield chemicals market, driven by demand for "solution-based" high performance biodegradable chemicals. PlatDrill, our graphene-enhanced performance based oil, is the first on the list of our products portfolio developed specifically for oilfield chemical applications.

Our products have undergone stringent acceptance tests by our customers and achieved positive results with end users. Introducing new substitute products within a well-established industry value chain has had challenges; particularly where the focus is on solutions offering and customisation of applications are required. This has resulted in delays of deployment, which has affected our financial target for 2013 but we firmly believe that it is only a matter of timing for deployment as much of the hard work has been done and significant progress has been made. In May 2013, we supplied to Scomi 40 drums of Plat Confi Poly AC for drilling fluids formulations and we expect to deploy PlatDrill into the market place by this year.

Adopting a strategic partnership model in accelerating our growth in this market, we have agreed a joint venture with Scomi Oiltools Sdn Bhd ("Scomi"), one of the world's leading oilfield chemical solutions providers. The 50/50 joint venture with Scomi entails the setting up of an initial multipurpose 45,000 tonnes per annum manufacturing plant for the production of drilling chemicals for oilfields that will include a dedicated 30 tonnes per annum graphene nanomaterials facility. The Group will be licensing its selected production technologies for the joint venture and Scomi, with a global book order for oilfield chemicals that currently stands at £844 million, will purchase the entire production output of the plant. The plant will be constructed in Port Klang and is expected to come on line by Q2 2016.

Leveraging on the potential growth of this market, the joint venture is expected to expand its product offering into the higher margin simulation chemicals segment in the next phase, which includes enhanced oil recovery ("EOR"). The next growth phase is expected to commence in 2017 where the target will be to capture between 5% and 7% of the global chemicals EOR market by 2020.

The joint venture is a vote of confidence in our product portfolio as well as the long-term growth of our chosen market segment, validated by the strength of our partnership with Scomi that started as a collaboration to a supplier-customer relationship, and into a successful joint venture partnership to date.

Home Care. We are looking at introducing our biodegradable cationic surfactant into the fast moving consumer goods market, specifically in the Home Care segment, as part of our immediate term strategy to expand our market reach into a new industry. We are currently negotiating a marketing joint venture agreement with Chemical Mate Sdn Bhd ("Chemate") for the global marketing supply of PlatQuat, our Home Care product. The joint venture will leverage on Chemate's existing global distribution infrastructure in the FMCG markets.

Investing In Innovation. We made a significant investment in innovation, both in strategic research and development as well as in new intellectual property acquisitions, aligned to increasingly complex market requirements, to strengthen our internal capability in meeting the anticipated demand of our marketplace. We have improved reaction process to enhance efficiency and reduce energy consumption. We have made significant additions to our IP portfolio on two fronts: (1) new process technologies to diversify our production capabilities into new chemicals; and (2) new products to enhance our solution-based portfolio for our targeted markets. We see potential performance chemicals in as many as 5 market areas based on the new additions to our IP portfolio.

One of our achievements this year is our success in developing an integrated graphene dispersion process unit for fluid matrices and solutions ("SimPlat 5.1"). With SimPlat 5, the dispersion of graphene for our oilfield chemical applications becomes a one-step process. SimPlat 5 is a significant breakthrough for the Group in applying the graphene dispersion technology as a platform for all fluid-based applications.

Lahad Datu Expansion. In October 2013, the Group successfully re-commissioned its Lahad Datu refinery ("Lahad Datu Facility") to ascertain its operational status in view of the plant having been dormant since 2011. The necessary rectification work has been carried out and we are now at the final stage of obtaining the certificate of fitness for the Lahad Datu Facility, which we expect to be resolved by Q3 2014. The Lahad Datu Facility is strategically located at the Sabah Palm Oil Industry Cluster ("POIC") where feedstock and infrastructure for the creation of a chemicals hub are readily available and well established. Our expansion plan for the Lahad Datu is in place and the Group is looking at investing to upgrade and convert the facility into a fully integrated chemicals hub by the second half of 2016..

2013/2014 is a year of investment and realignment of our operations in our core markets to provide the base for profitable growth. Whilst we have had teething problems in execution, the measures taken will provide us with the correct base for our growth plan. In the longer term, we envision multiple manufacturing locations in the region for our Advanced Chemicals division, focusing on solution-based high-value performance chemical products, servicing global markets. Some growth will be organic, servicing increased market demand, while some may be derived from new acquisitions or entry into new markets.

Advanced Materials

Our Advanced Materials division is comprised of three core elements:

· the production unit where the focus is in the in-house manufacturing of different types of graphene nanomaterials and nanostructures to suit the right applications; and

· the graphene functionalization unit focuses on the dispersion and functionalization of materials for application specific use with particular strength today for dispersion in liquid matrices and solutions;

· the product development unit.

Whilst the Group has the capability to manufacture graphene nanomaterials, we do not plan to be a volume supplier of the material to third parties. We look at the Advanced Materials division as our growth platform and our objective is to capitalise on our graphene production and dispersion strengths to add value and expand our core businesses. To achieve this objective, we have taken the bold step of focusing on defined products and end market targets, where we believe the commercial value of the use of this material can be maximized.

One of the most significant achievements of the Group on the technological front is the successful customization and upgrade of our proprietary SimPlat technology for graphene nanomaterials dispersion into liquid matrices and solutions. These include the redesigned process unit that effectively disperse and homogenizes our materials into liquid matrices and solutions at macro and micro level. With the SimPlat Cavitation Unit, we are able to provide a fully integrated solution based platform offering, which in turn will significantly accelerate product development activities for fluid based applications.

Our go to market strategy is based on three business models:

· the Integrator Model where we own and manage the entire innovation process shouldering the bulk of the risk and also reaping the highest payback, primarily through wholly- owned or joint venture models;

· the Orchestrator Model where we coordinate significant aspects of innovation but execute only part of the process through collaboration with strategic partners, to drive the path to commercialisation and revenue generation;

· the Licensor Model where we are the primary owner of the idea or the intellectual property but is not directly involved in its implementation. This model, may result in less cash, enables the Group to generate higher margins with minimal risks.

We adopted the Integrator Model for the commercialisation of PlatDrill, which has now translated into a joint venture with Scomi where we participate as a partner at the highest end of the value chain, which is the commercial end user benefitting from the use of the material. In this, we realize value through the licensing of our production technology for PlatDrill whilst at the same time and in line with our Advanced Chemicals' strategy; generate higher margin revenue from the sale of PlatDrill by the joint venture entity. Partnering Scomi, which is one of leading names in oil and gas services, is a major milestone for the Group and a strong validation of our strategy and our differentiated product offerings. At the same time, it accelerates the go-to-market access for our products with strong growth potential. We expect the joint venture facility to come online by Q2 2016.

A critical component to our 2014 plan is the commercial deployment of PlatDrill commencing this year. Whilst there has been significant delay, it has been primarily attributed to industry challenges in introducing a new product into an established market space. Significant progress has been made in overcoming these challenges, it is now an issue of timing issue and we are confident of our product going to market this year.

We have doubled the graphene nanomaterials production capacity in our graphene nanomaterials facility to support our product development and collaboration activities and are proud to report the addition to our graphene nanomaterials products portfolio with the acquisition of 3 new catalysts formulation from Yong Hong Chemicals Ltd in December 2013. The arrival and addition of Dr. Yinan Jin, with his nanomaterials production and chemical synthesis experience to our Advanced Materials team has helped to accelerate the progress of a number of product development activities particularly on the oilfield chemicals and polymers side.

In December 2013, we entered into a joint venture agreement with the Malaysian National Innovation Agency ("MNIA"), a national agency established under the Malaysian's Prime Minister Office, to develop a national graphene hub for the country. Phase I of the study led by a tier-1 global consultant was completed in April 2014 in which 4 strategic application areas were identified as priority areas. We expect to commence phase 2 of the MNIA joint venture in Q3 2014, which is the establishment of a prototyping facility for graphene enhanced products in Malaysia.

The Group is also focused on developing quality collaborations with industry partners and, depending on the progress of engagement with these partners, will adopt the suitable commercialization and business models on a case-by-case basis. In March 2014, we executed a heads of agreement with Emery Oleochemicals Sdn Bhd to explore potential collaboration on three key applications areas: Rubber, Plastic Additives and Polymer. Work is currently ongoing to identify the right products to commercialize. We believe our product-focus approach is a critical component to our commercialization efforts. We intend to adopt a similar approach for each of our collaboration efforts - defining a priority focus on product opportunities as opposed to generic application areas to secure immediate and medium term wins whilst we continue to invest in long term opportunities, which will also be product and end market driven.

Conclusion

That is what we have achieved so far, and it is considerable. We are an exciting company with a strong foundation and opportunity for growth. But as I look forward into 2014 and beyond, it is clear that we still have a long way to go on our journey. Our work must continue.

Dato' Jespal Singh Deol Balbir Singh

Chief Executive Officer

FINANCIAL REVIEW

· Sales up 21.5%

· Increased working capital

· Improved balance sheet

· Strategic joint ventures

· Governmental support

Overview

The past year has seen the Group deliver solid revenues with an increase year on year of 21.5% to £31.6 million. The Group secured the renewal and extension of a number of contracts with tier-1 oil and gas customers. It also entered into negotiations for a number of significant joint ventures with key industry leaders, two of which have been announced in 2014. Acting as an endorsement of the strength of our technology, these joint ventures are encouraging for the future. Our focus on expanding capacity and improving operational efficiency of our performance chemicals facility during the year had a material impact on results and margins in general, resulting in pre-tax loss for the year of £10.2 million. During the period, the management remained focused on areas within our control, including cost containment and operational efficiencies, enabling us to report solid operational and cost performance.

We have continued to bolster our human resources during the period and have successfully implemented a new Enterprise Resource Planning (ERP) software tool within the Group. With the infrastructure in place, we are well positioned to continue to grow in 2014.

The Group installed a second reactor at its nanomaterials facility in the period, which has doubled our production capacity. This increase in production is just the first step in the Group's continued capacity expansion plans. With continued support of our joint venture partners and stakeholders, the Group is well positioned to deliver as a growth company with a solid pipeline of growth ventures underpinned by strong cash flows.

Operations

The expansion of the Group's Senawang nanochemicals facility, which produces the Group's PlatAmber and PlatClear second-generation fuel additives and the base fluid for the Group's graphene-enhanced drilling fluid, was concluded on schedule and production recommenced on a phased basis in Q1 2014. The facility is expected to be in full production during June 2014. During the upgrade, arrangements with third parties were put in place when required. Our ability to ensure contractual delivery of PlatAmber and PlatClear during the upgrade period resulted in significant wins for our second generation biofuels. These included the addition of Petron Fuel International as a customer for PlatAmber for the domestic market, and the doubling of contracted volumes for PlatClear in the EU market by one of our tier-1 oil and gas customers. We also obtained approval for entry into the higher margin US biofuels market, which is anticipated to be the world's largest market for biofuels by 2017, from the EPA for PlatClear.

In April 2014, the Group announced that it was entering into a 50/50 joint venture with Scomi Oiltools Sdn Bhd ("Scomi") for the production of a range of high value, speciality chemicals, including PlatDrill, as well as base chemicals using the Group's proprietary nanotechnology. This venture will service the growing US$21 billion global market via a 45,000MT multi-function production chemicals plant to be completed by the beginning of 2016, costing £14.7 million to be funded via debt and equity.

The Group continues to receive support for its business initiatives from the Government of Malaysia. Financially, this comes in the form of government guarantees for loans, subsidised interest payments through the Green Technology Financing Scheme, potential grants for capital expenditure incurred on selected projects, and tax holidays. The Group will continue to work with the Government to leverage on these and other incentives in the future.

Administrative expenses increased by 34% to approximately £2.8 million in line with management expectations. Finance costs in the period also increased by 14% to approximately £2.6 million. This was largely due to the increase in sales volumes and a longer feedstock holding period due to the expansion activity at the Senawang Facility.

In August 2013, the Group restructured a term loan facility, reducing the outstanding loan amount from £7.4 million to £2.7 million, with corresponding reduction in interest payable. During the year, the Group increased its working capital facility with Malaysia Debt Ventures Sdn Bhd from £6.5 million to £13.0 million*. This facility has been subsequently further increased in 2014 to £20.4 million, enabling the Group to continue to grow and maximise opportunities.

Capital expenditure during the year was £5.4 million, predominantly for the capacity expansion exercise at the Senawang Facility. The development of PlatDrill resulted in the Group incurring costs of approximately £1.8 million, however PlatDrill formed the cornerstone of the Scomi joint venture that was signed in April 2014.

Available cash and cash equivalents at year end were £7.4 million, to be used for continued deployment in operations. Operating in a very dynamic space with regular demands for the use of its technology, the Group continues to explore opportunities at various stages of development and will utilise capital accordingly as it continues to explore and invest in R&D initiatives.

*At an exchange rate of RM5.4 to £1.

2014 Outlook

We look forward to a successful 2014 with a turnaround to profitability based on the foundations laid in 2013. We will continue to explore and develop joint venture and new business opportunities to deliver the best possible shareholder value.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2013

The above items relate entirely to continuing operations.

Consolidated Statement of Financial Position

As at 31 December 2013

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

Consolidated Statement of Cash Flows

For the year ended 31 December 2013

Notes to the Financial Information

For the year ended 31 December 2013

1 General information

Graphene Nanochem plc was formed through the reverse takeover of Platinum Nanochem Sdn. Bhd. by Biofutures International plc ("Biofutures") where £32.5 million was raised through a placing of 23.2 million ordinary shares with new investors. The enlarged group's shares were readmitted to the AIM market on 26 March 2013 under the name of Graphene Nanochem plc.

The consolidated financial statements are presented as a continuation of the financial statements of Platinum Nanochem Sdn. Bhd. The consideration transferred was calculated after determining the fair value of the assets and liabilities of Biofutures at the transfer date. The consideration comprises the value of the additional shares that would need to have been purchased in Biofutures International plc to acquire the entire share capital. The consideration transferred was not calculated based on the share price of the listed shell at the date of the acquisition as trading in the shares of the listed shell was suspended at that time. All other transaction costs have been treated as post transaction cost in profit or loss. The consideration transferred was calculated after determining the fair value of the assets and liabilities of Biofutures at the transfer date. The consideration comprises the value of the additional shares that would need to have been purchased in Biofutures to acquire the entire share capital

The share capital and share premium at the period end represent the equity structure of the legal parent including the equity instruments issued by the legal parent to effect the transaction. This has been effected the creation of another reserve to reflect the reverse acquisition.

The Company and its subsidiaries are involved in the design, formulation and manufacturing of intermediate and performance chemicals and advanced nano-materials.

The Company is a public limited company incorporated and domiciled in England.

These consolidated financial statements have been approved for issue by the Board of Directors on 28 May 2014.

2 Summary of significant accounting policies

2.1 Basis of preparation

These consolidated financial statements of the Group are for the year ended 31 December 2013. They have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The consolidated financial statements have been prepared under the historical cost convention except where accounting standards require the use of fair values.

The financial statements of the Company have been prepared using the UK Generally Accepted Accounting Principles (UKGAAP).

The significant accounting policies set out below have been consistently applied, except where stated.

2.2 Going concern

During the year, the Group was able to enhance its position with regards to its customer commitments through the execution of longer term contracts with its tier 1 oil & gas customers rendering its manufacturing facility sold out for the next 12 months. Further, the Group is confident that its graphene enhanced high margin oil field chemical, Plat Drill, will be sold during 2014 to a leading global oilfield drilling fluid formulator. The Group announced that on 29th January 2014, the upgraded advanced chemical facility was commissioned with phased increase in production to May 2014. Since the year end, the Group has extended and increased its working capital facility to £20.4M from Malaysian Debt Ventures Berhad. Also during May 2014 the group settled its redeemable convertible preference shares through the issue of ordinary share capital. This had no cash impact on the group. Taking these key factors into consideration and the cash and cash equivalents at year end, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

2.3 Standards and Interpretations in issue not yet adopted

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group. The Directors anticipate that all of the pronouncements will be adopted in the Group's accounting policies for the first period beginning on or after the effective date of the pronouncement.

Standards, amendments and interpretations currently in issue but not effective for accounting periods commencing on 1 January 2013 as adopted by the EU are:

• IFRS 10 Consolidated Financial Statements (effective 1 January 2014)

• IFRS 11 Joint Arrangements (effective 1 January 2014)

• IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)

• IAS 27 Separate Financial Statements revised (effective 1 January 2014)

• IAS 28 Investments in Associates and Joint Ventures revised (effective 1 January 2014)

 • IAS 36 Recoverable Amounts (Amendments) (effective 1 January 2014)

 • IAS 39 Novation of Derivatives (Amendments) (effective 1 January 2014)

 • IAS 19' Defined Benefit Plans (Amendments) (effective 1 July 2014)

• Annual Improvements to IFRSs' 2010-2012 Cycle (effective 1 July 2014)

• Annual Improvements to IFRSs' 2011-2013 Cycle (effective 1 July 2014)

The Group has not early adopted these amended standards and interpretations. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the periods of initial application.

2.4 Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to 31 December 2013.

Subsidiaries are entities (including structured entities) controlled by the Group. The Group controls an entity when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities.

Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate.

Intragroup transactions, balances, income and expenses are eliminated on consolidation. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

(a) Business Combinations

Acquisitions of businesses are accounted for using the acquisition method. Under the acquisition method, the consideration transferred for acquisition of a subsidiary is the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group at the acquisition date. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than the costs to issue debt or equity securities, are recognised in profit or loss when incurred.

In a business combination achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

Non-controlling interests in the acquiree may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets at the date of acquisition. The choice of measurement basis is made on a transaction-by-transaction basis.

The IFRS requires that the consolidated financial statements prepared following a reverse acquisition shall be issued in the name of the legal parent (i.e. the accounting acquiree), but presented as a continuation of the financial statements of the legal subsidiary (i.e. the accounting acquirer).

The following principles have been applied:

(i) The assets and liabilities of the legal subsidiary shall be recognised and measured in the consolidated financial statements at their pre-combination carrying amounts;

(ii) The assets and liabilities of the legal parent shall be recognised and measured in the consolidated financial statements at their fair values at the acquisition date;

(iii) The retained profits and other equity balances (such as revaluation reserves and foreign exchange reserves) recognised in the consolidated financial statements shall be the retained profits and other equity balances of the legal subsidiary immediately before the business combination;

(iv) The amount recognised as issued equity instruments (i.e. share capital and share premium) in the consolidated financial statements shall be determined by adding to the issued equity of the legal subsidiary immediately before the business combination the fair value of the legal parent (i.e. the deemed cost of the business combination); and

(v) The equity structure appearing in the consolidated financial statements shall reflect the equity structure of the legal parent, including the equity instruments issued by the legal parent to effect the combination.

 (b) Loss of Control

Upon the loss of control of a subsidiary, the Group recognises any gain or loss on disposal in profit or loss which is calculated as the difference between:

(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest in the former subsidiary; and

(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the former subsidiary and any non-controlling interests.

Amounts previously recognised in other comprehensive income in relation to the former subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of (i.e. reclassified to profit or loss or transferred directly to retained profits). The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 39 or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

2.5 Foreign currency translation

(a) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in sterling, which is the Company's functional and presentational currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency of each individual entity using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the year end date are reported at the rate of exchange prevailing at that date. All exchange gains arising on retranslation of assets and liabilities are dealt with in the profit or loss.

(c) Consolidation of overseas subsidiary

Income and expenditure for overseas subsidiaries are included based upon monthly average exchange rates to give a fair approximation to the transaction rate. Items of Statement of financial position are included at the year-end exchange rate. All other differences are included within the translation reserve, including related goodwill and intangible assets, which are translated at the rate ruling at the year end date.

2.6 Property, plant and equipment

All property, plant and equipment (PPE) is shown at cost less subsequent depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit and loss during the financial period in which they are incurred.

Depreciation on assets is calculated using the straight-line method so as to allocate the cost of each asset less its residual value over its estimated useful life. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

The principal annual depreciation rates used to depreciate other assets are as follows:

Capital work-in-progress represents assets under construction, and which are not ready for commercial use at the end of the reporting period. Capital work-in-progress is stated at cost, and will be transferred to the relevant category of assets and depreciated accordingly when the assets are completed and ready for commercial use.

Cost of capital work-in-progress includes direct cost, related expenditure and interest cost on borrowings taken to finance the acquisition of the assets to the date that the assets are completed and put in use.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Company and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Company is obligated to incur when the asset is acquired, if applicable.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset is recognised in profit or loss. The revaluation reserve included in equity is transferred directly to retained profits on retirement or disposal of the asset.

2.7 Goodwill and intangible assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purposes of impairment testing.

Identifiable intangible assets are recognised separately from goodwill on all acquisitions. Such assets are carried at fair value at the date of acquisition (i.e. as deemed cost). Such intangible assets are reviewed for impairment on an annual basis. Intangible assets are tested annually for impairment along with the goodwill.

Intangible assets comprise of the followings:

(a) Research and development expenditure

Research expenditure is recognised as an expense when it is incurred.

Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as non-current assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:

(i) its ability to measure reliably the expenditure attributable to the asset under development;

(ii) the product or process is technically and commercially feasible;

(iii) its future economic benefits are probable;

(iv) its intention to complete and the ability to use or sell the developed asset; and

(v) the availability of adequate technical, financial and other resources to complete the asset under development.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period.

The development expenditure is amortised on a straight-line method over a period of 8 to 10 years when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.

(b) License

Separately acquired license is shown at historical cost. License has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of license over its estimated useful lives of 10 years.

(c) Patent

Separately acquired patent is shown at historical cost. Patent has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of license over its estimated useful lives of 5 years.

2.8 Impairment testing of goodwill, other intangible assets and property, plant and equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life, and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

2.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in-first-out basis and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition.

Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

2.10 Trade and other receivables

Trade and other receivables are initially recognised at fair value, which is usually the original invoiced amount plus transaction costs, and subsequently carried at amortised cost using the effective interest method less provisions made for impairment of receivables.

An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loans and receivables financial assets and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgment to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.

2.11 Trade and other payables

Trade and other payables are initially recognised at fair value, which is usually the original invoiced amount, and subsequently carried at amortised cost using the effective interest method.

2.12 Borrowing costs

Borrowing costs, directly attributable to the acquisition, construction or production of a qualifying asset, are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted.

All other borrowing costs are recognised in profit or loss as expenses in the period in which they incurred.

2.13 Cash and cash equivalents

Cash and cash equivalents (readily convertible into a known amount of cash) include cash in hand and deposits held at call with banks with an original maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents are as defined above, net of outstanding bank overdrafts.

2.14 Financial Instruments

Financial instruments are recognised in the statements of financial position when the Group has become a party to the contractual provisions of the instruments.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

A financial instrument is recognised initially at its fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial instrument (other than a financial instrument at fair value through profit or loss) are added to/deducted from the fair value on initial recognition, as appropriate. Transaction costs on the financial instrument at fair value through profit or loss are recognised immediately in profit or loss.

Financial instruments recognised in the statements of financial position are disclosed in the individual policy statement associated with each item.

(a) Financial Assets

On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.

(i) Financial Assets at Fair Value Through Profit or Loss

As at the end of the reporting period, there were no financial assets classified under this category.

(ii) Held-to-maturity Investments

As at the end of the reporting period, there were no financial assets classified under this category.

(iii) Loans and Receivables Financial Assets

Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

(iv) Available-for-sale Financial Assets

As at the end of the reporting period, there were no financial assets classified under this category.

(b) Financial Liabilities

All financial liabilities are initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.

(c) Equity Instruments

(i) Ordinary Shares

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from proceeds.

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

(ii) RedeemableConvertible Cumulative Preference Shares ("RCCPS")

The redeemable convertible cumulative preference shares are regarded as compound instruments, consisting of a liability component and an equity component. The component of redeemable convertible cumulative preference shares that exhibits characteristics of a liability is recognised as a financial liability in the statements of financial position, net of transaction costs. The dividends on those shares are recognised as interest expense in profit or loss using the effective interest method. On issuance of the redeemable convertible cumulative preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible debt and this amount is carried as a financial liability in accordance with the Group's accounting policy.

The residual amount, after deducting the fair value of the liability component, is the equity component and is included in equity, net of transaction costs. The equity component is not remeasured subsequent to initial recognition.

Transaction costs are apportioned between the liability and equity components of the redeemable convertible cumulative preference shares in proportion to their initial carrying amounts.

(iii) Irredeemable Convertible Preference Shares ("ICPS")

Preference shares are classified as equity if they are non-redeemable, or are redeemable but only at the Company's option, and any dividends are discretionary. Dividends on preference shares are recognised as distributions within equity

Preference shares are classified as financial liabilities if they are redeemable on a specific date or at the option of the preference share holders, or if dividend payments are not discretionary. Dividends thereon are recognised as interest expense in profit or loss as accrued.

(d) Derecognition

A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

2.15 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts and returns. The Group recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity, and when specific criteria have been met for each of the Group's activities, as described below.

(a) Sales of goods

Sales of refined palm oil and biofuels are recognised when the risks of obsolescence and loss have been transferred to the customers, and either the customers have accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the Group has objective evidence that all criteria for acceptance have been satisfied.

(b) Rendering of services

Palm oil tolling services are recognised when services are performed in accordance with the service contract.

(c) Finance income

Interest income is recognised on an accrual basis using the effective interest method.

2.16 Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

2.17 Employee Benefits

(a) Pension obligations

Group companies do not operate defined contribution schemes but contribute to individual personal pension plan for certain employees by way of paying 12% of their gross salary costs in lieu of a scheme contribution as required by Malaysian law, which is accounted for as salary when payable.

(b) Share-based payments

The fair value of previous share options is calculated by the Company using the Black Scholes option pricing model, as the Directors believe that the options are likely to be exercised nearer to their expiry dates. The expense is recognised in the profit and loss on a straight line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of shares that will eventually vest. A credit is recognised on the same basis in the share-based payment reserve.

2.18 Judgements and estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal to the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Impairment of goodwill and intangible assets

Determining whether goodwill and intangible assets are impaired requires an estimation of the value-in-use of the cash-generating units to which goodwill and intangible assets have been allocated. The value-in-use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

(b) Amortisation of Development Costs

Changes in the expected level of usage and technological development could impact the economic useful livesandtherefore, future amortisation charges could be revised.

2.19 Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market's participant ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as follows:

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liability that the entity can access at the measurement date;

Level 2: Inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3: Inputs are unobservable inputs for the asset or liability.

The transfer of fair value between levels is determined as of the date of the event or change in circumstances that caused the transfer.

2.20 Related parties

A party is related to an entity (referred to as the "reporting entity") if:

(a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:

(i) the entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

(iii) both entities are joint ventures of the same third party; or

(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a) above.

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

3 Subsidiaries

Graphene Nanochem plc has the following subsidiaries:

Platinum Nanochem Sdn. Bhd. has the following subsidiaries:

All the above subsidiaries are incorporated in Malaysia.

Following the Reverse Acquisition on 26 March 2013, as in Note 32 to the consolidated financial statements, Platinum Nanochem Sdn. Bhd. is the accounting acquirer and Graphene Nanochem plc is the legal parent.

4 Operating segments

Management has determined the operating segments based on the reports reviewed by The Board that are used to make strategic decisions.

Management has determined that the Group has one operating segment, which is refining and manufacturing of palm oil and biofuels which is wholly operated in Malaysia. The financial information contained in these financial statements therefore relates solely to this segment. The Group's non-current assets consist of property, plant and equipment, goodwill and intangible assets, and are located entirely in Malaysia.

5 Revenue

6 Other Income

7 Administrative expenses

8 Directors and employees

The employee benefit expense during the year was as follows:

The average number of employees inclusive of executive directors during the year was 157 (2012:139).

Remuneration in respect of Directors was as follows:

The number of Directors who accrued benefits under Company pension schemes was as follows:

9 Finance costs

10 Income tax

The tax on the Group's loss before tax differs from the loss before taxation multiplied by the standard rate of corporation tax in Malaysia due to the following:

The deferred tax assets are not provided in view of the uncertainty on the timing of its recoverability.

The tax rate applied is reflecting the average tax rate weighted in proportion to accounting profit earned in each geographical territory.

11 Loss per share

Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company do not has any dilutive potential ordinary shares at the reporting date.

Accordingly, the diluted loss per share is the same as the basic loss per share.

12 Property, plant and equipment

The leasehold land, buildings, plant and machinery have been pledged to licensed banks as security for banking facilities granted to the Group as disclosed in Note 19.

The title of the leasehold land at Lahad Datu, Sabah, Malaysia is yet to be transferred to the subsidiary company as it is held under master title.

Capital work-in-progress is in respect of construction of plant and machinery.

13 Goodwill and Intangible assets

The carrying amount of goodwill is allocated to each operational cash-generating unit as follows:

The goodwill and intangible assets are tested for impairment annually at the statement of financial position date and as and when other events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The recoverable amounts of the cash generating units are based on value-in-use approach, and are derived from the present value of future cash flows from the operating segment computed based on the projections of financial budgets approved by the management covering a period of 5 to10 years.

Management has estimated the key assumptions based on their knowledge of the industry and external sources of information.

The remaining amortisation period of the above intangible fixed assets is as follows:

License - 10 years and 18 years

Development costs - 4 years and 10 years

Patent - 4 years

The key assumption used for value in use calculations are as follows:

The management believes that no reasonable change in the above key assumptions would cause the carrying amount of the goodwill to exceed its recoverable amount.

License

i) License for the usage of development, exploitation and commercialisation of graphite nano-fibres and its derivatives; and

ii) License for the manufacture palm oil biodiesel and the linked refinery license subsequently obtained. A useful economic life of 20 years has been assumed as the licence has no termination date and the Group has full rights to the land. The production of palm oil is also such an important commodity in Malaysia that its production and demand is expected to continue indefinitely.

Development cost

The details of the development cost are:

Included in the development cost are:

14 Inventories

The amount of inventories recognised as an expense during the year to 31 December 2013 was £28,693,000  (2012: £22,930,000). The write-down of inventories recognised as an expense during the year to 31 December 2013 was Nil (2012:£569,000).

15 Trade and other receivables

The normal trade credit term is 30 days (2012: 30 days).

Included in prepayments, there are advances paid to trade creditors for the purchase of raw materials which is amounting to approximately £1,844,000 (2012 - £140,000).

16 Cash and cash equivalents

The effective interest rate on fixed deposit with licensed banks at the end of the reporting period is 3% (2012: 3.09%-3.15%) per annum and the fixed deposits have maturity periods ranging from 30 to 365 days (2012: 30 to 365 days).

Included in the fixed deposits with licensed banks with an amount of £375,000 (2012: £375,000) are held in trust by two third parties.

Included in the fixed deposits with licensed banks is an amount approximate to £663,000(2012: £375,000) have been pledged as security for banking facilities granted to the Group.

17 Trade and other payables

The trade and other payables of the group for this and the prior year are due for payment within 30 - 60 days.

Included in other payables is an amount approximate to £65,000 (2012: £234,000) for the purchase of plant and equipment.

18 Redeemable Convertible Cumulative Preference Shares ('RCCPS")

(a) The salient features of the RCCPS Series A are as follows:

(i) The RCCPS holder shall be entitled to a fixed cumulative dividend of 4% per annum on the issue price of RM1 for each fully paid up RCCPS. The coupon shall accrue on each RCCPS from its date of issuance whether or not declared and shall be pro-rated for any part of the financial year of the Company. Upon conversion to ordinary shares of the Company, the RCCPS holder will not entitled to the coupon payment.

(ii) The holder of the RCCPS shares has an option to either demand for redemption or conversion of the RCCPS in the event of the occurrence of certain events.

(iii) All RCCPS that are not redeemed on the third anniversary from the date of the issue or other extended date shall be redeemed by the Company on the maturity date at the redemption price.

(iv) Each RCCPS shall be convertible at a conversion ratio into fully paid new ordinary shares in the share capital of the Company at the option of the RCCPS holder in the event of the occurrence of certain events.

(v) All outstanding RCCPS that are not converted in accordance with its items before the maturity shall be converted by the Company upon maturity at the conversion ratio.

(vi) All RCCPS were converted to equity on 6 May 2014.

(b) The salient features of the RCCPS Series B are as follows:

(i) The RCCPS holder shall be entitled to a fixed cumulative dividend of 8% per annum on the issue price of RM1 for each fully paid up RCCPS. The coupon shall accrue on each RCCPS from its date of issuance whether or not declared and shall be pro-rated for any part of the financial year of the Company. Upon conversion to ordinary shares of the Company, the RCCPS holder will not entitled to the coupon payment.

(ii) The holder of the RCCPS shares has an option to either demand for redemption after the expiry of the second anniversary of the Series B issue date.

(iii) Each RCCPS shall be convertible on a one-to-one basis ("Conversion Ratio") into fully paid new ordinary shares in the share capital of the Company at any time during the maturity period at the option of the holder ("conversion right"). The conversion right shall be exercisable in respect of all, but not part of the RCCPS held by a holder at the conversion ratio.

(iv) All outstanding preference shares Series B that not converted or redeemed in accordance with its terms before the maturity date shall be converted by the Company on the maturity date at the conversion ratio.

(v) Distribution applied first, in payment of capital plus any accrued and unpaid dividends or coupon together with an 8% liquidation premium on the preference shares series B.

(vi) The RCCPS has a maturity period of 3 years or such period extended from the issue date.

(vii) All RCCPS were converted to equity on 6 May 2014.

The amount of the liability component of RCCPS at the end of the financial year is as follows: