Preliminary Results

Graphene NanoChem plc

(the "Company" or the "Group")

Preliminary unaudited results for the twelve months ended 31 December 2014

Graphene NanoChem (AIM: GRPH), the performance nanochemicals and advanced material company, is pleased to announce its unaudited preliminary results for the 12 months ended 31 December 2014. These results relate to business conducted by the Group, trading as Graphene NanoChem plc (the "Company" or the "Group")

Strong Foundation

· Leading provider of graphene nanomaterial enhanced chemical applications

· Employing nanotechnology to enhance chemical performance and enable cost reduction giving a unique value proposition

· Proven success in commercialising chemical applications with expansion into high margin lines

· Partnerships with established industry players accelerate product testing and deployment

· Strong sales channels providing near and long term revenue visibility

· Well positioned to capitalise on the growth potential in the oil and gas ("O&G") market

Financial Highlights

· Group revenue increased to a record of £48.3 million (2013: £31.6 million) with sales up 53%

· Gross Profit of £1.6 million (2013: £1.3 million)

· Loss before tax of £6.8 million (2013: £10.2 million)

· Loss per share of 5.7p per share (2012: 11.0p)

Other Highlights

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

"This has been a year of significant progress. We have achieved our stated goals of completing our enhanced oil recovery ("EOR") technology platform and, launched and commercialised innovative solutions and partnered with industry heavyweights to develop new ventures and secure long term sales. Our strategy to develop and commercialize applications in the EOR sector through our nanotechnology platform has produced tangible operational and financial results.

We are conscious of the uncertainties in the industry given the recent decline in oil prices, its impact on drilling activities as well as exploration and production investment and there is a marked slow-down in O&G drilling as well as E&P activities in 2015 as operators conserve capital, reprioritise activities and focus on higher margin projects.

However, the long term fundamentals of the industry remain strong and, and on the back of our cost-advantaged value proposition, the Group's business is gradually developing with potential sales pipelines in excess of £2.1 billion over the next 5 years and the Group remains optimistic about our prospects in the sector. We have laid strong foundations on which to continue to build and drive the Group forward and are now firmly focused on capitalising on the opportunities that are before us.

At the same time, the Group remains agile in adapting to industry challenges at its critical period of growth, effecting operational changes to optimize the use of our operational assets. These changes include the right sizing of our low margin Fuel Additive business and focusing our resources on developing and executing the EOR business platform to deliver quality earnings to the Group. Greater efficiency and increased focus on high margins applications have already begun to have a positive impact on our operating cost.

A well-capitalised position throughout its period of growth will be advantageous for the Group to realise the full potential within the large and expanding EOR sector and to execute its business plan as well as deliver the high margins envisaged for the Group's solutions as we work on converting ongoing activities into sustainable revenue streams.

The Group is in the process of raising additional funds through a corporate exercise and continues to engage with its financial partners to further enhance the Group's financial platform thereby providing us greater flexibility and speed to address and execute our business and growth opportunities.

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 10.00 a.m. on 6 July 2015 at Academy House, London Road, Camberley, Surrey GU15 3HL.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

The above items relate entirely to continuing operations.

Consolidated Statement of Financial Position

As at 31 December 2014

Consolidated Statement of Changes in Equity

For the year ended 31 December 2014

All reserves are attributable to the equity holders of the parent company.

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

The accompanying accounting policies and notes form an integral part of these financial statements.

Notes to the Financial Statements

For the year ended 31 December 2014

1 General information

Graphene Nanochem Plc is a public limited company incorporated and domiciled in England.

In 2013, the Company was formed through the reverse takeover of Platinum Nanochem Sdn. Bhd. ("PNC") 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 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 by 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.

These consolidated financial statements have been approved for issue by the Board of Directors on 5 June 2015.

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 2014. 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.

Prior year adjustment

During the reverse takeover exercise highlighted in Note 1, the holders of the Redeemable Cumulative Convertible Preference Shares ("RCCPS") of PNC agreed to sell their RCCPS together with the interest accrued in PNC's financial statements to Biofutures in consideration of new shares allotted by Biofutures to facilitate the readmission of the enlarged new shares in Biofutures to the AIM market. After the completion of reverse takeover exercise in 2013, the RCCPS were owned by PNC's new holding company, Biofutures. At 31 December 2013 this change in ownership had not been reflected and the RCCPS and the interest accrued were not eliminated during the preparation of consolidated financial statements, in addition they were omitted when preparing the reverse acquisition reserve calculation. On this basis, the consolidated financial statements for the year ended 31 December 2013 have been restated to reflect the elimination of the RCCPS, reversal of interest accrued and reversal of deferred tax that arose from the RCCPS as well as a recalculation of the reverse acquisition reserve. The comparatives of the current year financial statement are restated as follows;

Consolidated Statement of Comprehensive Income for year ended 31 December 2013

Consolidated Statement of Financial Position as at 31 December 2013

Consolidated Statement of Cash Flows for the year ended 31 December 2013

The prior year error has no impact on the balances at 31 December 2012 and therefore a third statement of financial position is not shown.

2.2 Going concern

The Group recorded a net loss of £6,691,000 for the financial year ended 31 December 2014. In addition, revolving credit and short-term borrowings of the Group, which are due and repayable within one (1) year amounted to £18,884,000.

Notwithstanding the above, the group has £18,884,000 of borrowings included in current liabilities, of this £16,718,000 relates to a revolving credit facility which is repayable on demand. The directors have not received confirmation that this facility will not be recalled in the near future. The facility was extended in March 2014 and the group maintains sufficient further resources within the existing facility. The Group continues to engage the finance providers in line with the agreed terms and is in constructive discussions on revising the tenure by extending the maturity date of payment for the facility. In the event that the liability is recalled the directors believe, given the Group's 1:1 debt equity ratio, that they would be able to service the liability through raising new debt finance or by raising additional funds, or a combination of both.

The directors have prepared financial forecast which suggests that, based on conversion of the anticipated sales pipelines, successful process of revising funds, rescheduling of debt payment and tenure timelines, the Group and the company is able to continue to meet their obligations as and when they fall due.

The sales forecasts are however necessarily based on the achievement of timings and revenue forecasts which, although believed reasonable by the directors, are nevertheless outside the Group's control. If significant delays were to take place, these may render the Group's cash resources insufficient.

If as a result the Group were unable to continue as a going concern then adjustments would be necessary to write assets down to their recoverable amounts, non-current assets and liabilities would be re-classified as current assets and liabilities and provisions would be required for any costs associated with closure.

The directors consider there to be a material uncertainty that casts doubt upon the group's ability to continue as a going concern, however the Directors consider that it is appropriate to prepare the financial statements of the Group and the Company on a going concern basis, and accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that may be necessary, if the going concern basis of preparing the financial statements of the Group and of the Company is not appropriate.

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.

The Group has not early adopted amended standards and interpretations which are currently in issue but not effective for accounting periods commencing on 1 January 2014 as adopted by EU. The Directors do not anticipate that the adoption of 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 2014.

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 FRS 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) Joint Arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements' returns.

Joint arrangements are reclassified and accounted for as follows:

· A joint arrangement is classified as "joint operation" when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation.

· A joint arrangement is classified as "joint venture" when the Group has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method.

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 15 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) Licence

Separately acquired licence is shown at historical cost. Licence 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 licence over its estimated useful lives of 10 years.

(c) Patent

Separately acquired patent is shown at historical cost. Patents have 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 licence over their 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) Redeemable Convertible 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.

(ii) 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 shareholders, 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 (see note 14 for details).

(b) Amortisation of Development Costs

Changes in the expected level of usage and technological development could impact the economic useful lives and therefore, future amortisation charges could be revised (see note 14 for details).

(c) Impairment of trade receivables

An impairment loss is recognised when there is objective evidence that a trade receivable is impaired. Management has specifically reviewed its trade receivables having specific regard to; 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, (see note 25 (b) for details regarding the groups trade receivables).

(d) Impairment of property, plant and equipment

The carrying amounts of property, plant and equipment are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated, which requires management judgement. As at 31 December 2014 management concluded that the recoverable amount of property, plant and equipment was in excess of its carrying value. The forecasts described in note 14 supported this conclusion.

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);

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.

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 30 to the consolidated financial statements, Platinum Nanochem Sdn. Bhd. is the accounting acquirer and Graphene Nanochem plc is the legal parent.

4 Investment in a joint venture

Scomi Platinum Sdn Bhd, a 50% owned joint venture in the Group which is principally engaged in manufacturing of speciality chemicals and other graphene-enhanced green chemicals. The group accounted for the joint venture by using the equity method.

Summarised financial information in respect of the Group's joint venture are set out below:

5 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 as well as production of oil field products 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.

6 Revenue

7 Other Income

8 Administrative expenses

9 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 131 (2013:157).

Remuneration in respect of Directors was as follows:

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

10 Finance income/costs

11 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.

12 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 does not have any dilutive potential ordinary shares at the reporting date.

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

13 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.

14 Goodwill and Intangible assets

Goodwill

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

Licence

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

ii) Licence for the manufacture of palm oil biodiesel and the linked refinery licence 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.

14 Goodwill and Intangible assets (Continued)

Development cost

The details of the development cost are:

Included in the development cost are:

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

Licence - 9 years and 17 years

Development costs - 3 years and 15 years

Patent - 3 years

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 the financial budgets approved by the management and these projections cover a period of 5 - 15 years. Where cash flow projections extend beyond the period covered by the most recent approved financial budget, management extrapolate the projections using the assumptions noted below for subsequent years.

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

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

Management have performed sensitivity analysis on the above key assumptions, including increasing the discount rate to 16% and concluded that no reasonable change on the above key assumptions would cause the carrying amount of the goodwill and intangible assets to exceed its recoverable amount.

15 Inventories

The amount of inventories recognised as an expense during the year to 31 December 2014 was £41,948,000  (2013: £28,693,000).

16 Trade and other receivables

The normal trade credit term is 30-90 days (2013: 30 days).

Included in prepayments, there are advances paid to trade creditors for the purchase of raw materials amounting to approximately £505,000 (2013 - £1,844,000 ).

17 Cash and cash equivalents

The deposits with licensed banks at the end of the reporting period bore an effective interest rate of 3% (2013 - 3%) per annum. The deposits have a maturity period of 30 days (2013 - 30 days).

In the previous financial year, included in deposits with licensed banks were amounts of £663,000 which have been pledged as security for banking facilities granted to the Group and of this £375,000 were held in trust by two third parties.

18 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 owing by Platinum Energy Global Sdn Bhd of £20,000 (2013: £20,000). Platinum Energy Global Sdn Bhd is a related party which hold ordinary shares in Graphene Nanochem Plc and their director, Dato' Jespal Deol is also a director of Graphene Nanochem Plc.

19 Bank borrowings