Graphene Nanochem Regulatory News (GRPH)

14 November 2016

Graphene NanoChem plc

(the "Company" or the "Group")

Preliminary unaudited results for the twelve months ended 31 December 2015

Graphene NanoChem (AIM: GRPH), the international provider of nanotechnology performance enhancing solutions for global industries, announces its unaudited preliminary results for the 12 months ended 31 December 2015. These results relate to business conducted by the Group, trading as Graphene NanoChem plc (the "Company" or the "Group").

Re-establishing a Strong Foundation

· Employing nanotechnology to enhance chemical & water treatment solution performance and enable cost reduction giving a unique value proposition.

· Proven success in commercialising chemical & water treatment solution applications with expansion into high margin lines.

· Partnerships with established industry players resulting in stronger sales channels providing near and long term revenue visibility.

· Debt rationalization plan with Financial Institutions (FI) well progressed.

Financial Highlights

· Group revenue decreased to £8.0million (2014: £48.3 million)

· Gross loss of £0.6 million (2014: Gross Profit £1.6 million)

· Impairment charges of £25.7 million (2014: None)

· Loss before tax of £34.1 million (2014: £6.8 million)

· Loss per share of 28.6p per share (2014: 5.7p)

· Cash and cash equivalents at the end of the period was £0.6m (2014: £2.2m)

· See note 2.2 to the financial statements in relation to going concern

Other Highlights

Business and Operational Highlights

· US$28 million contract award or the deployment of Drilling Solutions with a major national oil and gas company for an initial period of three years.

· 9 months testing for the certification of the biodegradable status of Drilling Solutions (PlatDrill R Series) successfully completed by the National Institute of Oceanography, India - exceeding industry standard.

· Successful deployment downhole of drilling solutions HypeRGraph lube for a National Oil Company

· Completed development of the integrated water treatment technology offering PlatClean for diverse water industry use.

· Began the structured exit from the low margin fuel additive and crude palm oil (CPO) refining businesses.

· Reduced the Group headcount from 131 to 45 personnel in line with the realignment of business portfolio focusing on solid, higher margin and longer term opportunities in chemicals and water treatment solutions.

Post Period Events

Group Operations

• The Group announced on 11th April 2016 a business reorganization strategy.

• Debt rationalization plan with FI undertaken as follows.

Note that all Sterling debt figures in the description below have been calculated on the basis of exchange rates as at 31 December 2015.

a) Primary short term financier - Malaysian Debt Ventures Berhad (MDV) - £14.6 million or 57% of the Groups FI debt is to MDV. The Group has restructured the short term debt into a seven year long term debt schedule as follows with customary conditions precedent to be met;

(i) A two (2) year payment moratorium up to 31 December 2017;

(ii) An extended maturity date from November 2015 to December 2021; and

(iii) A pay down in the aggregate amount of £315,000 only in 2016 and 2017 respectively.

The Group has made the repayment of £315,000 for 2016 and the successful restructuring bodes well for the Group as the moratorium of payment and long-term repayment schedule enables the Group to utilise operating cash flows for advancement of the Group's businesses rather than payment of debt in the near term.

b) Primary long term debt financier - Bank Pembangunan Malaysia Berhad (BPMB)

In lieu of the Group's exiting from the fuel additive business, non-core assets of the fuel additive business are in the process of being sold for repayment of £9.2 million or 36% of the FI debt.

Accordingly during the period, BPMB appointed Messrs. KPMG to act as Receiver Managers for the process under a wholly owned subsidiary of the Group namely Platinum Green Chemicals Sdn Bhd.

In view of the exit from the fuel additive business, the directors deemed it prudent to write down the asset values to its force sale value as determined by a prominent valuer approved by BPMB.

The assets as determined by the valuer have a force sale value of £13.1 million providing 1.4 times cover over the debt to BPMB

Similarly to the restructuring of the MDV debt, the repayment of debt to BPMB via the proceeds from the sale of non-core assets will alleviate cash flow constraints for the Group whilst focusing the operating cash flows for advancement of the Group's businesses.

c) Secondary long term debt financier - Bank Kerjasama Rakyat Malaysia Berhad (BKRMB)

With the Group's exit from the crude palm oil (CPO) refining business, the Group has been in engagement with BKRMB in negotiating for the £1.7 million or 7% of FI debt to be repaid via the sale of the non-core assets of the CPO refining business.

To date, the respective parties are negotiating a settlement arrangement that amongst others provides the Group a window of 12 months for the sale of the assets prior to repayment of outstanding debt.

In view of the exit from the CPO refining business, the directors deemed it prudent to write down the asset values to force sale value as determined by a prominent valuer approved by BKRMB.

The assets, as determined by the valuer, have a force sale value of £5.1 million providing 3 times cover over the debt to BKRMB.

The Group is confident that a settlement arrangement can be concluded in the final quarter of 2016.

• The Group has exited the low margin fuel additive and crude palm oil (CPO) refining businesses (non-core businesses).

• Significant cost cutting measures have been implemented during the period and the Group's headcount has been reduced from 45 at 31 December 2015 to 21 to date.

• In line with the business reorganization and the exit from the non-core businesses, 2 subsidiaries of the Group namely Platinum Nanochem Sdn Bhd and Platinum Green Chemicals Sdn Bhd are in the process of being wound up.

• Strategic focus by the Group is currently on the 3 high margin platforms, the nanofluids (oil field chemicals) and water treatment, and enhanced building materials offerings with strategic partnerships and alliances entered into and efforts are continuing in building other long term sustainable partnerships and alliances.

Jespal Deol, Chief Executive Officer of Graphene NanoChem, commented: "During the course of 2015, Graphene Nanochem has been highly active in continuing to build its position as a significant international provider of nanotechnology performance enhancing solutions for global industries. Given our exposure to the troubled oil and gas industry, we have spent this past year executing a holistic turnaround plan to withstand the pressure of operating in this challenging environment.

To this end, we have enjoyed a number of successes during the period including improving our operational capabilities, streamlining and recalibrating our business portfolio to focus on higher margin opportunities and expanding our application reach into areas such as water treatment which should help position us for future growth in 2016 and beyond.

We are successfully implementing the holistic restructuring plan that began in 2015 that focuses on growth strategies on the long term, higher margin businesses. We are pleased to announce that we have made significant progress with the debt rationalization plan which, on successful completion, will significantly reduce the Group's debt balance and interest rate expense which will have a positive impact on the Group's balance sheet and cash flow. Our cash position however remains challenging and we intend to undertake a fundraise in the near future to strengthen the Group's financial position and remain a going concern.

The trading suspension of GRPH shares occurred due to the longer time that was required for completion of the audited financial statements of the company for 2015 a direct result of the then ongoing debt restructuring exercise that has subsequently been successfully addressed and which is anticipated to be unconditionally complete by year end. The Company will update on the status of the trading suspension in due course.

We have had significant wins and are making good progress in building the market for our solutions with our joint venture partners. We have developed the market foundation for our end-to-end Nanofluids solutions for oilfield chemical processes i.e oil and gas drilling, recovery and production processes and have now expanded our solution offerings into the Water and Polymer industries.

The reorganized Graphene NanoChem is well positioned to advance across its chosen sectors and markets. However there is still considerable work to be done for the Group to realise the full potential of its business platforms, the key being securing more contract wins. We are focused towards achieving that through existing project pipelines that we are currently working on and new tenders and bids that we are participating in and that we believe we have the opportunity to capitalize and build on."

Annual Report and Accounts and Annual General Meeting

The Company's annual report and accounts has been sent to shareholders and shall shortly be made available on the Company's website. The Company's annual general meeting will be held at 10.00 a.m. on 6 December 2016 at Academy House, London Road, Camberley, Surrey GU15 3HL.

In accordance with AIM Rule 20, the Group's Annual Report and Accounts for the year ending 31 December 2015, which incorporates the Notice of AGM and Form of Proxy, has been posted to shareholders and will shortly be made available on the Company's website at: www.graphenenanochem.com.

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR").

Chairman's Statement

In 2015, the oil and gas industry faced the most severe cyclical downturn in decades, affecting businesses across the spectrum and caused disorientation for many industries. Graphene NanoChem is no exception to this as we endured the continuing impact of the global downturn of the industry and this has been reflected in the current position of the Group. In addition to that the Group also faced the internal challenges of managing its debt position.

In every challenge there also lies opportunity, and as a truly flexible and entrepreneurial company, we adapted and adjusted. In these challenging times, Graphene NanoChem's strength rests in our ability to make the necessary adjustments to our business and strategy, to concentrate on our key assets and to focus on new opportunities. Following a comprehensive review of our business and strategy, we developed a turnaround plan and started executing firm actions and steps to reorganize our business, address our debt position, reduce costs and rebuild our business.

We took the decision to begin exiting the asset-heavy, low margin, fuel additive and crude palm oil businesses which contributed significantly to reducing our cost base. In line with this and international accounting standards, the said assets were impaired to their forced sales values along with intangible assets and goodwill, incurring impairment charges of £25.7 million for the year. To align our cost structure and strengthen our delivery capability, we continue to focus on the strategic outsourcing of our non-core operations that enables an asset-light model in the execution of the business and allow us to focus on value-add integration. The result of these activities is a leaner and more efficient Graphene NanoChem that focuses on its fundamental competence of delivering disruptive, high margin applications of our platform nanotechnologies.

The invaluable support of our financiers during this financial year has been fundamental in allowing us to implement our restructuring plan and to move to the next phase of our business recalibration plan. A key milestone achievement to our turnaround plan is the restructuring of our short-term debt of c. £14.5 million to Malaysia Debt Ventures Berhad into a longer term debt repayment structure mapped against the Group's new business plan. In conjunction with our secured financiers efforts are ongoing for the disposal of our non-core assets to repay the Group's remaining bank debt, as well as seeking additional equity finance in the near term to continue trading as a going concern.

Looking at the business front, we are introducing new products into the highly fragmented oil and gas industry - a new entrant in a seasoned market space. That, by itself, has its own set of challenges and more so in an industry with underlying rhythms which move in terms of years and not months. For example, securing a well for field trials alone would take between 8 - 15 months. The downturn in the oil and gas market at this critical juncture in our market-building phase no doubt has a double impact to the Group. Delays and deferments in capital investments as the industry struggles to establish the new 'normal' has had significant financial impact to the Group. However, despite the difficulties in the industry, we continue to secure new wins which I believe are significant achievements in the current industry climate. We have achieved considerable success in the field trials of our nanofluid solutions with oil supermajors. These successes, which have translated into commercial orders, validates our proposition of increasing production, improving efficiency, reducing cost and protecting the environment, and more importantly creating critical market awareness and field track record for our products. This is the right start towards market building and will augur well for us when the industry recovers. Through our partnership with the Scomi Group, we continue to enjoy global presence at 48 locations in 22 countries including the Middle East and Africa, where rapid future growth is projected and we intend to continue building on that.

Graphene NanoChem remains unique, offering technology platforms that we can provide across diverse applications in multiple industries and we are keeping a key eye on the longer term as we continue to work on new applications in lucrative areas and sectors.

The challenging market condition has prompted us to prioritize and accelerate focus our next growth opportunities in the Water industry. We see significant advantage in our capability to enhance existing products and solutions with our platform nanotechnologies, and we continue to work in collaboration and partnership with industry veterans, where necessary.

In March 2016, our water solutions platform was formally launched at the Offshore Technology Conference. This marked our expansion into the leading disruptive commercial applications of our platform nanotechnologies. In Q2 2016 we secured the first contract for our water treatment solution, for a greenfield petroleum refinery project in Thailand. Water treatment is a natural extension of the diverse applications of our nanotechnology solutions within the equally diverse oil and gas market segments. We have now expanded into a fully integrated water treatment solutions supplier for multiple industry use. We are taking a more diverse approach in our water treatment applications - we target multiple market segments and geographical locations and work with value-adding partners to secure market opportunities and deliver integrated solutions to meet project requirements. The speed at which we have achieved this was only made possible because of the groundwork that we have laid in previous years, working with industry experts.

We will continue to leverage our partnership with Scomi and other strategic partners in deploying our water treatment solutions globally with focus in Asia, Africa and the Middle East. I am also pleased to report that we have been selected by TecnoConsult, an international engineering procurement and construction expert, to be its partner for water treatment solutions. This will give the Group to leverage over TecnoConsult's geographical presence in 3 continents, and engineering expertise in turnkey solutions projects. Our strategic alliance with TecnoConsult is the latest validation of our cutting edge solutions offering and the potential of its growth.

We will need some time to close on market opportunities that we have developed for our Water business but I believe that decisive actions taken by our management to reorganize the business and address the consequential impact of the market downturn, specifically in restructuring the Group's debt, reducing costs and diversifying business has improved the Group's prospects considerably. Our cash position remains challenging and we will be undertaking a fundraise in the near future to strengthen the Groups financial position.

The markets have been harsh, but Graphene NanoChem is emerging smarter, leaner and more cost conscious and we continue to make progress. Whilst we can't control the economic environment, we know that we are taking the right steps and making the right decisions for the current environment. Through our focus on delivering better solutions and securing new business we will continue to grow.

I must extend my sincere gratitude to all the management and staff of Graphene NanoChem and the Board for their continued support during this challenging period for the Group. Finally, my particular thanks to the financial institutions that continue to support and facilitate our business reorganisation efforts through this difficult period.

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

Non-Executive Chairman

CEO's Review

Overview

The last 18 months has been challenging for Graphene NanoChem. We entered 2015 on the back of a significant debt burden against plunging oil prices with the industry hitting its all-time low and going almost into a standstill. Our phase of growth, closely tied to the troubled oil and gas industry was significantly impacted and consequently our financial position.

Given the challenges that we have faced, we have undertaken a comprehensive review of Graphene NanoChem's position and this has led to a decisive plan to clearly address the challenges for continued growth. We remain confident of the value proposition, the growth potential and long term prospects of the business. In order to take Graphene NanoChem forward, the following key fronts are being addressed; firstly, the debt position of the Group; secondly, the Group's cost base and business structure; and thirdly, the acceleration of the diversification of its business. Pursuant to the review of Graphene's operations and growth strategy, we have embarked on executing a holistic turnaround plan to streamline our business operations, lower cost and restructure our debt with the aim of addressing these challenges and driving the growth potential of the business to deliver value ("Turnaround Plan").

Turnaround Plan

Phase 1 of the turnaround plan was to undertake a debt restructuring plan for both the short and long term debt of the Group. This has meant actively engaging with our financial institutions for the restructuring of our debt and working out a debt settlement plan to enable the Group to conserve cash outflow against debt repayment and deploy its funds towards stabilizing and growing the business. It has taken much longer than we originally expected but we are pleased to report that a significant milestone of Phase 1 has been met with the debt restructuring approval (with customary conditions precedent to be met by year end) by our lead financier, Malaysia Debt Ventures Berhad ("MDV Approval") resulting in the conversion of our short term debt into a longer term debt with a 2 year payment moratorium coupled with a minimal fixed pay down and a 7 year repayment tenure mapped against the business plan of the Group ("MDV Loan"). The MDV Loan represents 57% of the total secured bank debt of the Group.

Underpinning the Group's turnaround plan is the focus on core value add businesses that fit our strength and growth strategy. A key decision made to this end is the exit from our asset-heavy low-margin fuel additive and crude palm oil refining businesses which carries the remaining 43% of the secured bank debt of the Group and the disposal of its underperforming assets that will enable the Group to reduce its bank debt and focus on solid, higher margin and longer-term opportunities in our core businesses. The assets realization process is currently ongoing in conjunction with the secured financiers of our non-core subsidiaries ("Non-core Subsidiaries") including dedicated efforts to liquidate these non-core assets which, based on written down force sale values, provides an assumed aggregated value cover of approximately 1.4 times of the bank debt of the Non-core Subsidiaries. We will continue to manage the process of liquidation to ensure a smooth exit from the non-core businesses.

In Phase 2, we had concentrated on streamlining our business structure and aligning our cost base against the new business plan. The process commenced with our exit from the non-core businesses resulting in major headcount and administrative cost reductions for the Group. Parallel to this effort is our strategic move towards an asset-light approach business model, refocusing our operations to a value-adding process and through independent manufacturing. This strategy eliminates the need for significant capital investment to deliver our solutions and allows us to focus on our core competence of value adding while protecting our growth prospects and flexibility to continue building our business around new markets.

To create realisable value, we have streamlined and structured our business platforms around two areas that offer a diverse range of applications potential - Nanofluids and Water Treatment. We have made solid progress in both areas and although this may not be obvious to our external stakeholders, we have enjoyed a number of successes which will position us for growth in 2017 and beyond.

The Scomi Group remains the primary partner for our Nanofluids applications in the Energy sector and through our Scomi Partnership, we continue to enjoy market presence at 48 locations in 22 countries for the deployment of our solutions. A leading service provider for the energy industry, the Scomi Group provides integrated oil drilling and completion services including waste management and water treatment services to the oil and gas industry. The current downturn in oil prices, deeper and more prolonged than anticipated, has had a far-reaching impact on the energy industry, which is continuing to determine the new 'normal'. Today, we are facing close to a 60% drop in oil prices, due to an oversupply in the market. No doubt the Group's market has been severely impacted by the industry downturn and this has been reflected in our revenues for the year, but we believe this hiatus is temporary. The world's population will continue to grow, creating long-term resource demand and, over time, we believe the industry will right and balance itself. As an inelastic commodity, a sudden positive snapback in prices comes with the territory. We have built significant inroads from our successful field trials and sales during the market downturn.We have developed the field track record that demonstrated the technological and performance excellence of our solutions, and hence we believe that we are well positioned to benefit from an industry upturn.

We undertook swift action in addressing the industry hiatus by embarking on Phase 3 of our turnaround plan to accelerate business development efforts in expanding the applications of our solutions in the Water industry. The global water market is currently estimated at US$425.0 billion with strong demand for innovative solutions that enable more efficient use of available water resources, reusing and recycling of water to optimize and improve water treatment processes and quality. Demand will continue to grow with the market opportunities related to the water sector to reach US$1 trillion by 2025.

We have made solid progress in our business development activities in the Water sector. Scomi remains a strong partner for the water treatment market in the energy sector and we are working with Scomi to offer water treatment solutions for the oil and gas sector in the Middle East region on a leasing model. At the same time, we have developed and secured strategic partnerships with industry stakeholders that enable us access to project-based market opportunities and most importantly to enhance our delivery and execution capabilities as we target to bid and secure project-based contracts that will provide strong margins and returns to the Group. We are continuing to work on new business development, formalizing our partnerships and further refining our growth plans in this sector and we hope to update our stakeholders as and when we meet our targeted milestones in the new business.

Our turnaround plan is well underway and this has been made possible by having a clear vision of where we want to take the Group and rationalising our corporate structure so as to achieve our goal in the quickest and most cost effective manner. We remain confident in the market fundamentals, and what we have created today is a leaner, more agile and simplified company that is now capable of exploiting new opportunities in our markets.

Prospects

Despite ongoing challenges, we have a solid business platform to build a future for the Group. We have had significant wins and are making good progress in building the market for our solutions. We have developed the market foundation for our end-to-end Nanofluids solutions specifically within the areas of drilling, recovery and treatment for the oilfield chemicals sector and have now expanded our solution offerings into the Water industry with the opportunity to leverage on our well established go-to-market infrastructure to grow the business within our existing markets, to expand our geographical spread and tap into new exciting market segments.

Nanofluids

In the energy industry, our Nanofluids platform comprises an end-to-end spectrum of solutions that tackle the industry pain points in a cost effective manner, from addressing drilling challenges and time, recovery and production rates to regulatory health, safety and environmental concerns associated with oil and gas exploration and productions activities.

Having undergone rigorous testing protocols and successful field trials with a number of oil majors and supermajors, our oilfield products are now positioned by Scomi as the mainstream solutions for new tenders and bids participated by Scomi. For our drilling solutions, I am happy to report that our game changing disruptive value proposition was field-validated in our first delivery of the 3-year contract win with Scomi in Myanmar where our product delivered a 50% increase in drilling efficiency resulting in 40% reduction in total drilling cost for the end customer, a national oil company ("NOC"). This breakthrough performance have led to a planned programme for our solutions to be deployed in other operating geographies of the NOC, to commence with a well trial for Thailand in 2017.

Successful trials concluded in Myanmar, Turkmenistan, Indonesia, Vietnam and India have translated into purchase orders for our water-based drilling fluids to replace existing product to service ongoing drilling campaign in Turkmenistan until the end of 2017. We anticipate that the product rollout in other trialed jurisdictions to commence once drilling activity resumes. We have also closed our first commercial order in Pakistan for our viscosifier this year.

Our well simulation and recovery solution, which increases production output without the use of hazardous and harsh chemicals, was launched this year and is now undergoing commercial trial by an NOC operating in Myanmar with encouraging results. We anticipate having the opportunity to rollout our solution in other operating locations of the NOC once the commercial trail is completed. At the same time we are also in advanced negotiations with an NOC in India and an international oil company operating in Turkmenistan for deployment of our solution which will commence with well trials in India and Turkmenistan this year.

Our field performance successes are providing us with the proven track record hurdle demanded by the industry for mainstream commercial deployment, strengthens our value proposition and tender bids and shortens the time to market in this highly fragmented industry. After the hiatus, we are today seeing indication of activities resuming and subject to working capital availability; we anticipate participating in 12 new oilfield tenders in the next 12 months in the South East Asia (''SEA'') and the Middle East and North Africa (MENA) regions with our proven track record.

Water

Working in collaboration with a specialized equipment manufacturer, we apply our platform technology to tailor, customize and integrate systems and solutions to meet the varied water treatment, recycling and reuse needs of the energy, municipality, power plant and industrial sectors. Our systems combine speed, efficiency and extensiveness through a wide range of improved processes and treatment solutions, designed in both modular and centralized form to enhance productivity, reduce cost and ensure environmental compliance for all aspects of water.

Our strategy is to focus on:

· smaller to mid-sized markets where we have the competitive advantage in technology and there is a niche unaddressed space in which larger companies are not active in; and

· geographical locations where we have developed local partnerships and where we believe there are tremendous opportunities and growth potential.

Key regions that we are currently developing are Southeast Asia, South Asia, the Middle East North Africa (MENA) and the African regions, for the following market segments:

(a) Produced & Industrial Water

For upstream oil and gas application, we are collaborating with Scomi to capitalize on its captive drilling waste management markets and our solution was formally launched in March 2016 at the Offshore Technology Conference Asia to well-received industry participants. Our partnership with Scomi further enables us to combine our technology offering with in-depth industry expertise and on-site services delivered by Scomi for each commercial deployment providing us, with the ability to offer an attractive value proposition for our environmental solutions and structuring a recurring revenue model-base business platform for this market segment. We are making positive inroads into the Middle East markets and are currently at the technical data evaluation stage with 2 NOCs for the customization of our modular produced water solutions for offshore rigs and platforms operated by the NOCs in the MENA region.

In downstream applications, our non-toxic biological pathway in wastewater treatment has been selected as part of an integrated water treatment solution for a greenfield petrochemical refinery complex in Thailand with the letter of award issued in Q3 2016, a further validation of our innovative solution offering in water treatment.

Parallel to this, we are also in early stage discussion with an international gas processing company operating in Egypt to develop an integrated on-site wastewater treatment for a gas-processing refinery on a design-build-own-operate-transfer model. The wastewater is currently transported on daily basis for treatment at offsite location and our solutions would eliminate costly haulage expenses and environmental risk of spillage and non-compliance.

(b) Municipalities/Utilities

On the municipal side, we are working on three different geographical-based fronts, namely, drinking water treatment, sewage water treatment and desalination. Key to our execution strategy is the local and international industry partnerships that we developed to allow an integrated solutions offering on various business models and structures from turnkey to build-own-operate-transfer models.

Drinking Water Treatment

Our partnership model has enabled us to be pre-qualified for an international government tender for water supply and distribution system in South Asia and we expect to participate in the upcoming tender to be issued in Q4 2016 in which, through our partnership-consortium, we intend to offer a modern decentralized-based water system to address the need for access to clean drinking water for the region.

Sewage Water Treatment

Our alliance with Millennium Engineering Corporation, a process water treatment specialist avails us with the delivery arm to pursue and address the sewage water treatment markets which we are developing in South Asia.

Desalination

For desalination opportunities, we have entered into a strategic alliance agreement with Tecnoconsult International, an international engineering procurement and construction expert in turnkey solutions projects with geographical presence across 3 continents to design, develop and implement integrated customised solutions to treat local source water and provide high purity water for the region. Together with TecnoConsult, we have identified project pipelines in MENA and Africa that we intend to develop and pursue within the next 3 years.

Global water consumption doubles every 20 years. Today, water scarcity, changing demographics, declining water quality, stringent regulations and climate change impact have become major issues in the global water sector, driven by rising demand due to population and economic growth. The global water market is currently estimated at US$425.0 billion with strong demand for innovative solutions that enable more efficient use of available water resources, reusing and recycling of water to enhance the quality of drinking. Demand will continue to grow with the market expecting to reach US$1 trillion by 2025 and leveraging on its technology platform, Graphene NanoChem intends to capitalize on the opportunities to address these water-related challenges focusing on speed, size and cost reduction offered by its solutions.

Our key focus areas are the restructuring of bank debt that has been progressing well, the advancement of the Nanofluids business and the Water treatment business through strategic partnerships, and a fundraise to recapitalize the Group.

We are confident that the measures that we have undertaken enables the reorganized Graphene NanoChem to be well positioned to advance across its chosen sectors and markets. Considerable work is to be done for the Group to realise the full potential of its business platforms, the key being securing more contract wins. We are focused towards achieving that through existing project pipelines, new tenders and bids that we are participating in. Whilst no guarantees can be given that this stage, we anticipate to meet customary conditions on the approved Phase 1 of the debt restructuring by year end. Approval and completion of the Phase 2 debt restructuring and seeking of additional equity finance are also expected by year end, in order to continue trading as a going concern. Please refer to note 2.2 to the financial statements in regards the material uncertainty over the Group's ability to continue as a going concern.

Whilst cautious, we are optimistic on the market opportunities and confident in the fundamentals of our strategy and look forward to sustained earnings in the near future.

Dato' Jespal Deol

Chief Executive Officer

Business overview

Fiancial Review

Overview

Faced with macro-economic challenges of a global downturn in the oil and gas markets in 2015, the Group has been taking decisive action in reducing its cost base and recalibrating and streamlining its portfolio of businesses to maximize growth opportunities. Our focus has been on a holistic turnaround plan which includes debt restructuring, reducing headcount and diversification from the traditional low margin high volume fuel additive business to build future foundations with new high margin technologies.

The Group's structured exit from the low margin, high volume fuel additive and crude palm oil refining businesses began in 2015, which is not expected to have any significant growth in margins. This structured exit contributed to the lower revenues for the year of £8.0 million. The 2nd phase of the proposed exit, is the realisation of the assets and closure of the related subsidiaries in the most expedient and efficient manner. In line with the proposed exit and closure of subsidiaries, the Group incurred £25.7 million in impairment charges on the assets of those businesses for the year that contributed to the overall loss attributable to shareholders of £32.9 million.

A key focus for the Group during the year was the holistic restructuring of debt (with customary conditions precedent to be met by year end 2016) mapped against the recalibrated business plans of the Group. The Group successfully restructured c. £14.5 million in short term bank debt due in 2015 into a 7 year long term debt schedule by extending the maturity date to December 2021, a two year payment moratorium and payment in the aggregate amount of £0.315 million in 2016 and 2017, effectively reducing the Group's short and immediate term cash pressure within a challenging operating environment amidst the oil and gas industry downturn. The Group has made the £0.315 million payment for 2016 to date.

The c.£14.5 million in bank debt constitutes approximately 57% of the Group's total debt to secured financiers and on the heels of this success, the Group has progressed the second phase of its debt restructuring plan with its remaining secured financiers, for the settlement of its balance of secured debt of approximately £10.9 million (at a current average effective interest rate of 7.3%) through the planned realisation and disposal of its non-core assets and the utilisation of proceeds thereof towards reducing the Group's term loan debt. Such non-core assets include the fuel additive assets and the palm oil refinery. These non-core assets have a written down force sale value of £18.2 million providing an assumed c.1.4 times cover ratio over the outstanding debt.

The successful implementation of the restructuring plan, by year end 2016 is expected to significantly reduce the Group's debt balance and interest rate expense, which will have a positive impact of strengthening the Group's balance sheet. Further, the utilization of operating cash flows in the near term for advancement of the recalibrated business plan rather than repayment of debt obligations, bodes well for the Group as it focuses on available resources and growth strategies on long term, higher margin business opportunities. 

In line with the reorganization of the Group, GNC is in the process of winding up 2 non-core subsidiaries namely Platinum Nanochem Sdn Bhd and Platinum Green Chemical Sdn Bhd;

1) Platinum Green Chemicals Sdn Bhd (PGC) winding up

KPMG Deal Advisory Sdn. Bhd. was appointed as receivers and managers of Platinum Green Chemicals Sdn. Bhd. The appointment was made by the Bank Pembangunan Malaysia Berhad via the Security Deed and Debenture held and pursuant to Sections 188(1), 189(1) and 189(2) of the Malaysian Company Act 1965. Subsequent to this a further winding up order for PGC via Section 218 of the Malaysian Companies Act 1965 was received on 1 August 2016.

2) Platinum Nanochem Sdn Bhd (PNC) winding up

15 July 2016, a winding up order was received for Platinum Nanochem Sdn. Bhd., a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian Companies Act 1965.

The proposed exit from the fuel additive and palm oil refining businesses are not anticipated to have any material impact on the Group's core business portfolio, consisting of the oilfield chemicals and water solutions businesses, in which the Group is continuing to have strong market traction and growth opportunities.

In spite of the challenging period of the oil and gas industry, compounded further by the financial restructuring undertaken, the Group has delivered on its two core near term strategies:

· establishing market access and presence in 48 locations and 22 countries with engagement, contracts, purchase orders and upcoming tenders for Nanofluids through its Scomi Joint Venture, negating the need to incur cost that would otherwise be required; and

· the launch of the enhanced water treatment solution platform with marketing efforts focused towards securing early wins.

Operationally, 2016 continues to be a period of market building for the Group and a number of commercial opportunities have been identified to increase sales volumes and expand market reach particularly in light of the urgent needs for water treatment solutions and significant progress is being made.

For the larger water treatment projects currently pursued, the Group is looking at various methods of financing including off balance sheet structures.

Looking further ahead, improvements in key financial metrics can be achieved and the deployment of our partnership based market access strategy will continue to strengthen the business and enhance shareholder returns. After a difficult year, the business has been right sized with personnel reduction from 131 to 21 persons to date, is leaner and well positioned to capitalize upon future prospects in the two large markets in which the Group operates.

Operations

Revenue for the period decreased to £8.0 million in lieu of the proposed exit from the high volume, low margin fuel additive business.

Administrative expenses increased by 24% to approximately £3.4 million due to unfavourable foreign exchange movements during the year. Finance costs in the period also decreased by 26% to approximately £1.8 million. This was largely due to the debt restructuring and payment and interest moratoriums given by one of the Groups lenders given during the year.

Capital expenditure and product development expenses during the year decreased by 99% to £0.7 million reflecting the completion of the development phase for the current suite of products and manufacturing capability.

Available cash and cash equivalents at year-end were approximately £0.6 million, to be used for continued deployment in operations

2016 Outlook

The Group will look to ensure a strengthened balance sheet to reflect the recalibrated portfolio of businesses, through the realisation of our debt restructuring plan to improve short to medium term liquidity and future debt balance.

As noted in note 2.2 to the financial statements, in view of the net current liabilities and shareholders' deficiency of the Group, the ongoing discussions with the Group's financiers and the rationalization plan also being dependent upon the Group having access to sufficient funds, the directors consider there is a material uncertainty that casts significant 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.

The Group will continue to establish a strong foundation in 2016 for both its Nanofluids and water solution business. Focusing on achieving a resilient business model founded on high margin products with a competitive cost profile.

We will continue to explore and develop joint ventures and new business opportunities to deliver value to shareholders

Sushil Sidhu

Finance Director

OUR STRATEGY

Business Strategy

Graphene NanoChem's strategy is to deliver innovative, high value high margin applications in attractive growth sectors that will ensure sustained global growth that will translate to improved earnings for our shareholders. The Group seeks to deliver this by progressing the following objectives:

Growth Strategy

Sustained growth remains an important strategic objective for the Group and the Group intends to achieve this in the following manner:

· deliver quality earnings by focusing on higher margin business segments

· develop sustained market position in high growth sectors by leveraging on our technology platform and through continuous innovation

· move to an asset-light model through structured independent manufacturing, focusing on creating and adding value

· accelerate market penetration and expand geographical reach through quality value-add industry partnerships

The Group will continue to focus on its core strategy of advancing disruptive high margin applications of its platform nanotechnologies in the markets that allows it to grow predictable and recurring revenue streams. Breaking into the lucrative high end of the O&G market is expected to open up extensive, long-term global market for the Group for both its Nanofluids and Water applications and the platform to diversify into other market segments outside energy. With that, the Group is now moving onto the next phase of development of market building and securing long-term growth opportunities in its chosen industry segments. Accordingly, the Graphene NanoChem board will continue to invest in business and applications development and securing long-term projects so as to deliver returns and sustained growth.

Key Performance Indicators

The Group has a range of performance indicators, both financial and non-financial, to monitor and manage the business. These are set at the individual customer level and for business units as well as for the Group as a whole. The Group's key performance indicators ('KPIs') are: headline operating margin, headline operating profit, net cash and net debt. These measures are used continually to manage the business, improve performance and compare results against targets.

Principal Risks and Uncertainties

Risk management forms an integral part of the business planning and review cycle. The Directors believe in the following risks to be the most significant for potential investors. However, the risks listed do not necessarily comprise all of those associated priority. Additional risks and uncertainties not currently known to the Directors, or which the Directors currently deem not to be significant, may also have an adverse effect on the Group and the information set out below does not purport to be an exhaustive summary of the risks affecting the Group. In particular, the Group's performance may be affected by the changes in market or economic conditions and in legal, regulatory and tax requirements. The Group has put in place controls and strategies to minimise these risks where possible.

Results affected by Continued Market Volatility

The general economic climate is volatile and is affected by numerous factors beyond the Group's control, which could impact its operations, business and profitability. These factors include supply and demand of capital, growth in gross domestic products, employment trends, international economic trends, currency exchange rate fluctuations, interest rates' level, inflation rate, global and regional political events and international events, as well as a range of other market forces, all of which have an impact on demand and business costs. Economic downturns, particularly in the energy sector can adversely impact the end-users. The Group is exposed to the consequences of fluctuation in the price of oil and gas, as the supply and demand for oil is a key driver in the rollout of the Group's Nanofluids solutions. O&G operators may reduce or curtail operations if oil and gas prices fall to a level where drilling as well as exploration and production activities become uneconomical and this had and may continue to have, an adverse impact on the Group's business. The Group maintains flexibility to meet changes in demand by maintaining tight inventory with maintaining regular contact with customers through its partners, equipping it with the ability to assess the potential impact and for the management to respond accordingly. The Board monitors the situation and takes actions as required.

Reliance On Partners

The Group is reliant on its relationship with Scomi for the commercial rollout of its Nanofluids solutions. Good progress is being made on gaining new accounts, applications as well as geographical reach, and ongoing activities with Scomi are currently quite buoyant. Whilst Scomi, one of the world's leading oilfield service company in the Emerging Markets provides a strong go-to-market platform for the Group, the exposure to one primary partner to market remains high. With the aim of minimising the effect of this risk, the Group has progressed the commercial rollout of its Water solutions into diversified markets and geographies, some of which are independent of Scomi.

New Products, Projects and Technology Innovation

All new technologies and products involve business risk both in terms of possible abortive expenditure, reputational risk, and potential customer claims or onerous contracts. The same is true in transferring technology and projects executions. Such risks may have a material impact on the Group. The nature of the competitive market we operate in makes innovation a key to success, absence of which could erode margins and/or result in loss of market share. The Group counters this risk by investing in research and development resources and continuously focusing on application development path.

Early Stage of Commercialisation and New Markets

Whilst the Group has made initial sales of its Nanofluids and Water applications, the Group is still at early stage of commercial development. There are a number of operational, strategic and financial risks associated with early stage commercialisation efforts. The Group will continue to face risks frequently encountered by early stage companies looking to bring new applications to market. In particular its future growth and prospects will depend on its ability to develop applications which have broad commercial appeal, to secure commercialisation partners on appropriate terms and to continue to improve its commercialisation functions and to secure sales on a timely basis, whilst at the same time maintaining effective cost controls. There are no guarantees that the Group will be able to implement the strategy detailed in its growth strategy successfully or at all. The ability of the Group to implement its strategy in a competitive market will require effective management planning and operational controls. If the Group fails to implement its business expansion strategy then this may have a material adverse effect on the Group's results of operations, financial condition and future prospects. With the aim of minimising this risk, the Group is working with specialist in those areas where it currently believes it has exposure to risk.

Intellectual Property

The Group is fundamentally based on a platform of intellectual properties (IP), which includes a combination of proprietary technologies owned by it (wholly or partly) or licensed to it. The Group's success depends on its ability, and the ability of any third part with which it may partner, in creating a defensible IP portfolio with adequate protection covering its intellectual property rights so as to preserve its exclusive rights in respect of its technology, to preserve the confidentiality of its own and its third party partners' know-how and to be able to operate without having third parties circumvent the rights that it owns, has licensed or has been licensed. The Group's products and technologies may infringe or be alleged to infringe third parties' intellectual property or rights that may be granted in the future. If the Group is sued for infringement, the Group would need to demonstrate that its product or methods either do not infringe the relevant third party rights or that the rights of the third party are invalid and there can be no guarantee that the Group will be successful in defending any such proceedings. The Group closely monitors intellectual property in the areas in which it operates.

Dependence on Recruitment and Retention of Key Personnel

The Group's business, future success and planned expansion of its operations will depend upon its ability to attract, train and retain qualified and appropriately skilled personnel and on the efforts and abilities of its executive officers and certain other key employees, particularly those with sales and sales management responsibilities, who are key to the Group's growth. The lack of an appropriately skilled workforce or comprehensive succession plans would adversely impact our ability to perform. Our operations could be adversely affected if for any reason we were unable to attract or retain such officers or key employees. The Group aims to mitigate this risk by in-house staff development while giving them clear objectives and career paths.

Industry Operating Environment

In the past, cessation or delay of customers' test programmes has inhibited the Group's growth. The Group has little or no influence over the duration of testing, which nearly always takes longer than originally projected by its partner or the end customers. It is common for test programmes, particularly in safety-critical applications such as oilfield chemicals, to take several years to complete. It is also a risk that significant application development time is spent on test programmes that do not result in sales. We mitigate the risk by establishing as early as possible the likelihood of a customer's test programme coming to fruition and that the potential commercial opportunities for the Group justifies embarking on the programme in the first place.

Bid Success and Contract Performance

The Group is dependent on the success of its bid activities across its targeted sectors and applications. Bidding, by its nature, can be long and expensive and investment in such activity needs to be closely monitored to ensure adequate return. The success and performance of the Group also depends on our businesses' ability to successfully execute their contractual obligations on terms that provide the expected returns. There is a risk that a particular project (including but not limited to, capital expenditure in relation to production expansion, meeting agreed standards or timescale and/or product development and commercialisation) could experience unforeseen delays and incur unexpected expenses, adversely impacting the implementation of the Group's strategy and the Group's business, financial condition and results of operations. The Group has developed and laid down its 'gatekeeping' process to assess on a business by business and project to project basis, or if necessary at a Group level, the risk and reward balance in deciding to bid for or execute contracts whether on our own account or in partnership with others. Further, the Group maintains rigorous quality standards in all of its operations and carefully assesses the terms on which it agrees to enter into contractual relationships at appropriate levels of responsibility.

Dependence of third party suppliers

Whilst the Group's contract manufacturers will manage their own supply chains, the Group will continue to hold relationships with (i) key component suppliers (which are likely to be used by contract manufacturers) and (ii) a more extensive supply chain to support its ongoing development activities. Whilst the Group has sought to mitigate the risk attaching to its reliance on third party suppliers through expanding its supplier base, a supplier's failure to supply materials or components in a timely manner, or to supply materials and components that meet the Group's quality, quantity or cost requirements, or the Group's inability to obtain substitute sources for these materials and components in a timely manner or on terms acceptable to it, could harm its ability to meet its contractual obligations to its customers.

Litigation and Claims

The Group is subject to litigation from time to time in the ordinary course of business, and makes provision for the expected cost based on appropriate professional advice. In particular, the fuel additive subsidiaries of the Group, currently in the process of closing down, are subject to litigations and winding up proceedings which however are not expected to have a material adverse impact on the Group's position. There is a risk that additional litigation could be instigated in the future which could have a material impact on the Group.

Environmental and Regulatory Considerations

In addition to general UK and international laws, our activities are subject to significant additional obligations, particularly in the jurisdictions that we operate in. In the context of changes in the regulatory environment there is a risk that we fail to adopt policies/processes to ensure compliance with emerging requirements. It is also difficult to predict the impact of future changes to laws or regulations or the introduction of new law or regulations that affect us and, from time to time, interpretation of existing laws or regulations may also change or the approach to enforcement may become more rigorous. It could also lead to high levels of scrutiny by regulators, enforcement agencies or authorities with associated increase in operational costs.

Group May Continue to Make Losses

The Group has always been focused on developing commercial applications. Notwithstanding the commencement of commercialisation of its Nanofluids applications in the energy industry and the progress of its business development activities in Water, the Group expects to continue to make significant expenditure on R&D in order to develop further its applications in the areas that have been identified in its business expansion strategy.

Financial Risk

There are a number of financial risks, which will be outside the control of the Group, and which can affect revenues and/or costs, and neither the Company nor its subsidiaries currently hedges against such risks. These includes going concern risks (please refer to Note 2.2), varying international exchange rates, interest rates, world commodity prices, energy prices and supplies, raw materials prices and supplies, inflation and international trends in trade, tariffs and protectionism and changes in legal and regulatory framework. There can be no assurance that such variables will not have a material adverse impact on the Group's financial position or results of operations.

Policy on Financial Instruments

The Group's financial instruments comprise cash, borrowings, short-term debtors and creditors arising from its operations. The Group has not established a formal policy on the use of financial instruments but assesses the risks faced by the Group as economic conditions and the Group's operations develop.

Approval of Strategic Report

Part I of this Annual Report comprises the Strategic Report for the Group which has been drawn up and presented in accordance with, and in reliance upon, applicable English company law, in particular Chapter 4A of the Companies Act 2006, and the liabilities of the Directors in connection with this Annual Report shall be subject to the limitations and restrictions provided by such law.

It should be noted that the Strategic Report has been prepared for the Group as a whole and are deemed to form part of this report, and therefore gives greater emphasis to those matters, which are significant to Graphene NanoChem and its subsidiary undertakings when viewed as a whole.

Approved by the Board and signed on behalf of the Board.

Dato' Jespal Deol Sushil Sidhu

Chief Executive Officer Finance Director

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

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

Consolidated Statement of Financial Position

As at 31 December 2015

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

Company Registration No: 05712979

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015

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

Consolidated Statement of Cash Flows

For the year ended 31 December 2015

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 2015

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 costs 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 were involved in the design, formulation and manufacturing of intermediate and performance chemicals and advanced nano-materials. During the year ended 31 December 2015 and subsequent to the balance sheet date, the Group commenced a restructuring of its business.

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 2015. 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 FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland ("new UK GAAP").

These consolidated financial statements are presented in Pounds Sterling ("£") which is the functional and presentation currency of the parent, and rounded to the nearest thousand ("£'000"). The functional currency of the subsidiaries is the Malaysian Ringgit as that is the currency of their primary economic environment. The directors have chosen to present these financial statements in Pounds Sterling due to the international exposure and shareholders of the entity.

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

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

2.2 Going concern

Faced with the challenges of a global downturn in the oil and gas markets, the Group has taken decisive action to improve operating efficiencies, reduce its cost base and recalibrate and streamline its portfolio of businesses to maximize growth opportunities.

As part of the execution of its rationalization plan, the Group is in the process of exiting the low margin fuel additive and palm oil refining businesses, which are not expected to have any significant growth in margins. In view of the proposed structured exit, the directors deemed it prudent to impair the assets of those businesses that resulted in the Group incurring a loss for the year ended 31 December 2015 of £33,283,000 after impairment charges of £25,694,000 and as at that date the Group and Company had net current liabilities of £26,572,000 and £117,000, respectively, and the Group and Company had a shareholders' deficiency of £5,893,000 and £76,000, respectively.

During the year ended 31 December 2015, the Group has been in discussions with its financiers on outstanding loan repayment obligations and as at that date the Group had total secured borrowings of £24,927,000 which have been reported in the consolidated statement of financial position as being repayable on demand (Note 19).

Subsequent to the balance sheet date, the Group successfully negotiated the restructure of borrowings amounting to £14,463,000 repayable in instalments to 2021 with a 2 year repayment moratorium and a pay down in the aggregate amount of £315,000 for 2016 and 2017 respectively. The pay down of £315,000 has been made for 2016. The Group remains in discussion with its other major lenders to dispose of property plant and equipment ("PPE") used in the Group's palm oil refining and biodiesel businesses, in order to settle the remaining borrowings of £10,464,000. The PPE has been recorded at an estimated forced sale value as disclosed in Note 13 to the financial statements the value of which is in excess of the borrowings due. The carrying amount of PPE of £20,631,000 disclosed in the financial statements are at a forced sale value estimated by the directors that are based on independent valuation of the assets undertaken by independent valuer's approved by the lenders.

 The status of the Group's current borrowings are as follows:

* Assuming that PPE from Lender 2 and Lender 3 are realised at forced-sale value to settle outstanding loans from Lender 2 and Lender 3 and the balance used to reduce Lender 1 borrowings.

Upon completion of the rationalisation plan, the Group's plans to realise the sale of its non-core assets at its carrying value to fully repay Lenders 2 and 3 with excess funds to be utilized to reduce the liabilities of Lender 1. If this is successfully achieved the Group should see a carrying value of a single debt going forward in the range of £7.3 mil depending on additional costs that would be deducted for the restructuring.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

2.2 Going concern (Continued)

As part of the restructuring exercise as per the announcement made on 11 April 2016, a receiver and manager has been appointed by Lender 2 to manage the sale of the non-core assets. The Directors recognise the uncertainty over the value of the assets subject to disposal, even though these assets have been written down to forced sale value. Furthermore, Lender 2, does not have a corporate guarantee from the parent company limiting recourse to the parent company and its effects to the Group as a Going Concern.

The Group is confident that the 3.0x asset cover over borrowings of Lender 3 of £1.6m is sufficient to fully settle the borrowings upon sale of the PPE.

The business will be carried on in a new wholly-owned subsidiary, Platinum TechSolve Sdn. Bhd., and will leverage on the Group's proprietary nanotechnology platforms and joint venture with SCOMI to provide performance enhancing solutions within the oilfield chemicals and water treatment sectors that have higher margins and longer term opportunities. The Group is continuing its chemicals sales through SCOMI that are providing the Group with working capital through payment upon order. The Group also has a pipeline of water treatment projects in Asia, Africa and the Middle East, funding for which is expected to be met via joint ventures, specialist water treatment funds, private equity, and a proposed equity offering in the coming months.

The implementation of the rationalisation plan, which management believes will be successful, is expected to significantly reduce the Group's debt balance and interest rate expense, which will have a positive impact of strengthening the Group's balance sheet. Further, the utilization of operating cash flows in the near term for advancement of the recalibrated business plan rather than repayment of debt, bodes well for the Group as it focuses on available resources and growth strategies on long term, higher margin business opportunities.

In view of the net current liabilities and shareholders' deficiency of the Group, the ongoing discussions with the Group's financiers and the rationalization plan also being dependent upon the Group having access to sufficient funds, the directors consider there is a material uncertainty that casts significant 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.

2.4 Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to 31 December 2015.

Subsidiaries are entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

(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 consolidated financial statements have been 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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

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 subsidiaries

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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

2.6 Property, plant and equipment (Continued)

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) Licences

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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

(c) Patents

Separately acquired patents are shown at historical cost. Patents have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of licences 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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

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 except for loan and receivables.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

2.14 Financial Instruments (Continued)

(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.

(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 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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

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, biofuels and nanofluids 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.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

2.18 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.

2.19 Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group. Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

2.20 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). In view of the Group's planned exit from the palm oil refining and biodiesel businesses, goodwill and intangible assets have been fully impaired at the balance sheet date.

Notes to the Financial Statements

For the year ended 31 December 2015

2 Summary of significant accounting policies (Continued)

2.20 Judgements and estimates (Continued)

(b) 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 disclosed in Note 13, management has impaired property, plant and equipment to its estimated forced sale value based on independent valuations arranged by the Group.

(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 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 group's trade receivables.

(d) Borrowings

As disclosed in Note 19, the Group has defaulted on its borrowings during the year. Subsequent to the balance sheet date, borrowings of £14,463,000 were restructured into a new facility but negotiations with other lenders are ongoing. The carrying values of outstanding borrowings in Note 19 include accrued interest to date but exclude any penalties that the Group may incur once settlement has been reached with other lenders involving disposal of property, plant and equipment held by the banks as security.

(e) Discontinued operations

As disclosed in Note 2.2, the Group is undertaking a restructure of its debt and is in the process of exiting the palm oil refining and biodiesel businesses and refocusing on higher margin and longer term opportunities. As at the balance sheet date, the criteria set out in IFRS 5 for these businesses to be disclosed as discontinued or held for sale in the financial statements had not all been met. Accordingly, they are presented as continuing operations in the financial statements.

(f) Contingent liabilities

As disclosed in Note 24 to the financial statements, the Group has received a claim from a supplier and based on legal advice no provision for damages has been made as the case is not yet resolved and the outcome uncertain.

(g) Going concern

Management of the Group has made a number of significant judgments about the applicability of the going concern basis of presentation of the financial statements. These are set out in note 2.2.

Notes to the Financial Statements

For the year ended 31 December 2015

3 Subsidiaries

Graphene Nanochem plc has the following subsidiaries:

Platinum Nanochem Sdn. Bhd. has the following subsidiaries and joint venture:

All the above subsidiaries are incorporated in Malaysia.

Following the Reverse Acquisition on 26 March 2013, 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: 

Notes to the Financial Statements

For the year ended 31 December 2015

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

Notes to the Financial Statements

For the year ended 31 December 2015

9 Directors and employees

The employee benefit expense during the year was as follows:

The number of employees inclusive of executive directors at year end was 45 (2014:131).

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

Notes to the Financial Statements

For the year ended 31 December 2015

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 net deferred tax assets are not provided in view of the uncertainty on the timing of their 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 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.

Notes to the Financial Statements

For the year ended 31 December 2015

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.

The Group's property, plant and equipment, including capital work in progress, was subject to independent valuations during the year which assessed both their current market value and forced sale value. The valuations were performed in accordance with Malaysian Valuation Standards and The Royal Institution of Surveyors, Malaysia. As disclosed in Note 19, the Group has defaulted on its bank loans and is in discussions with its lenders to dispose of the secured fixed assets to settle the loans. Accordingly, fixed assets have been impaired to their estimated forced sale values, as determined by the valuations.

Notes to the Financial Statements

For the year ended 31 December 2015

14 Goodwill and Intangible assets

Goodwill

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

Licenses

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

ii) License for the manufacture of palm oil biodiesel and the linked refinery license subsequently obtained. A useful economic life of 20 years has been assumed as the license 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.

Notes to the Financial Statements

For the year ended 31 December 2015

14 Goodwill and Intangible assets (Continued)

Development costs

The details of the development costs are:

Included in the development costs are:

The goodwill and intangible assets are tested for impairment annually at the statement of financial position date, the Group evaluates, among other factors, the duration and extent to which their carrying amount is less that its cost and the recoverable amounts. This including factors such as market conditions, changes in business, operational strategies and significant changes expected to take place in the near future.

The directors are of the opinion that the Group will not generate sufficient future profits and cash flows from its palm oil and biodiesel businesses and accordingly the goodwill and intangible assets related those businesses have been fully impaired.

15 Inventories

The amount of inventories recognised as an expense during the year to 31 December 2015 was £8,493,000 (2014: £41,948,000).

Notes to the Financial Statements

For the year ended 31 December 2015

16 Trade and other receivables