Mission NewEnergy (MNELF) 20-F 2013 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2013

OR

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

OR

¨ Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this shell company report ___________________

Commission file number: 001-35022

Mission NewEnergy Limited

(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant’s name into English)

Western Australia, Australia
(Jurisdiction of incorporation or organization)

Unit B2, 431 Roberts Rd,

Subiaco, Western Australia 6008, Australia
(Address of principal executive offices)

Guy Burnett

Chief Financial Officer and Company Secretary

+61 8 6313 3975; guy@missionnewenergy.com

Unit B2, 431 Roberts Rd,

Subiaco, Western Australia 6008, Australia
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Ordinary Shares, no par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of June 30, 2013: 10,870,275 Ordinary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨Yes      x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

¨Yes      x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

SYes      £ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

SYes      £ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

¨ Large accelerated filer ¨Accelerated filer xNon-accelerated filer

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP¨

International Financial Reporting Standards as issued by the International Accounting Standards Boardx

Other¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨Item 17¨ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨Yes     x No

TABLE OF CONTENTS

	Page
CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT	2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	2
INDUSTRY AND MARKET DATA	3
PART I
Item 1. Identity of Directors, Senior Management and Advisers	3
Item 2. Offer Statistics and Expected Timetable	3
Item 3. Key Information	4
Item 4. Information on the Company	18
Item 4A.Unresolved Staff Comments	26
Item 5. Operating and Financial Review and Prospects	26
Item 6. Directors, Senior Management and Employees	36
Item 7. Major Shareholders and Related Party Transactions	51
Item 8. Financial Information	52
Item 9. The Offer and Listing	53
Item 10.Additional Information	55
Item 11. Quantitative and Qualitative Disclosures About Market Risk	66
Item 12. Description of Securities Other than Equity Securities	68
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies	68
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	68
Item 15. Controls and Procedures	69
Item 16. [Reserved]	70
Item 16A. Audit Committee Financial Expert	70
Item 16B. Code of Ethics	70
Item 16C. Principal Accountant Fees and Services	70
Item 16D. Exemptions from the Listing Standards for Audit Committees	70
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	70
Item 16F. Change in Registrant’s Certifying Accountant	70
Item 16G. Corporate Governance	71
Item 16H. Mine Safety Disclosures	71
PART III
Item 17. Financial Statements	71
Item 18. Financial Statements	71
Item 19. Exhibits	71

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Conventions that apply to this Annual Report

Unless otherwise indicated or the context clearly implies otherwise, references to “we,” “us,” “our,”, “Mission NewEnergy”, “Mission”, "the Group" and “the Company” are to Mission NewEnergy Limited, an Australian corporation, and its subsidiaries. In this annual report “shares” or “ordinary shares” refers to our ordinary shares.

In this annual report, references to “$,” “US$” or “U.S. dollars” are to the lawful currency of the United States and references to “Australian dollars” or “A$” are to the lawful currency of Australia.

Solely for the convenience of the reader, this annual report contains translations of certain Australian dollar amounts into U.S. dollars at specified rates. Except as otherwise stated in this annual report, all translations from Australian dollars to U.S. dollars are based on the noon buying rate of the City of New York for cable transfers of Australian dollars, as certified for customs purposes by the Federal Reserve Bank of New York on the date or year indicated. No representation is made that the Australian dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars at such rates or any other rates. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

The following table sets out relevant conversion measures for Mission NewEnergy’s business:

1 Tonne = 2,204.6226 Pounds biodiesel

1 Tonne = 1.1023 Tons (short) biodiesel

1 Tonne = 298 Gallons biodiesel

1 Tonne = 7.4 Barrels biodiesel

1 Barrel = 42 Gallons biodiesel

1 Hectare = 2.4 Acres

Unless otherwise indicated, the consolidated financial statements and related notes as of and for the fiscal years ended June 30, 2011, 2012and 2013 included elsewhere in this annual report have been prepared in accordance with Australian Accounting Standards and also comply with International Financial Reporting Standards (“IFRS”) and interpretations issued by the International Accounting Standards Board.

References to a particular “fiscal year” are to our fiscal year ended June 30 of that year. References to a year other than a “fiscal” year are to the calendar year ended December 31.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that relate to our current expectations and views of future events. All statements, other than historical fact or present financial information, may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Item 3.D — Key Information — Risk Factors,” “Item 4 — Information on the Company” and “Item 5 — Operating and Financial Review and Prospects,” all of which are difficult to predict and many of which are beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “predict,” “forecast,” “budget,” “project,” “target,” “likely to” or other similar expressions. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements.

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We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

• our beliefs regarding the design, technology, operation and maintenance of our refinery;

• our ability to procure a sufficient supply of raw materials, in particular, suitable and cost competitive feedstocks;

• our beliefs regarding the competitiveness of our products;

• our beliefs regarding the advantages of our business model;

• our expectations related to our ongoing restructure;

• our expectations regarding the scaling and expansion or reduction of our production capacity;

• our expectations regarding our ability to procure customersand expand them;

• our expectations regarding settlement of our terminated Indonesian Joint Venture ;

• our expectations regarding increased revenue growth and our ability to achieve profitability resulting from increases in our production volumes;

• our beliefs regarding our ability to successfully implement our strategies;

• our beliefs regarding our abilities to secure sufficient funds to meet our cash needs for our operations and capacity expansion;

• our future business development, results of operations and financial condition;

• the effects of weather;

• government regulatory and industry certification, approval and acceptance of our product and its derivatives; and

• government policymaking and incentives relating to renewable fuels.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

INDUSTRY AND MARKET DATA

This annual report includes information with respect to market and industry conditions and market share from third party sources or that is based upon estimates using such sources when available. We believe that such information and estimates are reasonable and reliable. We also believe the information extracted from publications of third party sources has been accurately reproduced and, so far as we are able to ascertain from information published by the third party sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, we have not independently verified any of the data from third party sources. Similarly, our internal research is based upon the understanding of industry conditions, and such information has not been verified by any independent sources.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

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Item 3. Key Information

A. Selected Financial Data.

The following selected consolidated statements of operations and other consolidated financial data for the fiscal years 2013, 2012 and 2011 have been derived from our audited consolidated financial statements included elsewhere in this annual report. You should read the selected consolidated financial data in conjunction with our consolidated financial statements and related notes and “Item 5 — Operating and Financial Review and Prospects” included elsewhere in this annual report. Our historical results do not necessarily indicate our expected results for any future periods.

Our financial statements have been prepared in Australian dollars and in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Income statement data for the fiscal years ended June 30, 2013, 2012 and 2011 and the balance sheet data as at June 30, 2013 and 2012 have been derived from our audited financial statements that are included elsewhere in this annual report. Income statement data for the fiscal years ended June 30, 2010 and 2009 and the balance sheet data as at June 30, 2011, 2010 and 2009 have been derived from our audited financial statements that are not included in this annual report.

	2013			2013			2012			2011			2010			2009
	US$(1)			A$			A$			A$			A$			A$
	(in thousands, except share and per share data)
Income Statement data:
Total sales revenue		174			169			27,543			13,629			14,394			43,368
Total other income		8,468			8,244			10,659			1,890			2,066			11,809
Cost of sales		(378	)		(368	)		(26,153	)		(13,352	)		(15,021	)		(45,709	)
Employee benefits expense		(1,662	)		(1,618	)		(3,221	)		(6,349	)		(5,307	)		(5,117	)
Other income (expenses)		8,603			8,375			(9,012	)		(7,965	)		(88,751	)		(19,271	)
Finance costs		(4,159	)		(4,048	)		(3,243	)		(4,865	)		(5,152	)		(8,401	)
Profit/(loss) from operations before income tax		11,046			10,754			(3,427	)		(17,012	)		(97,771	)		(23,321	)
Income tax (expense) benefit		21			20			(16	)		1			(29	)		(434	)
Profit/(Loss) from continuing operationNet (loss)/profit		11,067			10,774			(3,443	)		(17,011	)		(97,800	)		(23,755	)
Loss for the year from discontinued operations		(736	)		(717	)		(2,755	)		(4,659	)		-			-
Net Profit / (Loss)		10,331			10,057			(6,198	)		(21,670	)		(97,800	)		(23,755	)
Profit/(Loss) attributable to non-controlling interests		(15	)		(14	)		68			-			-			-
Profit/(Loss) attributable to members of the parent		10,316			10,043			(6,130	)		(21,670	)		(97,800	)		(23,755	)
Basic and diluted earnings (loss) per share(2)		0.98			0.96			(0.69	)		(3.50	)		(20.76	)		(12.00	)
Weighted average ordinary number of shares outstanding(3)		10,481,820			10,481,820			8,919,299			6,199,265			4,711,249			1,979,725
Balance Sheet data:
Total current assets		5,028			5,486			7,682			29,236			25,007			26,372
Total assets		18,428			20,105			10,703			36,598			33,749			118,030
Total current liabilities		28,458			31,051			2,362			22,059			4,300			9,550
Total non-current liabilities		1,428			1,558			31,215			44,287			59,137			57,441
Total liabilities		29,888			32,609			35,144			66,346			63,437			66,991
Retained earnings (accumulated losses)		(139,366	)		(136,188	)		(140,377	)		(135,720	)		(117,259	)		(19,475	)
Total equity		(11,460	)		(12,504	)		(24,441	)		(29,748	)		(29,688	)		51,039
Other financial data:
Dividends per share		—			—			—			—			—			—

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(1) The balance sheet data has been translated into U.S. dollars from Australian dollars based upon the noon buying rate of the City of New York for cable transfers of Australian dollars, as certified for customs purposes by the Federal Reserve Bank of New York on June 30, 2013, which exchange rate was A$1.00 = US$0.9165. The income statement data has been translated into U.S. dollars from Australian dollars based upon the weighted average of the noon buying rate of the City of New York for cable transfers of Australian dollars, as certified for customs purposes by the Federal Reserve Bank of New York for the period from July 1, 2012 to June 30, 2013 which as A$1.00 = US$1.0272. These translations are merely for the convenience of the reader and should not be construed as representations that the Australian dollar amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.

(2) Net (loss)/profit per ordinary share — basic and diluted is calculated as net loss for the period divided by adjusted weighted average number of ordinary shares outstanding for the same period, after giving effect to the 50-1 share consolidation that was effected on April 4, 2011.

(3) The weighted average number of ordinary shares outstanding is shown after giving effect to the 50-1 share consolidation that was effected on April 4, 2011.

Exchange Rate Information

The Australian dollar is convertible into U.S. dollars at freely floating rates. There are no legal restrictions on the flow of Australian dollars between Australia and the United States.

For your convenience, we have translated some Australian dollar amounts into U.S. dollar amounts at the noon buying rate in The City of New York for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the “noon buying rate”). On June 30, 2013, the noon buying rate for Australian dollars into U.S. dollars was A$1.00 = US$0.9165. On October 11, 2013, the noon buying rate for Australian dollars into U.S. dollars was A$1.00 = U.S $ 0.9473.

We make no representation that any Australian dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Australian dollars, as the case may be, at any particular rate, the rates stated below, or at all.

The following table contains information for the noon buying rate for the Australian dollar into U.S. dollars for the periods indicated.

	At Period End		Average Rate (1)			High		Low
Fiscal year ended June 30,
2009		0.8055		0.7423			0.9797		0.6073
2010		0.8480		0.8837			0.9369		0.7751
2011		1.0732		0.9905			1.0970		0.838
2012		1.0236		1.0323			1.1026		0.9453
2013		0.9165		1.0272			1.0591		0.9165
Month ended
April 30, 2013		1.0372		1.0380	��		1.0564		1.0255
May 31, 2013		0.9608		0.9919			1.0313		0.9608
June 30, 2013		0.9165		0.9440			0.9770		0.9165
July 31, 2013		0.8957		0.9155			0.9259		0.8957
August 31, 2013		0.8901		0.9037			0.9193		0.8901
September 30, 2013		0.9324		0.9301			0.9444		0.9055
October 31, 2013(through October 11, 2013)		0.9473		0.9426			0.9473		0.9366

(1) For the fiscal years, determined by averaging noon buying rates on the last day of each full month during the fiscal year.

5

B. Capitalization and Indebtedness.

Not applicable.

C. Reasons for the Offer and Use of Proceeds.

Not applicable.

6

D. Risk Factors.

Set forth below are certain risks that we believe are applicable to our business. You should carefully consider the risks described below and the other information in this annual report, including our consolidated financial statements and related notes included elsewhere in this annual report, before you decide to buy, sell or hold our ordinary shares. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially harmed. Additional risks not presently known to us, or risks that do not seems significant today, may also impair our business operations in the future.

Risks Related to Our Business

We may not be able to continue as a going concern.

We have a history of net losses and there is a substantial doubt about our ability to continue as a going concern. We incurred an operating profit for the year ended June 30, 2013 of A$10.1 million (2012: A$6.2 million loss), with net cash used in operating activities of A$3.7 million (2012: A$4.9 million). At balance date, the current assets less current liability deficit was A$11.0 million (2012: A$6.0million surplus) and the net asset deficiency A$12.5 million (2012: A$24.4 million). The current asset deficiency is primarily due to convertible note due and payable in May 2014. The net asset deficiency is primarily as a result of the impairment of the majority of the refinery assets during the current and previous financial years (refer to note 5a).

At June 30, 2013, the Company has a current liability for the series three convertible notes of A$32.9 million (nominal value).As of October 30, 2012 A$7.5 million of the series three convertible notes were redeemed by the Company resulting in an outstanding debt obligation of A$25.4 million.

As announced to the market on the February25, 2013, a debt funding package was signed with SLW International, LLC (SLW) a substantial convertible note holder, to provide the Group with a US$5 million line of credit facility. As of October 30, 2013 the Company had fully settled all outstanding drawn funds and fully paid the interest and charges on this Facility.

The Directors believe that at the date of this report the Group has sufficient financial resources at June 30, 2013 to meet its committed financial liabilities.

The financial statements for the fiscal year ended June 30, 2013have been prepared on a going concern basis which has been assessed based on detailed cash flow forecasts extending out twelve months from the date of this financial report. The cash flow forecasts from operations are based on the forecast cash flows required to sustain the business and cash on hand at June 30,2013. The cash flow forecasts do not take into account any capital commitments as these are not foreseen to be payable within the forthcoming twelve months.

The ability of the Group to continue as a going concern in the ordinary course of business and to achieve the business growth strategies and objectives is dependent upon the ability of the Group to do a sufficient combination of the following things to enable its commitments to be met:

· Generate positive cash flows from operations.

· Raise cash through sale of assets and recovery of receivables.

· Reduce cash outflows through cost control measures.

· Renegotiate the maturity date of the convertible notes.

· Raise cash through the issue of further equity.

· Increase debt facilities.

The Directors consider that there are reasonable grounds to expect that the Group will be able to meet its commitments through the measures listed above, and accordingly have prepared the financial report on a going concern basis in the belief that the Group will realize its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial report. However, should the Group not be successful in the matters discussed above, there is material uncertainty whether the Group will be able to continue as a going concern.

7

If we are unable to generate sufficient alternative revenue to offset the losses from our primary business, our business and financial condition will suffer a significant adverse effect.

Revenue from our business may not exceed our expenses and thus there is substantial risk that we will not be able to generate enough revenue to reverse our pattern of historical losses and negative cash flow, which would have a significant adverse effect on our business and financial condition.

We may not be able recover any funds from intercompany loans

The head company holds security over all material assets of the group in regards to all inter company loans. The company’s subsidiary’s may not be able to repay or service these intercompany loans, which would have a significant adverse effect on our business and financial condition.

Our substantial level of current debt could impair our ability to service our indebtedness, finance our operations and compete with less leveraged players in the industry.

We have substantial current indebtedness. As of June 30, 2013, we had total current indebtedness of A$31.1 million, including approximately A$27.4 million (accounting value) outstanding under our convertible notes which is due and payable in May 2014, and A$3.7 million of other debt. Our high level of indebtedness could have important consequences. For example, it could:

· make it more difficult for us to satisfy our indebtedness obligations under the convertible notes, exposing us to the risk of default, which could result in a foreclosure on our assets, which, in turn, would negatively affect our ability to operate as a going concern;

· make it more difficult for us to satisfy our obligations under our other indebtedness;

· require us to dedicate a substantial portion of our cash flow from operations to interest and principal payments on our indebtedness, reducing the availability of our cash flow for other purposes, such as capital expenditures, acquisitions, dividends and working capital;

· limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

· increase our vulnerability to general adverse economic and industry conditions;

· place us at a disadvantage compared to our competitors that have less debt;

· limit our ability to pursue new strategies and business opportunities;

· increase our cost of borrowing; and

· limit our ability to borrow additional funds.

We may not be able to generate sufficient cash to service our indebtedness and the terms of our indebtedness, as well as economic conditions, may prevent us from successfully refinancing.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our future performance, which will be affected by financial, business and economic conditions and other factors. We will not be able to control many of these factors, such as economic conditions in the industry in which we operate and competitive pressures. Our cash flow may not be sufficient to allow us to pay principal and interest on our debt and to meet our other obligations. Any limitation on our ability to pay principal of, and interest on, the convertible notes would likely reduce the value of our ordinary shares. If our cash flows and capital resources are insufficient to fund our debt service obligation, including those obligations under our convertible notes, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the convertible notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements, including our convertible notes, may restrict us from pursuing any of these alternatives.

8

If we do not meet certain EPA requirements under Renewable Fuels Standard 2 ("RFS2"), fuels produced from palm oil may not be able to generate retroactive Renewable Identification Numbers, or RINs, which are commercially necessary to supply biodiesel produced from palm oil into the United States, which would limit our market opportunity and jeopardize our near term financial viability.

Under the National Renewable Fuel Standard.Palm based biodiesel does not qualify as an approved biodiesel generate RINs. A RIN is a 38-character numeric code that is generated by the producer or importer of renewable fuel representing gallons of renewable fuel produced/imported and assigned to batches of renewable fuel that are transferred (change of ownership) to others. RINs are then turned into the EPA each year by petroleum refiners to prove that they have blended the required amount of renewable fuel under RFS2. Therefore, biodiesel that does not generate a RIN may have a very limited market in the U.S. If we are not able to meet these requirements, we may suffer a significant adverse effect on our business, financial performance and financial condition and could cause us to cease operations.

We may not be compliant under the European Renewable Energy Directive, our ability to sell palm-based biodiesel into the European Union will be significantly constrained and the results of our operations will be adversely impacted.

Under the Renewable Energy Directive, the entire pathway for palm based biodiesel including the suppliers of raw materials and the production pathway must be certified. Failure for our production facility to meet such certification or failure by our suppliers of palm oil feedstock to satisfy the Renewable Energy Directive could affect our ability to sell palm-based biodiesel into the European Union. The European Union has been and remains a key market for us. Any limitation on our ability to sell biodiesel into the European Union could have a significant adverse effect on our business, financial performance and financial condition.

The design and technology of our refineries may be unable to meet future biodiesel specifications and further capital expenditures may be required.

The specifications for biodiesel are continually evolving and are subject to further change. Further capital expenditures may be required to ensure that our refineries meet new specifications, adversely affecting our financial performance and financial position. There is also no assurance that the equipment and technology used in our capital improvements will achieve performance specifications. The failure of utilized equipment and technology in this regard may adversely affect our business.

The operation and maintenance of our refineries involve significant risks that could result in disruptions in production or reduced output.

The operations of our refineries are exposed to significant risks, including:

· failure of equipment or processes;

· operator or maintenance errors;

· labor disruptions;

· extended and unscheduled interruptions to production;

· accidents; and

· damage to equipment and disaster whether arising from the actions or omissions by us or our employees or from external factors.

There are operational hazards inherent in chemical manufacturing industries, such as fires, explosions, abnormal pressures, blowouts, pipeline ruptures, and transportation accidents. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in suspension or termination of operations and the imposition of civil or criminal penalties. In addition, our insurance may not be adequate to fully cover the potential operation hazards described above, and we may not be able to renew our insurance on commercially reasonable terms or at all. See “Item 3.D — Key Information — Risk Factors — Our insurance coverage may not be sufficient to cover our liability risks.”

9

If we are unable to generate profitable sales this will significantly reduce our revenues and harm our results of operations.

In 2013, our biofuel revenue was NIL due to the shut down of the refining operations in the prior financial year. Our historic revenue contracts have since expired and we cannot assure you that we will be able to source new customers and establish and maintain long-term relationships with such customers. As a result of our inability to find profitable sales contracts our refining operations are currently in care and maintenance. If we are unable to source new customers our revenues will be significantly reduced and could have a material adverse effect on our results of operations.

If we cannot find suitably qualified personnel to run our refineries we may be unable to deliver into sales contracts which may result in lost revenues and incurred costs.

The operation of our refineries requires suitably qualified personnel. With the current status of the refineries being in care and maintenance, the majority of personnel have been retrenched. The ability to restart the refineries may be affected by an inability to employ suitably trained staff.

If we cannot get the refineries to run successfully after being in care and maintenance.we may be unable to deliver into sales contracts which may result in lost revenues and incurred costs.

With the refineries being under care and maintenance, suchnon-operation may result in significant costly technical and mechanical delays if the decision were made to restart production.

An increase in cost or an interruption in the supply of our feedstock may inhibit production and adversely affect our financial performance.

The operation of our refineries is dependent on our ability to procure substantial quantities of suitable quality feedstock.

At this time, our refining operation is in care and maintenance and not operating. However, should we return to operations, the failure to procure a sufficient supply of raw materials satisfying our quality, quantity and cost requirements in a timely manner could impair our ability to produce our products or could increase our costs. Any interruption to the supply of suitable quality feedstock may result in disruptions in production or reduced output, which may materially and adversely affect our financial performance.

Additionally, our financial results are substantially dependent on the prices for our feedstock. A substantial increase in feedstock price relative to the value of our end products would adversely affect our financial performance. Although we may attempt to offset the effects of fluctuations in prices by entering into arrangements with our customers on a feedstock price plus contract basis through which we receive a predetermined margin over the price of the feedstock or by engaging in transactions that involve exchange-traded futures contracts (or other contractual arrangements securing future commodity prices), the amount and duration of these hedging and risk mitigation activities may vary substantially over time. These activities also involve substantial risks.

We have experienced and may in the future experience volatile capacity utilization which may adversely affect our results of operations.

We remain reliant on palm oil as a feedstock. If the price of palm oil is greater than the value of our biodiesel, which is generally priced relative to ultra low sulphur diesel (“ULSD”), we may not be able to profitably sell biodiesel into the immediate cash payment and delivery market. Our ability to supply palm-based biodiesel profitably is based on having positive margins where our input costs are lower than the value of our refined product. We are unable to influence the price of palm oil or the price of biodiesel. Resultantly, our biodiesel profitability is reliant on the existence of a positive spread between these two commodities. As we only operate when a positive operating margin exists, currently we have not been operational at anytime during the period, we have and expect to continue to have in the future erratic capacity utilization, which may adversely affect our results of operations.

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We have suffered and may continue to suffer low capacity utilization if we are unable to secure term contracts.

Given the volatility of profit margins on biodiesel production due to fluctuations in commodity pricing for palm oil and the value of our finished product, we have not converted palm oil to biodiesel unless we have a committed contract customer willing to accept pricing based on our cost of purchasing feedstock and earning a positive margin from refining. Our refineries are currently shut down and we currently have no customers and have no visibility on our ability to attract customers. As such our refining operationshave been put on care and maintenance.

We have suffered and may continue to suffer low capacity utilization if we are unable to secure material volumes of biodiesel sales under the Malaysian Biodiesel mandate.

After numerous years discussing the possible implementation of a biodiesel blending mandate in Malaysia, the Malaysian Government introduced a scheme to mandate a 5% biodiesel blend into commercial diesel sales in the Central region of Malaysia. This scheme may grow or reduce depending on Government support. In addition the scheme was for a lower volume than previously communicated to Malaysian Biodiesel producers. Accordingly we secured relatively low volumes of biodiesel sales under this scheme. If the scheme is not extended, or cancelled altogether, or commercially viable quantities are not secured by us, this may adversely affect our results of operations.Due to insufficient and unprofitable sales volumes under this mandate, we terminated the arrangements to supply biodiesel and we currently have no biodiesel sales in Malaysia and have no visibility towards further sales in Malaysia.As such, our refining operationshave been put on care and maintenance.

We may be unable to perform under offtake agreement

The company may not be able to perform under any existing or new offtake agreements, given that its refinery is currently in care and maintenance. Additionally any changes in legislation in the local jurisdiction of the offtaker may prohibit such sales including in the United States where palm based biodiesel is not compliant with governmental regulations.

Our inability to meet margin calls on hedged positions would adversely affect our financial condition.

To maximize and protect the profitability of the offtake agreement, we may enter into hedging positions to protect against commodity risk. Upon entering the hedging positions and the inherent volatility in the commodity markets, we will likely be required to make margin call payments from time to time. Inability to meet such margin calls would adversely affect our financial condition and financial performance.

We may suffer losses due to sales of competing products that infringe on our intellectual property.

We rely on a combination of patents, trademarks, domain names and contractual rights to protect our intellectual property. We cannot assure you that the measures we take to protect our intellectual property rights will be sufficient to prevent any misappropriation of our intellectual property, or that our competitors will not independently develop alternative technologies that are equivalent or superior to technologies based on our intellectual property. In the event that the steps we have taken and the protection afforded by law do not adequately safeguard our proprietary technology, we could suffer losses due to the sales of competing products that exploit our intellectual property, and our profitability would be adversely affected.

If we are subject to claims of infringement of the intellectual property of others, the defense of these claims could drain our resources and any adverse determination could adversely impact or halt our biodiesel production.

Our biodiesel refineries include contracts with Axens for the supply of our proprietary systems, over which they have intellectual property that they have licensed to us. This intellectual property includes the operating procedures and technical schematics of our biodiesel refineries, which are required to operate and maintain the plants. The unauthorized use or Axens’ or our intellectual property or the infringement by us of another person’s intellectual property right may adversely affect our financial performance..

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To the best of our knowledge, our patented process does not infringe any third party’s intellectual property rights. However, intellectual property rights are complex and there exists the risk that our process may infringe, or be alleged to infringe, another party’s intellectual property rights.

The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our products or manufacturing processes or subject us to injunctions prohibiting the manufacture and sale of our products or the use of our technologies.

Any inability to obtain and maintain all the required licenses and permits related to our business and the resulting increased compliance costs may adversely affect our financial performance.

We are required to hold or obtain a number of licenses and permits, including environmental and those related to materials handling, in various jurisdictions in order to implement and operate our business. In particular our biodiesel refining operation in Malaysia holds a LembagaMinyakSawit Malaysia license (which allows for the buying, selling, movement and importation of palm oil products) and a Kementerian Perusahaan Perladangan&Komoditi license (which allows the production of biodiesel). The LembagaMinyakSawit Malaysia license is renewed annually and is currently valid. We have no reason to believe that this license will not be renewed, although renewal is not assured. The Kementerian Perusahaan Perladangan&Komoditi license is renewed every three years and is currently valid and we have no reason to believe that this license will not be renewed yearly, although renewal is not assured.

We are subject to environmental regulations, the compliance with which imposes substantial costs on us and the violation of which could result in penalties and other liabilities.

Laws dealing with protection of the environment provide for penalties and other liabilities for the violation of such laws and establish, in certain circumstances, obligations to remediate facilities and locations where operations are conducted. We may incur substantial costs in the future as part of our continued efforts to comply with these environmental laws and to avoid violations of them.

We may experience a significant chemical or biodiesel spill at our refineries or we may experience a chemical spill. If any of these events occur or if we otherwise fail to comply with the applicable environmental or other regulations, we could be subject to significant monetary damages and fines or suspensions of our operations, and our business reputation and profitability could be adversely affected.

Any amendments to the environmental laws could impose substantial pollution control measures that could require us to make significant expenditures to modify our production process or change the design of our products to limit actual or potential impact to the environment. Moreover, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures, which may adversely affect our business, results of operations and financial condition.

Our insurance coverage may not be sufficient to cover our liability risks.

Our insurance arrangements may not adequately protect us against liability for all losses, including but not limited to environmental losses, property damage, public liability or losses arising from business interruption and product liability risk. Additionally, we may be unable to renew our existing insurance arrangements on commercially reasonable terms or at all. Should we be unable to maintain sufficient insurance coverage in the future or experience losses in excess of the scope of our insurance coverage, our financial performance could be adversely affected.

Changes in government policy could adversely affect our business.

Our refineries are located in Malaysia and possible sales of biodiesel sales may be in the United States and Europe. In addition, the equipment for our plants is imported from, and our products are sold in, various other countries. There is a risk that actions of a government in any of these countries may adversely affect our ability to implement and operate our business.

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Government action or policy change in relation to access to lands and infrastructure, import and export regulations, environmental regulations, taxation, royalties and subsidies could adversely affect our operations and financial performance. In particular, upon significant changes in U.S. legislation, the renewable fuels standard or the biodiesel blenders excise tax credit, where palm based biodiesel is not compliant. Generally, however, a policy change in any of the jurisdictions in which we operate, or intend to operate, may inhibit our ability or the financial viability of our operations to export feedstock oil or the refined products that we market. This, in turn, could adversely affect our operations and financial performance.

Our financial performance may be adversely affected by fluctuations in exchange rates.

Our revenues and expenditures are potentially denominated in a number of currencies, including U.S. dollars, euros, Australian dollars, Indonesian rupiah,and Malaysian ringgit. Historically, we have experienced losses due to unhedged negative changes in exchange rate. Additionally, we have experienced foreign currency translation differences (which are held on our balance sheet in the foreign currency translation reserve) as a result of reporting consolidation of non-Australian subsidies. We have limited foreign currency hedging arrangements in place. As a result, our financial performance may be adversely affected by fluctuations in exchange rates.

We may be unable to recover our investment in our Indonesian palm oleochemical joint venture project.

We terminated our Indonesian joint venture project given material breaches in obligations by the joint venture partner. Under the terms of our Joint Venture Agreement upon termination for breach of obligations the breaching party must acquire all shares of the non-breaching party at the greater value of the initial investment being US$2.8 million of the market value of the shares. The valuation of the shares is in dispute and the matter has been referred to Indonesian Arbitration. The company can provide no assurances that it will be able to recover the original investment amount or an amount greater than our invested capital nor the timing thereof.

Risks Related to Our Strategy

We may not be able to restart refining operations.

The refining operations are currently held in care and maintenance. Should profitable opportunities present themselves there can be no assurance that theCompany would be able to restart refining operations. Further the Company can make no assurances as to its ability or cost thereof to attract necessary staff, obtain working capital lines and re-commission the equipment.

We may be unable to settle the loan raised to fund our operations in India

In April 2013, the Company announced that it had secured a short term financing facility to meet operating costs in India. The lenders required that the equity in the Indian Subsidiary, Mission Biofuels India PL, be held as security in the event that the group does not repay the facility. As at the date of this report the loan is in default and we are working with the lender on a settlement arrangement.If we are unable to negotiate a settlement the lender has the right to enforce their collateral position being security held over all shares in the Indian subsidiary. If this right is enforced we would have no further business interests in India.

We have terminated our joint venture in Indonesia following our joint venture partners breach of material obligations. If we are unable to resolve the dispute we may suffer substantial financial loss.

The Indonesian Joint Venture settlement is in Indonesian arbitration following the breach by the joint venture partner to perform material obligations. If the joint venture partners are unable to determine a way forward the Company may be materially adversely financially effected. The Company can provide no assurances that it will receive adequate compensation following the termination.

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We may be unable to sell our assets for fair market value or sell them at all.

If the Company sells its assets, it may not be able to realize its original investment, nor an amount greater than the current debt obligations of the Company and as such upon the sale of its assets can provide no assurance as to the realization of proceeds for the Company or shareholders. Under the sale agreement of the 100,000 tpa refinery the company entered into a right of first refusal with Felda Global Ventures (FGV) to purchase the second biodiesel refinery that expires on 7 Jan 2014. During this time the presence of such a right of first refusal may inhibit the companies efforts to sell its refinery to a third party. The existence of the right of first refusal can provide no assurance as to the intent of FGV to acquire the second refinery.

We may be unable to continue our business in renewable energy or any other Industry.

If the Company sells all its assets, the company may not be able to find suitable projects to continue business in the renewable sector. If this is the case the company may require shareholder approval to change the Groups strategic direction, may not qualify for ASX listing and may not have sufficient capital beyond settling its obligations to launch any new business activities.

Our future growth will depend on our ability to establish and maintain strategic relationships with distributors and feedstock suppliers.

Our future growth depends on our ability to establish and maintain relationships with third parties, including distributors and feedstock suppliers. We may not be able to establish strategic relationships with third parties on terms satisfactory to us or at all, and any arrangements that we enter into may not result in the type of collaborative relationship with the third party that we are seeking. Further, these third parties may not place sufficient importance on their relationship with us and may not perform their obligations as agreed. Any failure to develop and maintain satisfactory relationships with distributors and feedstock suppliers would have a material adverse effect on our business.

We currently are not generating revenue from operations and thus we may be unable to fund our operational and capital requirements and service our existing indebtedness and we may be unable to obtain adequate financing on favorable terms to meet these needs.

We currently expect that our cash flow will be used to fund operating losses and capital expenditures. Should we become operational we would also require substantial working capital. Additionally, as of the date of this annual report we are required to repay approximately A$25.4million to redeem our outstanding convertible notes in May 2014. We cannot assure you that we will be successful in generating sufficient revenue and we may require financing to meet our needs.

Our ability to access to equity and debt capital and trade financing on favorable terms may be limited by factors such as:

· general economic and market conditions;

· conditions in energy markets;

· credit availability from banks or other lenders for us and our industry peers;

· investor confidence in the industry;

· the operation of our refineries;

· our financial performance; and

· our levels of indebtedness.

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Our ability to access equity capital is limited without shareholder approval and we may be unable to obtain the required shareholder approval to obtain financing in future equity offerings.

Our ability to access equity capital is also limited by ASX Listing Rule 7.1, which provides that a company must not, subject to specified exceptions (including approval by shareholders), issue or agree to issue during any 12-month period any equity securities, or other securities with rights to conversion to equity, if the number of those securities exceeds 25% of the number of securities in the same class on issue at the commencement of that 12-month period. Our ability to issue shares in certain subsequent offerings will be restricted by this 25% annual placement capacity to the extent that we are unable to obtain shareholder approval of the offerings.

Risks Related to Our Industry

A decline in the price of diesel or other fuel sources or an increase in their supply could constrain the selling price of our biodiesel.

Biodiesel prices are influenced by market prices for petroleum diesel, the pricing of which is affected by global and domestic market prices for crude oil. The pricing of petroleum diesel is also subject to typical market movements and decreases when there is an increase in supply in the face of unchanged or decreased demand. To remain competitive, the price of biodiesel tends to decrease as the price of petroleum diesel decreases. As a result, any decline in petroleum prices will likely lead to lower prices for biodiesel. If the price of our inputs, such as palm oil feedstock, is greater than the price of our biodiesel in the market, we will be unable to make profitable sales and we would halt production. We did not operate our refinery for twelve months in fiscal 2013,six months in fiscal 2012, nine months infiscal 2011, nine months in fiscal 2010 and five months in fiscal 2009 due to negative spreads that existed between the potential sales price of biodiesel and the input costs to produce the biodiesel. Declines in the pricing of our biodiesel relative to the cost of the inputs for production may cause us to continue the halt in production in the future which may materially and adversely affect our performance.

The biodiesel industry is a new industry and its continued development is subject to a number of risks and obstacles.

Our primary product is biodiesel. The global biodiesel industry is at an early stage of development and acceptance as compared to petroleum-based fuels. Biodiesel has experienced significant fluctuations in growth during that last five years and demand for biodiesel as our primary product may not grow as rapidly as expected or at all. Biodiesel and the global biodiesel industry, as a whole, also face a number of obstacles and drawbacks, including:

· gelling at lower temperatures than petroleum diesel, which can require the use of low percentage biodiesel blends in colder climates or the use of heated fuel tanks;

· potential water contamination that can complicate handling and long-term storage;

· reluctance on the part of some auto manufacturers and industry groups to endorse biodiesel and their recommendations against the use of biodiesel or high percentage biodiesel blends;

· potentially reduced fuel economy due to the lower energy content of biodiesel as compared with petroleum diesel; and

· potentially impaired growth due to a lack of infrastructure such as dedicated rail tanker cars and truck fleets, sufficient storage facilities, and refining and blending facilities.

Delayed market acceptance of our products may adversely affect our pricing and profitability. The lack of infrastructure to store, ship and distribute our products may also increase our logistical costs and diminish our profitability.

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We may be subjected to new or amended standards for biodiesel from time to time and required to modify our production process or procure alternate or additional feedstock.

New standards may be introduced and existing standards may be amended or repealed from time to time. The production of biodiesel that meets stringent quality standards is complex. Concerns about fuel quality may impact our ability to successfully market and sell our biodiesel. If we are unable to produce biodiesel that meets the industry quality standard, our credibility and the market acceptance and sales of our biodiesel could be negatively affected. In addition, actual or perceived problems with quality control in the industry generally may lead to a lack of consumer confidence in biodiesel. This could result in a decrease in demand or mandates for biodiesel, with a resulting decrease in revenue.

A change to the quality standards for biodiesel in any market in which we sell biodiesel may require us to modify our production process or procure alternate or additional feedstock, which may affect our revenue and expenditure and adversely affect our results of operations..

We face significant competition from existing and new competitors as well as competing technologies and other clean energy sources.

Our primary product is a substitute for mineral diesel and a global commodity and as such is highly cost competitive. There are already many global producers of biodiesel with which we currently compete. While these existing competitors are limited by installed refining capacity, we would expect further new entrants into the market if economic opportunities present themselves thereby increasing competition. In addition to existing and new direct competitors, as a relatively new industry with distribution channels still in the development stage, market forces may limit our access to end markets or make our costs of delivering product to end-users uncompetitive. Our future financial performance and earnings growth may be adversely affected if either of the above occurs.

In addition, new technologies may be developed or implemented for alternative energy sources and products that use such energy sources. Advances in the development of fuels other than biodiesel, or the development of products that use energy sources other than diesel, such as gasoline hybrid vehicles and plug-in electric vehicles, could significantly reduce demand for biodiesel and thus affect our sales. Biodiesel also faces competition from fuel additives that help petroleum diesel burn cleaner and therefore reduce the comparative environmental benefits of biodiesel in relation to petroleum diesel.

Other clean energy sources such as liquefied petroleum gas, hydrogen and electricity from clean sources may be more cost-effective to produce, store, distribute or use, more environmentally friendly, or otherwise more successfully developed for commercial production than our products. These other energy sources may also receive greater government support than our products in the form of subsidies, incentives or minimum use requirements. As a result, demand for our products may decline and our business model may no longer be viable and our results of operations and financial condition may be materially adversely affected. The introduction, increase in the availability or reduction in costs of alternative energy sources may materially and adversely affect the demand for our products and our financial performance.

Any increase in competition arising from an increase in the number or size of competitors or from competing technologies or other clean energy sources may result in price reductions, reduced gross profit margins, loss of our market share and departure of key management, any of which could adversely affect our financial condition and profitability.

Risks Related to Our Ordinary Shares

Unless an active trading market develops for our securities, you may not be able to sell your ordinary shares.

Our ordinary shares were delisted from trading on The NASDAQ Global Market effective July 9, 2012 and currently trade on the OTC Bulletin Board under the symbol “MNELF” and on the Australian Stock Exchange under the symbol “MBT.” Although we are a reporting company, currently there is only a limited trading market for our ordinary shares and a more active trading market may never develop or, if it does develop, may not be maintained. Failure to develop or maintain an active trading market will have a generally negative effect on the price of our ordinary shares, and you may be unable to sell your ordinary shares or any attempted sale of such ordinary shares may have the effect of lowering the market price and therefore your investment could be a partial or complete loss.

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As a foreign private issuer, we follow certain home country corporate governance practices which may afford less protection to holders of our ordinary shares.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices. As a company incorporated in Australia and listed on the Australian Securities Exchange, or ASX, we expect to follow our home country practice with respect to the composition of our board of directors and nominations committee and executive sessions. The corporate governance practice and requirements in Australia do not require us as to have a majority of our board of directors to be independent, do not require us to establish a nominations committee, and do not require us to hold regular executive sessions where only independent directors shall be present. Such Australian home country practices may afford less protection to holders of our ordinary shares.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.

We do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current fiscal year ending June 30, 2013. However, we must make a separate determination each fiscal year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year ending June 30, 2013or any future fiscal year. A non-U.S. corporation will be considered a PFIC for any fiscal year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during the fiscal year) is attributable to assets that produce or are held for the production of passive income. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ordinary shares, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any fiscal year during which a U.S. holder (as defined in “Item 10.E - Additional Information Taxation — U.S. Federal Income Tax Considerations”) holds an ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. holder. See “Item 10.E - Additional Information Taxation — U.S. Federal Income Tax Considerations — Passive Foreign Investment Company Considerations.”

Currency fluctuations may adversely affect the price of our ordinary shares.

Our ordinary shares are quoted in Australian dollars on the ASX and in U.S. dollars on the OTC Bulletin Board. Movements in the Australian dollar/U.S. dollar exchange rate may adversely affect the U.S. dollar price of our ordinary shares. In the past year the Australian dollar has generally appreciated against the U.S. dollar. Any continuation of this trend may positively affect the U.S. dollar price of our ordinary shares, even if the price of our ordinary shares in Australian dollars increases or remains unchanged. However, this trend may not continue and may be reversed. If the Australian dollar weakens against the U.S. dollar, the U.S. dollar price of the ordinary shares could decline, even if the price of our ordinary shares in Australian dollars increases or remains unchanged.

Risks Relating to Takeovers

Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares.

We are incorporated in Australia and are subject to the takeovers laws of Australia. Among other things, we are subject to the Australian Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations Act prohibits the acquisition of a direct or indirect interest in our issued voting shares if the acquisition of that interest will lead to a person’s voting power in us increasing from 20% or below to more than 20%, or increasing from a starting point that is above 20% and below 90%. Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares. This may have the ancillary effect of entrenching our board of directors and may deprive or limit our shareholders’ strategic opportunities to sell their ordinary shares and may restrict the ability of our shareholders to obtain a premium from such transactions.

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Our Constitution and other Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders.

As an Australian company we are subject to different corporate requirements than a corporation organized under the laws of the United States. Our Constitution, as well as the Corporations Act, set forth various rights and obligations that are unique to us as an Australian company. These requirements operate differently than from many U.S. companies and may limit or otherwise adversely affect our ability to take actions that could be beneficial to our shareholders. For more information, you should carefully review the summary of these matters set forth under the section entitled, “Item 10.B — Additional Information — Memorandum and Articles of Association” as well as our Constitution.

Item 4. Information on the Company

A. History and Development of the Company.

Our legal and commercial name is Mission NewEnergy Limited, which was incorporated in Western Australia under the laws of Australia (specifically, the Australian Corporations Act) in November 2005. We are an Australian public company, limited by shares.

In May 2006, we conducted an initial public offering in Australia, raising A$27.0 million, and listed on the Australian Securities Exchange.

In August 2006, we commenced construction of our first biodiesel refinery with a 100,000 tonnes (30 million gallons) per year nameplate capacity at an industrial hub in Port Kuantan, Malaysia along the eastern coast of Malaysia.

In early calendar 2007, we commenced non-food biodiesel feedstock cultivation operations in India. We focused on the cultivation of JatrophaCurcas, or Jatropha, an inedible, low cost dedicated energy crop with the intention to become self-sufficient with respect to our feedstock supply and not in competition with the food supply.

In April 2007, recognizing the need to scale up both our feedstock cultivation and biodiesel production operations, we completed a convertible note offering and raised A$65.0 million in new capital. These funds were raised to fund the expansion of our feedstock cultivation operations in India and the construction of a second larger biodiesel refinery in Port Kuantan with a 250,000 tonnes (75 million gallons) per year nameplate capacity.

In mid-2008, we commenced commercial operations of our first biodiesel refinery, using locally sourced palm oil as feedstock.

Since January 2009, we have raised approximately A$35.1 million in equity capital from institutional investors in private placements to complete the funding requirement for our second biodiesel refinery and provide working capital.

In December 2009, we entered into a long term biodiesel offtake agreement with Valero.

In mid-2010, we received our first commercial quantities of Jatropha oil from our feedstock cultivation operations.

Also in mid-2010, we commissioned our second biodiesel trans-esterification refinery with a 250,000 tonnes (75 million gallons) per year nameplate capacity.

In April 2011, we conducted our initial public offering in the U.S., raising U.S. $25.1 million, and listed on the NASDAQ Global Market.

On January 27, 2012, the Company launched a major re-structure including a reduction in operating expenditure on all fronts, divestment of non-core assets and efforts to raise additional capital. At the same time,the Company announced that it would cease planting further Jatropha acreage and dramatically downscale its field operations.

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On February20, 2012, the Company announced a major initiative with the acquisition of 85% of Oleovest, a special purpose company with a 70% interest in a Joint Venture with PTPN111 (a state owned major palm oil plantation company) to set up a downstream palm oil and oleo-chemical complex in Indonesia.

On May4, 2012, the Company announced the final production runs in its Malaysian refining operation. The refining assets have been put in care and maintenance.

On the July4, 2012, the Company’s ordinary shares were formally delisted from trading on the NASDAQ Global Market.

On July11, 2012, the Company announced that due to failure of material obligations by PTPN111, it had terminated its Joint Venture in Indonesia.

On October 8, 2012, the Company announced that a placement of approximately 15% of its outstanding equity raising approximately US$100,000 before placement costs.

On October 19, 2012, the Company announced that its Indian operations had been significantly downsized and that the Company was focused on divesting its remaining Indian assets.

On November23, 2012, the Company announced that it had successfully completed a substantial restructuring of the convertible notes, with the key changes being the elimination of the 4% pa cash coupon and a change in the conversion ratio from 1:4 to 1:433 ordinary shares.

On February25, 2013, the Company announced that it had secured a US$5million working capital facility, which is to be used to fund the business through the completion of the Company re-structure.

On 17 April 2013, the Company secured a short term financing facility to meet operating costs in India.

On October 11, 2013, the Company completed the sale of its 100,000 tpa refinery to Felda Global Group for US$11.5 million.

As at the date of this report the India working capital loan is in default and we are working with the lender on a settlement arrangement. If we are unable to negotiate a settlement the lender has the right to enforce their collateral position being security held over all shares in the Indian subsidiary. 

We have incurred the following capital expenditures over the last three fiscal years:

	2013 A$’000		2012 A$'000		2011 A$'000
Biodiesel refineries		45		765		2,981
Land & buildings		-		-		-
IT systems & office equipment		5		68		182
Vehicles & sundry equipment		-		-		-

During the 2013 financial year, Mission’s principle capital expenditure primarily relatedto minor capital expenditures at Mission’s refineries.

Our principal office is located at Unit B2, 431 Roberts Rd, Subiaco, Western Australia 6008 Australia. Our telephone number is +61-8-6313-3975. Our website address is www.missionnewenergy.com. Information on our website and websites linked to it do not constitute part of this annual report.

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B. Business Overview.

Recent Developments

The Company is not operating its biodiesel refining segment. The 250,000 tpa refinery is being held in care and maintenance either awaiting a return to positive operating conditions or sale.As part of the ongoing overall Company restructure the Company has sold the 100,000 tpa refinery. As at the date of this report the company’s Indian subsidiary working capital loan is in default and we are working with the lender on a settlement arrangement, if we are unable to negotiate a settlement the lender has the right to enforce their collateral position being security held over all shares in the Indian subsidiary resulting in us having no further business interests in India.

Settlement of the Company’s terminated Indonesian Joint Venture project has been referred to arbitration in Indonesia following a dispute between the former Joint Venture partners over the settlement following the Joint Venture termination. Failing mediation as at the date of this report the arbitration proceedings have moved from mediation to formal hearing.

Overview

Mission NewEnergy is a producer of biodiesel and wholesale biodiesel distribution focused on the government mandated markets of the United States, Europe and Malaysia.

We own atransesterificationrefinery that converts feedstock oil to biodiesel located at Port Kuantan, Malaysia, which has a nameplate capacity of 75 million gallons-per-year. The transesterification process utilized at this facility incorporates leading proprietary technology that allows us to produce biodiesel simultaneously from multiple feedstocks, allowing us to shift in and out of different feedstocks based on feedstock supply, customer demand and market cost dynamics..The transesterification and pre-treatment unit is yet to be handed over to us by the EPCC contractor. As further discussed below, our refinery uses highly efficient second-generation transesterification technology. Our production facility in Kuantan is connected by two-way pipelines to a dedicated jetty 200 meters away at an all-weather, deep sea, international port.Our refinery iscurrently non-operational and being held in care and maintenance.

The Company also owns an 85% stake in OleovestPte Ltd, a company incorporated in Singapore.Oleovest is a special purpose company which has a 70% equity stake in PT Sinergi Oleo Nusantara (“PTSON”), a newly formed joint venture company in Indonesia which is 30% owned by PT Perkebunan Nusantara III (“PTPN III”).Under the Joint Venture Agreement, PTSON was toestablish a new downstream palm oil and oleo-chemical complex at the PTPN III owned SeiMangkei Industrial Zone in North Sumatra, which in the first stage wasexpected to consist of a 600,000 tpa edible oil refinery, a 250,000 tpa Methyl Ester (“biodiesel”) plant and a 100,000 tpa Fatty Alcohol plant. The project had anan estimated cost of US$200 million cost of construction.

Due to failure of material obligations by PTPN111, the Joint Venture in Indonesia was terminated in July 2012. The Company has taken this matter to Arbitration in Indonesia and expects that this will result in the sale of its equity interests, which are to valued at the greater of the invested value US$2.8 million or the market value of the equity interest in the Joint Venture. 

Our Competitive Strengths

We believe that the following strengths enable us to compete successfully in the biofuels industry:

Established Refining Operations

Should the market condition for biodiesel production become profitable, we believe our established operations will allow the Company to react faster than competitors that either need to build or acquire refining assets..

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Second Generation Transesterification Technology

Our refinery based on Axen’s technology makes it potentially an attractive technology for certain retrofit bolt on technology providers. Should such technology providers emerge the Company may be well positioned as partner thereby enabling it to operate its refining asset in a beneficial manor.

Our Strategies

The Company is focused on maximizing shareholder value through operation or divestment of assets.

Malaysian Asset

The Company intends to keep its Malaysian asset in care and maintenance while awaiting a favourable change in operating conditions or if deemed to be economically beneficial to shareholders may sell the asset for an equity position in a related company or for a cash value.

Indonesian Joint Venture

The Company has an 85% stake in a 70% joint venture that is in arbitration to determine the buyout value of the interest. The Company seeks the greater of its initial investment US$2.8 million or the market value of the interest. The Company believes the marketvalue of its interest are substantially greater than US$2.8 million. Depending on the final outcome of the arbitration and negotiations with the Company’s lenders, the Company may be positioned to further invest its awarded sum into new business enterprise.

Corporate Opportunities

The Company will continue to look at other related opportunities and projects on a continued basis, which are expected to create synergies with existing projects to enhance shareholder value.

Biodiesel Production

Refinery overview

Our refinery, Plant II, islocated at Port Kuantan, Malaysia. We constructed and in June 2010 commissioned the transesterification unit of Plant II at the Kuantan facility with a 75 million gallon (250,000 tonne) per year nameplate capacity, using second-generation biodiesel technology developed by Axens, a subsidiary of the French Institute of Petroleum. Plant II has the flexibility to convert a variety of feedstocks to biodiesel. TheAxens’ technology does not require the use of sodium methoxide as catalyst. It employs a solid state, proprietary catalyst with an expected multi-year lifetime to trigger the required transesterification reaction central to the biodiesel production process.

For general market acceptance, biodiesel sold to customers in the United States must meet the technical standards of ASTM D6751-08, which specifies 18 required properties of pure biodiesel (sometimes referred to herein as B100) for use as a blend component with petroleum-based diesel fuel. This standard of ASTM International, an open forum for the development of high-quality, market-relevant international standards, specifies, among other parameters, the maximum amounts of certain residual by-products that can remain in the finished product after the conversion process, including acid, free glycerine, total glycerine, water and sediment content, sulphated ash, total sulphur, carbon residue and phosphorous. The standard also specifies minimum flash point, cetane numbers and copper corrosivity and ASTM has recently revised the standards to include specifications for a Cold Soak Filter Test. The test is intended to replicate performance of the biodiesel in cold climates. Compliance with this standard requires a process that provides for complete transesterification and efficient and thorough separation and purification processes. We are currently installing additional equipment that will enable both our conversion units to meet the U.S. standard ASTMD6751-08. We are contractually required under the offtake agreement with Valero to supply biodiesel that meets the ASTMD6751 standard.

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Biodiesel Conversion Process

The biodiesel conversion process (transesterification) shown in the diagram below is based on the Axens technology utilized in Plant II.

Grey:  Inputs

Light Green:  Saleable by-products

Dark Green:  Saleable primary products

Feedstock (typically palm oil) is pre-treated to remove high molecular-weight (long-chain) fatty acids and other impurities. The treated oil is then reacted with methanol in the presence of a liquid or solid catalyst, and this chemical reaction produces biodiesel (fatty-acid esters of varying molecular weights) and glycerine. The glycerine by-product from the Axens’ production process in Plant II is technical grade glycerine with a purity of 97% and it can be sold at a higher price than crude glycerine without further processing. Plant II has the capacity to produce 25,000 tonnes (7.5 million gallons) per year of this technical grade glycerine and 10,000 tonnes (3 million gallons) per year of fatty acid distillate, another marketable by-product. Both forms of glycerine are marketable by-products for which there is a worldwide market and numerous commercial applications. However, a higher market value is assigned to the higher purity of glycerine. As Plant II has not yet run commercially we have not yet sold any technical grade glycerine.

Quality control

We employ strict quality control procedures at each stage of the manufacturing process.

We have established systematic inspections at various manufacturing stages, from raw material procurement to finished product testing. Raw materials that fail to pass our incoming inspection are returned to suppliers. We believe that we are able to maintain the quality and reliability of our products through close monitoring of our manufacturing processes by our quality control team and scheduled maintenance of our equipment.

To ensure the effectiveness of our quality control procedures, we also provide periodic training to our production line employees. Our quality control team also consists of experienced equipment maintenance technicians that oversee the operation of our production facilities to avoid unintended interruptions and minimize the amount of time required for scheduled equipment maintenance.

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Our management team has implemented policies to proactively safeguard against accidents. In addition, we conduct regular inspections and maintenance of our facilities to help ensure product quality and safety.

Plant Utilization & Operating History

Historic Biofuel Sales

We sell our products via our own direct sale force in the wholesale market. We historically have only sold our biodiesel to oil trading companies. Generally, oil traders aggregate biodiesel, blend it with mineral diesel and sell the blended product to major oil companies who distribute the product via their distribution channel to the end market. Sales to oil trading companies are highly competitive and pricing fluctuates with market conditions. Because we have not historically had control of the costs of our feedstock, there have been few times when we could procure feedstock at a price which we could convert to biodiesel and sell profitably. Consequently, we have not fully utilized our biodiesel production capacity.

The following chart shows actual sales production and utilization of the refining complex.

	2011			2012			2013
Production (tons)		12,149			17,119			NIL
Capacity Utilization		3.5	%		4.9	%		NIL

Subsequent to its commissioning of the transesterification unit, we have not yet used Plant II to produce biodiesel for commercial sales because the full facility is yet to be commissioned.

In fiscal 2013, we did not produce any biodiesel.All previous contract with customershaveexpired.

Refining By-product Sales

We have historically sold our glycerin and fatty acid distillates ex works into the immediate cash payment and delivery market.However such sales have been negatively impacted by our restructuring.

Summary of Historic Sales

The tables below outlines Mission’s historic sales by country and by product:

Indian Operations:
Description	Fiscal Year Ended June 30, 2011		Fiscal Year Ended June 30, 2012		Fiscal Year Ended June 30, 2013
	Indian Rupees ‘000
Agricultural Income		36,250		2,345		-
Wind Mill electricity generation		23,345		24,901		19,658
Crude Jatropha Oil		1,305		—		-
Others		3,801		2,787		1,219
Total		64,701		30,033		20,877

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Malaysian Operations:
Description	Fiscal Year Ended June 30, 2011		Fiscal Year Ended June 30, 2012		Fiscal Year Ended June 30, 2013
	Malaysian Ringgit
Biofuels		40,717,910		82,713,450		482,276
Pure Glycerin		-		114,625		-
Crude Glycerin		369,158		2,181,344		12,399
PFAD		693,904		2,932,160		15,800
Crude Jatropha Oil		146,082		-		-
Total		41,927,054		87,941,579		510,475

Intellectual Property

We have a perpetual license for the life of Plant II for all patents and intellectual property rights relating to Axens’ process technology and engineering design used in construction and operation of that refinery. In connection with the distillation column that we are installing to retrofit our refineries, we will also have a perpetual license for the life of each refinery for the patents and intellectual property rights from the manufacturer.

Competition and Competitive Dynamics

Our primary product, biodiesel, sells in the liquid fuels market. The liquid fuels market is a highly competitive, large global market with many well established market participants.

Historically, there have been many entrants into the biodiesel market in the United States and elsewhere in the world as governments encourage the use of renewable energy and seek to reduce greenhouse gas emissions, thus inviting new entrants into the market. Despite the over capacity of biodiesel refining in much of the world, much of the built capacity is rendered either uneconomic or non-competitive by the limited number of long term offtake agreements, the limited access to necessary working capital and the limited access to sustainable feedstock.

Competitive Forces

We believe the principal competitive factors for biodiesel producers are as follows:

• Scale.   Considerable refining capacity to attract long term significant offtake agreements.

• Pricing.   A producer’s ability to set pricing of products and the ability to use economies of scale to secure competitive cost advantages to be able to price biofuels below prevailing oil prices.

• Technology.  A producer’s ability to produce biodiesel and by-products efficiently and to utilize low cost raw materials.

• Sustainability.   Bearing in mind social responsibility towards the environment, a producer’s ability to produce biodiesel from sustainable feedstock.

• Access to Working Capital & Commodities Risk Management.  A producer’s ability to take advantage of positive spreads depends on having access to working capital.

• Connectivity to Existing Infrastructure.   The distribution of product relies on the ability to fit within the existing infrastructure.

We have developed our long-term business strategy with the above-mentioned competitive forces in mind to meet technical requirements, reach scale, be integrated and have the lowest cost and sustainable product.

Production Safety and Environmental Matters

Safety

We have had no material safety issues since commencement of operations.

Environment

We are committed to environmental protection that complies with or exceeds local environmental standards. Our plant designs have incorporated world class engineering solutions to pollution as listed below:

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• Waste water.   In-house waste treatment plants within our facilities meet the Malaysian standard for discharge. To conserve water resources, we also recycle waste water generated during our production process, which decreases our consumption of water and reduces the discharge of waste water into the environment.

• Exhaust fumes.   We generate exhaust fumes during our production process. Exhaust fumes are treated to comply with Malaysian air quality standards.

• Noise.   We generate noise through the operation of our heating, ventilation and pumping systems. The equipment in the plant is ergonomically designed and sound proofed to operate well below the regulatory standards for noise of 80 decibels.

We have not been subject to any material fines or legal action involving non-compliance with any relevant environmental regulation, nor are we aware of any threatened or pending action, by any environmental regulatory authority.

C. Organizational Structure.

Set forth below is the organizational structure of Mission NewEnergy:

All subsidiaries are 100% owned at June 30, 2013, except Mission Agro Diesel (India) which is 51% owned by us and OleovestPte Ltd, which is 85% owned by us.PT Sinergi Oleo Nusantara is 70% owned by OleovestPte Ltd. Mission Biotechnologies Sdn Bhd and Mission Biofuels Sdn Bhd were incorporated in Malaysia. Mission Agro Energy Limited was incorporated in Mauritius and Mission Biofuels (India) Private Limited and Mission Agro Diesel (India) Private Limited were incorporated in India.

Our refining operations is held by Mission Biofuels Sdn Bhd, which owns the 250,000 tonnes (75 million gallons) per year nameplate capacity.

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Mission Biotechnologies Sdn Bhd is the Malaysian administrative entity and Mission Agro Energy Limitedis a dormant holding company with no operations).

For a list of our wholly-owned and indirectly owned subsidiaries, see Exhibit 8.1 filed hereto.

D. Property, Plant and Equipment.

We own a biodiesel production facility (with a lease for the underlying land) that is located at Port Kuantan, Malaysia.

The following is further information about each facility:

Biodiesel Facility	Site area (Acres)		Total Capacity(1) (million gallons per year)		Capacity Utilization(2) (percentage)			Commissioning Date
Plant II		6.0		75		0	%	Not yet commissioned

(1) Nominal operating capacity.

(2) The total tonnage produced during this period was NILtonnes and the operating nameplate capacity is 75 million gallons for the entire period.

We are in in formal arbitration with KNM over the final payment and commissioning for the Plant II refinery, however, we cannot be certain when the arbitration will be finalized.

Our principal executive and registered administrative offices are located on premises comprising approximately 60 square meters in an office building in Perth, Australia.

We also lease properties for purposes of production, research and development and employee living quarters in Malaysia. All 11.9 acres of the site area in Malaysia are on lease. We also lease and apartment in Kuala Lumpur, Malaysia for use by the operational staff.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

A. Operating Results.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with “Item 3.A — Selected Financial Data” and our consolidated financial statements and related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth under “Item 3.D — Risk Factors” and elsewhere in this annual report. Unless specifically noted, all figures in this section do not take into account and are exclusive of the 50-1 share consolidation that was effected on April 4, 2011.

Overview

Given our going concern opinion from our auditors, history of losses, excess of liabilities over assets and negative cash flows from operating activities as of June 30, 2013, we will need to raise further debt or equity, generate positive cash flows from operations, sell material assets, recover receivables and implement further cost control to meet the Group’s commitments. As announced to the market on the February25,2013, a debt funding package has been obtained from SLW International, LLC (SLW), a substantial convertible note holder, to provide the Group with a US$5 million line of credit facility, which we believe such funds will be more than adequate for 12 months of operating costs.

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We historically have been a producer of biodiesel that integrates sustainable biodiesel feedstock cultivation, biodiesel production and wholesale biodiesel distribution, focused on the government mandated markets of the United States and Europe and Malaysia.

During fiscal 2013, we madea net profit of A$10.1 million (2012: A$6.2 million loss). We generated revenues of A$8.4 million (A$38.2 million) in fiscal 2013. If we are unable to achieve our business strategies and objectives and obtain sufficient financing on acceptable terms in order to meet our future operational needs, there is a significant doubt as to whether we will be able to continue as a going concern.

In fiscal 2013, biodiesel operation continue to be under care and maintenance. The remaining inventories in the plant were sold to generate revenue. Biodiesel refining products contributed 2% of our revenue.The unallocated segment (mostly corporate) contributed 98% from the gain of conversion of convertible notes from Series Two to Series Three.

Biodiesel refining

Our first biodiesel refinery plant began operations in fiscal 2008 under immediate cash payment and delivery market and term contracts. Due to unattractive refining margins, capacity utilization was low and the revenue generated from biodiesel sales has thus far been insufficient to cover costs.

Selling prices (and profit margin) for biodiesel are largely affected by the price of crude oil and the price of feedstock oil. During recent years, crude oil prices have fluctuated significantly as has the price of feedstock oils. We are positioned to operate with a positive contribution margin when the spread between our feedstock oil (primary input cost) and oil prices (primary output value) are greater than our other variable costs. Greater contribution margin per tonne or greater number of tonnes produced drives our profitability.

Our financial performance relies on successfully arranging positive-margin sales contracts for biodiesel. Prior to placing the refineries into care and maintenance, we have been successful in arranging positive-margin sales for immediate cash payment and delivery (i.e. on the spot market).

The production of biodiesel from vegetable oil feedstock (e.g. palm and Jatropha) results in the generation of glycerin and a limited quantity of fatty acids. We can sell these products into the immediate cash payment and delivery market without further processing, although the price varies unpredictably depending on market conditions at the time.

Our cost of goods sold is primarily affected by the cost of feedstock oil and other refining inputs such as light fuel oil and methanol. The principal feedstock for our refinery has historically been palm oil. The price of palm oil can vary as a result of a variety of factors, including weather, market demand and general economic conditions.

The refinery is currently in care and maintenance and therefore NIL revenue is expected in the foreseeable future.

Critical Accounting Policies

Our discussion and analysis of our operating and financial performance and prospects are based upon our consolidated financial statements. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of revenue, assets, liabilities and expenses. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in Note 3 to our audited consolidated financial statements included elsewhere in this annual report. However, critical accounting policies that affect our more significant judgments and estimates used in the preparation of our financial statements are set forth below.

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Sale of goods

We recognize revenue from the sale of goods when reasonable certainty exists that such revenues will be realized and the risks and rewards of ownership have been transferred. In the case of biodiesel sales the transfer of risks and rewards of ownership under Free on Board and Cost Insurance Freight sales contracts occurs when the biodiesel passes the ships flange, i.e. when it is pumped onto the ship directly from our refinery.

Impairment of assets

We assess impairment of assets by evaluating conditions that may lead to impairment of particular assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.

Property, Plant and Equipment

Property, plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of “value in use” (being the net present value of expected future cash flows of the relevant cash generating unit) and “fair value less costs to sell.”

In determining value in use, future cash flows are based on:

· forecast future production and sales levels;

· sales forecasts; and

· forecast future commodity prices.

Value in use is calculated based on the present value of cash flow projections over the anticipated lives of the assets, with the material portion of the assets having anticipated lives of 20 years, with a discount rate for each cash generating unit (e.g., refinery operations) was estimated based on our weighted average cost of capital, adapted for the regions in which the cash generating unit operates.

There is a risk of the actual outcomes being different from those forecast due to changes in economic, market and agricultural conditions and/or assumption regarding events, which may result in the carrying value of biodiesel plants exceeding the recoverable amount.

During fiscal 2010, we announced the completion of our new 250,000 tonnes per annum transesterification plant, in Kuantan Port, Malaysia.However, handover from the EPCC contractor is still pending. The construction of a distillation column within the plant property is materially complete, however pending visibility of sales that require such specifications, the commissioning has been put on hold.

As of December 31, 2009, the value of the refinery assets were carried at their depreciated cost (A$66.9 million) because the forecast profits to be generated by the refineries exceeded their carrying value. This assessment was based on a number of assumptions including forecast oil yields, commodity prices, and volumes.

Palm oil is not presently, and in the future may not be, approved under RFS2. In addition, a key subsidy, called the Biodiesel Blending Tax Credit (being US$1 per gallon), lapsed on December 31, 2009. In December 2010, the subsidy was retroactively reinstated and extended through2013. This tax credit is due to expire in December 2013 and it is not known if it will be extended.

In addition, in July 2010 the European Union introduced, with effect from December 5, 2010, the Renewable Energy Directive, which requires palm-based biodiesel to be based on new sustainability criteria. This will require the use of certified palm oil. Our production facilities have been registered and are compliant with the Renewable Energy Directive, although the majority of our suppliers of the palm oil feedstock that is used in our production facilities have not yet been certified under the Renewable Energy Directive, which would affect our ability to sell palm-based biodiesel to the European Union.

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Despite our efforts to address RFS2 compliance and the Renewable Energy Directive compliance and despite the reinstatement of the Biodiesel Blending Tax Credit, we are required, under International Financial Reporting Standards, to assess the refineries ability to generate revenue based on existing conditions. At the time of assessment, the recent legislative developments and our lack of other contracts or evidence that would indicate profitable sales, forced us to provide for an impairment of the refining assets in fiscal 2010 until the legislative hurdles are cleared or alternative sales contracts are secured. Additional impairment of assets was made in the 2011, 2012and 2013 financial years relating to asset expenditure additions incurred in the year. This accounting write-off is not indicative that the refinery assets cannot produce biodiesel under the required specifications.

A reversal of the impairment value (up to depreciated cost) of our refinery assets would occur if and when the following occurred:

· palm oil is approved as a feedstock source for biodiesel to be produced for the United States;

· we are able to produce palm-based biodiesel complying with the Renewable Energy Directive at a price that would be profitable to us;

· the property plant and equipment is sold; or

· further sales contracts are secured in markets outside of the United States and Europe or Malaysia.

Comparison of Results of Operations

Fiscal 2013compared with fiscal 2012

Revenue. Revenue decreased by A$29.8 million (78% reduction) from A$38.2 million in fiscal 2012 to A$8.4 million in fiscal 2013 principally as a result of discontinued production in the Refining subsidiary and discontinued operations in the Feedstock subsidiary. Biofuel sales decreased by A$27.1 million from A$27.3 million in fiscal 2012 to A$0.2 million in fiscal 2013 and other revenue decreased A$ 2.5 million from A$10.7 million in 2012 to A$8,2 million in 2013. Our refinery operated for NIL months in fiscal 2013 and approximately six months in 2012. We operated at lower than full capacity (NIL% in 2013 and 17% in 2012). The reduction in capacity usage (i.e. volume of biodiesel sales) and revenue is primarily as a result of the closure of the refineries in late fiscal 2012. We do not foresee a change in the revenue position in the foreseeable futures

Of the revenue from external customers in fiscal 2013, the refinery business generated revenue of A$0.2 million (30.6%), with other operations (including wind farm) generating A$0.4 million (69.4%).

Of the other revenue in fiscal 2013, the fair value revenue from biological assets in the feedstock business generated revenue of A$0 (0%), a gain on settlement of convertible note of A$7.7 million (93.9%) was recorded, with sundry income (including interest) generating A$0.5 million (6.1%).

	Fiscal 2012	Fiscal 2013
Plant I	– Plant fully commissioned twelve months – Plant operated  six  months – Yearly capacity utilization of  14%	- Sale agreement of plant signed in April 2013, with sale agreement concluded in October 2013 – Plant operated  NIL  months
Plant II	– In the process of being handed over – No capacity utilization	– In the process of being handed over – No capacity utilization

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Our operating margins are primarily dependent on the relationship between the price of crude palm oil as our feedstock for the month of production and the price of mineral diesel, or the end market price for our refined product. Both the feedstock and refined product are commodities with highly volatile prices.

Cost of sales. (being material feedstocks, inputs and raw materials).Cost of sales for biodiesel are primarily the fair value of the inventory expensed. The remaining inventories carried forward from 1 July 2012 were consistently revalued or devalued to reflect the fair market value at the point of time. Gross profit margin is therefore small as the inventory fair value is very close to the sale or market price.

Expenses. Total expenses decreased by A$33.9 million (76% decrease) from A$44.4 million in fiscal 2012 to A$10.5 million in fiscal 2013 principally due non production of refining operation, reduced manpower and discontinued feedstock operations. Cost of sales decreased A$25.8 million from A$26.2 in fiscal 2012 to A$0.4 million in fiscal 2013. Employee benefits expenses decreased A$1.6million from A$3.2million in fiscal 2012 to A$1.6 million in fiscal 2013. All other expenditures registered a similar reduction trend. On the other hand, net foreign exchange gains/(losses) increased from a gainin fiscal 2012 of A$0.4million to a loss in fiscal 2013 of A$1.4 million.

Additional movements in expenses include:

• Depreciation and amortization.   Depreciation and amortization decreased A$0.3 million to A$7 thousand in fiscal 2013 primarily as the majority of assets were impaired at June, 30 2012.

• Finance costs.   Finance costs have increased by A$0.8 million from A$3.2 million in fiscal 2012 to A$4.0 million for the 2013 fiscal year, primarily as a result of the settlement of the series Two convertible notes to series Three resulting in a higher amortization of equity component.

Impairment.   Due to the sale of the 100,000 tpa, the Company has reflected a reversal of previous asset impairment to the value of the sale, being A$12.2 million.

Income tax.   Income tax expense decreased by A$36 thousand from an expenseof A$16 thousand in fiscal 2012 to an income of A$20 thousand in fiscal 2013.

Profit for the year.   As a result of the foregoing, fiscal 2013 registered a profit before income tax A$10.1 million, an increase of A$16.3 million from A$6.2 million loss in fiscal 2012.

Fiscal 2012 compared with fiscal 2011

Revenue.Revenue increased by A$22.7 million (146%) from A$15.5million in fiscal 2011 to A$38.2 million in fiscal 2012 principally as a result of an increase in biofuel sales (increased A$13.7 million from A$13.6million in fiscal 2011 to A$27.3 million in fiscal 2012) and other revenue (increased A$ 8.8million from A$ 1.9million in 2011to A$10.7 million in 2012). Our refinery operated for approximately sixmonths in fiscal 2012 and approximately three months in 2011. We operated at lower than full capacity (17% in 2012 and 12% in 2011).The increase in capacity usage (i.e. volume of biodiesel sales) and revenue is primarily as a result of the implementation of a biodiesel mandate in Malaysia in fiscal year 2012. Sales of product for the Biodiesel mandate were made to two large petroleum companies operating in Malaysia. The continuedlow overall capacity under-utilization was due to low demand as a result of the negative margin spread which existed between the potential sales price of biodiesel and the input costs to produce the biodiesel or more simply, the cost of producing biodiesel was more expensive than the price the market (other than the mandated market in Malaysia) was prepared to pay for the biodiesel. The change in margin spread is as a direct comparison between the market price of crude palm oil as the key input for biodiesel and the price of ULSD and Gasoil which is closely linked to the price of crude oil. We expect that our revenue will increase from our refining operations if and when margins between the sales price and input costs are profitable, and other income in our feedstock operations if and when we sell more saplings and generate revenue from Jatropha crude oil sales.

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Of the revenue from external customers in fiscal 2012, the refinery business generated revenue of A$27.3 million (99.3%), with interest income generating A$0.2 million (0.7%).

Of the other revenue in fiscal 2012, a gain on settlement of convertible note of A$10.3 million (96.3%) was recorded, with sundry income generating A$0.4 million (3.7%).

Our production capacity for Plant I is 8,333 tonnes per month or 274 tonnes per day. We run the plant to meet scheduled sales orders, which may result in a utilization rate of less than 100% for a given month.

	Fiscal 2011	Fiscal 2012
Plant I	– Plant fully commissioned twelve months – Plant operated three  months – Yearly capacity utilization of 12%	– Plant fully commissioned twelve months – Plant operated  sixmonths – Yearly capacity utilization of  14%
Plant II	– In the process of being handed over – No capacity utilization	– In the process of being handed over – No capacity utilization

Our operating margins are primarily dependent on the relationship between the price of crude palm oil as our feedstock for the month of production and the price of mineral diesel, or the end market price for our refined product. Both the feedstock and refined product are commodities with highly volatile prices.

Cost of sales. (being material feedstocks, inputs and raw materials). Sales contracts for biodiesel sales are primarily “feedstock cost plus” sales contracts, i.e. the Company obtains gross profit above the cost of crude palm oil feedstock. Hence as our cost per ton of crude palm purchased moves (driven by market forces and the commodity price of crude palm oil), so does our revenue increase, and vice versa. This thus generates a feedstock plus margin for Mission, in effect given that feedstock is approximately 85% of the cost of sales, results in a relatively stable gross profit margin regardless of feedstock cost. This gross profit margin is affected by commodity price movements of the remaining commodities required to make biodiesel. Cost of biodiesel increased from A$ 13.4million (includes change in inventory cost) in fiscal 2011 (99% of sales revenue) to A$26.2 million (includes change in inventory cost) in fiscal 2012 (96% of sales revenue) which is primarily attributable to the increase in both volume of biodiesel sales and the underlying sales price driver, being the cost price of crude palm oil.

Expenses. Total expenses increased by A$7.2 million (19%) from A$37.2 million in fiscal 2011 to A$44.4 million in fiscal 2012 principally due the increase in cost of sales from A$13.4 million in fiscal 2011 to A$26.2 million in fiscal 2012. The increase in cost of sales was offset by a reduction in employee benefits expense of A$3.1 million from A$6.3 million in fiscal 2011 to A$3.2 million in fiscal 2012 and a reduction in net foreign exchange gains/(losses) from a loss in fiscal 2011 of A$1.8 million to a gain in fiscal 2012 of A$0.4 million.

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Additional movements in expenses include:

• Impairment of trade receivables.   Impairment of trade receivables increased A$0.2million from A$ NIL in fiscal 2011 to A$0.2 million in fiscal 2012. The reduction reflects the zero value of sales of Jatropha saplings in fiscal 2012 financial year.

• Depreciation and amortization.   Depreciation and amortization remained the same at A$0.3 million in fiscal 2011 year and A$0.3million in fiscal 2012.

• Finance costs.   Finance costs have reduced by A$1.7 million from A$4.9 million in fiscal 2011 to A$3.2 million for the 2012 fiscal year, primarily as a result of the settlement of the series one convertible notes in September 2011

Income tax.   Income tax expense increased by A$17,000 from an income of A$1,000 in fiscal 2011 to an expense of A$16,000 in fiscal 2012.

(Loss) for the year.   As a result of the foregoing, our loss before income tax decreased from A$21.7million in fiscal 2011 to A$6.2 million in fiscal 2012.

Impact of Inflation

We do not believe that inflation has had a material effect on our business.

Effects of Currency Fluctuations

Our reporting currency is the Australian dollar. In accordance with IFRS, costs not denominated in Australian dollars are re-measured in Australian dollars, when recorded, at the prevailing exchange rates for the purposes of our financial statements. Consequently, fluctuations in the rates of exchange between the Australian dollar, Malaysian Ringgit, Indian Rupee and the U.S. dollar affect our results of operations. An increase in the value of a particular currency relative to the Australian dollar will reduce the Australian dollar reporting value for transactions in that particular currency, and a decrease in the value of that currency relative to the Australian dollar will increase the Australian dollar reporting value for those transactions.

The effect of foreign currency translation is reflected in our financial statements in the statements of changes in shareholders’ equity and is reported as accumulated foreign currency translation reserve. We have not entered into any hedging arrangements to mitigate the effects of currency fluctuations.

B. Liquidity and Capital Resources.

Overview

Our operations have been financed primarily from the issuance of convertible notes and equity securities to investors.

The following table sets forth our consolidated cash flows since fiscal 2011.

	2013 A$’000			2012 A$’000			2011 A$’000
Net cash provided by (used in) operating activities		(3,715	)		(4,871	)		(15,089	)
Net cash provided by (used in) investing activities		2,348			(3,968	)		(4,094	)
Net cash provided by (used in) financing activities		1,350			(5,461	)		19,640
Effect of exchange rate changes on cash held in foreign currency		(19	)		(5	)		(1,851	)
Net movement in cash and cash equivalents		(36	)		(14,305	)		(1,394	)
Cash and cash equivalents at the beginning of the year		1,456			15,761			17,155
Cash and cash equivalents at the end of the year		1,420			1,456			15,761

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Fiscal 2013 compared with fiscal 2012

Net cash used in operating activities in fiscal 2013 and 2012 consisted of losses incurred in operations. The losses were incurred in all segments of the business. Due to NIL throughput volume our refining operations generated insufficient gross profit to cover overheads, resulting in a negative cashflow from refining operations. Our Jatrophaoperations, now a discontinued operation, is generating negligible revenue, resulting in negative operating cashflow from the Jatropha segment. As a result of negative operating cashflows in all segments and group overheads, the group was cashflow negative for the years. However, cash used in 2013 was A$3.7 million as opposed to cash used in fiscal year 2012 of A$4.9 million. Lower operating cash outflow is principally a result of less operating activities in fiscal year 2103. Cash generated from sale of assets and borrowings were used to sustain the basic operating expenses including, employees remunerations, insurances and utilities.

Net cash inflow in investing activities related principally to the proceeds received for the sale of property and for our advance monies received relative to the sale of our one refinery.

Net cash inflow in financing activities was A$1.4 million in fiscal 2013. The inflow was primarily from the loan drawdown from SLWI at the parent level and NCEIPL in India.

Fiscal 2012 compared with fiscal 2011

Net cash used in operating activities in fiscal 2012 and 2011 consisted of losses incurred in operations. The losses were incurred in all segments of the business. Due to low throughput volume our refining operations generated insufficient gross profit to cover overheads, resulting in a negative cashflow from refining operations. Our Jatorpha operations,while still in development is generating negligible revenue, resulting in negative operating cashflow from the Jatrophasegment. As a result of negative operating cashflowin all segments and group overheads, the group was cashflow negative for the years. However, cash used in operating activities in 2012 was A$4.9million as opposed to cash used in fiscal year 2011of A$15.1 million. This improvement in cashflow is principally a result of miss match of revenue vs. cost recognition between the two financial years. In fiscal year 2011 the group purchased a material value of inventories for production of biodiesel which was sold in the fiscal year 2012. In addition, the group has significantly reduced the operating costs of the group in the fiscal year 2012 and the interest payment on the convertible notes reduced as a result of settlement of the series one convertible notes in September of 2011, thus no longer attracting interest, and the conversion of a portion of the series two convertible notes, also no longer attracting an interest charge.

Net cash used in investing activities related principally to an advance to a related entity and purchases of property, plant and equipment for our refineries.

Net cash usedin financing activities was A$5.5 million in fiscal 2012. The outflow was primarily for the settlement of the series one convertible note.

Credit terms for receivables

Historically, the receipt of payment for sales to biodiesel customers was required on the date the ship was loaded with biodiesel. Credit risk was managed through the use of letters of credit. However market conditions dictate that future sales to customers may be made on credit terms of up to 60 days, depending on our assessment of customers’ creditworthiness, and we may have to maintain ownership of products during transit to customers which could extend our cash collection cycle well beyond our historical experience and increase our need for working capital.

33

For sales of Jatropha saplings to contract farmers, the receivable arose and was recorded as of the date of delivery of the saplings, with credit risk mitigated by our right to offset the receivable for each farmer against amounts we may owe that farmer for future purchases of seeds. Due to the scale back of operations we have made written off all Jatropha segment receivables.

Convertible Notes

We issued 50,000,000 convertible notes at a price of A$1.30 per note in May 2007 (Series 1 convertible notes). During the 2011 fiscal year, the majority of these notes (75.33%) were restructured into Series 2 Convertible Notes with an extension of the maturity date from May 2012 to May 2014. Holders could convert all or part of the notes at any time until maturity (May 16, 2014) at a conversion price of A$65.00 per note. The series one convertible note, with a nominal value of A$15 million, was due in May 2012. We settled the liability relating to the remaining Series 1 Convertible Note holder in September 2011 for A$5 million after mutual agreement with the note-holder. Each remaining Series 2 note was convertible into four ordinary shares (subject to adjustment for customary events, such as share consolidation). The Series 2 notes carried interest at a rate of 4.0% per annum and interest was payable semi-annually.Mission NewEnergy could convert some or all of the notes at any time if the daily volume weighted average price of Mission NewEnergy’s ordinary shares on the Australian Securities Exchange, or ASX, for a period of 90 consecutive days is 1.5 times the face value of the notes. At no stage during the period have any covenants on these convertible notes been breached.

During 2012, 198,885 convertible notes were converted into ordinary shares.

The remaining Series 2 notes totaling 505,904 convertible notes were convertible into an aggregate of 2,023,616 ordinary shares at a conversion price of A$16.25 per share.

In November 2012 we successfully converted the Series 2 notes into Series 3 notes, bearing NIL interest, and a revised conversion ratio of 1:433 ordinary shares. The Series 3 notes totaling 505,904 convertible notes are convertible into an aggregate of 219,056,432 ordinary shares.

In October 2013 we settled A$7,500,000 of the convertible note debt from proceeds of the sale of our 100,000 tpa refinery, leaving 390,520 notes with a nominal debt value of A$25,383,800 owing.

We are subject to negative covenants under the convertible note deed poll that may impact our ability to undertake additional debt or equity financing. Without noteholders' consent in each instance, we cannot incur total indebtedness in excess of 2.5 times our net worth nor can we issue more than 25% of our share capital in options or convertible notes. In addition, any sale of material assets requires note holders consent. We believe that these are the only material covenants reasonably likely to impact our ability to undertake additional financing. We confirm that we are in compliance with these covenants.

Bank facility

We do not currently have any bank credit facilities.

Secured loans

As of June 30, 2013, we had secured loans of A$ 1.8 million that relate to our windmill in India and a working capital facility from SLW International and Non Conventional Energy Projects India Pvt. Ltd. The loan for the windmill is secured over an office in Mumbai, India. The loan from SLWI is secured over the refineries, Indonesian Joint venture and shares in Mission Agro Energy Ltd. The Loan from non-conventional Energy Projects is secured over the shares in Mission Biofuels India PL.

As of June 30, 2012, we had secured loans of A$ 1.8million that relate to our windmill in India and our office in Kuala Lumpur, Malaysia. The loan for the windmill is secured over an office in Mumbai, India. These loans are recourse only to the assets securing the loans.

34

Other material commitments

Our only material contingent capital expenditure commitment relates to our second biodiesel refinery. In 2007, we entered into an engineering, procurement, construction and commissioning contract, or the EPCC Contract, with KNM Process Systems Sdn Bhd, or KNM.

In March 2012 Mission decided that due to being unable to reach a settlement with KNM Process Systems SDN BHD (“KNM”) as it relates to the handover and final acceptance for Mission’s 250,000 tpa biodiesel plant, the matter has been referred to arbitration.

We cannot be certain when the arbitration process will be finalized. We have secured all approvals and licenses required to operate the second biodiesel refinery. When the transfer of the second biodiesel refinery to us has been properly completed, we would owe KNM approximately 30.5 million Ringgit (A$9.5 million), before any late delivery fees and other costsincurred by us on behalf of KNM and counter claims that may be offset against the outstanding payments. . It is also likely that our counter claims may exceed 30.5 million Ringgit.

Warrants

Over the past three fiscal years, we issued a total of 150 million units (prior to the share consolidation of 50:1) (each comprising one ordinary share and one warrant to purchase one ordinary share at an exercise price of A$15.00 per share). The expiration date is five years from the date of issuance. If at any time on or after April 15, 2012 the preceding 20-trading day volume weighted average price of our ordinary shares on the ASX is at least A$50.00, then Mission NewEnergy may give written notice to each warrant holder that if such holder does not exercise its warrants within 15 days from the date of such notice, then the warrants would expire on the 15th day.

In addition, we have issued 731,492 warrants to placement advisers with a strike price of A$50.00 and A$60.00. At the date of this annual report, all these warrants have lapsed. We have also issued 70,000 warrants in accordance with the shareholder approved employee option plan to senior executives which lapsed on June 30, 2011.

C. Research and Development, Patents and Licenses, etc.

Our expenditure on research and development was Nil, A$11,000, and A$168,000 in fiscal years 2013, 2012 and 2011, respectively.

All research and development expenditures have been expensed through the Profit and Loss.

We have currently suspended all research and development projects.

D. Trend Information.

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our revenue, income, profitability, liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Off-Balance Sheet Arrangements.

Except for amounts potentially due under the EPCC Contract (discussed above) and operating lease commitments disclosed in “Item 5.F — Operating and Financial Review and Prospects — Tabular Disclosure of Contractual Obligations,” we do not have any material off-balance sheet commitments or arrangements.

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F. Tabular Disclosure of Contractual Obligations.

The following table summarizes our contractual obligations and commitments as of June 30, 2013:

	Payments due by period
	Total A$’000		less than 1 year A$’000		1 – 3 years A$’000		3 – 5 years A$’000		more than 5 years A$’000
Operating lease obligations		3,238		181		572		410		2,075
Secured loans		3,234		562		2,672		-		-
Convertible notes		27,404		27,404		—		—		—
Capital commitments		2,614		2,614		—		—		—
Total		36,490		30,761		3,244		410		2,075

Depending on specific market prices for Jatropha relative to our contracted price, Mission Biofuels India has a contractual obligation to buy back all seeds from itscontract farmers delivered to itswarehouse if those warehouses exist at all. At this point in time it is not possible to reasonably estimate what this value could be or if any liability would ever materialize. There is no obligation at the group level.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management.

The following table sets forth information of our directors and executive officers as of the date of this annual report. The directors have served in their respective capacities since their election or appointment and will serve until the next annual general shareholders meeting or until a successor is duly elected.

Name	Age	Position
Dario Amara	58	Chairman
Nathan Mahalingam	56	Chief Executive Officer and Director
Guy Burnett	45	Chief Financial Officer, Director and Company Secretary
DatukZain Yusuf	74	Director
Admiral (Ret) Tan Sri Dato’ Seri Mohd Anwar bin Haji Mohd Nor	63	Director
ArunBhatnagar	69	Director
Peter Torre	41	Director
James Garton	37	Head of Corporate Finance/Mergers and Acquisitions
Samsudeen Ganny	54	Vice President of Refining (joined on July 1, 2011)

Dario Amara. Mr. Amara has been Chairman and a Director of Mission NewEnergy since 2006. Mr. Amara is an engineer with extensive business experience gained over 30 years in the Australian and international markets and across the resources and infrastructure sectors. Mr. Amara is an civil engineer and experienced Chief Executive with extensive business experience gained over 30 plus years in the Australian and international markets; spanning the infrastructure, industrial and property sectors. For the past 17 years he has held CEO, executive leadership and Board positions with major construction and engineering groups. Mr Amara has a record of achievement in establishing, growing and rejuvenating businesses and strategic leadership. He has served as chairman of the Art Gallery of Western Australia, the West Australian Opera Company and Heritage Perth and as a board member of the Perth International Arts Festival. Appointed Chairman March 31, 2006. Board member since March 31, 2006. He is currently a non-executive director of Austal and non-executive chairman of Mission New Energy (ASX listed). Mr. Amara has also served as chairman of the West Australian Opera Company and the Art Gallery of Western Australia, and as a board member of the Perth International Arts Festival. He is a Fellow of the Institution of Engineers Australia.

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Nathan Mahalingam. Mr. Mahalingam has been Chief Executive Officer (formerly having the title of Managing Director) and a Director of Mission NewEnergy since 2005. He has over 25 years of management experience in banking and finance, heavyindustries and infrastructure development. He has successfully implemented numerous startupmanufacturing operations in Malaysia during his tenure of service with a large Malaysianconglomerate. Between 1995 and 2000, he served as project director in the Westport Group,developers of one of Malaysia’s largest privatised port and transhipment facility. Mr. Mahalingam has gained extensive project advisory, corporate finance, mergers and acquisitionsexperience while running his own boutique corporate advisory practice between 2000 and2004.

Guy Burnett. Mr. Burnett has been Chief Financial Officer (formerly having the title of Finance Director) since 2008, a Director since 2009 and Company Secretary of Mission NewEnergy since September 2010. He is a Chartered Accountant and has worked as a financial professional in several large corporations. Prior to joining Mission NewEnergy, Mr. Burnett was Manager, Corporate Accounting & Tax with Western Power (an electricity networks corporation owned by the Western Australian government) from 2006 to 2008 and, before that, worked as a financial accountant for Water Corporation from 2004 to 2005 and served as a Manager with KPMG from 2005 to 2006 where he assisted clients with implementing International Financial Reporting Standards.

DatukZain Yusuf. DatukZain has been a non-executive Director of Mission NewEnergy since 2006. DatukZain has over 25 years experience in Shell Malaysia. From 1986 to 1988, he was seconded to Shell International, United Kingdom and worked as Marketing Consultant in Shell UK and Shell Caribbean. Upon his return to Malaysia, he was made Marketing Director of Shell Malaysia. He subsequently served on the Board of Directors of Shell Group Malaysia as Executive Director, with responsibility over a total of 18 group subsidiaries involved in both the upstream and downstream petrochemical business. DatukZain is a Director of Faber Groupand Malacca Securities Sdn Bhd, immediate past chairman of the Malaysian Australia Business Council and served as a Director of Airod Sdn Bhd, NADI Bhd, PJ Bumi Bhd and as chairman of Confoil (Malaysia) Bhd, a Malaysian - Australian joint venture company in Malaysia.

Admiral (Ret) Tan Sri Dato’ Seri Mohd Anwar bin Haji Mohd Nor (Tan Sri Anwar). Tan Sri Anwar has been a non-executive Director of Mission NewEnergy since 2009. Tan Sri Anwar made history in April 2005 when he became the first naval chief in theMalaysian Armed Forces (MAF) to ascend to its highest military office, the Chief of DefenceForce, commanding a strength of nearly 100,000. With nearly 40 years of military experiencewith the Royal Malaysian Navy (RMN) and MAF, he has acquired a massive portfolio ofachievements.

His outstanding performance extends to the academic arena as well inclusive of stints atthe Naval Staff College (Rhode Island, USA), Navigation and Direction Course and PrincipalWarfare Officers, Course (HMS DRYAD, United Kingdom). He also holds a Master of Sciencein Engineering Business Management from the University of Warwick, United Kingdom.Tan Sri Anwar has received numerous commendations, awards and accolades in recognitionof his talents, and was bestowed the PanglimaMangku Negara (PMN), which carries the titleof ‘Tan Sri’, by His Majesty the Yang Di-PertuanAgong (the King of Malaysia). He has alsoreceived distinguished medals from foreign governments such as the Ordre National De LaLegion D’Honneur from France and the Command of the Legion of Merit from the U.S.Amongst the varied positions he holds in the corporate sector, Tan Sri Anwar also chairs theboard of the Armed Forces Fund Board (LTAT), a multi-billion dollar fund with investments inbanking, plantations, petrol retail and hotels.

ArunBhatnagar. Mr. Bhatnagar, who has been a non-executive Director of Mission NewEnergy since 2009. MrBhatnagar first joined the Company as Chairman of our Indian subsidiary, Mission BiofuelsIndia Pvt Ltd in June 2008. He was the Secretary of the National Advisory Council, a bodytasked with the implementation of the National Common Minimum Program and to provideinputs in the formation of policy and support to the government in its legislative business.During his long tenure with the government since 1966, MrBhatnagar has served as head orin senior positions in various ministries, amongst others the Ministries of Rural Development, Energy, Foodand Personnel. He also served as Minister (Economics) in the Indian HighCommission in UK.

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Peter Torre. Mr. Torre has been a non-executive Director of Mission NewEnergy since September 2010. He was previously joint company secretary of Mission NewEnergy from May 2008 to September 2010. Mr. Torre is the principal of the corporate advisory firm Torre Corporate which providescorporate secretarial services to a range of listed companies. Prior to establishing TorreCorporate, Mr Torre was a partner and Chairman of the National Corporate Services Committeeof an internationally affiliated firm of Chartered Accountants working within its corporateservices division for over nine years. Mr. Torre is the company secretary of several ASX-listedcompanies, a director of Neo Resources Limited and Mineral Commodities Limited and is oneof the founding Directors of the charity organisation, “A Better Life Foundation WA”. Mr Torrewas also formerly a Director of Carbine Resources Limited and CI Resources Limited. MrTorre holds a Bachelor of Business, is a Chartered Accountant, a Chartered Secretary and isa member of the Institute of Company Directors.

James Garton. Mr. Garton has been Head of Corporate Finance and Mergers and Acquisitions since 2008. He has over 10 years experience in corporate finance, working in investment banking. Mr. Garton joined Mission NewEnergy from the U.S. investment bank, FBR Capital Markets, where he was Vice President, Investment Banking. Prior to joining FBR Capital Markets, he worked in corporate finance and equity capital markets with the Australian firm BBY Limited. Before BBY, Mr. Garton worked in private equity with the Australian advisory firm Investment Capital Limited. Mr. Garton has a Masters of Applied Finance from Macquarie University, Sydney, and a Bachelor of Science in Economics and a Bachelor of Business Administration in Finance from Texas A&M University.

Samsudeen Ganny.Mr Gannyjoined as Mission asVice President of Refining in July 2011.His working career spans over a period of 27 years involving engineering, project and business in the palm oil industry. He started as an engineer in the oil mill before moving to an oleochemical sector as a Senior engineer with a Japanese multinational corporation manufacturing fatty alcohols, methylester&glycerine responsible for the construction, commissioning and operations. He then joined Golden Hope Plantations Berhad(now Sime Darby Berhad) a conglomerate in the palm oil industry as a manager in its Engineering Division before rising to theposition of chief engineer for its downstream businesses responsible for both the business and technical aspect of refining operations ( Malaysia, Vietnam & Holland), wood/furniture manufacturing, fruit juice processing, rubber/pvc boots manufacturing ( United Kingdom), vitamin E extraction and MethylesterSulphonates (MES, China) both locally and overseas. He was heading the technical and business due diligence team working with international consultants in the acquisition of a carve-out business of an olechemical giant Cognis, Germany. Prior to joining Mission, he was the general manager for an oleochemical plant manufacturing biodiesel &glycerine responsible for establishing the business and managing the operations. He designed the first the integrated plant first in the country comprising of biodiesel plant, oil mill and biogas plant. He holds a Bachelor of Engineering, Hons (Agricultural) from University of Agriculture, Malaysia (UPM), and is a Professional Engineer registered member of Institute of Engineers, Malaysia (IEM) and Board of Engineers, Malaysia(BEM).

Family Relationships

There are no family relationships between any directors or executive officers of Mission NewEnergy.

Arrangements

There are no known arrangements or understandings with any major shareholders, customers, suppliers or others pursuant to which any of our officers or directors was selected as an officer or director of Mission NewEnergy.

B. Compensation.

In fiscal year 2013, the aggregate remuneration we paid and that accrued to our directors and senior management was A$1.115million.

2013	Short term						Post employment				Proportion of remuneration		Value of options and performance shares as a
	Salary		Non-cash Benefits		Share based payments		Super Contribution		Total		performance related		proportion of remuneration
	A$’000		A$’000		A$’000		A$’000		A$’000		%		%
Non-Executive Directors												-		-
Mr Dario Amara		75		-		-		7		82		-		-
DatukZain Yusuf		57		-		-		1		58		-		-
Mr. Peter Torre		38		-		-		3		41		-		-
Admiral (Ret) Tan Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor		38		-		-		1		39		-		-
MrArunBhatnagar		38		10		-		-		48		-		-
Total Non-executive Directors		246		10		-		12		268		-		-
Mr Nathan Mahalingam		288		-		-		-		288		-		-
Mr Guy Burnett		218		2		-		20		240		-		-
Total Executive Directors		506		2		-		20		528		-		-
Key management personnel
Mr Samsudeen Ganny1		113		-		-		12		125		-		-
DatukAzizan Bin Abd Rahman (non-executive Director of Mission Biofuels and Biotechnologies Sdn Bhd)2		9		-		-		-		9		-		-
Mr James Garton (Group Head of Corporate Finance)		221		-		-		15		236		-		-
Mr Sinnasami Nadason (Group Plantation Advisor)3		20		-		-		-		20		-		-
TOTAL KEY MANAGEMENT PERSONNEL		1,115		12		-		59		1,186		-		-

¹ Mr Ganny joined the group on 1 July 2011 as COO of the Refining operations.

² DatukAzizan Bin Abd Rahman resigned on 21 December 2012.

³ MrNadasan’sresigned when his contract expired on 31 September 2012. 

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In fiscal year 2012, the aggregate remuneration we paid and that accrued to our directors and senior management was A$1.5 million.

2012	Short term						Post employment				Proportion of remuneration			Value of options and performance shares as a
	Salary		Non-cash Benefits		Share based payments		Super Contribution		Total		performance related			proportion of remuneration
	A$’000		A$’000		A$’000		A$’000		A$’000		%			%
Directors												-			-
Mr Dario Amara		100		-		-		9		109		-			-
DatukZain Yusuf		75		-		-		1		76		-			-
Mr Nathan Mahalingam		288		-		-		-		288		-			-
Admiral (Ret) Tan Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor		50		-		-		1		51
MrArunBhatnagar		50		18		-		-		68		-			-
Mr Guy Burnett		218		-		-		20		238		-			-
Mr. Peter Torre		50		-		-		4		54		-			-
Key management personnel
Mr Samsudeen Ganny4		113		-		49		14		176		28	%		28	%
Mr Abu Bakar Bin Jani (non-executive Director of Mission Biofuels and Biotechnologies Sdn Bhd)5		13		-		-		-		13		-			-
DatukAzizan Bin Abd Rahman (non-executive Director of Mission Biofuels and Biotechnologies Sdn Bhd)		19		-		-		-		19		-			-
DatukJaafar Abu Bakar (non-executive Director of Mission Biofuels and Biotechnologies Sdn Bhd)6		3		-		-		-		3		-			-
Mr James Garton (Group Head of Corporate Finance)		272		-		-		17		289		-			-
Mr Sinnasami Nadason (Group Plantation Advisor)		78		-		-		-		78
TOTAL		1,329		18		49		66		1,462		-			-

⁴ Mr Ganny joined the group on 1 July 2011

⁵ Datuk Abu Bakar resigned on the 29 February 2012

⁶ DatukJaafar resigned on 31 August 2011 

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(1) Superannuation is a mandatory retirement plan for employees in Australia.

Share Based Compensation Plans

We have two employee performance and recognition plans pursuant to which our senior executives are granted rights and options to receive our ordinary shares. These two plans are a share option scheme and a performance rights scheme. Our Employee Option Plan allows us to grant options to purchase our ordinary shares to our executive directors and employees. At our annual general meeting in November 2008, our shareholders approved the establishment of a new performance rights scheme, the Executive Performance Rights Plan. A performance right is the right to receive an ordinary share for no issue price, provided certain performance and vesting conditions are satisfied.

In November 2008, shareholders approved the Executive Performance Rights Plan. Subsequently the Board approved the allotment and issuance of a total of 20.75million (pre 50:1 consolidation)performance rights and 3.5 million (pre 50:1 consolidation) options to our senior executives. The performance rights were issued in three tranches with the details of the performance criteria discussed below.

In addition to the formal share based compensation plans for employees, Mission also from time to time engages external parties as consultants or to provide other services, Advisory board members or others and may use share based awards as a component of the compensation for work provided.

Performance Rights

Each performance right gives the holder the right to subscribe for a free ordinary share. To obtain the ordinary share attached to each performance right, the holder must convert the performance right. The amount payable upon conversion is nil. A holder may convert some or all of the performance rights held following satisfaction of the relevant vesting conditions. The ordinary shares allotted to a holder upon conversion will rank paripassu in all respects with other ordinary shares. The performance rights are non-transferable (except in limited circumstances).

The conversion of performance rights into ordinary shares is conditional upon the satisfaction of certain time based and performance hurdles.

The time based rights are granted as set out below:

Tranche Number	Date of Issue	Number of Performance Rights(1)		Vesting Date
1	June 2009		559,999	December 31, 2009
1	June 2009		559,999	June 30, 2010
1	June 2009		560,002	December 31, 2010
2	March 2010		5,000,00	July 1, 2010
2	March 2010		5,000,00	January 1, 2011
2	March 2010		5,000,00	July 1, 2011
3	October 2010		206,668	December 31, 2010
3	October 2010		206,668	June 30, 2011
3	October 2010		206,668	December 31, 2011
Total			17,300,004

(1) Prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011.

The time based rights will vest only if the executive is still employed as an executive on the applicable vesting date, unless there are special reasons for him ceasing to be employed such as illness, injury, disability, redundancy, retirement and other circumstances that may be approved by our Board. The time based rights do not expire.

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The performance based rights are dependent on group performance and are granted as set out below:

Tranche Number	Number of Performance Rights(1)		Vesting Date	Group Performance Criteria
1		840,000	June 30, 2010	Positive group operating cash flow
1		840,000	June 30, 2011	Earnings per share of A$0.06
1		840,000	June 30, 2012	Earnings per share of A$0.15
3		310,000	June 30, 2011	Earnings per share of A$0.06
3		310,000	June 30, 2012	Earnings per share of A$0.15
3		310,000	June 30, 2013	Earnings per share of A$0.15
Total		3,450,000

(1) Prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011.

Performance based rights will vest only upon achievement of the performance targets set by our Board. The June 30, 2010 Tranche 1 performance rights, did not vest because we did not have positive operating cash flow for fiscal 2010 and accordingly these performance rights have lapsed. The June 30, Tranche 2 performance based rights did not vest because our consolidated earnings per share for fiscal 2011 was not at least A$0.06 (prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011) and Tranche 3 will vest on June 30, 2013 if our consolidated earnings per share for fiscal 2013 is at least A$0.15 (prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011). Once vested, performance based rights do not expire.

Options

Each option gave the holder the right to subscribe for one ordinary share. The holder may exercise the option prior to its expiration on the second anniversary of the date on which it was issued. The exercise price for each option was A$0.17 (prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011) and the options held by each holder may be exercised in whole or in part. The ordinary shares allotted to a holder upon exercise of the options will rank paripassu in all respects with other ordinary shares. The options were transferable at the option of the holder and are not subject to any vesting conditions. At June 30, 2012, all options had expired.

Retirement Benefits

All employees employed by Mission NewEnergy and its subsidiaries belong to appropriate retirement schemes for each jurisdiction in which it operates. All such employee retirement schemes are defined contribution schemes and thus no amounts are required to be set aside by us to meet any future retirement benefit obligations.

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C. Board Practices.

Role of the Board of Directors

The Board of Mission is responsible for setting the Company’s strategic direction and providing effective governance over Mission’s affairs in conjunction with the overall supervision of the Company’s business with the view of maximising shareholder value. The Board's key responsibilities are to:

·chart the direction, strategies and financial objectives for Mission and monitor the implementation of those policies, strategies and financial objectives;

·keep updated about the Group’s business and financial status;

·provide oversight and monitor compliance with regulatory requirements, ethical standards, risk management, internal compliance and control, code of conduct, legal compliance and external commitments;

·appoint, evaluate the performance of, determine the remuneration of, plan for the succession of and, where appropriate, remove the Managing Director/Group Chief Executive Officer, the Company Secretary and the Finance Director/Chief Financial Officer;

·exercise due care and diligence and sound business judgment in the performance of those functions and responsibilities; and

·ensure that the Board continues to have the mix of skills and experience necessary to conduct Mission's activities, and that appropriate directors are selected and appointed as required.

The Group has a formal process to educate new directors about the nature of the business, current issues, the corporate strategy, the culture and values of the Group, and the expectations of the Group concerning performance of the directors. In addition directors are also educated regarding meeting arrangements and director interaction with each other, senior executives and other stakeholders. Directors also have the opportunity to visit Group facilities and meet with management to gain a better understanding of business operations. Directors are given access to continuing education opportunities to update and enhance their skill and knowledge.

The Board has adopted a Board Charter, which sets out in more detail the responsibilities of the Board. The Board Charter sets out the division of responsibility between the Board and management to assist those affected by decisions to better understand the respective accountabilities and contribution to Board and management.

In accordance with Mission's Constitution, the Board delegates responsibility for the day–to–day management of Mission to the Managing Director/Group Chief Executive Officer (subject to any limits of such delegated authority as determined by the Board from time to time). Management as a whole is charged with reporting to the Board on the performance of the Company.

Board structure and composition

The Board currently is comprised of seven directors, of which five are independent non–executive directors. Details of each director’s skills, expertise and background are contained within the directors’ report included with the company’s annual financial statements. The Board considers the mix of skills and the diversity of Board members when assessing the composition of the Board. The Board assesses existing and the potential director’s skill to ensure they have appropriate industry expertise in the Group’s operating segments.

Independence, in this context, is defined to mean a non–executive director who is free from any interest and any business or other relationship that could, or could reasonably be perceived to, materially interfere with the directors ability to act in the best interests of Mission. The definition of independence in ASX Recommendation 2.1 is taken into account for this purpose.

A director cannot hold the position of both Chairman and Managing Director/Group Chief Executive Officer.

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Mission's non–executive directors may not hold office for a continuous period in excess of three years or past the third annual general meeting following their appointment, whichever is longer, without submitting for re–election. Directors are elected or re–elected, as the case may be, by shareholders in a general meeting. Directors may offer themselves for re–election. A Director appointed by the directors (e.g., to fill a casual vacancy) will hold office only until the conclusion of the next annual general meeting of Mission but is eligible for re–election at that meeting.

Under Mission's Constitution, voting requires a simple majority of the Board. The Chairman does not hold a casting vote.

Board Diversity

The Board has a formal diversity policy which states that Mission NewEnergy Limited is committed to embedding a corporate culture that embraces diversity through:

• Recruitment on the basis of competence and performance and selection of candidates from a diverse pool of qualified candidates,

• Maintaining selection criteria that does not indirectly disadvantage people from certain groups,

• Provide equal employment opportunities through performance and flexible working practices,

• Maintain a safe working environment and supportive culture by taking action against inappropriate workplace and business behavior that is deemed as unlawful (discrimination, harassment, bullying, vilification and victimization),

• Promote diversity across all levels of the business,

• Undertake diversity initiatives and measuring their success,

• Regularly surveying our work climate, and

• The Board of Directors establishing measurable objectives in achieving gender diversity.

Since the Company’s incorporation, given its cross-jurisdictional operations in Australia, Malaysia and India, a diversity practice is naturally in place.

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Board and management effectiveness

Responsibility for the overall direction and management of Mission, its corporate governance and the internal workings of Mission rests with the Board, notwithstanding the delegation of certain functions to the Managing Director/Group Chief Executive Officer and management generally (such delegation effected at all times in accordance with Mission’s Constitution and its corporate governance policies). The Board has access, at the company’s expense, to take independent professional advice after consultation with the Chairman.

An evaluation procedure in relation to the Board, individual directors and Company executives was completed during the year. The evaluation of the Board as a whole was facilitated through the use of a questionnaire required to be completed by each Board member, the results of which were summarised, discussed with the Chairman of the Board and tabled for discussion at a Board Meeting. Similarly each individual director was required to self assess his performance and discuss the results with the Chairman. Individual directors’ performance is evaluated by reference to the Director’s contribution to monitoring and assessing management performance in achieving strategies and budgets approved by the Board (among other things).

A similar process for review of committees was undertaken during the 2011 and 2012financial year.

To ensure management, as well as Board effectiveness, the Remuneration and Nomination Committee has direct responsibility for evaluating the performance of the Managing Director/Group Chief Executive Officer and other executives.

Internal control, risk management and financial reporting

The Board has overall responsibility for Mission's systems of internal control. These systems are designed to ensure effective and efficient operations, including financial reporting and compliance with laws and regulations, with a view to managing the risk of failure to achieve business objectives. It must be recognized, however, that internal control systems can provide only reasonable and not absolute assurance against the risk of material loss.

The Board reviews the effectiveness of the internal control systems and risk management on an ongoing basis, and monitors risk through the Audit and Risk Management Committee (see the Audit and Risk Management Committee). The Board regularly receives information about the financial position and performance of Mission. For annual and half-yearly accounts released publicly, the Managing Director/Group Chief Executive Officer and the Finance Director/Chief Financial Officer sign-off to the Board:

· the accuracy of the accounts and that they represent a true and fair view, in all material respects, of Missions financial condition and operational results, and have been prepared in accordance with applicable accounting standards; and

· that the representations are based on a system of risk management and internal compliance and control relating to financial reporting which implements the policies adopted by the Board, and that those systems are operating efficiently and effectively in all material respects.

In addition, management has reported to the Board on the effectiveness of the Company’s management of its material business risks.

Internal audit

The Board has employed a permanent internal auditor, who reports directly to the Audit and Risk Committee. The Audit and Risk Committee reviews all material internal audit items and provides guidance where appropriate or required.

Our risk management policy is included in the Corporate Governance section of the Company’s website.

Committees of the Board of Directors

The Board has established two permanent Board committees to assist the Board in the performance of its functions:

·the Audit and Risk Management Committee; and

·the Remuneration and Nomination Committee.

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Each committee has a charter that sets out its purpose and responsibilities. The committees are described further below.

The names of the members of the two committees are set out in the directors’ report contained within the Company’s annual financial statements.

Audit and Risk Management Committee

The purpose of the Audit and Risk Management Committee is to provide assistance to the Board in its review of:

·Mission's financial reporting, internal control structure and risk management systems’;

·the internal and external audit functions; and

·Mission's compliance with legal and regulatory requirements in relation to the above.

The Audit and Risk Management committee has specific responsibilities in relation to Missions' financial reporting process; the assessment of accounting, financial and internal controls; the appointment of the external auditor; the assessment of the external audit; the independence of the external auditor; and setting the scope of the external audit.

The Audit and Risk Management Committee comprises five independent non–executive directors that have diverse and complementary backgrounds. The Chairman of the Audit and Risk Management Committee must be an independent non–executive director.

Messrs. DatukZain Yusuf (Chairman), Amara, Bhatnagar, Torre and Tan Sri Anwar are members of the Audit and Risk Management Committee. All five members of the Audit and Risk Management Committee satisfy the “independence” requirements of Rule 5605 of the NASDAQ Stock Market Marketplace Rules and Rule 10A-3 under the Exchange Act.

Remuneration and Nomination Committee

The purpose of the Remuneration and Nomination Committee is to discharge the Board's responsibilities relating to the nomination and selection of directors and the compensation of the Company's executives and directors.

The key responsibilities of the Remuneration and Nomination Committee are to:

· ensure the establishment and maintenance of a formal and transparent procedure for the selection and appointment of new directors to the Board; and

· establish transparent and coherent remuneration policies and practices, which will enable Mission to attract, retain and motivate executives and Directors who will create value for shareholders and to fairly and responsibly reward executives.

The Remuneration and Nomination Committee comprises five independent non–executive directors. The Chairman of the Remuneration and Nomination Committee must be an independent non–executive director. 

Messrs. Amara (Chairman), DatukZain Yusuf, Torre, Bhatnagar and Tan Sri Anwar are members of the Remuneration and Nomination Committee.

We have a remuneration policy that sets out the terms and conditions for the Managing Director and other senior executives.

Mission Advisory Board

Mission has dissolved its Advisory Board.

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Disclosure policy

Mission is committed to promoting investor confidence and ensuring that shareholders and the market have equal access to information and are provided with timely and balanced disclosure of all material matters concerning the Company. Additionally, Mission recognizes its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act. To assist with these matters, the Board has adopted a Continuous Disclosure and Shareholder Communication Policy.

The Continuous Disclosure and Shareholder Communication Policy allocates roles to the Board and management in respect of identifying material information and coordinating disclosure of that information where required by the ASX Listing Rules.

The Policy also identifies authorized company spokespersons and the processes Mission has adopted to communicate effectively with its shareholders. In addition to periodic reporting, Mission will ensure that all relevant information concerning the Company is placed on its website.

Code of Conduct

The Board has created a framework for managing the Company including internal controls, business risk management processes and appropriate ethical standards.

The Board has adopted practices for maintaining confidence in the Company's integrity including promoting integrity, trust, fairness and honesty in the way employees and directors’ conduct themselves and Mission’s business, avoiding conflicts of interest and not misusing company resources. A formal Code of Conduct has been adopted for all employees and directors of Mission. 

Securities Trading Policy

A Securities Trading Policy has been adopted by the Board to set a standard of conduct, which demonstrates Mission's commitment to ensuring awareness of the insider trading laws, and that employees and directors’ comply with those laws. The Securities Trading Policy imposes additional share trading restrictions on Directors, the Company Secretary, executives and employees involved in monthly financial accounting processes ("specified persons").

Under the Securities Trading Policy, specified persons are only permitted to buy and sell securities if they do not possess non–public price sensitive information and trading occurs outside of specified restricted periods. These periods are the periods commencing on the first day of the month before the end of the half–year or full year period and ending on the next business day after the announcement of the results for that period. In addition, before a specified person can deal in Mission's securities they must obtain clearance from the appropriate officer, confirming that there is no reason why they cannot trade. 

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Ownership of Equity settled Options and Performance rights

The following table sets forth certain information regarding ownership of the Company’s options and performance rights by the officers and directors as of June 30, 2013.

Equity settled Options

	Balance July 1, 2011		Balance June 30, 2012		New issue		Balance June 30, 2013
Directors
Guy Burnett7		-		-		-		-
Executive
James Garton8		-		-		-		-
TOTAL		-		-		-		-

⁷ Grant date was October19, 2009, share price on grant date was $14.25, exercise price is $8.50, fair value at grant date was $7.97, volatility used was 125.35%, risk free rate used was 4.83%, the options expire on June30, 2011. Prices adjusted to reflect the impact of the share consolidation.

⁸ Grant date was June25, 2009, share price on grant date was $9.25, exercise price is $8.5, fair value at grant date was $4.84, volatility used was 138.77%, risk free rate used was 4.16%, the options expire on June30, 2011. Prices adjusted to reflect the impact of the share consolidation.

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Equity settled Performance Rights

	Balance 30/6/2011		New Issue			Exercised			Lapsed			Balance 30/06/2012		New Issue		Exercised		Lapsed		Balance 30/06/2013		Vested and unexercised at 30/06/2013
	No.		No.			No.			No.			No.		No.		No.		No.		No.		No.
Director
Nathan Mahalingam		33,334		-			(33,334	)		-			-		-		-		-		-		-
Guy Burnett		39,334		-			(33,334	)		(6,000	)		-		-		-		-		-		-
													-
Executives																							-
James Garton		39,334		-			(33,334	)		(6,000	)				-		-		-		-		-
Samsudeen Ganny		-		20,000	9		(10,000	)		(10,000	)		-		-		-		-		-		-
Total		112,002		20,000			(110,002	)10		(22,000	)		-		-		-		-		-		-

Performance Rights

The performance conditions of the performance rights were chosen to encourage staff retention and to drive company performance. The achievement of the performance condition is deemed achieved if:

(a)the employee is still in employment within the Group on the vesting date where the performance criteria is for service, and

(b)measured against audited financial results where company performance is the vesting condition.

⁹Grant date was 1 July 2011, share price and fair value on grant date was $4.90.10,000 of the performance rights vest on 31 December 2011 for service and 10,000 vest on 30 June 2011 if the refining operations are cash flow positive for the 2011 financial year.

¹⁰The weighted average exercise price was $5.47 for performance rights exercised in 2011.

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D. Employees.

As of June 30, 2013, we had approximately 10employees. The following table provides a breakdown of our employees by main category of activity and geographic location:

	USA		Australia		Malaysia		India
Finance, legal and other administrative functions		0		2		6		2
Engineering, operations, R&D and information systems		0		0		0		0

Historic Employees

For the fiscal year ended June 30,	USA		Australia		Malaysia		India
2010		-		3		57		367
2011		1		2		65		398
2012		1		1		7		36
2013		-		2		6		2

We believe that our relations with employees are good and we have not experienced any significant labor stoppages or disputes. Our employees are not represented by labor unions or covered by a collective bargaining agreement.

Due to the change in the scope of the Company’s operations, the Company decided to significantly reduce the amount of employees during the fiscal year ended June 30, 2013.

We typically enter into a standard confidentiality and non-competition agreement with our management and research and development personnel. Each of these contracts includes a covenant that prohibits the relevant personnel from engaging in any activities that compete with our business during his or her employment with us and for two years after their employment with us.

Insurance

We have insurance policies covering all normal aspects of our business inline with industry practices.

We believe that our overall insurance coverage is consistent with the market practice or the jurisdiction of operation. However, significant damage to any of our manufacturing facilities and buildings, whether as a result of fire or other causes, could have a material adverse effect on our results of operations. See “Risk Factors — Risks Related to Our Business and Our Industry — We have limited insurance coverage and may incur losses resulting from product liability claims, business interruption or natural disasters.” We also maintain appropriate Directors and Officers Liability Insurance.

E. Share Ownership.

The following table presents certain information regarding the beneficial ownership of our ordinary shares based on total issued ordinary shares of 10,870,275 as of October 7, 2013 by:

• each person known by us through substantial shareholder notices filed with the Australian Securities Exchange and SEC to be the beneficial owner of more than 5% of our ordinary shares;

• each of our directors;

• each of our named executive officers; and

• all of our current directors and executive officers as a group.

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Principle Shareholders(1)	Number of Shares		Percentage
Noble Haus Asia Limited(9)		84,547,147		88.61	%
SLW International LLC(5)		42,636,763		80.06	%
Eastwood Trust(7)		21,136,895		66.04	%
Westcliffe Trust(8)		21,136,895		66.04	%
McDermott Industries Ltd(2)		2,000,000		16.85	%
NadarajaMuthu(3)		1,417,860		13.04	%
Houston International Insurance Group(6)		850,411		7.82	%
Directors and Executive Officers:
Nathan Mahalingam(4)		612,956		5.64	%
James Garton		112,051		1.03	%
Guy Burnett		112,001		1.03	%
Dario Amara		2,000		0.02	%
DatukZain Yusuf		—		—
ArunBhatnagar		—		—
Admiral (Ret) Tan Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor		—		—
Peter Torre		—		—
Samsudeen Ganny		10,000		0.09	%
All directors and executive officers as a group (10 persons)

*	Represents beneficial ownership of less than 1% of the outstanding ordinary shares of Mission NewEnergy.
(1)	Unless otherwise indicated in the footnotes to the table below, the address for each of the persons listed in the table below is Mission NewEnergy Limited, Unit B2, 431 Roberts Rd, Subiaco, Western Australia 6008, Australia.
(2)	McDermott Industries Ltd holds all of their shares as trustee for Lee Swee Eng. Address is Trident Chambers, PO Box 146, Road Town, Tortola, British Virgin Islands. Includes 1,000,000 warrants exercisable within the next 60 days.
(3)	Address of 27 Jalan SS7/4, Petaling Jaya, Selangor, Malaysia, 47301.
(4)	Address of Unit 725, 7th Floor Block A, Kelana Centre Point No 3, Jalan Ss 7/19 47301, Pataling Jaya Selangor, Singapore. Includes 492,957 shares held by Mission Equities Sdn Bhd., a company in which Nathan Mahalingam, Mission NewEnergy’s Chief Executive Officer, has a 34% pecuniary interest in and is considered a beneficial owner of the shares held by Mission Equities Sdn Bhd.
(5)	Address of 7941 Katy Freeway, #529, Houston, Texas, 77024. Includes  (i) 152,195 ordinary shares owned directly by SLW International, LLC (“SLW”), (ii) 100,000 ordinary shares owned by the principal of SLW, Stephen L. Way, in his IRA account with sole power to vote, and (iii) 42,636,763 ordinary shares that would be issuable to SLW upon conversion of the Company’s series 3 notes due May 2014, and (iv) 110,345 ordinary shares that would be issuable to the principal of SLW upon exercise of the Warrants.  Information is based on a Schedule 13G filed with the SEC on May 10, 2013 and amended for convertible note redemption as announced by the company on October 23, 2013.
(6)	Address of 800 Gessner, Suite 600, Houston, Texas, 77024. Includes 850,411 shares of common stock. Information is based on a Schedule 13G filed with the SEC on February 14, 2013.
(7)	Address of 7941 Katy Freeway, #529, Houston, Texas, 77024. Includes  (i) 21,136,895ordinary shares that would be issuable to Eastwood Trust upon conversion of the Company’s series 3 notes. The notes are due and payable in May 2014. Information is based on a Schedule 13G filed with the SEC on May15, 2013 and amended for convertible note redemption as announced by the company on October 23, 2013.
(8)	Address of 7941 Katy Freeway, #529, Houston, Texas, 77024. Includes  (i) 21,136,895ordinary shares that would be issuable to Westcliffe Trust upon conversion of the Company’s series 3 notes. The notes are due and payable in May 2014. Information is based on a Schedule 13G filed with the SEC on May 15, 2013 and amended for convertible note redemption as announced by the company on October 23, 2013.
(9)	Noble Haus Asia Ltd, a British Virgin Islands business company residing at OMC Chambers, Wickhams Cay, 1 Road Town, Tortola, British Virgin Islands  (i) 84,547,147 ordinary shares that would be issuable upon conversion of the Company’s series 3 notes. The notes are due and payable in May 2014

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Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he or she possesses sole or shared voting or investment power of that security, and includes options that are exercisable within 60 days. Information with respect to beneficial ownership has been furnished to us by each director, executive officer or 5% or more shareholder, as the case may be.

Unless otherwise indicated, to our knowledge, each shareholder possesses sole voting and investment power over the ordinary shares listed, subject to community property laws where applicable. None of our shareholders has different voting rights from other shareholders after the closing of this offer.

The numbers of ordinary shares and options shown in the above table and discussed below give effect to the 50-1 share consolidation that was effected on April 4, 2011.

To the best of our knowledge, there have not been any significant changes in the ownership of our ordinary shares by major shareholders over the past three years, except the beneficial ownership of:

• McDermott Industries Ltd became a substantial shareholder in fiscal 2010 and as at November 28, 2011 has a shareholding of 16.85% (excluding dilutive effect of warrants);

• Mission Equities Sdn Bhd decreased from 27.08% at June 30, 2007 to 5.64% as at October 22, 2012; and

• N Muthu increased from 0% to 13.04% on 19 October 2012.

As of October 18, 2013, we had fifty-eight holders of record in the United States with a combined holding of 4,918,257 shares, representing 45.2% of our total outstanding shares as of that date.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders and Related Party Transactions.

See “Item 6.E—Directors, Senior Management and Employees—Share Ownership.”

B. Related Party Transactions.

Other than as disclosed below, from July 1, 2012through to June 30, 2013, we did not enter into any transactions or loans between us and any (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with us; (b) associates; (c) individuals owning, directly or indirectly, an interest in our voting power that gives them significant influence over us, and close members of any such individual’s family; (d) key management personnel and close members of such individuals’ families; or (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly by any person described in (c) or (d) or over which such person is able to exercise significant influence. Refer to note 31 of the financial statements included at the end of this report for details of any related party transactions.

Loans

From time to time, we have made loans to or received loans from our wholly owned subsidiaries, including Mission Biotechnologies Sdn Bhd, Mission Biofuels Sdn Bhd and Mission Agro Energy Limited. Loans are repaid regularly and are given on interest free terms.

Refer to note 31 of the financial statements included at the end of this report for details of intercompany loans at June 30, 2013 and June 30, 2012 respectively.

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Management rights with subsidiaries

During fiscal 2012, Mission NewEnergy received management fees from both Mission Biotechnologies Sdn Bhd, a 100% owned subsidiary company, in the amount of A$627,000, and Mission Biofuels Sdn Bhd, a 100% owned subsidiary company, in the amount of A$940,000. These transactions were on commercial terms and conditions no more favorable than those available to other parties. There were no management fees charged in fiscal year 2013.

From time to time, we have been involved in transactions with wholly owned and controlled subsidiaries. Such transactions between related parties are on commercial terms and conditions no more favorable than those available to other parties.

Ir Lee Swee Eng

Ir Lee Swee Eng, a Malaysian citizen, is the founding member and the Group Managing Director of KNM, a public company listed on the Main Board of the Bursa Securities Malaysia Berhad. KNM is Mission’s equipment, procurement, construction and commissioning contractor in respect of the Company’s second biodiesel refinery in Malaysia.

On November 17, 2009, Mission issued 1,000,000 units comprising ordinary shares and warrants to Ir Lee Swee Eng. Consideration per share was US$7.25 and the warrants have an exercise price of A$15.00 per share. As part of the placement of units, Ir Lee Swee Eng was able to appoint one executive director to the Board as well as an alternate director.Mission and KNM Group have agreed that Ir LeeSwee Eng is a related party and as such Ir Lee Swee Eng has a conflict of interest, which until such time as the arbitration between KNM and Mission is resolved. Mission is not supportive of the appointment of Ir Lee SweeEng's nominated director.

The expiration date for the warrants is April 28, 2014. If all warrants are exercised, an additional A$15 million will be raised. If at any time on or after April 15, 2012 the immediately preceding 20 trading day volume weighted average price of Mission’s shares is at least A$1.00 (prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011), Mission may give written notice to Ir Lee Swee Eng that if he does not exercise his warrants within 15 days from the date of such notice, then the warrants would expire on that 15 th day.

The rights attaching to the shares issued to Ir Lee Swee Eng are the same as those attaching to the Company’s currently issued shares.

McDermott Industries Ltd, which holds all of their shares as trustee for Ir Lee Swee Eng, could hold up to 16.85% of Mission if all of Ir Lee SweeEng’s warrants were exercised.

Ir Lee Swee Eng was not paid any compensation or granted any benefits in kind (including contingent or deferred compensation accrued for the year) by Mission for the fiscal year ended June 30, 2013.

During the last 3 years from the date of this annual report, KNM has been paid a total of 91.5 million Malaysian Ringgit (US$28.2 million) pursuant to its equipment, procurement, construction and commissioning contractor with Mission in respect of the Company’s second biodiesel refinery in Malaysia.

C. Interests of Experts and Counsel.

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information.

Our consolidated financial statements are set out in Item 18 of this annual report.

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Legal Proceedings

Other than disclosed below, we are not involved in any significant legal proceedings.

A subsidiary within the group has terminated a JV agreement in Indonesia and is in discussion with the JV party to determine an appropriate way forward. This may result in an inflow greater than the value invested, however at this stage it is not possible to quantify this value.

A subsidiary of the company has received various claims for payments from the contractor liable to complete the construction of Missions 250,000 tpa refinery. The subsidiary company disputes these claims and has counter claimed on various matters. In addition the subsidiary company has submitted that all these matters should be heard as part of the arbitration proceedings. These may result in an outflow or inflow of cash resources to the company however it is not possible to quantify this value.

Dividend Distributions

We have never declared or paid any cash dividends on our ordinary shares and we do not anticipate paying any cash dividends in the foreseeable future. Our Board’s current intention is to reinvest any income in the continued development and operation of our business.

Except as permitted by the Corporations Act, under our Constitution dividends may only be paid out of our profits.

Payment of cash dividends, if any, in the future will be at the discretion of our Board or, if our directors do not exercise their power to issue dividends, our shareholders in a general meeting may exercise the powers.

Even if our Board decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial conditions, contractual restrictions and other factors that the Board may deem relevant.

B. Significant Changes.

Except as disclosed elsewhere and below in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

Item 9. The Offer and Listing

A. Offer and Listing Details.

The following tables present, for the periods indicated, the high and low market prices for our ordinary shares reported on the ASX (symbol: “MBT”) and the NASDAQ (symbol: MNEL) and the OTC Bulletin Board (symbol: MNELF) for the periods indicated. Our ordinary shares were delisted from trading on the Nasdaq on July 9, 2012. All prices for the ASX values are in Australian dollars and do not give effect to the 50-1 share consolidation that became effective on April 4, 2011. All prices for the NASDAQ and OTC are in US Dollars.

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	OTC Bulletin Board				NASDAQ				ASX
	High		Low		High		Low		High		Low
Fiscal year ended	US$		US$		US$		US$		A$		A$
June 30, 2013
First Quarter		0.12		0.02		-		-		0.09		0.07
Second Quarter		0.03		0.03		-		-		0.05		0.05
Third Quarter		0.01		0.01		-		-		0.02		0.02
Fourth quarter (through October 18, 2012)		0.06		0.05		-		-		0.05		0.05
June 30, 2012
First Quarter		-		-		2.54		0.48		4.03		0.50
Second Quarter		-		-		0.49		0.11		0.60		0.11
Third Quarter		0.14		0.06		-		-		0.11		0.06
Fourth quarter (through October 24, 2012)		0.07		0.06		-		-		0.08		0.07
June 30, 2011
First Quarter		-		-		-		-		0.29		0.19
Second Quarter		-		-		-		-		0.20		0.17
Third Quarter		-		-		-		-		0.24		0.17
Fourth Quarter		-		-		8.15		5.46		8.50		4.90
Month ended
April 2013		0.03		0.03		-		-		0.03		0.03
May 2013		0.04		0.04		-		-		0.02		0.02
June2013		0.02		0.02		-		-		0.02		0.02
July 2013		0.01		0.01		-		-		0.02		0.02
August 2013		0.02		0.02		-		-		0.02		0.02
September 2013		0.02		0.02		-		-		0.01		0.01
October 2013 (through October 18 2013)		0.06		0.05		-		-		0.05		0.05
Fiscal year ended June 30,
2013 (through October 4, 2013)		0.02		0.02		-		-		0.05		0.05
2012		0.07		0.06		-		-		0.08		0.07
2011		-		-		8.15		5.46		8.50		0.17
2010		-		-		-		-		0.51		0.16
2009		-		-		-		-		0.81		0.16
2008		-		-		-		-		1.58		0.57

B. Plan of Distribution.

Not applicable.

C. Markets.

See “Item 9.A—The Offer and Listing—Offer and Listing Details.”

D. Selling Shareholders.

Not applicable.

E. Dilution.

Not applicable.

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F. Expenses of the Issue.

Not applicable.

Item 10. Additional Information

A. Share Capital.

Not applicable.

B. Memorandum and Articles of Association.

Our Constitution

We are a public company limited by shares registered under the Corporations Act by the Australian Securities and Investments Commission, or ASIC. Our constituent document is a Constitution, which is similar in nature to the by-laws of a company incorporated under the laws of a U.S. state. Our Constitution does not provide for or prescribe any specific objectives or purposes of Mission NewEnergy. Our Constitution is subject to the terms of the ASX Listing Rules and the Corporations Act. Our Constitution may be amended or repealed and replaced by special resolution of shareholders, which is a resolution passed by at least 75% of the votes cast by shareholders entitled to vote on the resolution.

Under Australian law, a company has the legal capacity and powers of an individual both inside and outside Australia. The material provisions of our Constitution are summarized below. This summary is not intended to be complete, nor to constitute a definitive statement of the rights and liabilities of our shareholders and is qualified in its entirety by reference to the Constitution, which is available on request.

Directors

Interested Directors

Except where permitted by the Corporations Act, a director may not vote in respect of any contract or arrangement in which the director has, directly or indirectly, any material interest according to our Constitution. Such director must not be counted in a quorum, must not vote on the matter and must not be present at the meeting while the matter is being considered.

Unless a relevant exception applies, the Corporations Act requires directors of Mission NewEnergy to provide disclosure of certain interests and prohibits directors of companies listed on the ASX from voting on matters in which they have a material personal interest and from being present at the meeting while the matter is being considered. In addition, the Corporations Act and the ASX Listing Rules require shareholder approval of any provision of related party benefits to our directors.

Directors’ Compensation

Our directors are paid remuneration for their services as directors, which is determined in a general meeting of shareholders. The aggregate, fixed sum for directors’ remuneration is to be divided among the directors in such proportion as the directors themselves agree, and in accordance with our Constitution. The fixed sum remuneration for directors may not be increased except at a general meeting of shareholders and the particulars of the proposed increase are required to have been provided to shareholders in the notice convening the meeting. In addition, executive directors may be paid remuneration as employees of Mission NewEnergy.

Pursuant to our Constitution any director who devotes special attention to our business or who otherwise performs services which in the opinion of our Board are outside the scope of the ordinary duties of a director may be paid extra remuneration which is determined by the Board.

In addition to other remuneration provided in our Constitution, all directors are entitled to be paid by us for reasonable travel accommodation and other expenses incurred by the directors in attending company meetings, board meetings, committee meetings or while engaged on our business.

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Additionally in accordance with our Constitution, a director may be paid a retirement benefit as determined by the Board subject to the limits set out in the Corporations Act and the ASX Listing Rules.

Borrowing Powers Exercisable by Directors

Pursuant to our Constitution, the management and control of our business affairs are vested in our Board. The Board has the power to raise or borrow money. The Board may also charge any of our property or business or any uncalled capital and may issue debentures or give any other security for any of our debts, liabilities or obligations or of any other person, in each case, in the manner and on terms it deems fit.

Retirement of directors

Pursuant to our Constitution, one third of directors other than the director who is the Chief Executive Officer, must retire from office at every annual general meeting. If the number of directors is not a multiple of three then the number nearest to but not less than one third must retire from office. The directors who retire in this manner are required to be the directors or director longest in office since last being elected. A director, other than the director who is the Chief Executive Officer, must retire from office at the conclusion of the third annual general meeting after which the director was elected.

Share Qualifications

Our Constitution provides that we may fix a share qualification for our directors in general meeting. However, there are currently no requirements for directors to own our shares in order to qualify as directors.

Rights and Restrictions on Classes of Shares

Subject to the Corporations Act and the ASX Listing Rules, rights attaching to our shares are detailed in our Constitution. Our Constitution provides that any of our shares may be issued with preferred, deferred or other special rights, whether in relation to dividends, voting, return of share capital, payment of calls or otherwise as the Board may determine from time to time. Except as provided by contract or by our Constitution to the contrary, all unissued shares are under the control of the Board which may grant options on the shares, allot or otherwise dispose of the shares on the terms and conditions and for the consideration it deems fit. Currently our outstanding share capital consists of only one class of ordinary shares.

Dividend Rights

The Board may from time to time determine to pay dividends to shareholders. All unclaimed dividends may be invested or otherwise made use of by the Board for our benefit until claimed or otherwise disposed of in accordance with our Constitution.

Voting Rights

Under our Constitution, each shareholder has one vote determined by a show of hands at a meeting of the shareholders. On a poll vote each shareholder shall have one vote for each fully paid share and a fractional vote for each share which is not fully paid, such fraction being equivalent to the proportion of the amount which has been paid to such date on that share. Under Australian law, shareholders of a public company are not permitted to approve corporate matters by written consent. Our Constitution does not provide for cumulative voting.

Right to Share in our Profits

Subject to the Corporations Act and pursuant to our Constitution, our shareholders are entitled to participate in our profits only by payment of dividends. The Board may from time to time determine to pay dividends to the shareholders, however no dividend is payable except out of our profits. A declaration by the Board as to the amount of our profits is conclusive.

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Rights to Share in the Surplus in the Event of Liquidation

Our Constitution provides for the right of shareholders to participate in a surplus in the event of our liquidation. In certain circumstances, any division may be otherwise than in accordance with the legal rights of the contributories, and in particular, any class may be given preferential or special rights or may be excluded altogether or in part from participation in a surplus in the event of liquidation.

Redemption Provisions

There are no redemption provisions in our Constitution in relation to ordinary shares. Under our Constitution and subject to the Corporations Act, any preference shares may be issued on the terms that they are, or may at our option be, liable to be redeemed.

Sinking Fund Provisions

There are no sinking fund provisions in our Constitution in relation to ordinary shares.

Liability for Further Capital Calls

According to our Constitution, the Board may make any calls from time to time upon shareholders in respect of all monies unpaid on partly-paid shares, subject to the terms upon which any of the partly-paid shares have been issued. Each shareholder is liable to pay the amount of each call in the manner, at the time, and at the place specified by the Board. Calls may be made payable by installment.

Provisions Discriminating Against Holders of a Substantial Number of Shares

There are no provisions under our Constitution discriminating against any existing or prospective holders of a substantial number of our shares.

Variation of Share Rights

Our Constitution provides that, unless otherwise provided by the terms of issue of the shares of such class, the rights attaching to any class of shares may, subject to the ASX Listing Rules, be varied with the consent in writing of members with at least 75% of the votes in the class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of such class. These conditions are not more significant than that required by the Corporations Act.

General Meetings of Shareholders

General meetings of shareholders may be called by the Board. Except as permitted under the Corporations Act, shareholders may not convene a meeting. Under the Corporations Act, shareholders with at least 5% of the votes which may be cast at a general meeting may call and arrange to hold a general meeting. The Corporations Act requires the directors to call and arrange to hold a general meeting on the request of shareholders with at least 5% of the votes that may be cast at a general meeting or at least 100 shareholders who are entitled to vote at the general meeting. Twenty-eight days notice of the proposed meeting of our shareholders is required under the Corporations Act.

According to our Constitution, the chairman of the general meeting may refuse admission to or exclude from the meeting, any person who is in possession of a picture recording or sound recording device, in possession of a placard or banner, in possession of an object considered by the chairman to be dangerous, offensive or liable to cause disruption, any person who refuses to produce or permit examination of any object, any person who behaves or threatens to behave in a dangerous, offensive or destructive manner, or any person who is not a director or one of our auditors, one of our shareholders or a proxy, attorney or representative of one of our shareholders.

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Foreign Ownership Regulation

There are no limitations on the rights to own securities imposed by our Constitution. However, acquisitions and proposed acquisitions of shares in Australian companies may be subject to review and approval by the Australian Federal Treasurer under the Foreign Acquisitions and Takeovers Act 1975 (Commonwealth of Australia). Generally this Act applies to acquisitions or proposed acquisitions:

• by a foreign person, as defined in the Foreign Acquisitions and Takeovers Act, or associated foreign persons which would result in such persons having an interest in 15% or more of the issued shares of, or control of 15% or more of the voting power in, an Australian company; and

• by non-associated foreign persons which would result in such foreign person having an interest in 40% or more of the issued shares of, or control of 40% or more of the voting power in, an Australian company.

The Australian Federal Treasurer may prevent a proposed acquisition in the above categories or impose conditions on such acquisition if the Treasurer is satisfied that the acquisition would be contrary to the national interest. If a foreign person acquires shares or an interest in shares in an Australian company in contravention of the Act, the Australian Federal Treasurer may order the divestiture of such person’s shares orinterest in shares in the company. The Australian Federal Treasurer may order divestiture pursuant to the Act if he determines that the acquisition has resulted in that foreign person, either alone or together with other non-associated or associated foreign persons, controlling the company and that such control is contrary to the national interest.

Ownership Threshold

There are no provisions in our Constitution that require a shareholder to disclose ownership above a certain threshold. The Corporations Act, however, requires a substantial shareholder to notify us and the Australian Securities Exchange once a 5% interest in our shares is obtained. Further, once a shareholder owns a 5% interest in us, such shareholder must notify us and the Australian Securities Exchange of any increase or decrease of 1% or more in its holding of our shares. Such major shareholders are also required to file a notice with the SEC on Schedule 13D or Schedule 13G.

Issues of shares and Change in Capital

Subject to our Constitution, the Corporations Act, the ASX Listing Rules and any other applicable law, we may at any time issue shares and grant options or warrants on any terms, with preferred, deferred or other special rights and restrictions and for the consideration and other terms that the directors determine. Our power to issue shares includes the power to issue bonus shares (for which no consideration is payable to Mission NewEnergy), preference shares and partly paid shares.

Subject to the requirements of our Constitution, the Corporations Act, the ASX Listing Rules and any other applicable law, including relevant shareholder approvals, we may consolidate or divide our share capital into a larger or smaller number by resolution, reduce our share capital (provided that the reduction is fair and reasonable to our shareholders as a whole, and does not materially prejudice our ability to pay creditors) or buy-back our shares whether under an equal access buy-back or on a selective basis.

Change of Control

Takeovers of listed Australian public companies, such as Mission NewEnergy, are regulated by, amongst other things, the Corporations Act which prohibits the acquisition of a relevant interest in issued voting shares in a listed company if the acquisition will lead to that person’s or someone else’s voting power in the company increasing from 20% or below to more than 20% or increasing from a starting point that is above 20% and below 90%, subject to a range of exceptions.

Generally, and without limitation, a person will have a relevant interest in securities if they:

• are the holder of the securities;

• have power to exercise, or control the exercise of, a right to vote attached to the securities; or

• have the power to dispose of, or control the exercise of a power to dispose of, the securities (including any indirect or direct power or control).

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If at a particular time a person has a relevant interest in issued securities and the person:

• has entered or enters into an agreement with another person with respect to the securities;

• has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities; or

• has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities,

and the other person would have a relevant interest in the securities if the agreement were performed, the right enforced or the option exercised, the other person is taken to already have a relevant interest in the securities.

There are a number of exceptions to the above prohibition on acquiring a relevant interest in issued voting shares above 20%. In general terms, some of the more significant exceptions include:

• when the acquisition results from the acceptance of an offer under a formal takeover bid;

• when the acquisition is conducted on market by or on behalf of the bidder under a takeover bid and the acquisition occurs during the bid period;

• when shareholders of the company approve the takeover by resolution passed at general meeting;

• an acquisition by a person if, throughout the 6 months before the acquisition, that person, or any other person, has had voting power in the company of at least 19% and as a result of the acquisition, none of the relevant persons would have voting power in the company more than 3 percentage points higher than they had 6 months before the acquisition;

• as a result of a rights issue;

• as a result of dividend reinvestment schemes;

• as a result of underwriting arrangements;

• through operation of law;

• an acquisition which arises through the acquisition of a relevant interest in another listed company;

• arising from an auction of forfeited shares; or

• arising through a compromise, arrangement, liquidation or buy-back.

Breaches of the takeovers provisions of the Corporations Act are criminal offences. ASIC and the Australian Takeover Panel have a wide range of powers relating to breaches of takeover provisions including the ability to make orders canceling contracts, freezing transfers of, and rights attached to, securities, and forcing a party to dispose of securities. There are certain defenses to breaches of the takeovers provisions provided in the Corporations Act.

Proportional Takeovers

Our Constitution indicates that where offers to purchase our shares have been made under a proportional takeover scheme, we are prohibited from registering, other than where a transfer is effected in accordance with the takeover provisions (if any) under the ASTC Settlement Rules, a transfer which would give effect to the contract resulting from the acceptance of such an offer unless and until a resolution to approve the proportional takeover scheme is approved at a meeting by the persons entitled to vote on such resolution. The offeror or an associate of the offeror is not entitled to vote on such resolution. A person, other than an offeror or associate of the offeror, who, as at the end of the day in which the first offer under the proportional takeover scheme was made, held shares in that class of shares, is entitled to one vote for each of the shares held in that class.

Access to and Inspection of Documents

Inspection of our records is governed by the Corporations Act. Any member of the public has the right to inspect or obtain copies of our registers on the payment of a prescribed fee. Shareholders are not required to pay a fee for inspection of our registers or minute books of the meetings of shareholders. Other corporate records including minutes of directors meetings, financial records and other documents are not open for inspection by shareholders. Where a shareholder is acting in good faith and an inspection is deemed to be made for a proper purpose, a shareholder may apply to the court to make an order for inspection of our books.

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C. Material Contracts.

We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4—Information on the Company” or elsewhere in this annual report on Form 20-F.

D. Exchange Controls.

Under existing Australian legislation, the Reserve Bank of Australia does not prohibit the import and export of funds, and generally no governmental permission is required for us to move funds in and out of Australia. However, for the movement of funds to and from “tax havens,” as specified by current regulations, a tax clearance certificate must be obtained. The United States is not a declared tax haven. Accordingly, at the present time, remittances of any dividends, interest or other payments by us to non-resident holders of our securities in the United States are not restricted by exchange controls.

E. Taxation.

The following is a summary of material U.S. federal and Australian income tax considerations to U.S. holders, as defined below, of the acquisition, ownership and disposition of ordinary shares. This discussion is based on the laws in force as at the date of this annual report, and is subject to changes in the relevant income tax law, including changes that could have retroactive effect. The following summary does not take into account or discuss the tax laws of any country or other taxing jurisdiction other than the United States and Australia. Holders are advised to consult their tax advisors concerning the overall tax consequences of the acquisition, ownership and disposition of ordinary shares in their particular circumstances. This discussion is not intended, and should not be construed, as legal or professional tax advice.

This summary does not describe U.S. federal estate and gift tax considerations, or any state and local tax considerations within the United States, and is not a comprehensive description of all U.S. federal or Australian income tax considerations that may be relevant to a decision to acquire or dispose of ordinary shares. Furthermore, this summary does not address U.S. federal or Australian income tax considerations relevant to holders subject to taxing jurisdictions other than or in addition to the United States and Australia, and does not address all possible categories of holders, some of which may be subject to special tax rules.

U.S. Federal Income Tax Considerations

In this section, we discuss material U.S. federal income tax considerations applicable to an investment in ordinary shares by a U.S. holder, as defined below, that will hold the ordinary shares as capital assets within the meaning of Section 1221 of the Code. We do not discuss the tax consequences to any particular holder nor any tax considerations that may apply to holders subject to special tax rules, such as banks, insurance companies, individual retirement and other tax-deferred accounts, regulated investment companies, individuals who are former U.S. citizens or former long-term U.S. residents, dealers in securities or currencies, tax-exempt entities, persons subject to the alternative minimum tax, persons that hold ordinary shares as a position in a straddle or as part of a hedging, constructive sale or conversion transaction for U.S. federal income tax purposes, persons that have a functional currency other than the U.S. dollar, persons that own (directly, indirectly or constructively) 10% or more of our equity or persons that are not U.S. holders.

In this section, a “U.S. holder” means a beneficial owner of ordinary shares that is, for U.S. federal income tax purposes:

• an individual who is a citizen or resident of the United States for U.S. federal income tax purposes;

• a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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• a trust (i) the administration of which is subject to the primary supervision of a court in the United States and for which one or more U.S. persons have the authority to control all substantial decisions or (ii) that has an election in effect under applicable income tax regulations to be treated as a U.S. person.

As used in this section, a “non-U.S. holder” is a beneficial owner of ordinary shares that is not a U.S. holder or an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds ordinary shares, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. Partners of partnerships that will hold ordinary shares should consult their tax advisors.

You are urged to consult your own tax advisor with respect to the U.S. federal, as well as state, local and non-U.S., tax consequences to you of acquiring, owning and disposing of ordinary shares in light of your particular circumstances, including the possible effects of changes in U.S. federal and other tax laws.

Dividends

Subject to the passive foreign investment company rules, discussed below, U.S. holders will include as dividend income the U.S. dollar value of the gross amount of any distributions of cash or property (without deduction for any withholding tax), other than certain pro rata distributions of ordinary shares, with respect to ordinary shares to the extent the distributions are made from our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. A U.S. holder will include the dividend income at the time of receipt. To the extent, if any, that the amount of any distribution by us exceeds our current and accumulated earnings and profits, as so determined, the excess will be treated first as a tax-free return of the U.S. holder’s tax basis in the ordinary shares and thereafter as capital gain. Notwithstanding the foregoing, we do not intend to maintain calculations of earnings and profits, as determined for U.S. federal income tax purposes. Consequently, any distributions generally will be reported as dividend income for U.S. information reporting purposes. See “Backup Withholding Tax and Information Reporting” below. Dividends paid by us will not be eligible for the dividends-received deduction generally allowed to U.S. corporate shareholders.

For taxable years beginning before January 2013, subject to the passive foreign investment company rules, certain dividends received by an individual U.S. holder (as well as certain trusts and estates) from a “qualified foreign corporation” are eligible for a preferential U.S. federal income tax rate (15%), subject to certain minimum holding period requirements and other limitations. A foreign corporation may be a “qualified foreign corporation” if (it is eligible for the benefits of a comprehensive income tax treaty with the United States which the U.S. Secretary of Treasury determines is satisfactory for this purpose and which includes an exchange of information program. We expect to be considered a qualified foreign corporation with respect to our ordinary shares because we believe we are eligible for the benefits under the Double Taxation Convention between Australia and the United States. Accordingly, dividends we pay generally should be eligible for the reduced income tax rate. However, the determination of whether a dividend qualifies for the preferential tax rates must be made at the time the dividend is paid. U.S. holders should consult their own tax advisers.

Includible distributions paid in Australian dollars, including any Australian withholding taxes, will be included in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the Australian dollars are converted into U.S. dollars at that time. If Australian dollars are converted into U.S. dollars on the date of actual or constructive receipt, the tax basis of the U.S. holder in those Australian dollars will be equal to their U.S dollar value on that date and, as a result, a U.S. holder generally should not be required to recognize any foreign exchange gain or loss.

If Australian dollars so received are not converted into U.S. dollars on the date of receipt, the U.S. holder will have a basis in the Australian dollars equal to their U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the Australian dollars generally will be treated as ordinary income or loss to such U.S. holder and generally such gain or loss will be income or loss from sources within the United States for foreign tax credit limitation purposes.

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Dividends received by a U.S. holder with respect to ordinary shares will be treated as foreign source income, which may be relevant in calculating the holder’s foreign tax credit limitation. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For these purposes, dividends will be categorized as “passive” or “general” income depending on a U.S. holder’s circumstance.

Subject to certain complex limitations, a U.S. holder generally will be entitled, at its option, to claim either a credit against its U.S. federal income tax liability or a deduction in computing its U.S. federal taxable income in respect of any Australian taxes withheld by us. If a U.S. holder elects to claim a deduction, rather than a foreign tax credit, for Australian taxes withheld by us for a particular taxable year, the election will apply to all foreign taxes paid or accrued by or on behalf of the U.S. holder in the particular taxable year.

The availability of the foreign tax credit and the application of the limitations on its availability are fact specific. You are urged to consult your own tax advisor as to the consequences of Australian withholding taxes and the availability of a foreign tax credit or deduction. See “Australian Tax Considerations — Taxation of Dividends.”

Sale or Exchange of Ordinary Shares

Subject to the passive foreign investment company rules, discussed below, a U.S. holder generally will, for U.S. federal income tax purposes, recognize capital gain or loss on a sale, exchange or other disposition of ordinary shares equal to the difference between the amount realized on the disposition and the U.S. holder’s tax basis in the ordinary shares. This gain or loss recognized on a sale, exchange or other disposition of ordinary shares will generally be long-term capital gain or loss if the U.S. holder has held the ordinary shares for more than one year. Generally, for U.S. holders who are individuals (as well as certain trusts and estates), long-term capital gains are subject to U.S. federal income tax at preferential rates. For foreign tax credit limitation purposes, gain or loss recognized upon a disposition generally will be treated as from sources within the United States. The deductibility of capital losses is subject to limitations for U.S. federal income tax purposes.

You should consult your own tax advisor regarding the availability of a foreign tax credit or deduction in respect of any Australian tax imposed on a sale or other disposition of ordinary shares. See “Australian Tax Considerations — Tax on Sales or other Dispositions of Shares.”

Passive Foreign Investment Company Considerations

The Code provides special, generally adverse, rules regarding certain distributions received by U.S. holders with respect to, and sales, exchanges and other dispositions, including pledges, of shares of stock of, a passive foreign investment company, or PFIC. A foreign corporation will be treated as a PFIC for any taxable year if at least 75% of its gross income for the taxable year is passive income or at least 50% of its gross assets during the taxable year, based on a quarterly average and generally by value, produce or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, rents, royalties, gains from commodities and securities transactions and gains from assets that produce passive income. In determining whether a foreign corporation is a PFIC, a pro-rata portion of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

The determination of whether or not we are a PFIC is a factual determination that must be determined annually at the close of each taxable year. Based on our business results for the last fiscal year and composition of our assets, we do not believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ended June 30, 2012. Similarly, based on our business projections and the anticipated composition of our assets for the current and future years, we do not expect that we will be a PFIC for the taxable year ended June 30, 2013. If our actual business results do not match our projections, it is possible that we may become a PFIC in the current or any future taxable year.

If we are a PFIC for any taxable year during which a U.S. holder holds ordinary shares, any “excess distribution” that the holder receives and any gain realized from a sale or other disposition (including a pledge) of such ordinary shares will be subject to special tax rules, unless the holder makes a mark-to-market election or qualified electing fund election as discussed below. Any distribution in a taxable year that is greater than 125% of the average annual distribution received by a U.S. holder during the shorter of the three preceding taxable years or such holder’s holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:

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• the excess distribution or gain will be allocated ratably over the U.S. holder’s holding period for the ordinary shares;

• the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and

• the amount allocated to each other year will be subject to income tax at the highest rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or excess distribution cannot be offset by any net operating loss, and gains (but not losses) realized on the transfer of the ordinary shares cannot be treated as capital gains, even if the ordinary shares are held as capital assets. In addition, non-corporate U.S. holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.

If we are a PFIC for any taxable year during which any of our non-United States subsidiaries is also a PFIC, a U.S. holder of ordinary shares during such year would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules to such subsidiary. You should consult your tax advisors regarding the tax consequences if the PFIC rules apply to any of our subsidiaries.

Under recently enacted legislation, unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. Prior to such legislation, a U.S. shareholder of a PFIC was required to file U.S. Internal Revenue Service Form 8621 only for each taxable year in which such shareholder received distributions from the PFIC, recognized gain on a disposition of the PFIC stock, or made a “reportable election.” If we are or become a PFIC, you should consult your tax advisors regarding any reporting requirements that may apply to you as a result of our status as a PFIC.

A U.S. holder may avoid some of the adverse tax consequences of owning shares in a PFIC by making a “qualified electing fund” election. The availability of this election with respect to our ordinary shares requires that we provide information to shareholders making the election. We do not intend to provide you with the information you would need to make or maintain a qualified electing fund election and you will, therefore, not be able to make such an election with respect to your ordinary shares.

Alternatively, a U.S. holder owning marketable stock in a PFIC may make a mark-to-market election to elect out of the tax treatment discussed above. If a valid mark-to-market election for the ordinary shares is made, the electing U.S. holder will include in income each year an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of the holder’s taxable year over the adjusted basis in such ordinary shares. The U.S. holder is allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the holder’s taxable year. Deductions are allowable, however, only to the extent of any net mark-to-market gains on the ordinary shares included in the U.S. holder’s income for prior taxable years. Amounts included in the U.S. holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent the amount of such loss does not exceed the net mark-to-market gains previously included for such ordinary shares. The tax basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. A mark-to-market election will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on an applicable exchange or the Internal Revenue Service (“IRS”) consents to the revocation of the election.

The mark-to-market election is available only for stock which is regularly traded on (i) a national securities exchange that is registered with the U.S. Securities and Exchange Commission, (ii) NASDAQ, or (iii) an exchange or market that the U.S. Secretary of the Treasury determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. Our ordinary shares are listed on the ASX and, consequently, we expect that, assuming the ordinary shares are so listed and are regularly traded, the mark-to-market election would be available to you were we to be or become a PFIC.

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U.S. holders are urged to contact their own tax advisors regarding the determination of whether we are a PFIC and the tax consequences of such status.

Recent Legislation

Recently enacted legislation requires certain U.S. Holders who are individuals, estates, or trusts to pay a 3.8% tax on, among other things, dividends and capital gains from the sale or other disposition of shares of common stock for taxable years beginning after December 31, 2012. In addition, for taxable years beginning after March 18, 2010, recent legislation requires certain U.S. Holders who are individuals to report information relating to an interest in our ordinary shares, subject to certain exceptions. U.S. Holders are urged to consult their tax advisers regarding the effect, if any, of this tax legislation on their ownership and disposition of our ordinary shares.

Backup Withholding Tax and Information Reporting Requirements

U.S. holders that are “exempt recipients” (such as corporations) generally will not be subject to U.S. backup withholding tax and related information reporting requirements on payments of dividends on, and the proceeds from the disposition of, ordinary shares unless, when required, they fail to demonstrate their exempt status. Other U.S. holders (including individuals) generally will be subject to U.S. backup withholding tax at the applicable statutory rate, currently 28%, in respect of any payments of dividends on, and the proceeds from the disposition of, ordinary shares if they fail to furnish their correct taxpayer identification number or otherwise fail to comply with applicable backup withholding requirements. Information reporting requirements generally will apply to payments of dividends on, and the proceeds from the disposition of, ordinary shares to a U.S. holder that is not an exempt recipient. U.S. holders who are required to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification).

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. holder’s U.S. federal income tax liability. A U.S. holder may obtain a refund of any amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service in a timely manner and furnishing any required information.

U.S. holders are urged to contact their own tax advisors as to their qualification for an exemption from backup withholding tax and the procedure for obtaining this exemption.

The discussion above is not intended to constitute a complete analysis of all tax considerations applicable to an investment in ordinary shares. You should consult with your own tax advisor concerning the tax consequences to you in your particular situation.

Australian Tax Considerations

In this section, we discuss the material Australian income tax considerations related to the acquisition, ownership and disposal by the absolute beneficial owners of the ordinary shares. This discussion does not address all aspects of Australian income tax law which may be important to particular investors in light of their individual investment circumstances, such as shares held by investors subject to special tax rules (for example, financial institutions, insurance companies or tax exempt organizations). In addition, this summary does not discuss any foreign or state tax considerations, other than transfer duty. Prospective investors are urged to consult their tax advisors regarding the Australian and foreign income and other tax considerations of the purchase, ownership and disposition of the shares. This summary is based upon the premise that the holder is not an Australian tax resident.

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Taxation of Dividends

Australia operates a dividend imputation system under which dividends may be declared to be ‘franked’ to the extent of tax paid on company profits. Fully franked dividends are not subject to dividend withholding tax. Dividends payable to non-Australian resident shareholders that are not operating from an Australian permanent establishment (Foreign Shareholders) will be subject to dividend withholding tax, to the extent the dividends are not foreign sourced and declared to be conduit foreign income (CFI) and are unfranked. Dividend withholding tax will be imposed at 30%, unless a shareholder is a resident of a country with which Australia has a double taxation agreement and qualifies for the benefits of the treaty. Under the provisions of the current Double Taxation Convention between Australia and the United States, the Australian tax withheld on unfranked dividends that are not CFI paid by us to which a resident of the United States is beneficially entitled is limited to 15%.

If a company that is a non-Australian resident shareholder owns a 10% or more interest, the Australian tax withheld on dividends paid by us to which a resident of the United States is beneficially entitled is limited to 5%. In limited circumstances the rate of withholding can be reduced to nil.

Tax on Sales or other Dispositions of Shares — Capital gains tax

Foreign Shareholders will not be subject to Australian capital gains tax on the gain made on a sale or other disposal of our shares, unless they, together with associates, hold 10% or more of our issued capital, at the time of disposal or for 12 months of the last 2 years.

Foreign Shareholder who, together with associates, owns a 10% or more interest would be subject to Australian capital gains tax if more than 50% of our direct or indirect assets determined by reference to market value, consists of Australian land, leasehold interests or Australian mining, quarrying or prospecting rights. Double Taxation Convention between the United States and Australia is unlikely to limit the amount of this taxable gain. Australian capital gains tax applies to net capital gains at a taxpayer’s marginal tax rate but for certain shareholders a discount of the capital gain may apply if the shares have been held for 12 months or more. For individuals, this discount is 50%¹¹. Net capital gains are calculated after reduction for capital losses, which may only be offset against capital gains.

Tax on Sales or other Dispositions of Shares — Shareholders Holding Shares on Revenue Account

Some Foreign shareholders may hold shares on revenue rather than on capital account, for example, share traders. These shareholders may have the gains made on the sale or other disposal of the shares included in their assessable income under the ordinary income provisions of the income tax law, if the gains are sourced in Australia.

Non-Australian resident shareholders assessable under these ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for such gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 32.5%. Some relief from Australian income tax may be available to such non-Australian resident shareholders under the Double Taxation Convention between the United States and Australia.

To the extent an amount would be included in a non-Australian resident shareholder’s assessable income under both the capital gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the shareholder would not be subject to double tax on any part of the income gain or capital gain.

Dual Residency

If a shareholder were a resident of both Australia and the United States under those countries’ domestic taxation laws, that shareholder may be subject to tax as an Australian resident. If, however, the shareholder is determined to be a U.S. resident for the purposes of the Double Taxation Convention between the United States and Australia, the Australian tax would be subject to limitation by the Double Taxation Convention. Shareholders should obtain specialist taxation advice in these circumstances.

¹¹ Note that this is subject to proposed legislation to remove the discount for non-resident shareholders with effect from May 8, 2012.

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Transfer Duty

No transfer duty is payable by Australian residents or foreign residents on the trading of shares that are quoted on the ASX or NASDAQ/OTC.

Australian Death Duty

Australia does not have estate or death duties. As a general rate, no capital gains tax liability is realized upon the inheritance of a deceased person’s shares. The disposal of inherited shares by beneficiaries, may, however, give rise to a capital gains tax liability if the gain falls within the scope of Australia’s jurisdiction to tax (as discussed above).

Goods and Services Tax

The issue or transfer of shares will not incur Australian goods and services tax.

F. Dividends and Paying Agents.

Not applicable.

G. Statement by Experts.

Not applicable.

H. Documents on Display.

We are subject to the periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Under the Exchange Act, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC is available through the SEC’s Electronic Data Gathering, Analysis and Retrieval system, which may be accessed through the SEC’s website at www.sec.gov . Information filed with the SEC may also be inspected and copied at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents upon payment of a duplicating fee, by writing to the SEC. Please visit the SEC’s website at www.sec.gov for further information on the SEC’s public reference room.

As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Our business activities are exposed to a variety of market risks, including credit risk, foreign currency risk, interest rate risk and commodity risk.

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Credit Risk

Malaysian operations

Credit risk for receivables at June30, 2012 in the refining operations stemmed from sales to large Malaysian oil companies with an inherent low risk of credit default. At the date of this report, all material biodiesel sale receivables had been recovered.

Indian Operations

With the downsizing of the feedstock operations, all receivables from sale of saplings have been impaired. Sales of electricity, which is under a power purchase agreement, and the resultant receivable are to a large Indian State Owned enterprise and hence credit risk is deemed low.

Foreign Exchange Risk

The Group operates internationally through a number of subsidiaries and is thus exposed to fluctuations in foreign currencies, arising from the foreign currencies held in its bank accounts, the sale of goods in currencies other than the Group’s measurement currency, and the translation of results from investments in foreign operations. The foreign exchange exposures are primarily to the Indian Rupee, Indonesian Rupiah, Malaysian Ringgit and the US dollar.

Foreign exchange risks arising from the sale of products are hedged using forward exchange contracts.

Foreign currency risks arising from commitments in foreign currencies are managed by holding cash in that currency. Foreign currency translation risk is not hedged, with translation differences being reflected in the foreign currency translation reserve.

Group sensitivity

At 30 June 2013, if foreign currencies had changed by -/+ 10%, with all othervariables held constant, the following financial impacts would have been recorded bythe Group;

Effect on cash and cash equivalent – A$ 0.1 million lower/ A$0.2 million higher (2012:A$ 0.1 million lower/ A$0.1 million higher)

Profit and Loss would have been – A$ 0.1 million lower/ A$0.2 million higher (2012:A$ 0.1 million lower/ A$0.1 million higher)

Hedging of Foreign Currency Risk

At financial report date the Group had no forward exchange contracts in place.

Interest Rate Risk

Interest rate risk is managed with a mixture of fixed and floating rate deposits, fixedrate convertible note debt and floating rate debt. For further details on interest raterisk refer to the table below under liquidity risk. The Group‘s main interest rate risk,being cash flow interest rate risk, arises from the windmill loan.

Group sensitivity

At 30 June 2013, if interest rates had changed by -/+ 25 basis points, with all othervariables held constant, the following financial impacts would have been recorded bythe Group;

Effect on post tax profit – A$ Nil million lower/higher (2012: A$ Nil millionlower/higher)

Equity would have been – A$ Nil million lower/higher (2012: A$ Nil millionlower/higher)

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Commodity Risk

As there was no inventory held as at 30 Jun 2013, the Group has no exposure tomarket prices of input costs into the production of biodiesel.

Item 12. Description of Securities Other than Equity Securities

A. Debt Securities.

Not applicable.

B. Warrants and Rights.

Not applicable.

C. Other Securities.

Not applicable.

D. American Depositary Shares.

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

A.-D. Material Modifications to the Rights of Security Holders.

None.

E. Use of Proceeds.

The following “Use of Proceeds” information relates to our initial U.S. public offering of 2,785,000 ordinary shares at a public offering price of US$9.00 per share, thereby raising gross proceeds of approximately US$25.1 million. The registration statement on Form F-1 (File No. 333-170471) for our initial public offering was declared effective by the SEC on April 19, 2011. On April 26, 2011, we completed our public offering after 2,785,000 ordinary shares were sold. Chardan Capital Markets, LLC, Rodman &Renshaw, LLC, Maxim Group LLC and Northland Capital Markets were the underwriters for our initial public offering. We received net proceeds (after deducting underwriting discounts and commissions and other expenses related to the offering) of approximately $US22,228,504. None of the above expenses included direct or indirect payments to directors or officers of our company or their associates, persons owning 10% or more of our equity securities or our affiliates. The underwriters did not exercise their overallotment option.

From April 19, 2011, effective date of our registration statement on Form F-1 for the offering, to June 30, 2011, we used approximately US$0.8 million proceeds for the expansion of our feedstock operations, including but not limited to Jatropha acreage expansion, approximately US$2.1 million for general corporate and convertible note coupon purposes, and as of June 30, 2011, we had approximately $16.7 million left from the net proceeds of the offering. Approximately US$8.8 million of the cash at June 30, 2011 was held in the refining segment to meet working capital needs. In 2012 the Group used A$4.9m for operations, A$4.0 million for capital expenditure and advances to related entities and A$5.5 million for debt redemption. We had A$1.5 million in cash on hand at June 30, 2012. In 2013 the Group used A$3.7m for operations, released A$2.3 million from sale of capital items and raised a net A$1.4 million from debt facilities. We had A$1.4 million in cash on hand at June 30, 2013.

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None of the net proceeds from our initial public offering were paid directly or indirectly to directors or officers of our company or their associates, persons owning 10% or more of our equity securities or our affiliates.

Item 15. Controls and Procedures

A. Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Exchange Act), as of June 30, 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussions regarding required disclosure.

B. Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of the Registered Public Accounting Firm.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management has evaluated the effectiveness of the Company’s internal control over financial reporting as of June 30, 2013based upon criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, concluded that, as of June 30, 2013, the Company’s internal control over financial reporting was effective based on these criteria.

C. Changes in Internal Control over Financial Reporting.

There was no change in internal control over financial reporting during the year ended June 30, 2013that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

The Board determined that Mr. Peter Torre is qualified as an Audit Committee Financial Expert and all members are independent as determined by the NASDAQ listing rules.

Item 16B. Code of Ethics

Our board of directors adopted a Code of Conduct for Directors and Key Officers that applies to our directors, officers and employees. We have posted a copy of our code of business conduct and ethics on our investor relations website at http://missionnewenergy.com.

Item 16C. Principal Accountant Fees and Services

Audit Fees. The aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the Company’s annual financial statements for the fiscal years ended June 30, 2013 and 2012 were A$71,000 and A$123,000 , respectively.

All other Fees.A$0 and for the fiscal year ending 2013 and A$0 in fiscal year 2012.

Tax Fees. The Company incurred fees totaling A$0 during the fiscal year ended June 30, 2013. The Company incurred fees totaling A$0 during the fiscal year ended June 30, 2012.

Audit-Related Fees. A$0 and for the fiscal years ending 2013 and 2012.

All fees incurred by the Company in relation to audit and permissible non–audit services are approved by the Audit and Risk Management Committee prior to the expenditure being incurred.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

Effective 23 November 2012, Grant Thornton (Audit) Pty Ltd (GT Australia) resigned as the Company’s independent registered public accounting firm. The resignation was approved by the Company’s Audit and Risk Committee. On the same date the Company appointed BDO Audit (WA) Pty Ltd (BDO) as its new independent registered public accounting firm.   GT Australia’s reports on the Company’s financial statements for the years ended June 30, 2012 and 2011 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles except to contain a modification in regard to a material uncertainty regarding continuation as a going concern.

During the Company’s fiscal years ended June 30, 2012 and 2011, and through 23 November 2012, there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to the satisfaction of GT Australia, would have caused GT Australia to make reference to the subject matter of such disagreement in connection with their report. During the same period, there were no “reportable events” as that term is defined in Item 16F(a)(1)(v) of Form 20-F.

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We have provided GT Australia with a copy of this Item 16F and have requested and received from GT Australia a letter addressed to the Securities and Exchange Commission stating whether or not GT Australia agrees with the above statements. A copy of the letter from GT Australia is attached as Exhibit 14.4.

Prior to the engagement of BDO as our independent registered public accounting firm, we had not previously consulted with BDO regarding (1) the application of accounting principles to a specific completed or contemplated transaction, (2) the type of audit opinion that might be rendered on our financial statements, or (3) a reportable event (as provided in Item 16F(a)(1)(v) of Form 20-F) during our two most recent fiscal years and the interim period up to and including the date that BDO was engaged.

Item 16G. Corporate Governance

Not applicable.

Item 16H. Mine Safety Disclosures

Not applicable.

PART III

Item 17. Financial Statements

See Item 18.

Item 18. Financial Statements

The consolidated financial statements for Mission NewEnergy Limited and its subsidiaries are included at the end of this annual report.

Item 19. Exhibits

EXHIBIT NUMBER	Description of Exhibit
1.1	Constitution of Mission NewEnergy (incorporated by reference to Exhibit 3.1 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.1	Convertible Note Deed Poll (incorporated by reference to Exhibit 10.1 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.2	Employee Option Plan Rules (incorporated by reference to Exhibit 10.2 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.3	Executive Performance Rights Plan (incorporated by reference to Exhibit 10.3 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.4	EPCC contract with KNM Process Systems Sdn Bhd (incorporated by reference to Exhibit 10.4 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.5#	Product Supply Agreement with Valero Marketing and Supply Company (incorporated by reference to Exhibit 10.5 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).

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4.6	Form of Access, Indemnity and Insurance Deed for Directors and Ex-Directors (incorporated by reference to Exhibit 10.6 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.7	Employment agreement (as renewed) with Nathan Mahalingam (incorporated by reference to Exhibit 10.7 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.8	Employment agreement with Guy Burnett (incorporated by reference to Exhibit 10.8 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.9	Employment agreement with James Garton (incorporated by reference to Exhibit 10.9 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.10	Employment agreement of Kalaiselvan Somasundaram (incorporated by reference to Exhibit 10.10 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.11	Employment agreement of Nadason Sinnasami (incorporated by reference to Exhibit 10.11 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.12	Technology License Agreement with Crown Iron Works Company (incorporated by reference to Exhibit 10.12 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.13	Technology Transfer Agreement with Axens (incorporated by reference to Exhibit 10.13 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.14	Long Term Supply Contract with Cargill Palm Products Sdn Bhd (incorporated by reference to Exhibit 10.14 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.15	Agreement (as amended) with Trafigura Beheer B.V. Amsterdam (incorporated by reference to Exhibit 10.15 of our registration statement on Form F-1 (File No. 333-170471), as amended, initially filed with the SEC on November 8, 2010).
4.16	Long Term Supply contract, dated as of April 1, 2011, by and between Felda Marketing Services Sdn. Bhd. And Mission Biotechnologies Sdn. Bhd(incorporated by reference to Exhibit 4.16 of our annual report on Form F-20 (File No. 001-35022) filed with the SEC on December 28, 2011).
4.17	Employment Agreement of Samsudeen Ganny, dated as of June 21, 2011(incorporated by reference to Exhibit 4.17 of our annual report on Form F-20 (File No. 001-35022) filed with the SEC on December 28, 2011).
4.18	Series 2 Convertible Note Deed Poll.
4.19	Form of Warrant
8.1 *	List of Subsidiaries.
12.1 *	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) of the Securities Exchange Act of 1934, as amended.

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12.2 *	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) of the Securities Exchange Act of 1934, as amended.
13.1 *	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13(a)-14 (b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
14.1 *	Series 3 Convertible note deed poll
14.2 *	Loan agreement with SLW International
14.3 *	Sale of 100,000 tpa refinery agreement.
14.4 *	Letter from outgoing Independent registered public accountant

* Filed herewith.

# Order for confidential treatment of portions of this document has been granted by the SEC pursuant to Rule 406 of the Securities Act.

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	Mission NewEnergy Limited
Date:  October 31, 2013	By:	/s/ Guy Burnett
	Name:	Guy Burnett
	Title:	Chief Financial Officer and Company Secretary

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AUDIT REPORT

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

Independent Auditors’ Report

Board of Directors

Mission NewEnergy Limited

We have audited the accompanying consolidated balance sheets of Mission NewEnergy Limited as of June 30, 2013 and the related consolidated statements of income, stockholders’ equity, and cash flows for the year ended June 30, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mission NewEnergy Limited at June 30, 2013 and the results of its operations and its cash flows for the year ended June 30, 2013 in conformity with international Financial Reporting Standards as issued by the International Accounting Standards Board.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred operating cash outflows of $3.7 million during the year ended 30 June 2013 and, as of that date the consolidated entity’s total liability exceeded its total assets by $12.5 million. These conditions, along with other matters as set forth in Note 2 raise substantial doubt the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

BDO Audit (WA) Pty Ltd

 

Brad McVeigh

Director

Perth, Western Australia

Dated 31^st day of October 2013

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

FOR THE YEAR ENDED 30 JUNE 2013

	Note	2013			2012			2011
		A$’000			A$’000			A$’000
Sales revenue	7		169			27,543			13,629
Other income	7		8,244			10,659			1,890
Total revenue			8,413			38,202			15,519
Changes in Inventory			(357	)		(4,786	)		5,101
Cost of materials	8a		(11	)		(21,367	)		(18,453	)
Employee benefits expense	8b		(1,618	)		(3,221	)		(6,349	)
Net foreign exchange gains/(losses)			(1,418	)		355			(1,769	)
Consultants’ expenses			(115	)		(692	)		(328	)
Impairment	5a		11,494			(4,759	)		(3,203	)
Shareholder expenses			(109	)		(249	)		(125	)
Travel expenses	8e		(93	)		(407	)		(273	)
Rental expenses			(81	)		(137	)		(116	)
Other expenses	8c		(1,296	)		(2,865	)		(1,888	)
Depreciation and amortisation expenses			(7	)		(258	)		(263	)
Finance Cost – amortisation	8d		(3,394	)		(1,084	)		(2,382	)
Finance Costs			(654	)		(2,159	)		(2,483	)
Profit/(loss) before income tax			10,754			(3,427	)		(17,012	)
Income tax (expense)/benefit	9		20			(16	)		1
Net profit /(loss) before non-controlling interest			10,774			(3,443	)		(17,011	)
Loss for the year from discontinued operations	36		(717	)		(2,755	)		(4,659	)
Profit/(Loss) for the year			10,057			(6,198	)		(21,670	)
Profit/(Loss) is attributable to:
Owners of Mission NewEnergy Ltd			10,043			(6,130	)		(21,670	)
Non-controlling interests			14			(68	)		-
			10,057			(6,198	)		(21,670	)
Earnings/(loss) per share for the year attributable to Members of Mission NewEnergy Ltd (A$)	11		0.96			(0.69	)		(3.50	)
Diluted earnings/(loss) per share attributable to Members of Mission NewEnergy Ltd (A$)	11		0.96			(0.69	)		(3.50	)

The above Consolidated Statement of Profit And Loss should be read in conjunction with the accompanying notes.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2013

	2013 A$’000			2012 A$’000			2011 A$’000
Profit/(Loss) for the period		10,043			(6,130	)		(21,670	)
Other comprehensive income
Items that may be reclassified through profit and loss
Exchange differences on translating foreign operations		1,803			(195	)		(1,917	)
Items that will not be reclassified through profit and loss
Gain on settlement of Series 1 convertible note		-			1,473			3,207
Loss on settlement of Series 2 convertible note		(5,854	)		-			-
Effective portion of change in fair value of cash flow hedge		-			(39	)		39
Other comprehensive (loss)/income for the period net of tax		(4,051	)		1,239			1,329
Total comprehensive profit/(loss) for the period attributable to the parent		5,992			(4,891	)		(20,341	)
Attributable to non-controlling equity interests		14			(68	)		-
Total comprehensive  (loss) for the period		6,006			(4,959	)		(20,341	)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

	Note	2013			2012
		A$’000			A$’000
CURRENT ASSETS
Cash and cash equivalents	12		1,420			1,456
Trade and other receivables	13		3,833			4,225
Biological assets	14		-			-
Inventories	15		-			1,192
Other financial assets	16		12			581
Other assets	20		221			204
Current tax assets	23		-			24
Total current assets			5,486			7,682
Non-current assets held for sale	36		14,573			2,286
Total current assets			20,059			9,968
NON-CURRENT ASSETS
Property, plant and equipment	18		6			681
Intangible assets	19		-			-
Deferred tax assets	23		-			-
Other Assets	20		40			54
Total non-current assets			46			735
TOTAL ASSETS			20,105			10,703
CURRENT LIABILITIES
Trade and other payables	21		1,679			1,930
Financial Liabilities	22		27,404			83
Short-term provisions			136			104
			29,219			2,117
Liabilities included in disposal group held for sale	22/36		1,832			1,812
Total current liabilities			31,051			3,929
NON-CURRENT LIABILITIES
Financial liabilities	22		1,558			31,215
Deferred tax liabilities	23		-			-
Total non-current liabilities			1,558			31,215
TOTAL LIABILITIES			32,609			35,144
NET ASSETS (DEFICIT)			(12,504	)		(24,441	)
EQUITY
Issued capital	24		110,415			110,320
Reserves	25		13,323			5,684
(Accumulated losses)			(136,188	)		(140,377	)
Non-controlling Interests	35		(54	)		(68	)
Total Equity/(Deficiency)			(12,504	)		(24,441	)

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2013

	Ordinary Share Capital		Retained Earnings (Accumulated Losses)			Share Based Payments Reserve		Foreign Currency Translation Reserve			Convertible Notes Reserve			Cash flow hedge reserve			Non- controlling Interests			Total
	A$’000		A$’000			A$’000		A$’000			A$’000			A$’000			A$’000			A$’000
Balance as at 30 June2011		96,801		(135,720	)		4,868		(1,673	)		5,937			39			-			(29,748	)
(Loss) attributable to members of parent entity		-		(6,130	)		-		-			-			-			-			(6,130	)
Other Comprehensive income		-		1,473			-		(195	)		(3,292	)		(39	)		-			(234	)
Total comprehensive income		96,801		(140,377	)		4,868		(1,868	)		2,645			-			-			(37,931	)
Conversion of convertible notes to equity		13,239		-			-		-			-			-			-			13,239
Expenses for options and performance rights		-		-			39		-			-			-			-			39
Issue of Shares to Advisory Board		280		-			-		-			-			-			-			280
Non-controlling interest		-		-			-		-			-			-			(68	)		(68	)
Balance as at 30 June 2012		110,320		(140,377	)		4,907		(1,868	)		2,645			-			(68	)		(24,441	)
Profit attributable to members of parent entity		-		10,043			-		-			-			-			-			10,043
Other Comprehensive income		-		(5,854	)		-		1,803			5,836			-			-			1,785
Total comprehensive income		110,320		(136,188	)		4,907		(65	)		8,481			-			(68	)		(12,613	)
Transactions with owners in their capacity as owners
Issue of Shares		95		-			-		-			-			-			-			95
Non-controlling interest		-		-			-		-			-			-			14			14
Balance as at 30 June 2013		110,415		(136,188	)		4,907		(65	)		8,481			-			(54	)		(12,504	)

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2013

	Note	2013			2012			2011
		A$’000			A$’000			A$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers			891			32,232			10,128
Payments to suppliers and employees			(3,861	)		(35,374	)		(22,494	)
Interest received			3			289			161
Finance costs			(746	)		(2,023	)		(2,909	)
Income tax paid			(2	)		5			25
Net cash (used in) operating activities	29		(3,715	)		(4,871	)		(15,089	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment			(22	)		(615	)		(3,957	)
Proceeds and deposit from sale of assets			1,860			170			-
Release of performance bond, maturity investment and deposits			510			103			(137	)
Acquisition of subsidiary			-			(950	)		-
Advance to related entity			-			(2,676	)		-
Net cash provided / (used in) investing activities			2,348			(3,968	)		(4,094	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue (net of costs)			95			-			20,167
Proceeds from borrowings			1,613			-			-
Repayments of borrowings			(358	)		(5,461	)		(527	)
Net cash provided / (used by) by financing activities			1,350			(5,461	)		19,640
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(17	)		(14,300	)		457
Cash and cash equivalents at beginning of the financial year			1,456			15,761			17,155
Effects of exchange rate fluctuations of cash held in foreign currencies			(19	)		(5	)		(1,851	)
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR	12		1,420			1,456			15,761

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

80

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of operations and general information

Mission NewEnergy Limited is a company domiciled in Australia (ACN: 117 065 719) and:

· listed on the ASX (MBT) with its operations in Malaysia, Indonesia and India;

· that owns and operated a 100,000 tpa (approx. 30 million gallons p.a.) biodiesel plant at Kuantan in Malaysia producing biodiesel which is in the process of being sold;

· that owns a 250,000 tpa (approx. 75 million gallons p.a.) trans-esterification plant constructed by KNM Process Systems Sdn Bhd. In March 2012 Mission decided that due to being unable to reach a settlement with KNM Process Systems SDN BHD (“KNM”) as it relates to the handover and final acceptance for Mission’s 250,000 tpa biodiesel plant, the matter has been referred to arbitration;

· that has significantly downsized its upstream feedstock business in India and is now focused on divesting the remaining Indian assets and accordingly this segment is classified as a discontinued operation;

· that owns two wind energy turbines of 1.65 MW each in India which sell electricity to a Western Indian utility under a 13 year power purchase agreement. The Board has resolved to sell these windmills and accordingly they are classified as non-current assets held for sale.

2. Basis of preparation

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASB’s) (including Australian interpretations) issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) and Interpretations issued by the International Accounting Standards Board (IASB). Mission NewEnergy Limited is a for-profit entity for the purpose of preparing the financial statements.

Basis of measurement

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. All amounts shown are in Australian dollars ($A) unless otherwise stated.

The financial statements have been prepared on a going concern basis. The ability of the Group to continue as a going concern and pay its debts as and when they fall due is dependent on the continued support of its investors, bankers and suppliers.

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.

The Group has applied amendments to the Corporation Act (2001) that remove the requirement for the Group to lodge parent entity financial statements. Parent entity financial statements have been replaced by the specific parent entity disclosures in Note 33.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Going Concern

The Group realised an operating profit for the year ended 30 June 2013 of $10.0 million (2012: $6.1 million), with net cash used in operating activities of $3.7 million (2012: $4.9 million). At reporting date, the current assets less current liability deficit was $11.0 million (2012: $6.0 million surplus) and a net asset deficiency of $12.5 million (2012: $24.4 million). The current asset deficiency is primarily as a result of the convertible note now being shown as a current liability as it is payable within one year. The net asset deficiency is primarily as a result of the impairment of the majority of the refinery assets during the current and previous financial years (refer to note 5a).

During the financial year, the Company has successfully renegotiated the conversion of the series two convertible notes into series three convertible notes. The key changes being a new conversion ratio of 1 note for 433 ordinary shares should the note holders convert, and the elimination of the 4% coupon previously payable. At 30 June 2013, the Company has a non-current liability for the series two convertible notes of A$32.9 million (nominal value).

The Group has access to the working capital facility of US$5 million from SLW International for ongoing operating cash requirements, of which US$1.3 million has been drawn down at 30 June 2013. In addition the Group is in discussion with the note holders in respect to the possible amendment of the terms of the Convertible Notes including, but not limited to the possible extension of the Maturity Date which is currently May 2014.

The Directors believe that at the date of this report the Group has sufficient financial resources at 30 June 2013 to meet its committed financial liabilities.

The Financial Statements have been prepared on a going concern basis which has been assessed based on detailed cash flow forecasts extending out twelve months from the date of this financial report. The cash flow forecasts from operations are based on the forecast cash flows required to sustain the business and cash on hand at 30 June. The cash flow forecasts do not take into account any capital commitments as these are not foreseen to be payable within the forthcoming twelve months.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

The ability of the Group to continue as a going concern in the ordinary course of business and to achieve the business growth strategies and objectives is dependent upon the ability of the Group to do a sufficient combination of the following things to enable its commitments to be met:

· Generate positive cash flows from operations.

· Raise cash through sale of assets and recovery of receivables.

· Renegotiate the maturity date of the convertible notes.

· Raise cash through the issue of further equity.

The Directors consider that there are reasonable grounds to expect that the Group will be able to meet its commitments and liabilities through the measures listed above, and accordingly have prepared the financial report on a going concern basis in the belief that the Group will realise its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial report. However, should the Group not be successful in the matters discussed above, there is material uncertainty whether the Group will be able to continue as a going concern.

Functional and Presentation currency

The consolidated financial statements are presented in Australian Dollars. The functional currencies of the operating units are as follows:

· Refining operations - Malaysian Ringgit

· Feedstock operations – Indian Rupee

· Downstream Palm Oil Joint Venture Project – Indonesian Rupiah

· USA operations - United States Dollar

· Other – Australian Dollar.

The Board of Directors approved this financial report on 27 September 2013.

3. Statement of Significant Accounting Policies

Except where stated, these accounting policies have been consistently applied by each entity in the Group and are consistent with those of the previous year.

a. Principles of Consolidation

The consolidated financial statements comprise the financial statements of Mission NewEnergy Limited and its subsidiaries, as defined in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. These include Mission Biotechnologies Sdn Bhd (MBTSB), Mission Biofuels Sdn Bhd, Enviro Mission Sdn Bhd,Mission Agro Energy Limited Mission, Biofuels (India) Pvt Limited and Oleovest PL,.

A list of controlled and jointly controlled entities with details of acquisitions and disposals is contained in Note 17 to the financial statements. All controlled entities have a 30 June financial year-end.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

All inter-company balances and transactions between entities in the Consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies applied by the parent entity.

Where controlled entities have entered or left the Consolidated Group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Non-controlling interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

b. Business combinations

The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

c. Income Tax

The charge for current income tax expense is based on the profit/(loss) for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the reporting date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

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

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

d. Inventories

Inventories are measured at the lower of cost and net realisable value.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

e. Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.

The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

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 income statement during the financial period in which they are incurred.

f. Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

Class of Fixed Asset	Depreciation Rate
Buildings	5	%
Leasehold improvements	10	%
Machinery and equipment	10	%
Biodiesel Plant	5	%
Computer equipment	20% - 33	%
Motor Vehicles	20	%
Office equipment	10	%
Leased plant and equipment	10	%
Windmills	4.75	%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.

85

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

g. Leases

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the Group, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

h. Financial Instruments

Recognition

Financial instruments are initially measured at fair value on trade date, which includes transaction costs (except where the instrument is classified as ‘fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately), when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Compound financial instruments (Convertible Notes)

Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.

Interest, dividends, losses and gains relating to the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to equity; no gain or loss is recognised on conversion.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Held-to-maturity investments

These investments have fixed maturities, and it is the Group’s intention to hold these investments to maturity. Any held-to-maturity investments held by the Group are stated at amortised cost using the effective interest rate method.

Available-for-sale financial assets

Available-for-sale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Hedge accounting

The Group holds derivative financial instruments to hedge its foreign currency exposures. On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to hedged risk, and whether the actual results of each hedge are within a range of 80 - 125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. When the hedged item is a non-financial asset, the amount recognised in equity is included in the carrying amount of the asset when the asset is recognised. In other cases the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Impairment of financial assets

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the income statement.

i. Impairment of non-financial Tangible and Intangible Assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed at each reporting date for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

j. Intangibles

Goodwill

Goodwill on consolidation is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at 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.

k. Research and development

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably.

Development costs have a finite life and will be amortised on a systematic basis matched to the future economic benefits over the useful life of the project. As the development phase is still in progress, amortisation has not commenced. The estimated useful life of this asset will be determined when the development stage is complete.

l. Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

88

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows:

· assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

· income and expenses are translated at average exchange rates for the period where this is not materially different from the rate at the date of the transaction; and

· retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the statement of financial position. These differences are recognised in the income statement in the period in which the operation is disposed.

m. Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Equity-settled compensation

Equity settled share-based payments are measured at fair value at the date of grant. Fair values of options are measured using the Black Scholes model. Fair value of performance rights are based on the closing share price on the date of grant. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The fair value determined at the grant date of the equity settled share share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest.

n. Trade and Other Payables

Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services.

o. Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

p. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 3 months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

89

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

q. Revenue Recognition

Revenue from the sale of goods is recognised upon the delivery of goods to customers, when reasonable certainty exists that such revenues will be realised and the risks and rewards of ownership have been transferred.

The change in the fair value of biological assets (refer accounting policy 3v) is recognised in revenue in the period in which the change in fair value occurs.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers

All revenue is stated net of the amount of goods and services tax (GST).

r. Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use. Other borrowing costs are expensed in the period in which they are incurred.

s. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows

t. Government Grants

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis.

u. Rounding of Amounts

The parent entity has applied the relief available to it under ASIC Class Order 98/100 and accordingly, unless otherwise stated, amounts in the financial report and directors’ report have been rounded off to the nearest $1,000

v. Non-current assets held for sale

Non-current assets held for sale are measured at the lower of cost or fair value less cost to sell when the assets is available for immediate sale and expected to be sold within 12 months. No depreciation is recorded over the assets held for sale.

Liabilities are classified as 'held for sale' and presented as such in the statement of financial position if they are directly associated with a disposal group.

90

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

w. Biological assets

Biological assets, in the form of Jatropha Curcas saplings, are measured at fair value less estimated point of sale costs, with the changes in fair value during the period recognised in the Income Statement. Points of sale costs include all costs that would be necessary to sell the asset.

x. Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to owners of the company, excluding costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with the dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

y. Contributed equity

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

91

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

4. New standards and interpretations not yet adopted

The following new/amended accounting standards and interpretations have been issued, but are not mandatory for financial years ended 30 June 2013. They have not been adopted in preparing the financial statements for the year ended 30 June 2013 and are expected to impact the entity in the period of initial application. In all cases the entity intends to apply these standards from application date as indicated in the table below.

92

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Standards Likely to Have a Financial Impact

AASB reference	Title and Affected Standard(s):	Nature of Change	Application date:	Impact on Initial Application
AASB 9 (issued December 2009 and amended December 2010)	Financial Instruments	The following requirements have generally been carried forward unchanged from AASB 139Financial Instruments: Recognition and Measurementinto AASB 9: ·   Classification and measurement of financial liabilities; and ·   Derecognition requirements for financial assets and liabilities. However, AASB 9 requires that gains or losses on financial liabilities measured at fair value are recognised in profit or loss, except that the effects of changes in the liability’s credit risk are recognised in other comprehensive income.		The amendments require that any changes in fair value attributable to the liability’s credit risk be recognised in other comprehensive income instead of profit or loss. There will be no impact on the financial statements when these amendments are first adopted because they apply prospectively from 1 January 2015.
AASB 10 (issued August 2011)	Consolidated Financial Statements	Introduces a single ‘control model’ for all entities, including special purpose entities (SPEs), whereby all of the following conditions must be present: · Power over investee (whether or not power used in practice) · Exposure, or rights, to variable returns from investee · Ability to use power over investee to affect the entity’s returns from investee. Potential voting rights are only considered when determining if there is control when they are substantive (holder has practical ability to exercise) and the rights are currently exercisable. This may result in possibly fewer instances of control.	Annual reporting periods beginning on or after 1 January 2013	When this standard is first adopted for the year ended 30 June 2014, there will be no impact on transactions and balances recognised in the financial statements because the entity does not have any special purpose entities or because the new definition of control does not change the classification of any of the entities investments in subsidiaries, joint arrangements or associates.

93

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

AASB reference	Title and Affected Standard(s):	Nature of Change	Application date:	Impact on Initial Application
AASB 10 (issued August 2011) – contd.	Consolidated Financial Statements	Additional guidance included to determine when decision making authority over an entity has been delegated by a principal to an agent. Factors to consider include: ·    Scope of decision making authority ·    Rights held by other parties, e.g. kick-out rights ·    Remuneration and whether commensurate with services provided ·    Decision maker’s exposure to variability of returns from other interests held in the investee.
AASB 11 (issued August 2011)	Joint Arrangements	Joint arrangements will be classified as either ‘joint operations’ (where parties with joint control have rights to assets and obligations for liabilities) or ‘joint ventures’ (where parties with joint control have rights to the net assets of the arrangement). Joint arrangements structured as a separate vehicle will generally be treated as joint ventures and accounted for using the equity method (proportionate consolidation no longer allowed).	Annual reporting periods beginning on or after 1 January 2013	When this standard is first adopted for the year ended 30 June 2014, there will be no impact on transactions and balances recognised in the financial statements because the entity has not entered into any joint arrangements.

94

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

AASB reference	Title and Affected Standard(s):	Nature of Change	Application date:	Impact on Initial Application
AASB 13 (issued September 2011)	Fair Value Measurement	Currently, fair value measurement requirements are included in several Accounting Standards. AASB 13 establishes a single framework for measuring fair value of financial and non-financial items recognised at fair value in the statement of financial position or disclosed in the notes in the financial statements.	Annual reporting periods beginning on or after 1 January 2013	The entity has yet to conduct a detailed analysis of the differences between the current fair valuation methodologies used and those required by AASB 13. However, when this standard is adopted for the first time for the year ended 30 June 2014, there will be no impact on the financial statements because the revised fair value measurement requirements apply prospectively from 1 July 2013.
AASB 13 (issued September 2011) - cont	Fair Value Measurement	Additional disclosures required for items measured at fair value in the statement of financial position, as well as items merely disclosed at fair value in the notes to the financial statements. Extensive additional disclosure requirements for items measured at fair value that are ‘level 3’ valuations in the fair value hierarchy that are not financial instruments, e.g. land and buildings, investment properties etc.	Annual reporting periods beginning on or after 1 January 2013	When this standard is adopted for the first time for the year ended 30 June 2014, additional disclosures will be required about fair values.
AASB 2012-9 (issued December 2012)	Amendment to AASB 1048 arising from the Withdrawal of Australian Interpretation 1039	Deletes Australian Interpretation 1039Substantive Enactment of Major Tax Bills In Australiafrom the list of mandatory Australian Interpretations to be applied by entities preparing financial statements under theCorporations Act 2001 or other general purpose financial statements.	Annual reporting periods beginning on or after 1 January 2013	There will be no impact on first-time adoption of this amendment as the group does not account for proposed changes in taxation legislation until the relevant Bill has passed through both Houses of Parliament, which is consistent with the views expressed by the Australian Accounting Standards Board in their agenda decision of December 2012.

95

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Standards Likely To Have A Disclosure Impact Only

AASB reference	Title and Affected Standard(s):	Nature of Change	Application date:	Impact on Initial Application
AASB 12 (issued August 2011)	Disclosure of Interests in Other Entities	Combines existing disclosures from AASB 127 Consolidated and Separate Financial Statements, AASB 128 Investments in Associates and AASB 131 Interests in Joint Ventures. Introduces new disclosure requirements for interests in associates and joint arrangements, as well as new requirements for unconsolidated structured entities.	Annual reporting periods beginning on or after 1 January 2013	As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required for interests in associates and joint arrangements, as well as for unconsolidated structured entities
AASB 2012-6 (issued September 2012)	Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures	Defers the effective date of AASB 9 to 1 January 2015. Entities are no longer required to restate comparatives on first time adoption. Instead, additional disclosures on the effects of transition are required.	Annual reporting periods beginning on or after 1 January 2015	As comparatives are no longer required to be restated, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required on transition, including the quantitative effects of reclassifying financial assets on transition.

96

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

AASB 2013-3 (issued June 2013) Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets Clarifies the disclosure requirements for cash-generating units (CGUs) with significant amounts of goodwill and intangibles with indefinite useful lives and also adds additional disclosures when recoverable amount is determined based on fair value less costs to sell. 1 January 2014 As this standard amends disclosure requirements only, there will be no impact on amounts recognised in the financial statements. The recoverable amount for CGUs with significant amounts of goodwill and intangibles with indefinite lives will only be required to be disclosed where an impairment loss has been recognised. However, there will be additional disclosures about the level of the fair value hierarchy where recoverable amount for a CGU is determined based on fair value less costs to sell.

97

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

5. Critical Accounting Estimates and Judgments

The preparation of annual financial reports requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The Board evaluates estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Actual results may differ from these estimates

Except as described below, in preparing this consolidated financial report, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial report as at end for the year ended 30 June 2013. During the twelve months ended 30 June 2013 management reassessed its estimates in respect of:

a. Impairment of assets

The Group assesses impairment of assets at each reporting date by evaluating conditions specific to the Group that may lead to impairment. Where an impairment trigger exists, the recoverable amount of the asset is determined.

Goodwill

All goodwill was fully impaired at June 2012.

Credit risk of receivables

Malaysian operations

Credit risk for receivables at 30 June 2013 in the refining operations result from amounts recoverable from an EPCC contractor whereby the Group incurred costs during commissioning testing which the EPCC contractor was obliged to pay. This receivable is now part of arbitration and trial proceedings with the EPCC contractor and have not been impaired.

Indian Operations

Sales of electricity, which is under a power purchase agreement, and the resultant receivable are to a large Indian State Owned enterprise and hence credit risk is deemed low and hence no impairment has been made.

Property, Plant and Equipment

Property, plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash flows of the relevant cash generating unit) and ‘fair value less costs to sell’.

98

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Impairment of refineries

Due to uneconomic conditions and lack of visibility into further profitable sales contracts the 100,000 tpa refinery was put into care and maintenance in June 2012. The 250,000tpa is under care and maintenance and yet to be handed over to Mission.

The Board reviews the carrying value of its refinery assets at each reporting date.

Due to the majority of the conditions precedent to complete the sale of the 100,000 tpa refinery were completed at the date of this report and hence the Company has reflected a reversal of previous asset impairment to the value of the sale, being A$12.2 million.

Further impairment for the 250,000 tpa refinery has been provided during the year ended 30 June 2013 for capital additions to a value of $45 thousand.

Windmill impairment

At 30 June 2013, the Board re-assessed the carrying value of the windmills. In determining value in use of the windmills, future cash flows are based on forecast future revenue levels which are based on forecast electricity generation and contracted rates per Kwh, and forecast future maintenance expenses. Value in use was calculated based on the present value of cash flow projections over the anticipated lives of the assets, with the assets having an anticipated life of 20 years, with a discount rate based on a rate of funding available, being 14%, from the region in which the windmills operate. No further impairment was provided for in the 2013 financial year.

Goodwill has arisen as a result of the purchase of equity in Oleovest PL. The Board has reviewed the carrying value of goodwill in this segment and has determined that due to the termination of the joint venture agreement with PTPN 111, the goodwill value of $0.95 million has been impaired.

	June 2013			June 2012		June 2011
	A$000			A$000		A$000
Impairment of refineries		45			2,210		2,046
Impairment reversal of refineries		(12,219	)		-		-
Impairment of other assets		-			1,108		36
Impairment of Goodwill		-			950		1,157
Impairment of trade receivables		-			189		-
Impairment of inventories and biological assets		680			302		-
Total		(11,494	)		4,759		3,239

Investments in subsidiaries

Investments held by the parent entity, Mission NewEnergy Limited, are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. The recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash flows of the relevant cash generating unit) and ‘fair value less costs to sell’.

99

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

In line with the impairment of the carrying value of assets in the subsidiaries, the parent entity has impaired the value of all subsidiaries to zero, except for the receivable from PT Sinergi Oleo Nusantara, which is carried at cost. This accounting adjustment has no impact on the cash flows or the Consolidated Financial Statements of the Group. Refer to note 33: Parent Information for further details.

6. Determination of fair value

A number of the Groups accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods.

Share based payment transactions

The fair value of the employee share options is measured using the Black-Scholes option pricing model, with the fair value of performance rights being based on the share price of Mission NewEnergy Limited on the date of approval. Measurement inputs include the share price on measurement date, exercise price of the instrument, expected volatility, weighted average expected life of the instrument, expected dividends and the risk free interest rate. Service and non-market performance conditions are not taken into account in determining the fair value.

7. Sales revenue

	2013 A$’000		2012 A$’000		2011 A$’000
Sales Revenue
-    Sales of goods		159		27,265		13,514
-    Interest received		10		278		115
Total revenue		169		27,543		13,629
Other Income
Gain on sale of assets		146		-
Gain on settlement of convertible notes		7,748		10,300		1,735
Sundry income		350		359		155
Total Other income		8,244		10,659		1,890

100

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

During the year the company converted the outstanding Series Two convertible notes to Series Three convertible notes. The Series Two convertible notes represented a $32.9 million liability that were due in May 2014 along with a half yearly coupon at 4% per annum. The Series three convertible notes have the same nominal value and maturity date; however do not attract a coupon charge. The conversion resulted in a reporting gain of $7.7 million

8. Expenses

	2013 A$’000		2012 A$’000		2011 A$’000
8a) Cost of materials		11		21,367		18,453
Total		11		21,367		18,453
8b) Employee costs
Wages and Salaries		1,576		2,740		2,857
Contribution to defined contribution plans		42		182		168
Equity settled share based payments expense		-		299		3,324
		1,618		3,221		6,349
8c) Other expenses:
Audit fees		64		138		148
Advertising		-		2		46
Business acquisition costs		-		501
Computer maintenance & consumables		5		58		38
Communication expenses		47		211		315
Insurance costs		247		218		98
Legal fees		532		195		231
Plant operating costs		229		1,007		508
Asset maintenance		9		137		157
Other administrative costs		163		398		347
Total		1,296		2,865		1,888
8d) Finance Costs
Amortisation of liability portion of convertible notes		3,394		1,067		2,003
Amortisation of convertible note issue costs		-		17		379
Total		3,394		1,084		2,382
8e) Travel expenses
Corporate travel		65		274		142
Operations		28		133		131
		93		407		273

101

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

9. Income tax

			2013 A$’000			2012 A$’000			2011 A$’000
a.	The components of tax expense comprise
	Current tax			20			(16	)		1
	Deferred tax	23		-			-			-
				20			(16	)		1
b.	The prima facie tax on the profit  (loss) from ordinary activities before income tax is reconciled to the income tax as follows:
	Accounting profit/(loss) before tax			10,774			(3,427	)		(17,011	)
	Loss for the year from discontinued operations			(717	)		(2,755	)		(4,659	)
	Total loss for the year			10,057			(6,182	)		(21,670	)
	Prima facie tax (benefit)/expense on profit/ (loss) from ordinary activities before income tax at 30%			3,013			(1,855	)		(6,501	)
	Adjusted for:
	Tax effect of:
	-      overseas tax rate differential			(496	)		267			140
	-      Impairment of non-assessable item			(4,390	)		995			960
	-     other non-assessable items			1,853			609			5,400
				(20	)		16			(1	)
	Add:
	Over provision for income tax in prior year			-			-
	Income tax attributable to entity			(20	)		16			(1	)
	The applicable weighted average effective current tax rate is as follows:			25	%		-	12		-

¹² No effective tax rate calculated due to the loss position.

102

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Deferred tax assets on temporary differences and losses are not recognised because it is not probable that future taxable profit will be available against which the unused tax losses can be used. Refer to note 23 for further disclosures on deferred tax assets and liabilities.

No effective tax rate in 2011 due to the loss position.

10. Auditors’ Remuneration

	2013 A$’000		2012 A$’000		2011 A$’000
Audit services
Remuneration of the auditor of the parent entity for:
-     auditing or reviewing the financial reports – previous auditor		-		123		90
-  auditing or reviewing the financial reports – current auditor		71		-		-

11. Earnings per share

a.	Reconciliation of earnings to profit or loss
	Earnings used in calculation of both ordinary and dilutive EPS	10,043	(6,130	)	(21,670	)
b.	Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS	10,481,820	8,919,299		6,199,265
	Effect of:
	-       Performance Rights and options	-	-		-
	Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS	10,481,820	8,919,299		6,199,265

103

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Diluted earnings per share exclude convertible notes, performance rights and options that had an exercise price above the average market price during the period they existed. All the potential ordinary shares were anti-dilutive as they were all below the conversion price. Where a loss is made, all convertible notes, performance rights and options are excluded as the impact of including them would be to reduce the loss per share. The table below reflects the entire number of equity instruments in issue at each period end, which could potentially dilute basic earnings per share (i.e. numbers above are included in the table below):

	2013		2012		2011
Issued ordinary shares		10,870,275		9,452,415		8,512,259
Convertible notes		505,904		505,904		935,579
Employee and third party share options		-		-		7,315
Employee performance rights		1,600		1,600		133,077
Share issue options (warrants)		2,995,009		2,995,009		2,995,009
TOTAL		14,372,788		12,954,928		12,583,239

12. Cash and cash equivalents

	2013 A$’000		2012 A$’000
Cash at bank and in hand		1,419		1,420
Short-term bank deposits		1		36
		1,420		1,456
Reconciliation of cash
Cash and cash equivalents		1,420		1,456
		1,420		1,456

See note 32, Financial Instruments, for information on risk exposures for cash and cash equivalents.

104

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

13. Trade and Other Receivables

	2013 A$’000		2012 A$’000
CURRENT
Trade receivables		-		1,089
Other receivables13		3,833		3,136
Less: Impairment provision		-		-
TOTAL		3,833		4,225
NON – CURRENT
Trade receivables		-		18,772
Less: Impairment provision		-		(16,589	)
Less: Discount charge		-		(2,183	)
TOTAL		-		-

At each reporting date, the Board assesses the likely timing of recoverability of receivables and bases this assessment on a number of significant assumptions and estimates. Please refer to note 5, critical accounting estimates and judgements, and note 32 for a detailed discussion around credit risk, provisioning and age analysis of trade and other receivables. With the downsizing of operations in India all receivables were fully written off. The timing and recoverability of the current other receivables is dependant on the timing of arbitration proceedings.

14. Biological Assets

Mission Biofuels India Pvt Limited grew Jatropha Curcas saplings from seeds, which met the definition of a biological asset and were carried on the statement of financial position at fair value. With the decision to substantially downsize the operations in India, Mission Biofuels India Pvt Limited has NIL (2012: NIL) saplings on hand in its controlled nurseries.

¹³Included in Current: Other Receivables is an amount of A$2.7m relating to the investment into the palm oil project in Indonesia which the Board deems to be recoverable within the forthcoming twelve months.

105

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

	2013 A$’000		2012 A$’000
Opening Balance		-		88
Add: Increase in fair value due to new plantations		-		-
Less: Sale of saplings transferred to trade receivables		-		-
Less: Impairment of biological asset		-		(99	)
FX adjustments		-		11
Closing Balance		-		-

Regulatory and environmental risks, supply and demand risk and Climate and other risks

With the decision to discontinue operations in this region, the material risks relating to this operation have been eliminated or minimised.

15. Inventories

	2013 A$’000		2012 A$’000
CURRENT
Raw Material and stores - cost		-		577
Work in Progress - cost		-		-
Finished goods – cost		-		615
		-		1,192

The above is shown at the lower of cost and net realisable value.

16. Other Financial Assets

Current

Sundry financial assets	12	581
	12	581

106

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

17. Investments in subsidiaries and Jointly controlled entities

A Controlled Entities Consolidated
	Country of		Percentage Owned (%)
	Incorporation		2013		2012
Parent Entity:
Mission NewEnergy Limited		Australia
Subsidiaries of Mission NewEnergy Limited:
Mission Biotechnologies Sdn Bhd		Malaysia		100		100
Mission Biofuels Sdn Bhd		Malaysia		100		100
Enviro Mission Sdn Bhd14		Malaysia		-		100
Mission Agro Energy Limited		Mauritius		100		100
Mission NewEnergy USA LLC,15		USA		-		100
PJ Trading Pennsylvania, LLC16		USA		-		100
PJ Trading, LLC17		USA		-		100
Oleovest PL		Singapore		85		85
Subsidiaries of Mission Agro Energy Limited
Mission Biofuels India Private Limited		India		100		100
b. Jointly controlled entities
Subsidiaries of Mission Biofuels India Private Limited
Mission Agro Diesel (India) Private Limited		India		51		51

¹⁴Enviro Mission Sdn Bhd, a dormant entity was disposed during the financial year.

¹⁵Mission NewEnergy USA LLC (formerly Scarborough Beach Holdings, LLC), being a dormant entity, was deregistered on 10 September2012

¹⁶PJ Trading Pensylvania, LLC, being a dormant entity, was deregistered on 23 July 2012

¹⁷PJ Trading, LLC, being a dormant entity, was deregistered on 9 August2012

107

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

MBIPL had acquired 51.01% of the issued capital of Mission Agro Diesel (India) Private Limited on 8 March 2007 with the corporate decision making process resulting in joint control. On 2 May 2008 the Board resolved to sell or deregister Mission Agro Diesel (India) Pvt Limited. The full value of the investment in Mission Agro Diesel (India) Private Limited has been provided for. As at reporting date this company had not been sold or deregistered.

In February 2012 Mission acquired 85% of Oleovest PL, a Singapore registered company, which in turn owns 70% of PT Sinergi Oleo Nusantara, an Indonesian registered company. Oleovest PL has terminated the joint venture agreement in PT Sinergi Oleo Nusantara.

108

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

18. Property Plant and Equipment

18a. Property plant and equipment

	Land and Building			Office Equipment			Computer Equipment and software			Motor Vehicle			Plant and Equipment			Asset Under Construction			Biodiesel Plant			Total
	A$’000			A$’000			A$’000			A$’000			A$’000			A$’000			A$’000			A$’000
Cost at 30 June 2011		1,391			403			776			187			4,776			40,492			25,599			73,624
Additions		-			25			43			-			-			673			92			833
Foreign Currency Translation		(104	)		(46	)		286			(2	)		(760	)		(653	)		3,425			2,146
Held for Sale (Current Asset)		(515	)		-			-			-			(3,998	)		-			-			(4,513	)
Disposal		(189	)		(3	)		(150	)		(53	)		-			-			(48	)		(443	)
Cost at 30 June 2012		583			379			955			132			18			40,512			29,068			71,647
Additions		-			-			5			-			-			45						50
Foreign Currency Translation		(1	)		11			48			12			-			5,016			-			5,086
Transferred to Non-current Assets Held for Sale (Current Asset)		(24	)		(242	)		(138	)		(8	)		(18	)		-			(29,068	)		(29,498	)
Disposal		(558	)		-			-			(21	)		-			(8	)					(587	)
Cost at 30 June 2013		-			148			870			115			-			45,565			-			46,698

109

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Accumulated Depreciation and Impairment
Accumulated Depreciation and Impairment at 30 June 2011	120		193		584		126		2,411		39,537		23,993		66,964
Depreciation for the year  (continuing operation)	8		11		121		31		-		-		87		258
Depreciation for the year (discontinued operation)	28		62		33		3		131		-		-		257
Impairment	-		63		359		-		-		1,300		1,596		3,318
Foreign Currency Translation	(17	)	(27	)	(22	)	(2	)	(395	)	(325	)	3,401		2,613
Held for Sale (Current Asset)	(98	)	-		-		-		(2,129	)	-		-		(2,227	)
Disposal	-		(2	)	(168	)	(38	)	-		-		(9	)	(217	)
Accumulated Depreciation and Impairment at 30 June 2012	41		300		907		120		18		40,512		29,068		70,966
Depreciation for the year (continuing operation)	3		-		4		-		-		-		-		7
Impairment – Refer to note 5a	-		-		-		-		-		45		-		45
Foreign Currency Translation	(8	)	11		49		13		-		5,008		-		5,073
Transferred to Non-current Assets Held for Sale (Current Asset)	-		(163	)	(96	)	(6	)	(18	)	-		(29,068	)	(29,351	)
Disposal	(36	)	-		-		(12	)	-		-		-		(48	)
Accumulated Depreciation and Impairment at 30 June 2013	-		148		864		115		-		45,565		-		46,692
Carrying Amounts
At 30 June 2012	515		-		5		9		-		-		-		681
At 30 June 2013	-		-		6		-		-		-		-		6

110

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

18b. Non-current assets held for sale

	Land and Building			Office Equipment			Computer Equipment and software			Motor Vehicle			Plant and Equipment		Asset Under Construction		Biodiesel Plant			Total
	A$’000			A$’000			A$’000			A$’000			A$’000		A$’000		A$’000			A$’000
Cost at 30 June 2011		-			-			-			-			-		-		-			-
Foreign Currency Translation		-			-			-			-			—		-		-			-
Transfer from Property Plant and Equipment		515			-			-			-			3,998		-		-			4,513
Cost at 30 June 2012		515			-			-			-			3,998		-		-			4,513
Foreign Currency Translation		25			1			10			-			169		-		-			205
Transfer from Property Plant and Equipment		24			242			138			8			18		-		29,068			29,498
Asset Disposal		-			(160	)		(41	)		(8	)		-		-		-			(209	)
Cost at 30 June 2013		564			83			107			-			4,185		-		29,068			34,007
Accumulated Depreciation and Impairment
Accumulated Depreciation and Impairment at 30 June 2011		-			-			-			-			-		-		-			-
Depreciation for the year		-			-			-			-			-		-		-			-
Transfer from Property Plant and Equipment		98			-			-			-			2,129		-		-			2,227
Foreign Currency Translation		-			-			-			-			-		-		-			-
Accumulated Depreciation and Impairment at 30 June 2012		98			-			-			-			2,129		-		-			2,227
Depreciation for the year (discontinued operations) – Refer note 36		26			24			34			2			58		-		-			144
Impairment – Refer to note 36		27			1			4			-			318		-		-			350
Reversal of Impairment – Refer to note 5a		-			-			-			-			-		-		(12,219	)		(12,219	)
Foreign Currency Translation		(21	)		1			-			-			97		-		(354	)		(277	)
Transfer from Property Plant and Equipment		-			163			96			6			18		-		29,068			29,351
Disposal		-			(106	)		(27	)		(8	)		-		-		-			(141	)
Accumulated Depreciation and Impairment at 30 June 2013		130			83			107			-			2,619		-		16,495			19,434
Carrying Amounts
At 30 June 2012		417			-			-			-			1,869		-		-			2,286
At 30 June 2013		434			-			-			-			1,566		-		12,573			14,573

111

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Impairment loss

Refer to note 5, Critical Accounting estimates for a detailed discussion on the impairment of assets.

Assets under construction

These relate to the second biodiesel plant (being the 250,000 tpa plant) under construction in Malaysia. At 30 June 2013 the transfer of this plant to Mission and final payment is under arbitration. See note 26 on capital commitments relating to this plant.

112

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

19. Intangible Assets

	2013 A$’000		2012 A$’000
Goodwill
Carrying amount at beginning of year		-		-
Additions		-		950
Impairment of Goodwill		-		(950	)
FX Adjustments		-		-
Carrying amount at end of year		-		-

Additions to goodwill for the previous year relate to the acquisition of 85% of shares in Oleovest PL. Refer to note 5a for a discussion on impairment testing of goodwill and note 17 for details of ownership of subsidiaries.

20. Other Assets

	2013 A$’000		2012 A$’000
CURRENT
Prepayments		129		204
Security Deposits		92		-
		221		204
Prepayments are primarily insurance premiums. NON-CURRENT
Security Deposits		40		54
		40		54

113

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

21. Trade and Other Payables

CURRENT
Unsecured liabilities:
Trade payables	176	1,314
Interest accrued	-	646
Sundry payables and accrued expenses	247	-
Deposit received on sale of 100,000 tpa refinery18	1,257	-
	1,679	1,930

22. Financial Liabilities

	2013 A$’000			2012 A$’000
CURRENT
Secured loans		-			83
Convertible Notes
- Nominal value (unsecured)		32,884			-
- Equity portion of convertible note		(8,481	)		-
- Unamortisation costs of issues		-			-
- Amortisation of equity portion		3,001			-
		27,404			83
Current-liabilities included in disposal group held for sale		1,832			1,812
NON-CURRENT
Secured loans		1,558			114
Convertible Notes (unsecured)
- Nominal value (unsecured)		-			32,884
- Equity portion of convertible note		-			(2,644	)
- Amortisation of equity portion		-			861
		1,558			31,215

The secured loans and liabilities in the disposal group held for sale above relate to financing of the windmills and a working capital facility in India. The wind and property assets are held as security against the loan funding the windmills, and the working capital facility is secured over the shares of Mission Biofuels India PL. The non-current secured loans are secured over all refining assets and the Indonesian investment.

¹⁸ This initial deposit was received pursuant to the sale of the 100,000 tpa biodiesel plant in Malaysia.

114

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Convertible notes - Series 3 notes

At 30 June 2013 the following convertible notes were in existence:

Units		505,904
Maturity date		22 May 2014
Interest rate per annum		0	%
Convertible into ordinary shares at the option of the Holder or the Company in the circumstances set out in the Terms and Conditions of the Notes.		1 note for 433 ordinary shares
Conversion price	$	65.00

23. Tax

	2013 A$’000		2012 A$’000
Liabilities
CURRENT
Current Tax liability / (asset)		-		(24	)
NON-CURRENT
Deferred tax liability comprises:
Unrealised FX gains		-		-
Accruals		-		-
Other		-		-
Total		-		(24	)
Assets
Deferred tax assets comprise:
Provisions		-		-
Transaction costs included in equity		-		-
Other		-		-
		-		-
Reconciliations
i.      Gross Movements
The overall movement in the deferred tax account is as follows:
Opening balance		-		-
(Charge)/credit to income statement		-		-
Foreign currency translation difference		-		-
Closing balance		-		-
ii.     Deferred Tax Liability
The movement in deferred tax liability for each temporary difference during the year is as follows:
Tax allowances relating to unrealised FX gains:
Opening balance		-		-
Charged to the income statement		-		-
Closing balance		-		-
Tax allowances relating to accruals:
Opening balance		-		-
Charged to the income statement		-		-
Closing balance		-		-
Other
Opening balance		-		-
Charge to the income statement		-		-
Foreign currency translation difference		-		-
Closing Balance		-		-
iii.   Deferred tax assets
The movement in deferred tax assets for each temporary difference during the year is as follows:
Provisions:
Opening balance		-		-
Charged to the income statement		-		-
Closing balance		-		-
Transactions costs on equity issue:
Opening balance		-		-
(Charged)/Credited directly to equity		-		-
Closing balance		-		-
Other
Opening balance		-		-
Charged/(Credited) to the income statement		-		-
Closing balance		-		-

Deferred tax assets on losses to a value of $6.1 million to date are not brought to account due to not being probable of being recovered. In addition, deferred tax assets for deductible temporary differences of A$2.5 million and deferred tax liabilities for temporary differences of $0.5 million have not been brought to account.

115

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

24. Issued Capital

Fully paid ordinary shares (Issued and	2013		2013		2012		2012
authorised)	Number		A$’000		Number		A$’000
At the beginning of reporting period		9,452,415		110,320		8,512,259		96,801
Ordinary shares issued
-  July 2011		-		-		18,444		113
- January 2012		-		-		10,168		167
- October 2012		1,417,860		95		-		-
Shares issued on performance right conversion during the year		-		-		116,004		-
Subtotal		10,870,275		110,415		8,656,875		97,801
Shares issued from conversion of convertible notes		-		-		795,540		13,239
At reporting date		10,870,275		110,415		9,452,415		110,320

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

The ordinary shares issued in April, June and November 2009 includes a warrant (option). Each warrant entitles the holder to acquire one ordinary share of Mission NewEnergy at an exercise price of A$15.00. The Warrants may not be exercised on a “cashless” or “net exercise” basis. In addition, a Warrant will not entitle the holder to participate in a new issue of ordinary shares or other securities of Mission NewEnergy unless the Warrant has been exercised. The expiration date for exercise of the Warrants will be 30 April 2014. However, if at any time on or after April 15, 2012 the immediately preceding 20-trading day volume weighted average price (as published by or derived from the Australian Securities Exchange) is at least A$50.00, the Company may give written notice to each warrant holder that if such holder does not exercise its Warrants within 15 days from the date of such notice, then the Warrants would expire on that 15th day. The Warrants will not be listed on any stock exchange.

Shares issued in February 2010 and April 2011 did not include a warrant.

The following warrants and options were in existence at reporting date:

116

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

	2013		2012
Warrants – from share issues		2,995,009		2,995,009
Employee performance rights		1,600		1,600
Total		2,996,609		2,996,609

a. Options and Performance Shares

For information relating to the Mission NewEnergy Limited option and performance right plans, including details of options and performance shares issued, exercised and lapsed during the financial year and the options outstanding at year-end, refer to Note 30.

b. Capital Management

Management controls the capital of the Group in order to maintain an appropriate debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern. Due to the stage that the business is in, managements preferred approach is to fund the business with equity, however where equity funding is not available debt funding is considered. Management reviews historic and forecast cash flows on a regular basis in order to determine funding needs.

The Group’s debt and capital includes ordinary share capital, performance shares, convertible notes and financial liabilities, supported by financial assets.

The convertible notes include the following key covenants:

(i)           comply with the Conditions of the convertible notes;

(ii) maintain its corporate existence;

(iii)      not amend its Constitution or alter the voting or other rights attached to Shares in a manner that is prejudicial to the interests of Noteholders;

(iv)      not do or omit to do anything that would preclude the issue of a valid Cleansing Notice on the date such notice is required to be issued under the Conditions;

(v)       make disclosure of material information to the public as required by the Listing Rules, or the rules of any other stock exchange on which it is listed and the Corporations Act or any other applicable law;

(vi) not incur a total debt obligation (including any unconverted Convertible Notes outstanding at any given time) of higher than 2.5x Group’s net worth (being paid up equity plus any retained earnings) without the prior consent of at least 75% of Noteholders (on the basis of one vote for every Convertible Note held unconverted).

(vii)  not issue more than 25% of the Company's share capital in options or convertible notes, without the prior consent of at least 75% of Noteholders (on the basis of one vote for every Convertible Note held at such time unconverted).

117

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

(viii) maintain the capacity to issue sufficient Shares to enable the conversion of all of the outstanding Convertible Notes into Shares in accordance with the Conditions.

(ix) ensure that in the event of either material asset sales or consolidation or merger or other business combination transactions, that the Noteholders be given at least 5 Business Days notice prior to the event and that the obligation on the notes are assumed by the surviving entity or acquiring entity such that the value of the Notes are not diminished by the event. In any case given such an event the Noteholders can require the surviving or acquiring company to redeem the Outstanding Notes for their Face Value plus any accrued but unpaid interest.

The Company has complied with these provisions during the reporting period.

There are no other externally imposed capital requirements.

Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.

25. Reserves

1. Share based payments reserve

The share based payments reserve arose on the cumulative issue of 70,000 options and 415,000 performance shares to various officers of the Company. Refer to note 30 for details of the share based payments.

Amounts are transferred out of the reserve and into issued capital when the options are exercised, or if lapsed, then transferred to retained earnings.

2. Foreign currency translation reserve

The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries.

3. Convertible Notes Reserve

The Convertible Notes reserve is used to record the equity component, less the cost of issue, of the convertible notes.

26. Capital and Leasing Commitments

	2013 A$’000		2012 A$’000
a.  Operating Lease Commitments
- not later than12 months		182		154
- between 12 months and 5 years		982		849
- greater than 5 years		2,074		2,032
		3,238		3,035

118

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Mission Biotechnologies Sdn Bhd has entered into a lease of 2 lots totalling 24,000 sq metres of land at Kuantan Port, Malaysia. The term of the sub-lease is from 1^st March 2006 to 30^th December 2027. The rental value increases by 10%, commencing 1 January 2007, and subsequently every three years, starting 1 January 2011. Every 3 years, commencing 1^st January 2007, the annual rental will be increased by 10%. At the date of this report this lease has been novated to Felda as part of the sale of the 100,000 tpa refinery.

Mission Biofuels Sdn Bhd has entered into a lease of 2 lots totalling 24,000 sq metres of land at Kuantan Port, Malaysia for the 250,000 TPA plant. The term of the sub-lease is from 1^st June 2007 to 31^st December 2027. The rental value increases by 10%, commencing 1 January 2010, and subsequently every three years, starting 1 January 2010. Every 3 years, commencing 1^stJanuary 2013, the annual rental will be increased by 10%.

Capital Expenditure Commitments

	2013 A$’000		2012 A$’000
Capital expenditure commitments contracted for: -
Acquisition and installation biodiesel plants19		2,614		3,483
Other		-		-
		2,614		3,483

27. Contingent Liabilities and Contingent Assets

A subsidiary within the group has terminated a JV agreement in Indonesia and is in discussion with the JV party to determine an appropriate way forward. This may result in an inflow greater than the value invested, however at this stage it is not possible to quantify this value.

A subsidiary of the company has received various claims for payments from the contractor liable to complete the construction of Missions 250,000 tpa refinery. The subsidiary company disputes these claims and has counter claimed on various matters. In addition the subsidiary company has submitted that all these matters should be heard as part of the arbitration proceedings. These may result in an outflow or inflow of cash resources to the company however it is not possible to quantify this value.

The Group is not aware of any other contingent liabilities or contingent assets as at 30 June 2013.

¹⁹This value is net of late delivery charges and other costsand counter claims the Group believes are eligible to offset against the completion payments of the second biodiesel plant.

119

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

28. Segment Reporting

	Biodiesel Refining (Malaysia)			Corporate (Continuing Operations)			Consolidated (Continuing Operations)			Jatropha and Power Generation (India) (Discontinued Operations)			Consolidated (Continuing and Discontinued Operations)
	2013 A$’000			2013 A$’000			2013 A$’000			2013 A$’000			2013 A$’000
Revenue
Revenue from external customers		159			-			159			361			520
Interest received		8			2			10			-			10
Other revenue		495			7,749			8,244			8			8,252
Total segment revenue		662			7,751			8,413			369			8,782
Changes in Inventory		(357	)		-			(357	)		-			(357	)
Costs of materials		(11	)		-			(11	)		(87	)		(98	)
Employee benefits expense		(445	)		(1,173	)		(1,618	)		(128	)		(1,746	)
Impairment		11,494			-			11,494			(403	)		11,091
Depreciation and amortisation		(3	)		(4	)		(7	)		(144	)		(151	)
Interest expense		(3	)		(4,046	)		(4,049	)		(232	)		(4,281	)
Other expenses		(1,967	)		(1,144	)		(3,111	)		(92	)		(3,203	)
Segment result before tax		9,370			1,384			10,754			(717	)		10,037
Profit/loss from ordinary activities before income tax								10,754			(717	)		10,037
Income tax expense								20			-			20
Net profit								10,774			(717	)		10,057
Non-current Segment assets		40			6			46			-			46
Non-current Segment assets – Assets held for sale		12,573			-			12,573			2,000			14,573
Total Segment assets		13,741			4,272			18,013			2,092			20,105
Segment liabilities		1,591			29,186			30,777			1,832			32,609
Acquisitions of property, plant and equipment		17			5			22			-			22

120

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

	Biodiesel Refining (Malaysia)			Corporate			Consolidated (Continuing Operations)			Jatropha and Power Generation (India) (Discontinued Operations)			Consolidated (Continuing and Discontinued Operations)
	2012 A$’000			2012 A$’000			2012 A$’000			2012 A$’000			2012 A$’000
Primary Reporting — Business Segments
Revenue
Revenue from external customers		27,265			-			27,265			513			27,778
Interest received		60			218			278			11			289
Other revenue		360			10,299			10,659			67			10,726
Total segment revenue		27,685	20		10,517			38,202			591			38,793
Changes in Inventory		(4,786	)		-			(4,786	)		27			(4,759	)
Costs of materials		(21,367	)		-			(21,367	)		(458	)		(21,825	)
Employee benefit expense		(1,190	)		(2,031	)		(3,221	)		(817	)		(4,038	)
Impairment – Note 5a		(2,699	)		(2,058	)		(4,757	)		(919	)		(5,676	)
Depreciation and amortisation		(179	)		(80	)		(259	)		(256	)		(515	)
Interest expense		(598	)		(1,561	)		(2,159	)		(360	)		(2,519	)
Other expenses		(1,734	)		(3,346	)		(5,080	)		(563	)		(5,643	)
Segment result before tax		(4,868	)		1,441			(3,427	)		(2,755	)		(6,182	)
Profit/loss from ordinary activities before income tax								(3,427	)		(2,755	)		(6,182	)
Income tax expense								(16	)		-			(16	)
Net profit/(loss)								(3,443	)		(2,755	)		(6,198	)

²⁰Sales from the refining business unit are primarily to two customers in 2012 and two customer in 2011.

121

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

	Biodiesel Refining (Malaysia)		Corporate		Consolidated (Continuing Operations)		Jatropha and Power Generation (India) (Discontinued Operations)		Consolidated (Continuing and Discontinued Operations)
	2012 A$’000		2012 A$’000		2012 A$’000		2012 A$’000		2012 A$’000
Non-current segment assets		574		5		579		156		735
Non-current Segment assets – Assets held for sale		-		-		-		2,286		2,286
Total Segment assets		4,319		3,666		7,985		2,718		10,703
Segment liabilities		1,383		31,949		33,332		1,812		35,144
Acquisitions of property, plant and equipment		732		55		787		46		833

122

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

Segment reporting accounting Policies

The Managing Director/Group Chief Executive Officer is the Chief operating decision maker. The reportable segments presented are in line with the segmental information reported during the financial year to the Group Chief Executive Officer.

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses and borrowings. Segment assets and liabilities do not include deferred income taxes.

Segments exclude discontinued operations.

Intersegment Transfers

Segment revenues, expenses and results exclude transfers between segments.

Business and Geographical Segments

The Group has three key business segments. The Group’s business segments are located in Malaysia, Indonesia, and Mauritius (the Mauritian entity acts as a holding company for Mission Biofuels India Pvt Limited, and as such no operational activities occur in Mauritius) with the Group’s head office located in Australia. The Biodiesel Refinery segment is located in Malaysia and the downstream palm oil project is located in Indonesia. The Jatropha business segment is located in India along with the Power generation segment and is now classified in Discontinued operations (See note 36).

123

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

29. Cash Flow Information

Reconciliation of Cash Flow from Operations with Profit (loss) after Income Tax	2013 A$’000			2012 A$’000			2011 A$’000
Profit / (Loss) after income tax before non-controlling interests		10,774			(3,443	)		(17,011	)
Loss for the year from discontinued operations		(717	)		(2,755	)		(4,659	)
Non cash flows in profit / (loss)
Depreciation of plant and equipment – continued operations		7			259			263
Depreciation of plant and equipment – discontinued operations		144			257			299
Amortisation of Convertible Note Costs		-			17			379
Interest accrued		137			-			-
Gain on the settlement/restructure of Convertible Note		(7,748	)		(10,300	)		(1,734	)
Amortisation of Equity portion of Convertible Note		3,394			1,067			2,003
Provision for employee benefits		32			11			20
Impairment of Trade Receivables		-			188			1,930
(Impairment reversal)/Impairment of assets		(12,174	)		4,268			3,501
Impairment of inventories		680			303			-
Impairment of receivables, assets and inventories of discontinued operation		404			918			-
Share based payment expense		-			299			3,324
Net cash provided by / (used in) operating activities before change in assets and liabilities		(5,067	)		(8,911	)		(11,685	)
Change in assets and liabilities
- (Increase) decrease in receivables		618			3,954			(6,169	)
- (Increase) decrease in inventories		374			4,759			(5,090	)
- (Increase) decrease in biological assets		-			-			1,389
- (Increase) decrease in other assets		82			230			(524	)
- (Increase) decrease in deferred tax and current tax		25			6			17
- Increase (decrease) in creditors and accruals		(1,031	)		(4,691	)		5,378
Foreign Currency Adjustments		1,284			(218	)		1,595
		1,352			4,040			(3,404	)
Cash (used in) operations		(3,715	)		(4,871	)		(15,089	)

Cash flows from discontinued operations (being the Windmill segment) are a net operating cash lossof $0.1 million for the period ended 30 June 2013 ($0.02 million loss for 30 June 2012).

Credit Standby Facilities with Banks and Funding Sources

	2013 A$’000			2012 A$’000
Loan facilities		7,139			1,764
Amount utilised		(3,093	)		(1,764	)
		4,046			-

Facilities at June 2013 relate term loans for the funding of various items of Property, Plant and Equipment and a working capital facility. The loan terms range from two to six years with interest rates from 16.7% to 20%. These loans do not have an option to extend.

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Mission New Energy Limited and Controlled Entities
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NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

30. Interests and Remuneration of Key Management Personnel

	2013 A$000		2012 A$000
Salaries		1,115		1,329
Non-cash benefits		12		18
Post employment benefits		59		66
Share based payments		-		49
Total		1,186		1,462

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013 (Contd.)

Equity settled Performance rights

	Balance 30/6/2011		New Issue			Exercised			Lapsed			Balance 30/06/2012		New Issue		Exercised		Lapsed		Balance 30/06/2013		Vested and unexercised at 30/06/2013
Director
Nathan Mahalingam		33,334		-			(33,334	)		-			-		-		-		-		-		-
Guy Burnett		39,334		-			(33,334	)		(6,000	)		-		-		-		-		-		-
															-		-		-		-		-
Executives															-		-		-		-		-
James Garton		39,334		-			(33,334	)		(6,000	)		-		-		-		-		-		-
Senior employees collectively		21,075		20,000	21		(16,675	)		(22,800	)		1,600		-		-		-		1,600		-
Total		133,077		20,000			(116,677	)22		(34,800	)		1,600		-		-		-		-		-

Ordinary shares held by key management personnel

²¹Grant date was 1 July 2011, share price and fair value on grant date was $4.90.10,000 of the performance rights vest on 31 December 2012 for service and 10,000 vest on 30 June 2012 if the refining operations are cash flow positive for the 2012 financial year.

²²The weighted average exercise price was $5.47 for performance rights exercised in 2012.

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Mission New Energy Limited and Controlled Entities
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	Balance 30/6/2011		Exercised pursuant to performance rights		Disposed		Balance 30/06/2012		Exercised pursuant to performance rights		Disposed		Balance 30/06/2013
Dario Amara		2,000		-		-		2,000		-		-		2,000
Nathan Mahalingam		579,622		33,334		-		612,956		-		-		612,956
Guy Burnett		78,667		33,334		-		112,001		-		-		112,001
James Garton		78,717		33,334		-		112,051		-		-		112,051
Samsudeen Ganny		-		10,000		-		10,000		-		-		10,000
Total		739,006		110,002		-		849,008		-		-		849,008

Refer to the Remuneration report for full details on key management personnel remuneration and benefits

127

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

31. Related Parties

	2013 A$’000	2012 A$’000
There were no transactions with related parties during the period.

32. Financial Instruments

Financial Risk Management

The Group has a financial risk management policy in place and the financial risks are overseen by the Board. The Group’s financial instruments consist mainly of deposits with banks, secured loans, convertible notes, other financial assets, accounts receivable, accounts payable, and loans to and from subsidiaries.

The principal risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk.

The Group does not have any financial assets carried at fair value therefore no further disclosure in relation to the fair value hierarchy is presented.

Fair value of financial instruments

	Carrying amount $,000		Fair Value $,000
Financial assets
Cash and cash equivalents		1,420		1,420
Other Financial Assets		12		12
Receivables (Current)		3,833		3,833
Financial liabilities
Trade and other payables		1,679		1,679
Current loans		27,404		27,404
Non-current loans		1,558		1,558

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Mission New Energy Limited and Controlled Entities
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The fair value of cash and cash equivalents, other financial assets, receivables, trade and other payables and current loans are short-term instruments in nature whose carrying value is equivalent to fair value.

Non-current receivables are carried at a discounted value, which reflects the fair value.

Non-current loans are carried at amortised cost, with the fair value being determined using a discounted cash flow model incorporating current commercial borrowing rates.

Interest rate risk

Interest rate risk is managed with a mixture of fixed and floating rate deposits, fixed rate convertible note debt and floating rate debt. For further details on interest rate risk refer to the table below under liquidity risk. The Group’s main interest rate risk, being cash flow interest rate risk, arises from the windmill loan.

Group sensitivity

At 30 June 2013, if interest rates had changed by -/+ 25 basis points, with all other variables held constant, the following financial impacts would have been recorded by the Group;

· Effect on post tax profit – A$ Nil million lower/higher (2012: A$ Nil million lower/higher)

· Equity would have been – A$ Nil million lower/higher (2012: A$ Nil million lower/higher)

Foreign currency risk

The Group operates internationally through a number of subsidiaries and is thus exposed to fluctuations in foreign currencies, arising from the foreign currencies held in its bank accounts, the sale of goods in currencies other than the Group’s measurement currency, and the translation of results from investments in foreign operations. The foreign exchange exposures are primarily to the Indian Rupee, Malaysian Ringgit, Indonesian Rupiah and the US dollar.

Foreign exchange risks arising from the sale of products are hedged using forward exchange contracts.

Foreign currency risks arising from commitments in foreign currencies are managed by holding cash in that currency. Foreign currency translation risk is not hedged, with translation differences being reflected in the foreign currency translation reserve.

Group sensitivity

At 30 June 2013, if foreign currencies had changed by -/+ 10%, with all other variables held constant, the following financial impacts would have been recorded by the Group;

Effect on cash and cash equivalent – A$ 0.1 million lower/ A$0.2 million higher (2012: A$ 0.1 million lower/ A$0.1 million higher)

Profit and Loss would have been – A$ 0.1 million lower/ A$0.2 million higher (2012: A$ 0.1 million lower/ A$0.1 million higher)

Hedging of Foreign Currency Risk

At financial report date the Group had no forward exchange contracts in place.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

Credit risk

Malaysian operations

Credit risk for receivables at 30 June 2013 in the refining operations stemmed from sales to large Malaysian oil companies with an inherent low risk of credit default receivables from the 250,000 tpa refinery EPCC contractor for costs incurred on their behalf.

Indian Operations

With the downsizing of the feedstock operations, all receivables from sale of saplings have been written off. Sales of electricity, which is under a power purchase agreement and the resultant receivable, are to a large Indian State Owned enterprise and hence credit risk is deemed low.

Indonesian operations

The group carries a receivable relating to an investment into an Indonesian palm oil joint venture. This receivable is the minimum amount due to the Group under the joint venture agreement which is with a large state owned entity, and hence the credit risk is deemed low.

Second Biodiesel plant guarantee

The parent entity has provided a corporate guarantee to the contractor of the second Biodiesel plant in place of the standard letter of credit originally placed at construction commencement.

The following table sets out the credit quality of financial assets:

	2013 A$’000		2012 A$’000
Cash and Cash Equivalents
Counterparties with external credit rating (Standard and Poors)
A-1+		1,381		676
A-1		-		246
A-2		39		534
		1,420		1,454

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	2013 A$’000		2012 A$’000
Receivables
Counterparties without external credit rating
Group 1		3,833		3,136
Group 2		-		1,089

Group 1 receivables relate receivables under arbitration, the timing and recoverability being dependant on the outcome of the arbitration proceedings.

Group 2 receivables relate to existing customers (more than 6 months) with no defaults in the past.

Commodity Risk

As there was no inventory held as at 30 June 2013, the Group has no exposure to market prices of input costs into the production of biodiesel.

Liquidity risk

					Weighted Average Interest Rate
	2013		2012		2013			2012
	A$’000		A$’000		%			%
Financial Assets:
Cash and cash equivalents		1,420		1,456		0.1	%		2.5	%
Other financial assets		12		581		-			-
Loans and Receivables		3,833		4,225		-			-
		5,265		6,262
Financial Liabilities summarised by contractual maturity:
Current debt
Floating Interest Rate – less than 6 months		838		825		16.5	%		18.3	%
Floating Interest Rate - 6 to 12 months		838		825		16.5	%		18.3	%
Fixed Interest Rate – 6 to 12 months		27,404		-		-			-
Non Interest Bearing		-		2,175		-			-
Total Current Debt		29,080		3,825
Non-current debt
Floating Interest Rate(1 to 3 Years)		-		114		20.0	%		3.4	%
Floating Interest Rate(4 to 5 Years)		-		-
Fixed Interest Rate(1 to 3 Years)		1,558		31,101		20.0	%		4.0	%
Fixed Interest Rate(4 to 5 Years)		-		-
Total Non-Current Debt		1,558		31,215

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash is maintained.Working capital requirements are met through drawdowns of the US$5 million facility.

33. Parent entity information

	2013			2012
Information relating to Mission NewEnergy Limited:	A$’000			A$’000
Current assets		16,832			887
Total assets		16,839			892
Current liabilities		(27,629	)		(848	)
Total liabilities		(29,187	)		(31,948	)
Net asset (deficit)/surplus		(12,348	)		(31,057	)
Issued capital		110,311			110,215
Opening Retained loss		(151,985	)		(141,191	)
Share based payments reserve		4,907			4,907
Convertible notes reserve		8,481			2,645
Total shareholders’ equity		(12,348	)		(31,057	)
Profit / (Loss) of the parent entity		15,937			(7,633	)
Total comprehensive income of the parent entity		15,937			(7,633	)
Details of any guarantees entered into by the parent entity in relation to the debts of its subsidiaries *		2,858			3,483
Details of any contingent liabilities of the parent entity		-			-
Details of any contractual commitments by the parent entity for the acquisition of property, plant or equipment.		-			-

* The parent entity has provided a corporate guarantee to the contractor of the second Biodiesel plant in place of the standard letter of credit originally placed at construction commencement.

The Parent entity is not aware of any other contingent liabilities or contingent assets as at 30 June 2013.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

34. Events occurring after the reporting period

Other than the matters mentioned below, there have been no significant subsequent events up until the date of signing this Financial Report.

The majority of the conditions precedent to complete the sale of the 100,000 tpa refinery were completed at the date of this report and hence the Company has reflected a reversal of previous asset impairment to the value of the sale, being A$12.2 million.

35. Non-controlling Interests

	2013 A$’000			2012 A$’000		2011 A$’000
Issued Capital		70			70		-
Reserves		-			-		-
Retained profit / (loss) per annum		(14	)		68		-
Retained profit / (loss)		54			68		-

The non-controlling interest has a 15% (2012: 15%) equity holding in Oleovest PL.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

36. Non-current assets held for sale and discontinued operations

The Board has previously resolved to sell non-core assets in India being the windmill power generation operation in India and the office complex. In addition, during the current financial year, the Group completed the restructure of the Indian Jatropha operations and the operations have been significantly downsized. Accordingly these assets have been classified as non-current assets held for sale and the operations as discontinued operations.

The revenue, expenditure and carrying amount of the assets and liabilities in this disposal group are summarised as follows:

Discontinued operations – Power generation and Jatropha segment	2013 A$’000			2012 A$’000			2011 A$’000
Revenue		369			592			1,430
Cost of materials		(87	)		(431	)		(636	)
Depreciation		(144	)		(257	)		(299	)
Impairment – non-current assets		(350	)		-			(298	)
Impairment – current assets		(53	)		(919	)		(1,930	)
Other expenses		(220	)		(1,380	)		(2,503	)
Finance Costs		(232	)		(360	)		(423	)
Net loss from discontinued operations attributable to members of the parent		(717	)		(2,755	)		(4,659	)
Non-current assets classified as held for sale
- Property, Plant and Equipment – power generation assets		1,566			1,869
- Property, Plant and Equipment – jatropha assets		434			417
- Property, Plant and Equipment – refining assets		12,573			-
		14,573			2,286
Liabilities classified as held for sale
- Financial liabilities – power generation and jatropha segment		1,676			1,567
- Other liabilities – power generation and jatropha segment		156			245
		1,832			1,812

The assets in this disposal group are actively being marketed for sale and are expected to be sold within the forthcoming twelve months.

134

Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

37. Differences from preliminary final report

In accordance with ASX Listing Rule 4.5A, set out below are certain differences between information contained in the Appendix 4E lodged with the ASX and this financial report.

At the time of lodging the Preliminary Final Report, the Australian Accounting Standards Board accounting standard AASB 110, Events after Reporting Period, had not been applied when assessing the disclosure of impairment reversal of assets.

As disclosed in the Appendix 4E, the conditions precedent to concluding the sale of the 100,000 tpa refinery announced in April 2013 were yet to be completed. Had the conditions precedent been completed, the Group would have shown a reversal of impairment of Property, Plant and Equipment.

As of the date of this report the Board has determined that despite the conditions precedent not being fully completed, it is probable that the sale will conclude and have hence have reflected the impairment reversal.

As a result of this, the following differences between the Preliminary Final Report and this Financial Report have arisen.

The Profit after Income Tax attributable to members of the parent entity has increased from a loss of $2,177,000 to a profit of $10,057,000. This is primarily due to the reversal of impairment of refinery assets to a value of A$12.2 million in the Consolidated Group Statement of Profit and Loss. In the Consolidated Group Balance sheets, the Non-current assets held for sale of $2,000,000 has been increased to $14,573,000.

Earnings per share have increase from a loss per share of $0.21 to an earnings per share of $0.96 cents.

Total Assets have increased from $7,532,000 to $20,105,000. Net Assets Deficit has decreased from $25,077,000 to $12,504,000.

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Mission New Energy Limited and Controlled Entities
(ABN 63 117 065 719)

38. Company Details

The registered office of the company is: Mission NewEnergy Limited, Unit B2, 431 Roberts Road, Subiaco, WA 6008, Australia.

The principal places of business are:

Australia	Mission NewEnergy Limited Head Office Unit B2, 431 Roberts Rd, Subiaco, Western Australia, 6008, Australia.
Malaysia	Mission Biofuels Sdn Bhd Unit 621, Block A, Kelana centre point, No. 3, Jalan ss7/ 19, Kelanajaya, 47301 Petaling Jaya, Selangor	Mission Biotechnologies Sdn Bhd Unit 621, Block A, Kelana centre point, No. 3, Jalan ss7/ 19, Kelanajaya, 47301 Petaling Jaya, Selangor
Mauritius	Mission Agro Energy Limited 9th Floor Ebene Tower 52 Cybercity Ebene Republic of Mauritius
India	Mission Biofuels (India) Pvt Limited Shops nos. 1,2 and 3 Sun heights, Ground floor Gandhingar bridge Adishankaracharyya Marg Powai, Mumbai Maharashtra India, 400 076	Mission Agro Diesel (India) Pvt Limited 608 Powai Plaza, Hiranandani Business Park Powai, Mumbai - 400076, India

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