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



|S | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------
|  |                                                                                     
|  | For the fiscal year ended June 30, 2012                                             



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, 2012: 9,452,415 Ordinary Shares



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



 ̈YesxNo



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.



 ̈YesxNo



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.



xYes ̈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).











 ̈Yes ̈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 BoardxOther ̈



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).



 ̈YesxNo











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                        
|                                                  | Item 2. Offer Statistics and Expected Timetable                                      
|                                                  | Item 3. Key Information                                                              
|                                                  | Item 4. Information on the Company                                                   
|                                                  | Item 4A.Unresolved Staff Comments                                                    
|                                                  | Item 5. Operating and Financial Review and Prospects                                 
|                                                  | Item 6. Directors, Senior Management and Employees                                   
|                                                  | Item 7. Major Shareholders and Related Party Transactions                            
|                                                  | Item 8. Financial Information                                                        
|                                                  | Item 9. The Offer and Listing                                                        
|                                                  | Item 10. Additional Information                                                      
|                                                  | Item 11. Quantitative and Qualitative Disclosures About Market Risk                  
|                                                  | Item 12. Description of Securities Other than Equity Securities                      
|                                                  |                                                                                      
|PART II                                           |                                                                                      
|                                                  |                                                                                      
|                                                  | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                                  | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                                  | Item 15. Controls and Procedures                                                     
|                                                  | Item 16. [Reserved]                                                                  
|                                                  | Item 16A. Audit Committee Financial Expert                                           
|                                                  | Item 16B. Code of Ethics                                                             
|                                                  | Item 16C. Principal Accountant Fees and Services                                     
|                                                  | Item 16D. Exemptions from the Listing Standards for Audit Committees                 
|                                                  | Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers     
|                                                  | Item 16F. Change in Registrant’s Certifying Accountant                               
|                                                  | Item 16G. Corporate Governance                                                       
|                                                  | Item 16H. Mine Safety Disclosures                                                    
|                                                  |                                                                                      
|PART III                                          |                                                                                      
|                                                  |                                                                                      
|                                                  | Item 17. Financial Statements                                                        
|                                                  | Item 18. Financial Statements                                                        
|                                                  | Item 19. Exhibits                                                                    



i







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, 2010, 2011 and 2012 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.



2







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 expectations regarding the market for Jatropha;
| | - | ---------------------------------------------------



| | • | our expectations regarding the amount of Jatropha seeds
that will be produced from our Jatropha acreage;
| | - | --------------------------------------------------------------------------------------------------------



| | • | our belief regarding the amount of Jatropha oil that
our Jatropha seeds will yield;
| | - | -----------------------------------------------------------------------------------



| | • | our beliefs regarding the design, technology, operation
and maintenance of our refineries;
| | - | ------------------------------------------------------------------------------------------



| | • | 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 the restructuring we commenced
in January 2012;
| | - | ---------------------------------------------------------------------------



| | • | our expectations regarding the scaling and expansion
of our production capacity;
| | - | --------------------------------------------------------------------------------



| | • | our expectations regarding our ability to maintain
and expand our existing customer base;
| | - | -----------------------------------------------------------------------------------------



| | • | our expectations regarding entering into or maintaining
joint venture enterprises and other strategic investments;
| | - | ------------------------------------------------------------------------------------------------------------------



| | • | 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.



3









Item 3. Key Information



| | A. | Selected Financial Data.
| | -- | ------------------------



The following selected consolidated statements
of operations and other consolidated financial data for the fiscal years 2012, 2011 and 2010 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, 2012, 2011 and 2010 and the balance sheet data as at June 30, 2012 and 2011 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, 2009 and
2008 and the balance sheet data as at June 30, 2010, 2009 and 2008 have been derived from our audited financial statements that
are not included in this annual report.



|                                                               |  | 2012U$(1)                                       |           |   | 2012A$ |  |           | 2011A$ |  |  | 2010A$    |   |  | 2009A$ |           |   | 2008A$ | 
|-------------------------------------------------------------- |  | ----------------------------------------------- | --------- | - | ------ |  | --------- | ------ |  |  | --------- | - |  | ------ | --------- | - | ------ | 
|                                                               |  | (in thousands, except share and per share data) |          
|Income
    Statement data:                                     |  |                                                 |           |   |        |  |           |        |  |  |           |   |  |        |           |   |        | 
|Total sales
    revenue                                        |  |                                                 | 28,170    |   |        |  | 27,289    |        |  |  | 14,080    |   |  |        | 14,394    |   |        | 
|Total other income                                             |  |                                                 | 11,372    |   |        |  | 11,016    |        |  |  | 2,869     |   |  |        | 2,066     |   |        | 
|Cost of sales                                                  |  |                                                 | (27,329   | ) |        |  | (26,474   | )      |  |  | (13,987   | ) |  |        | (15,021   | ) |        | 
|Employee benefits expense                                      |  |                                                 | (4,321    | ) |        |  | (4,186    | )      |  |  | (7,527    | ) |  |        | (5,307    | ) |        | 
|Other income (expenses)                                        |  |                                                 | (10,810   | ) |        |  | (10,472   | )      |  |  | (11,818   | ) |  |        | (88,751   | ) |        | 
|Finance
    costs                                              |  |                                                 | (3,348    | ) |        |  | (3,243    | )      |  |  | (5,288    | ) |  |        | (5,152    | ) |        | 
|Profit/(loss) from operations
    before income tax            |  |                                                 | (6,266    | ) |        |  | (6,070    | )      |  |  | (21,671   | ) |  |        | (97,771   | ) |        | 
|Income
    tax (expense) benefit                               |  |                                                 | (17       | ) |        |  | (16       | )      |  |  | 1         |   |  |        | (29       | ) |        | 
|Net (loss)/profit                                              |  |                                                 | (6,283    | ) |        |  | (6,086    | )      |  |  | (21,670   | ) |  |        | (97,800   | ) |        | 
|Profit/(Loss)
    attributable to non-controlling interests    |  |                                                 | 70        |   |        |  | 68        |        |  |  | -         |   |  |        | -         |   |        | 
|Profit/(Loss)
    attributable to members of the parent        |  |                                                 | (6,212    | ) |        |  | (6,018    | )      |  |  | (21,670   | ) |  |        | (97,800   | ) |        | 
|Basic and diluted earnings
    (loss) per share (2)            |  |                                                 | (0.71     | ) |        |  | (0.69     | )      |  |  | (3.50     | ) |  |        | (20.76    | ) |        | 
|Weighted average ordinary number of shares
    outstanding (3) |  |                                                 | 8,919,299 |   |        |  | 8,919,299 |        |  |  | 6,199,265 |   |  |        | 4,711,249 |   |        | 
|Balance
    Sheet data:                                        |  |                                                 |           |   |        |  |           |        |  |  |           |   |  |        |           |   |        | 
|Total current assets                                           |  |                                                 | 7,863     |   |        |  | 7,682     |        |  |  | 29,236    |   |  |        | 25,007    |   |        | 
|Total assets                                                   |  |                                                 | 10,956    |   |        |  | 10,703    |        |  |  | 36,598    |   |  |        | 33,749    |   |        | 
|Total current liabilities                                      |  |                                                 | 2,418     |   |        |  | 2,362     |        |  |  | 22,059    |   |  |        | 4,300     |   |        | 
|Total non-current liabilities                                  |  |                                                 | 31,952    |   |        |  | 31,215    |        |  |  | 44,287    |   |  |        | 59,137    |   |        | 
|Total liabilities                                              |  |                                                 | 35,973    |   |        |  | 35,144    |        |  |  | 66,346    |   |  |        | 63,437    |   |        | 
|Retained earnings (accumulated
    losses)                     |  |                                                 | (143,690  | ) |        |  | (140,377  | )      |  |  | (135,720  | ) |  |        | (117,259  | ) |        | 
|Total equity                                                   |  |                                                 | (25,018   | ) |        |  | (24,441   | )      |  |  | (29,748   | ) |  |        | (29,688   | ) |        | 
|Other
    financial data:                                      |  |                                                 |           |   |        |  |           |        |  |  |           |   |  |        |           |   |        | 
|Dividends per share                                            |  |                                                 | —         |   |        |  | —         |        |  |  | —         |   |  |        | —         |   |        | 



4







| | (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, 2012, which exchange rate was A$1.00 = US$1.0236. 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, 2011 to June 30, 2012 which as A$1.00 = US$1.0323. 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, 2012, the noon buying rate for Australian dollars into U.S. dollars was A$1.00 = US$1.0236. On October 19, 2012, the
noon buying rate for Australian dollars into U.S. dollars was A$1.00 = U.S $ 1.0328.



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,                  |  |               |        |  |                  |  |        |      |  |  |        | 
|2008                                        |  |               | 0.9562 |  |                  |  | 0.9042 |      |  |  | 0.9644 | 
|2009                                        |  |               | 0.8055 |  |                  |  | 0.7423 |      |  |  | 0.9797 | 
|2010                                        |  |               | 0.8480 |  |                  |  | 0.8837 |      |  |  | 0.9369 | 
|2011                                        |  |               | 1.0732 |  |                  |  | 0.9905 |      |  |  | 1.0970 | 
|2012                                        |  |               | 1.0236 |  |                  |  | 1.0323 |      |  |  | 1.1026 | 
|Month ended                                 |  |               |        |  |                  |  |        |      |  |  |        | 
|April 30, 2012                              |  |               | 1.0410 |  |                  |  | 1.0350 |      |  |  | 1.0447 | 
|May 31, 2012                                |  |               | 0.9711 |  |                  |  | 0.9980 |      |  |  | 1.0345 | 
|June 30, 2012                               |  |               | 1.0236 |  |                  |  | 1.0323 |      |  |  | 1.1026 | 
|July 31, 2012                               |  |               | 1.0522 |  |                  |  | 1.0300 |      |  |  | 1.0522 | 
|August 31, 2012                             |  |               | 1.0334 |  |                  |  | 1.0475 |      |  |  | 1.0591 | 
|September 30, 2012                          |  |               | 1.0388 |  |                  |  | 1.0406 |      |  |  | 1.0561 | 
|October 31, 2012 (through October 19, 2012) |  |               | 1.0328 |  |                  |  | 1.0276 |      |  |  | 1.0397 | 



| | (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 loss for the
year ended June 30, 2012 of $6.1 million (2011: $21.7 million), with net cash used in operating activities of $4.9 million
(2011: 15.1 million). At June 30, 2012, the current assets less current liability surplus was $5.3 million (2011: $7.2 million)
and the net asset deficiency $24.4 million (2011: $29.7 million). 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
paid A$5 million to fully settle the series one convertible note liability of A$15 million shown in current liabilities at June
30, 2011. At June 30, 2012, the Company has a non-current liability for the series two convertible notes of A$32.9 million (nominal
value).



As announced    on August
17, 2012, a debt funding package has been agreed in principle with SLW International, LLC (“SLW”) a substantial convertible note
holder, to provide the Group with a US$5 million line of credit facility. In addition, the Company has sent a Notice of Meeting
to Shareholders to approve a Convertible Note restructure. Please refer to the Subsequent events note (Note 34) for further information
on these transactions. The restructure of the convertible note debt is subject to shareholder approval. The Group has appointed
an independent expert to review whether the transaction is fair and reasonable to shareholders (as required by the ASX listing
rules), in order to be able to recommend the transaction to shareholders. The Independent Expert’s Report and notice of meeting
are finalized and have been sent to shareholders with the shareholder meeting to be held on November 23, 2012. Please refer to
the subsequent events section in the F pages for details of an application lodged with the Takeovers Panel in regard to the funding
arrangement and convertible note restructure. At the date of this report, the Takeovers Panel has declined to conduct proceedings
in relation to this matter.



The Directors believe that at the date of
this report the Group has sufficient financial resources at June 30, 2012 to meet its committed financial liabilities.



The financial statements for the fiscal
year ended June 30, 2012 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 June 30, 2012. 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:



| | · | Obtain shareholder approval for the proposed
funding and restructure arrangements with SLW.
| | - | -------------------------------------------------------------------------------------------

| | · | Failing approval of the SLW arrangements,
raise debt or equity funding from other sources.
| | - | ------------------------------------------------------------------------------------------

| | · | Generate positive cash flows from operations.
| | - | ---------------------------------------------

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

| | · | Reduce cash outflows through cost control
measures.
| | - | ---------------------------------------------------



7







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.



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 primary business, the cultivation
and conversion of Jatropha seeds and the production of Jatropha-based biodiesel, may not exceed our expenses for at least the foreseeable
future. Should the cultivation and conversion of Jatropha seeds and the production of Jatropha-based biodiesel not produce revenue
in excess of our expenses there is substantial risk that we will not be able to generate enough alternative 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.



Our substantial level of non-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 non-current indebtedness.
As of June 30, 2012, we had total non-current indebtedness of A$32.9 million, including approximately A$31.1 million (accounting
value) outstanding under our convertible notes which is due and payable in May 2014, and A$1.8 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;
| | - | ---------------------------------------------------------------------------



| | · | 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.



In February 2010, the EPA finalized revisions
to the National Renewable Fuel Standard. The new rule, RFS2, incorporates changes mandated by the U.S. Energy Independence and
Security Act of 2007 and amends the original created under the U.S. Energy Policy Act of 2005. In December 2010, the EPA completed
the roll out of the RFS2 program by setting renewable fuel quality requirements for 2011. At the time RFS2 became effective on
July 1, 2010, the EPA had not completed its lifecycle analysis of several common biodiesel feedstocks, including palm oil. Under
the prior rule, fuels produced from these feedstocks were not recognized as having established fuel pathways and therefore did
not 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 has a very limited market in the U.S. In the final
rule adopted in December 2010, the EPA allowed the generation of retroactive or “delayed RINs” for fuels produced by
grain sorghum ethanol, pulpwood biofuel, palm oil biodiesel and canola oil biodiesel. To be eligible, fuel producers must meet
certain requirements, including having a commercialized production process that existed on July 1, 2010 and completing the EPA
petition process. We have historically used palm oil as feedstock for our biodiesel production. 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. Additionally, our offtake agreement with Valero Energy Corporation is contingent upon meeting these
requirements and we will not have any near term sales under that agreement if we fail to meet these requirements.



If Jatropha oil is not approved as a feedstock under Renewable
Fuels Standard 2, biodiesel produced from Jatropha oil will not generate RINs which will significantly limit our market opportunity
and could have a significant adverse effect on our business, financial performance and financial condition.



Under RFS2, biofuels produced from Jatropha
oil are not yet recognized by the EPA as having established fuel pathways and therefore do not generate RINs. Jatropha-based biodiesel
must demonstrate that it meets certain environmental and green house gas requirements prior to its approval by the EPA as a feedstock
eligible to generate RINs under RFS2.



There is no assurance that this feedstock
will meet the RFS2 requirements or that approval of this feedstock will be achieved. We have historically used palm oil as feedstock
for our biodiesel production and our future strategy is conditioned upon the viability of Jatropha oil as a feedstock. Palm oil
is not presently, and in the future may not be, approved under RFS2. Any significant delay or the failure of palm or Jatropha oil
to be accepted under the RFS2 requirements in the United States could have a significant adverse effect on our business, financial
performance and financial condition and could cause us to cease operations.



If more of our palm oil suppliers are not certified as
compliant with the 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.



In July 2010, the European Union introduced,
effective 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. This includes Cargill and Felda, who have historically been our primary suppliers of palm
oil, along with a range of palm oil producers and traders that supply to us. 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.



9







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.”



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



In 2012, our biofuel revenue was generated
primarily from three customers, with our by-products readily sold to a number of customers. Our contracts in 2012 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, such non-operation may result in significant costly technical and mechanical delays if the decision were made to restart
production.



10







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.



Our contract farming model is subject to inherent risks
and if we cannot improve the results of poor performing farmers in certain states, our Jatropha oil yield and the results of our
operations will be adversely impacted.



We have entered into contracts with farmers
in India to grow the Jatropha plants and provide the seeds that are crushed to produce feedstock oil. However, there is no assurance
that the contracted farmers will be able meet our expected yields of seeds for feedstock oil whether due to the poor farm management
of individual farmers or the poor health, low productivity or mortality of the Jatropha plants. Further as we have restructured
our operations in India and substantially reduced our field force we may not be able to influence the agronomy activities of our
contract farmers or be engaged in contract farming at all. We may be unable to enhance the results of the low performing states
or focus our operations in the areas giving the best results. Our contract farming operation is based on contract farming and that
the Jatropha oil is primarily an agricultural product subject to agronomic risks, it is unlikely that all recorded acreage will
provide us with Jatropha oil and we can provide no assurances as to our Jatropha oil yield. Further, as yields are below expectations,
and we have been unable to accurately predict yields in the past, resulting in an inability to predict yields going forward, a
decision has been made not to expand the contract farming acreage until more clarity can be obtained on yields.



Insufficient funds to fund the contract farming model
would severely limit the ability to gain value from the contract farming operations.



Our operations require a large field force
in order to manage the contract farming operations. An inability to fund this field force would likely result in uneconomic quantities
of Jatropha seeds being collected to make the business operation financially viable.



If our farmers are unable to obtain financing, they may
be unable to perform under their contracts and our feedstock supply could be disrupted.



The model for our feedstock cultivation
strategy relies on a contract farming agreement with our farmers. To assist our farmers in their purchase of saplings from us and
to provide the necessary working capital to operate their farms until their acreage produces yield, we have facilitated arrangements
with certain Indian banks to provide loans to some of the farmers to finance their planting, including purchases from us of saplings
and materials required for the cultivation of Jatropha plants. If we cannot facilitate such loans on similar terms or at all in
the future, the farmers with whom we have entered into contracts will likely be unable to pay for the saplings provided by us and
therefore may limit our ability to grow our business. An inability to collect payment on accounts receivable for sold saplings
may require us to alter our intended growth of acreage under contract, which ultimately could adversely affect our financial performance.
In addition, the inability of our contract farmers to obtain financing or their failure to perform under their contracts for any
reason would cause disruptions in our future feedstock supply chain and subject us to risks of disruption and reduction in output
at our plants.



11







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



As we continue with our downscaled Jatropha
cultivation, 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 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, we have and expect to continue to have in the future
erratic capacity utilization which may adversely affect our results of operations.



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. We currently have no customers and have no visibility on our ability to attract customers.
As such our refining operations have 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. 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 operation shave been put on care and maintenance.



We are unable to perform under the
offtake agreement with Valero.



Due to recent regulatory changes, our
palm and Jatropha-based biodiesel is not compliant with governmental mandates in the United States, the intended market for the
biodiesel under the offtake agreement. As a result, we do not expect to supply biodiesel to Valero under the offtake agreement
until these regulatory hurdles are resolved.



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.



12







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 Crown Iron Works, Inc., or Crown, and 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 disclosure of Crown’s, Axens’
or our intellectual property or the infringement by us of another person’s intellectual property right may adversely affect
our financial performance.



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 Lembaga Minyak Sawit 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 Lembaga Minyak Sawit 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 until July 20, 2012
and we have no reason to believe that this license will not be renewed, although renewal is not assured. In particular, our Jatropha
operations in India hold a Foreign Investment Promotion Board (“FIRB”) license (which allows investment by Mission
into its Indian feedstock business and approves the activity of being engaged in the contract farming of Jatropha Curcas and utilization
of the Jatropha oil for domestic or export markets). This license is in place and is not required to be renewed. There is a risk
that we will not comply with the ongoing requirements imposed under those licenses or permits, although we are not aware of any
compliance deficiency that jeopardizes our standing as a licensee. There is also a risk that the licenses and permits required,
or the conditions imposed on us under them, will change from time to time. Our ongoing compliance costs may increase as a result.
Either of the above may adversely affect our financial performance.



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 or human ingestion of toxic materials during the Jatropha
crude oil crushing process. 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.



13







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 contract farming operations are in India,
our refineries are located in Malaysia and the bulk of our expected biodiesel sales will 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.



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, including
changes in the renewable fuels standard or the biodiesel blenders excise tax credit, our offtake agreement with Valero can be renegotiated.
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.



The Indian government has developed a National
Policy on Biofuels, which establishes a framework for the industry until 2017. The policy limits the export of biofuels until domestic
Indian usage mandates are met. If we are unable to produce biofuels domestically in India, the legislation is changed to limit
the export of feedstock, such as Jatropha, or our existing export approval for unlimited amounts of Jatropha is repealed, we would
be unable to sell Indian sourced Jatropha-based biodiesel into the key markets of the European Union and the United States which
would adversely affect our operations and financial performance.



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



Our revenues and expenditures are denominated
in a number of currencies, including U.S. dollars, euros, Australian dollars, Indonesian rupiah, Indian rupees 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 not be able to execute and deliver on our Indonesian
palm oleochemical joint venture project.



Assuming that we are able to restart our
Indonesian joint venture, our ability to develop our oleochemcial complex and generate financial return from the Indonesian joint
venture relies on the ability to arrange substantial equity and debt financing, to construct and develop the site and to profitably
operate the facility. At this stage of the project we can provide no assurances of our ability to finance, develop or operate the
oleochemical facility. Further we can provide no protection from political risks inherent within the region of proposed operation.



14







Risks Related to Our Strategy



We may not be able to restart refining operations.



In January 2012 the company announced a
substantial restructure of its operations. One result of the restructure was to cease the refining operations until such time as
profitable trading opportunities present them self. The refining operations are currently held in care and maintenance. Should
such profitable opportunities present themselves there can be no assurance that the Company 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 shut down our Jatropha operations
in India



In January 2012, the Company announced a
substantial restructure of its operations, including the Indian Jatropha operations. In October 2012 the Company announced that
the Indian operations had been substantially downsized and the Company was focused on divesting its remaining Indian assets. The
Company can provide no assurances that it will be able to sell its Indian assets or that it may not face unforeseen liabilities
associated with closing the Indian operation.



We may not be able to maintain and our Jatropha Contract
Farmer network and as such our contract for Jatropha supply maybe not be fruitful.



Another result of the restructure was to
cease further planting operations and to dramatically reduce the field force in India. The result of which is a substantially reduced
field network to liaise with the Jatropha contract farmers. To the extent that the contract farming acreage under contract bears
yield there can be no assurances that the Company will be able to collect yield. Further the Company can make no assurances that
it will be able to either collect based on its existing contract farmers nor that it will be able to sign up new contract farmers.
The result of either the inability to collect Jatropha yield from existing contract farmers or sign up new farmers may result in
significantly lower supply of Jatropha which would materially adversely effect the Company’s financial results.



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.



In July 2012, the Company announced that
it had canceled its Indonesian Joint venture 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 the project will continue or that despite being due that it will receive any financial
or other compensation following the termination.



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.



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.





15







If we are unable to successfully enter new markets for
Jatropha by-products, we may be unable to enhance by-product realization.



One of our key strategies is to lower our
effective biodiesel cost base through increased by-product value realization. Our ability to enhance the value of the by-products
of our Jatropha-based biodiesel production process, such as Jatropha seed cake, will require us to enter and operate in new markets
for us. Further, we can provide no assurances of having access to any Jatropha oil or seed cake. We cannot be sure of our ability
to enter into these new markets, nor the market reaction to us as a new entrant. If we are unable or unsuccessful in these new
markets, it would limit our ability to enhance the value of our by-products, which could have a significant adverse effect on our
strategy and on our business, financial performance and financial condition.



If our contract farming model does not perform to expectations
our business may suffer.



Our access to Jatropha oil is based on our
ability to buy Jatropha seeds under our existing contract farming model. Despite our contract farmers being under definitive contract
farming agreements we may be unable to effectively enforce these contracts in the event of a breach.. If we are unable to enforce
our contract farming agreements or enter into additional contract farming agreements, this could have a significant adverse effect
upon our business, financial performance and financial condition.



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$32.9 million 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.



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.



The sale of our wind farm assets may not generate sufficient
funds to pay off the related loans and we may need to scale back planned initiatives as a result.



Our wind farm assets and our office buildings
in Malaysia and India are mortgaged or otherwise secured in relation to loan financings. In June 2012 we decided to discontinue
our wind business, which may result in the sale of our wind farm asset. If we are unable to realize sufficient funds from the sale
of these assets to fully pay off the loan associated with the mortgage on the wind farm assets or if we are unable to obtain additional
financing as needed, we might need to reduce the scope of our operations and scale back expansion and development programs.



16







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 six months in fiscal 2012, nine months in fiscal 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 growth only 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.



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. While we have no reason to believe
that Jatropha will not be a suitable feedstock for our existing refineries, should Jatropha prove to not be suitable, we may need
to modify our existing refineries and this could have an adverse affect on our financial condition.



17







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.



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.



18







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, 2012. 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, 2012 or 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.



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.



19







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 Jatropha Curcas, 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.



On February 20, 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 May 4, 2012, the Company announced the
final production runs in its Malaysian refining operation. The refining assets have been put in care and maintenance.



20







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



On July 11, 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.



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



|                              |  | 2012 A$'000 |     |  | 2011 A$'000 |  |       | 2010 A$'000 | 
|----------------------------- |  | ----------- | --- |  | ----------- |  | ----- | ----------- | 
|Biodiesel refineries          |  |             | 765 |  |             |  | 2,981 |             | 
|Land & buildings              |  |             | -   |  |             |  | -     |             | 
|IT systems & office equipment |  |             | 68  |  |             |  | 182   |             | 
|Vehicles & sundry equipment   |  |             | -   |  |             |  | -     |             | 



Since June 30, 2011 to the date of this
annual report, Mission’s principle capital expenditure primarily relates to the installation of a distillation column 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.



| | B. | Business Overview.
| | -- | ------------------



Recent Developments



The Company is not operating its biodiesel
refining segment. The refineries are being held in care and maintenance either awaiting a return to positive operating conditions
or the sale of assets.



The Company has materially diminished its
Jatropha contract farming operation and the company is now focused on divesting the remaining Indian assets. The Company intends
to cease all Indian operations.



At this point in time, due to failure
of material obligations by PTPN111, the Joint Venture in Indonesia has been terminated. The Company is reviewing its position in
the Joint Venture in Indonesia and expects that this will result in either the continuation of the project of the sale of its equity
interests.



Overview



Mission NewEnergy is 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.



We believe that being vertically integrated
will allow us to control our input costs and realize revenues from both our feedstock cultivation and our biodiesel production
operations. For this reason, following the commissioning of our first refinery we developed a low-cost and sustainable approach
to the cultivation of Jatropha in 2007 and have been expanding our cultivated acreage ever since. Jatropha is an inedible perennial
oil seed plant that we seek to grow on marginal soil without displacing agricultural land used for food supply. The inedible oil
from the crushed Jatropha seed is a suitable feedstock for biodiesel and the remaining meal, or seedcake, is valued as an input
for biofertilizer. Until our existing Jatropha cultivations fully mature, which cannot be determined at this stage, we have sought
to utilize our low-cost refinery to opportunistically produce biodiesel on short-term contracts for third parties using purchased
feedstocks other than Jatropha oil.



21







Our biodiesel production facilities are
comprised of two separate transesterification refineries that convert feedstock oil to biodiesel located at Port Kuantan, Malaysia.
Our first biodiesel refinery (Plant I) has a 30 million gallons-per-year nameplate capacity. Plant I has achieved ISO9001:2008
certification. Plant I is also the only non-German biodiesel production facility certified to produce BPAC-AGQM technical standard
biodiesel. The BPAC-AGQM is a quality German certification system that assures customers that our products are high quality. This
certification assists us to sell compliant biodiesel in Germany, the largest biodiesel market in Europe. 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. Our second biodiesel transesterification refinery (Plant II) was commissioned adjacent to Plant I with a
75 million gallons-per-year nameplate capacity. The transesterification and pre-treatment unit is yet to be handed over to us by
the EPCC contractor. As further discussed below, Plant II 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. Both plants are currently non-operational and being held in care and maintenance.



In February of 2012, the Company acquired
an 85% stake in Oleovest Pte 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 will establish a new downstream
palm oil and oleo-chemical complex at the PTPN III owned Sei Mangkei Industrial Zone in North Sumatra, which in the first stage
is expected 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 to be built at an estimated cost of US$200 million will require successfully arranging approximately
US$140 million in debt and US$60 million in equity, before construction begins. To start with, Mission will invest approximately
US$3.0 million to acquire the stake and fund the initial operations of PTSON. Once fully funded, it is anticipated that the project
would be implemented over approximately 3 years.



Historically, we have produced biodiesel product for the European
and Malaysian market that we have sold to various customers.



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. With a cumulative nameplate production capacity of 105 million gallons per annum (350,000 tonnes per
annum), this scale makes us commercially relevant to large scale fuel blenders.



We have a potential supply of feedstock that does not
compete with food crops



Should the Company intend to re-engage in
Jatropha contract farming, we have established a contract farmer network that potentially provides us with a supply of relatively
priced stable feedstock.



Joint Venture Agreement with State Owned Indonesia Palm
Plantation Company to develop Oleochemical Complex



Our Joint Venture agreement with PTPNIII
to build a substantial oleochemcial complex, while currently terminated, provides us the potential to build a refining complex
with a dedicated supply of palm oil as feedstock material.



22







Our Strategies



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



Malaysian Assets



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



Jatropha Contract Farming Network & Indian Operations



The Company is ceasing all further Jatropha
operations. We intend to divest ourselves of all remaining Indian operations and assets.



Indonesian Joint Venture



The Company will work with the Joint Venture
partners to seek a way forward with the Indonesian Oleo-chemical project.



The Company is reviewing its position in
the Joint Venture in Indonesia and expects that this will result in either the continuation of the project of the sale of its equity
interests.



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



Refining capability is a key element of
our long term strategy to be an integrated biofuel producer as it provides the market linkage mechanism needed to realize maximum
value for feedstock oil.



Our two refineries, Plant I and Plant
II, are located at Port Kuantan, Malaysia. Plant I was built as a stand-alone biodiesel refinery with a 30 million gallon (100,000
tonne) per year nameplate capacity. It has been demonstrated to produce at this capacity and produces high quality biodiesel meeting
quality standards for biodiesel, including Europe’s EN14214 specifications. Our refining process for Plant I has been certified
for compliance to ISO 9001:2008, which is the highest commercial quality management certification..



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, similar to the capability of Plant I. However, the Axens’
technology does not require the use of sodium methoxide as catalyst, which is used in Plant I. Rather, 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. The change in catalyst technology results in a lower per unit conversion cost of Plant II relative to Plant
I at volumes over 100,000 tonnes per year.



23







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 hereinas 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. The term of the offtake agreement with Valero does not begin nor
do payment obligations for Valero arise under the offtake agreement until the first shipment of compliant diesel to them.



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 from the Plant I process is crude glycerine with a purity of approximately 80%. 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. We have also equipped our
Kuantan facility with a secondary stand-alone glycerine purification capability having a capacity of about 2.4 million gallons
per year. The production of each 1,000 tonnes of biodiesel results in the production of 98 tonnes of glycerine. From this secondary
refinery we can produce 99.7% pure pharmaceutical grade glycerine if market prices justify doing so. Refining by-product sales
represent 3.5% of total revenue from biodiesel and by-product sales, of which 1.5% is glycerine sales revenue. Both the by-products
of crude glycerine and fatty acid distillate are in high demand and we have been able to sell these by-products without difficulty.
As Plant II has not yet run commercially we have not yet sold any technical grade glycerine.



24







Both our plants have technologies that
allow us to produce biodiesel simultaneously from multiple feedstocks. The technology to handle multiple feedstocks gives us the
potential to optimize our costs by shifting in and out of different feedstocks based on feedstock availability, price, customer
requirements and other market dynamics. We expect this flexibility to be most important during the period before our supply of
crude Jatropha oil equals the combined capacity of our refinery.



Quality control



We employ strict quality control procedures
at each stage of the manufacturing process in accordance with ISO 9001 quality management standards to ensure the consistency of
our product quality and compliance with our internal production benchmarks. We have achieved ISO9001:2008 certification for our
refining process at Plant I.



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.



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.



|                     |  | For the fiscal year ended June 30, |       
|-------------------- |  | ---------------------------------- | ------
|                     |  | 2010                               |       
|Production           |  |                                    | 14,151
|Capacity Utilization |  |                                    | 14    



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.



25







In fiscal 2012, our biofuel revenue was
generated primarily from three new customers, with our by-products readily sold to a number of customers. Our contract with these
customers have expired.



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.



Strategic long term offtake agreement



We have entered into a large biodiesel offtake
agreement with subsidiaries of Valero Energy Corporation, a Fortune 500 company based in Texas. Due to recent regulatory changes,
our palm and Jatropha-based biodiesel is not compliant with governmental mandates in the United States, the intended market for
the biodiesel under the offtake agreement. As a result, we do not expect to be able to supply biodiesel to Valero under the offtake
agreement until these regulatory hurdles are resolved.



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, 2010 |        |  | Fiscal Year EndedJune 30, 2011 |  |        | Fiscal Year Ended
June 30, 2012 | 
|                                 |  | Indian rupees, in millions      |       
|Agricultural Income              |  |                                 | 27,538 |  |                                |  | 36,250 |                                 | 
|Wind Mill electricity generation |  |                                 | 21,473 |  |                                |  | 23,345 |                                 | 
|Crude Jatropha Oil               |  |                                 | 5,006  |  |                                |  | 1,305  |                                 | 
|Others                           |  |                                 | —      |  |                                |  | 3,801  |                                 | 
|Total                            |  |                                 | 54,017 |  |                                |  | 64,701 |                                 | 
|                                 |  |                                 |        |  |                                |  |        |                                 | 



|Malaysian Operations: |  |                                |            |  |                                |  |            |                                 | 
|--------------------- |  | ------------------------------ | ---------- |  | ------------------------------ |  | ---------- | ------------------------------- | 
|Description           |  | Fiscal Year Ended June30, 2010 |            |  | Fiscal Year Ended June 30,2011 |  |            | Fiscal Year Ended June 30, 2012 | 
|                      |  | Malaysian ringgits             |           
|Biofuels              |  |                                | 39,288,051 |  |                                |  | 40,717,910 |                                 | 
|Pure Glycerin         |  |                                | 196,556    |  |                                |  | -          |                                 | 
|Crude Glycerin        |  |                                | 815,584    |  |                                |  | 369,158    |                                 | 
|PFAD                  |  |                                | 1,035,293  |  |                                |  | 693,904    |                                 | 
|Crude Jatropha Oil    |  |                                | -          |  |                                |  | 146,082    |                                 | 
|Total                 |  |                                | 41,335,484 |  |                                |  | 41,927,054 |                                 | 



Intellectual Property



We have a perpetual license for the life
of Plant I for all patents and intellectual property rights relating to Crown Iron Works’ process technology and engineering
design used in construction and operation of the refinery. We similarly 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.



Seasonality



Palm-based biodiesel is prone to gelling
in cold climates. We have therefore historically experienced lower demand for palm-based biodiesel from Europe in the winter months.
We hope to counter seasonal demand from Europe for palm-based biodiesel by establishing and expanding demand in the southern hemisphere.
Jatropha-based biodiesel has superior gelling properties to palm-based biodiesel and is less susceptible to seasonal demand.



26







Approximately 90 days after the onset of
the monsoon season in India, Jatropha plants are expected to be ready to harvest. At the same time we are obligated to purchase
Jatropha seeds from our contracted farmers. Given the wide geographic spread of our contract farming operations and the variability
in the cycle of the monsoon season in India, we expect the harvest season to last approximately four months. Our contracted farmers
aggregate their seeds and deliver the seeds to our field agents in the relevant village. Upon aggregation of quantities of Jatropha
seeds sufficient to justify the transportation costs, these seeds are transferred to a state-owned and operated warehouse where
the weight of the seeds is confirmed. Once the quantity of Jatropha seeds is confirmed, we disburse payment to each contracted
farmer. Once quantities of Jatropha seeds are aggregated at the warehouse sufficient to reduce our per unit transport cost, the
seeds are transported to an outsourced crushing facility, where the seeds are converted to Jatropha oil and seed cake. The seed
cake is sold directly at the crushing site and the Jatropha oil is transported to a port and then shipped to our refineries. It
is expected that we will only ship quantities of Jatropha oil to our refineries when we have sufficient quantities to reduce the
per unit transport cost, resulting in a requirement to store Jatropha oil either at the port in India or at our refineries. In
addition, we have the option to sell the Jatropha crude oil to third parties.



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 a feedstock that is not a crop (such as corn) but rather a weed (such as Jatropha).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | Access to Second Generation Feedstock.A producer’s access to commercial scale quantities of second
generation biodiesel to attract long term offtake agreements.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | 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.



27













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:



| | • | 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.



Wind Farm



We are exploring the sale of our two wind
turbines and we do not intend to maintain or expand in the wind energy business.



| | C. | Organizational Structure.
| | -- | -------------------------



Set forth below is the organizational structure
of Mission NewEnergy:







28







All subsidiaries are 100% owned at June
30, 2012, except Mission Agro Diesel (India) which is 51% owned by us and Oleovest Pte Ltd, which is 85% owned by us. PT Sinergi
Oleo Nusantara is 70% owned by Oleovest Pte 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 and all associated
business contracts are held by two wholly owned subsidiaries. Mission Biotechnologies Sdn Bhd owns the first biodiesel refinery
with the 100,000 tonnes (30 million gallons) per year nameplate capacity and Mission Biofuels Sdn Bhd owns the second biodiesel
refinery with the 250,000 tonnes (75 million gallons) per year nameplate capacity.



Our feedstock cultivation operations are
conducted by Mission Agro Energy Limited and Mission Biofuels (India) Private Limited. Mission Agro Diesel (India) Private Limited
is a dormant corporation with no active 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 two biodiesel production facilities
(with leases for the underlying land) that are located adjacent to one another at Port Kuantan, Malaysia.



The following is further information about
each facility:



|Biodiesel Facility |  | Site area
    (Acres) |      |  | Total Capacity(1)(milliongallonsper year) |  |    | Capacity Utilization (2)(percentage) |  |  | Commissioning Date
|------------------ |  | --------------------- | ---- |  | ----------------------------------------- |  | -- | ------------------------------------ |  |  | ------------------
|Plant I            |  |                       | 12.0 |  |                                           |  | 30 |                                      |  |  | 18.7              
|Plant II           |  |                       | 6.0  |  |                                           |  | 75 |                                      |  |  | 0                 



| | (1) | Nominal operating capacity.                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | For Plant I, percentage is based on nameplate capacity and the cumulative production during the period from the plant opening in January 2008 to June 2012. The total tonnage produced during this period was 82,788 tonnes and the operating nameplate capacity is 441,667 tonnes for the entire period.



We are in in formal arbitration with KNM
over the final payment and commissioning for the 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 and India. All 13.2 acres of the site area in
Malaysia are leased. We also lease apartments in Kuantan Port and Kuala Lumpur, Malaysia for use by the operational staff, and
an apartment in India for use by the operational staff.



Item 4A. Unresolved Staff Comments



None.



29







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, 2012, we will need to further debt or equity, generate positive cash flows from operations, defer the coupon commitments
relating to the convertible notes, sell material assets, recover receivables and implement further cost control to meet the Group’s
commitments. As announced to the market on the August 17, 2012, a debt funding package has been agreed in principle with 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. The facility is conditional on the restructure of the Group’s
existing convertible note debt whereby each existing convertible note will be exchanged for a new convertible note. The restructure
of the convertible note debt is subject to shareholder approval. The Group has appointed an independent expert to review whether
the transaction is fair and reasonable to shareholders, in order to be able to recommend the transaction to shareholders. The Independent
Experts Report and notice of meeting are close to final form.



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.



During fiscal 2012, we incurred a net loss
of A$6.1 million (US$6.3 million). We generated revenues of A$38.3 million (US$39.6 million) in fiscal 2012. 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.



We have three sources of total revenue:
biodiesel refining, upstream feedstock business and wind farm operations. In fiscal 2012, biodiesel refining contributed 70% of
our revenue, upstream feedstock business contributed 0% of our revenue and other operations (including wind farm operations) contributed
1% of our revenue and the unallocated segment (mostly corporate) contributed 29%.



Revenue from our primary business, the cultivation
and conversion of Jatropha seeds and the production of Jatropha-based biodiesel, is unlikely to exceed our expenses for the foreseeable
future. We have already crushed and exported commercial quantities of Jatropha oil, but we have not yet produced a commercial quantity
of Jatropha-based biodiesel. There is substantial risk that we will not be able to generate alternative revenue during the interim
to offset the shortfall from our primary business and reverse our pattern of historical losses and negative cash flow.



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.



30







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, crude Jatropha oil or Jatropha by-products. During each of the past three
fiscal years we have been successful in arranging positive-margin sales for immediate cash payment and delivery (i.e. on the spot
market) and we anticipate that there will be opportunities to do so in the coming fiscal years, although the timing and quantity
of such sales is unpredictable and there is no assurance that we will achieve this objective.



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 production complex in Malaysia is capable of further refining the glycerin into
a pharmaceutical-grade glycerin. We expect to undertake this further refinement of glycerin if the value of the higher-grade glycerin
(which is also subject to significant price volatility) is sufficiently greater than the incremental cost to undertake the enhancement
process.



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. As our Jatropha plantation operation matures, we will shift the mix of feedstock from palm oil
to Jatropha oil, and we expect to reduce our costs of feedstock from their current levels.



Upstream Feedstock Business



Our feedstock business generates other revenue
from the recognition of fair value revenue of Jatropha sapling biological assets in the initial years of the business, and sales
revenue of Jatropha oil and Jatropha seed cake (which is used as an input for organic fertilizer) in subsequent years. Although
our Jatropha feedstock contract farming operations are still in the development stage (i.e. not yet producing quantities of Jatropha
crude oil that allow us to continually run our biodiesel refineries) we may expand our future revenue potential by taking steps
to increase the supply of Jatropha seeds from existing acreage under contract, by coordinating the planting of additional Jatropha
saplings and by contracting for the expansion of our acreage under contract.



We currently generate other revenue in the
feedstock business solely by growing and then selling Jatropha saplings from our nurseries to contract farmers. Please note the
discussion on revenue recognition principles discussed in - “Critical Accounting Policies”. The sale of saplings to
a contract farmer is a one time upfront event for us and therefore sapling sales to our contracted farmers does not constitute
recurring income, except to the extent that we are able to expand our acreage under contract.



Our contract farming arrangements, whereby
we sell Jatropha saplings to farmers who plant and maintain them, include agreements with these farmers to buy back all the seeds
from the farmers once the planted saplings have matured into trees and begin to bear fruit. We are the exclusive supplier of Jatropha
saplings to our contract farmers. As saplings take approximately three years to begin providing fruits, continue to mature for
an additional three to five years and then continue to bear fruit for approximately 30 years thereafter, it will be several years
before we will be in a position to generate significant cash flows from seed cake sales.



We sell the Jatropha saplings to farmers
on credit, securing the receivables of the farmers against our future purchase of oil seeds produced by these saplings. In order
to accelerate the recovery of such receivables, we have established relationships with a number of Indian banks that are willing
to fund the farmers associated with us. These loans are required to be processed and approved by small rural branches, which require
extensive documentation and a physical inspection of the fields. This process has taken more time than expected and we continue
to work with the banks and farmers to improve the receipt of cash. Mission has no obligation to pay the banks that made loans to
its contract farmers if those contract farmers default on their loans.



31







We expect to continue to increase the number
of farmers under contract because they are attracted by the ability to grow Jatropha where most other crops cannot successfully
grow, the guaranteed market for the product, the lack of any capital outlay by them and the provision of necessary technical support
by us.



The quantity of seed cake (husk and meal
left over from the crude oil extraction process) by-product from our Jatropha-seed oil-extraction process is insignificant at this
stage due to the low quantity of Jatropha seeds available from our plantations, which are in an early stage of development. As
a result, we have had minimal Jatropha seed cake revenue to date. In the future we expect that for each three tonnes of Jatropha
seeds, we will generate two tonnes of Jatropha seed cake that can be sold as an input to organic fertilizer, and that this will
become a material source of revenue and cash flow.



Windfarm Business



Mission NewEnergy’s two wind mills
began generating electricity in February 2008 in India. By June 30, 2012, the two wind mills had generated and delivered 6,253,671
kwh of total electricity. The electricity is supplied to the Maharashtra State Electricity Distribution Company Limited under a
power purchase agreement that expires in 2021.



We are in the process of exploring the disposition
of our two wind turbines and do not currently expect to make further investments in or realize material financial contributions
from this line of business. If the turbines are sold, we do not expect that it would have a material financial impact on our balance
sheet or cash flow, given the partial impairment in the valuation of these assets recognized during fiscal 2010, 2011 and 2012.



Seasonality



Jatropha sapling fair value income is recognized
at the beginning of the planting season in India, which generally runs from late June to the end of October. Therefore, income
from the recognition of the fair value of Jatropha saplings is minimal during other periods of the year. An outline of the yearly
cycle for our Jatropha business is presented below:



|Year 1                       
|-----------------------------
|                             
|                             
|Business operational activity



32







|Year 1                                      
|--------------------------------------------
|                                            
|                                            
|Biological asset and other income assessment
|                                            
|                                            





|Year 1                        
|------------------------------
|                              
|                              
|Revenue recognition assessment
|Receivables                   



33









|Year 1       
|-------------
|             
|             
|Cost of sales



|Event                                                                                                               |  | Years 2 – 5                                                                                                                                                                                                                                                                                                                            |  | Years 6 – 30                                                                                                                                                                                                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Business operational activities                                                                                     |  | Continued monitoring, agronomy support and assisting farmers to get bank loans.                                                                                                                                                                                                                                                        |  | Continued monitoring, agronomy support, assisting farmers to get bank loans and purchase seeds. Seeds will be crushed to produce Jatropha crude oil and Jatropha seedcake.                                                                                                                                                            
|Condition of sapling/tree                                                                                           |  | Sapling grows steadily into a fruit/seed producing tree.   Minimal seeds produced during these initial years.                                                                                                                                                                                                                          |  | Mature tree delivers fruit/seeds.                                                                                                                                                                                                                                                                                                     
|Mission purchases seeds from the farmer.                                                                            |  | Mission buys whatever seeds are delivered to our warehouses, but volume expected to be low.                                                                                                                                                                                                                                            |  | Mission buys seeds from farmers.                                                                                                                                                                                                                                                                                                      
|Mission can offset the purchase value payable to the contract farmers against any outstanding receivables (if any). |  | If the receivable is still outstanding, Mission has the right to offset any amounts payable for the purchase of seeds against any outstanding receivable.   If a portion of the saplings/trees owned and managed were to die, Mission can still recover the full value of the receivable through the offset against purchase of seeds. |  | If the receivable is still outstanding, Mission has the right to offset any amounts payable for the purchase of seeds against any outstanding receivable.   If a portion of the saplings/trees owned and managed were to die, Mission can still recover the full value of the receivable through the offset against purchase of seeds.



34







|Event                                                                                                               |  | Years 2 – 5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Years 6 – 30                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Mission assists the contract farmer in applying for the bank loans and will act as a collection agent for the bank. |  | If no bank loan has been applied for or granted the Mission team assist the contract farmer in arranging bank finance. A portion of the proceeds of the bank loan to the contract farmer is utilized to pay Mission for the outstanding receivable.   Under this bank loan process, the lending bank is paid directly by us with the proceeds from our purchase of the farmer’s seeds and the remaining proceeds are paid to the farmer. Mission has no obligation to pay the banks that made loans to its contract farmers if those contract farmers default on their loans.   When Mission buys seeds from the farmer, the value of the seeds procured will be recognized as inventory, along with a corresponding payable to the bank (to the value owing by the farmer to the bank) with any remaining value recognized as a payable to the farmer. Mission will then pay the bank and the farmer the value of the payable outstanding. For example, Mission buys $300 worth of seeds from the farmer, which is recognized as inventory. Assuming the farmer owes the bank $100, a payable of $100 will be recognized to the bank, with the remaining $200 recognized as a payable to the farmer. |  | Bank loan activities may continue for a number of years.                                                                                                                                                                      
|Impairment of receivables                                                                                           |  | Mission assesses the recoverability of the receivable based on an estimate of mortality of the saplings, as mortalities will affect seed yield, and hence reduce Mission’s ability to recover the receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | The Board assesses the recoverability of the receivable based on an estimate of mortality of the saplings, as mortalities will affect seed yield, and hence reduce Mission’s, ability to recover the receivable.              
|Revenue recognition                                                                                                 |  | Nil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | The Jatropha crude oil can be sold directly to the market and revenue is recognized when the oil is sold.   The seedcake produced can also be sold directly to the market and revenue is recognized when the seedcake is sold.



Revenue growth



Our Jatropha feedstock plantations have
not yet matured and we have therefore not yet achieved vertical integration or realized the economic benefits of our Jatropha plantations.
While our Jatropha feedstock cultivations are maturing we are seeking to generate revenue from the immediate cash payment and delivery
market for biodiesel contracts that utilize our existing refinery capacity. Our ability to significantly increase revenue from
current levels and become profitable depends upon the following:



| | · | increasing quantities of Jatropha oil and seed cake from our plantation operations;
| | - | -----------------------------------------------------------------------------------



| | · | meeting certain EPA requirements for palm-based and Jatropha-based biodiesel under the RFS2 in the United States, resulting
in an ability to commence sales under the Valero agreement;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | execution of new offtake agreements;
| | - | ------------------------------------



| | · | improvement in the underlying economics for the immediate cash payment and delivery market for biodiesel production (i.e. a
positive spread between feedstock oil and mineral oil);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our ability to generate revenue from immediate cash payment and delivery market contracts that utilize our existing refinery
capacity prior to maturation of our Jatropha cultivations; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | increasing global mandates and subsidies for biodiesel.
| | - | -------------------------------------------------------



Many of these events are outside our control.
There can be no assurance as to if or when any of these events will occur.



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.



35







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.



Change in fair value of Biological assets



We recognize revenue in our feedstock segment
in two primary phases. The first phase recognizes the change in fair value of the Jatropha saplings where we grow saplings from
seeds in our own self managed nurseries. The saplings meet the definition of biological assets under International Accounting Standard
(IAS) 41 Agriculture and hence the change in fair value of these biological assets is recognized in other income. The seeds germinate
into saplings over a period of three to four months into a condition that can be sold to the contract farmers and the fair value
of the biological assets (and hence other income) is recognized at this point in time. These saplings are sold to contract farmers
(at principally the same value as the fair value) who are responsible for tending to the saplings until they mature into seed producing
trees. We do not recognize revenue again when the sapling is sold to the farmer because this would result in revenue being recognized
twice. When the biological assets are sold and delivered to the contract farmer, management control and the risks and rewards beneficial
to the ownership of the saplings are lost and, as a result, the saplings are derecognized as biological assets at this point in
time. If at a point in time it is determined that revenue will not ultimately be realized into cash, no revenue is recognized for
that period, as is the case for the 2012 financial year.



The second phase where we recognize revenue
results from sale of Jatropha crude oil and the by-product, seedcake. This occurs after we buy the seeds from these contract farmers
and crush the seeds into Jatropha crude oil with seedcake being the by-product. We then recognize revenue from the sale of the
Jatropha crude oil or seedcake in line with the sale of goods policy above.



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. We have based a number of assumptions and estimates on an independent review commissioned to determine the
life span, yield of fruit, yield of oil and key operating costs of the Jatropha Curcas feedstock operations.



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 are based on current contracted volumes in accordance with the Valero off-take agreement and an assumption
that these volumes will be rolled forward, plus an estimate of sales volumes resulting directly from biodiesel mandates in Malaysia;
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, Jatropha operations
and windfarm operations) was estimated based on our weighted average cost of capital, adapted for the regions in which the cash
generating unit operates.



36







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, adjacent to the 100,000 tonnes per annum 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. In addition, management considered the absence of orders to date under our 5-year Valero offtake sales contract signed
in December 2009.



During the second half of fiscal 2010, the
United States introduced its revised RFS2. RFS2 introduced a requirement for vegetable oil feedstocks, such as soy, rape seed,
palm oil and Jatropha oil to meet certain environmental and green house gas requirements. At this point in time, the detailed analysis
required to demonstrate that palm and Jatropha will meet these requirements is in progress. Palm oil and Jatropha oil are 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 through
2011 and into 2012.



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.



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 and 2012 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 and Jatropha are 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; or
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

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



Credit risk of receivables in feedstock business



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 resulting receivable are to a large Indian State Owned enterprise and hence credit risk is deemed low.



37







|                                                    |  | As of and for the year ended |      
|--------------------------------------------------- |  | ---------------------------- | -----
|                                                    |  | June 30, 2012 A$ in millions |      
|Gross carrying value of the sapling sale receivable |  |                              | 18.8 
|Provision for impairment                            |  |                              | (16.6
|Discount on non-current portion of receivable       |  |                              | (2.2 
|Net carrying value of receivables                   |  |                              | —    
|Current                                             |  |                              | —    
|Non-current                                         |  |                              | —    
|Total Carrying value                                |  |                              | —    



Amounts collected in the Jatropha operations are presented below:



|               |  | As of and for the year ended |    
|-------------- |  | ---------------------------- | ---
|               |  | June 30, 2012 A$ in millions |    
|Cash collected |  |                              | 0.2



Comparison of Results of Operations



Fiscal 2012 compared with fiscal 2011



Revenue. Revenue increased
by A$21.9 million (133%) from A$16.4 million in fiscal 2011 to A$38.3 million in fiscal 2012 principally as a result of an increase
in biofuel sales (increased A$13.8 million from A$13.5 million in fiscal 2011 to A$27.3 million in fiscal 2012) and other revenue
(increased A$ 8.2 million from A$ 2.8 million in 2011 to A$11.0 million in 2012). Our refinery operated for approximately six months
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 continued low 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.



Of the revenue from external; customers
in fiscal 2012, the refinery business generated revenue of A$27.3 million (98.2%), with other operations (including wind farm)
generating A$0.5 million (1.8%).



Of the other revenue in fiscal 2012, 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$10.3 million (93.5%) was recorded, with sundry income (including interest) generating A$0.7 million (6.5%).



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 six months
– 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                                          



38







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. 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$ 13.4 million (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.



Cost of growing our biological assets reduced
from A$0.6 million in fiscal 2011 to A$0.4 million in fiscal 2012, attributed to efficiencies and reductions in operations in 2012.



Expenses. Total expenses increased
by A$6.7 million (18%) from A$37.7 million in fiscal 2011 to A$ 44.4 million in fiscal 2012 principally due the increase in cost
of sales from A$13.9 million in fiscal 2011 to A$26.5 million in fiscal 2012. The increase in cost of sales was offset by a reduction
in employee benefits expense of A$3.3 million from A$7.5 million in fiscal 2011 to A$4.2 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$0.3 million.



39







Additional movements in expenses include:



| | • | Impairment of trade receivables.   Impairment of trade receivables decreased A$0.9 million (48%) from A$1.9 million in fiscal 2011 to A$1.0 million in fiscal 2012. The reduction reflects the zero value of sales of Jatropha saplings in fiscal 2012 financial year. The impairment is driven by the poor yield of Jatropha seeds in the 2011/12 season and the resultant downsizing of the feedstock operations and therefore all receivables from the sale of saplings have been impaired.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Depreciation and amortization. Depreciation and amortization remained the same at A$0.4 million in fiscal 2011 year and A$0.4 million 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$21.2 million in fiscal 2011 to A$6.1 million in fiscal 2012.



Fiscal 2011 compared with fiscal 2010



Revenue. Revenue remained
static from A$16.5 million in fiscal 2010 to A$16.4 million in fiscal 2011. Revenue from the refining segment reduced marginally
(reduced A$ 0.04 million from A$13.9 million in 2010 to A$13.5 million in 2011). Our refinery operated for approximately three
months in fiscal 2011 and approximately three months in 2010. We operated at lower than full capacity (12% in 2011 and 14% in 2010.
This lower capacity utilization was due to lower than expected 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 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 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.



Of the total sales revenue in fiscal 2011,
the refinery business generated revenue of A$13.5 million (96%), with other operations (including wind farm) generating A$0.5 million
(4%).



Of the other income in fiscal 2011, the
fair value revenue from biological assets in the feedstock business generated revenue of A$0.8 million (28%), with sundry income
(including interest) generating A$ 2.1 million (72%).



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 2010                                                                                                 |  | Fiscal 2011                                                                                                
|-------- |  | ----------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|Plant I  |  | – Plant fully commissioned twelve months
– Plant operated three months
– Yearly capacity utilization of 13% |  | – Plant fully commissioned twelve months
– Plant operated three months
– Yearly capacity utilization of 12%
|Plant II |  | – Not commissioned
– 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.



40







Cost of sales. 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 decreased marginally from A$ 13.6 million in fiscal 2010 (98% of sales revenue) to A$13.4 million
in fiscal 2011 (99% 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.



Cost of growing our biological assets reduced
from A$1.5 million in fiscal 2010 to A$0.6 million in fiscal 2011, attributed to efficiencies in operations and the timing of expenditures
in 2011.



Expenses. Total expenses decreased
by A$74.5 million (75%) from A$99.2 million in fiscal 2010 to A$24.6 million in fiscal 2011 principally due to a non cash impairment
of property plant and equipment of A$73.1 million in fiscal 2010 compared to A$2.1 million in fiscal 2011.



Additional movements in expenses include:



| | • | Employee benefits expenses.   Employee benefit expenses increased A$2.2 million (42%) from A$5.3 million in fiscal 2010 to A$7.5 million in fiscal 2011 principally due to an increase in non-cash expenses related to equity based payments to employees.                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | • | Impairment of trade receivables.   Impairment of trade receivables decreased A$7.2 million (79%) from A$9.2 million in fiscal 2010 to A$1.9 million in fiscal 2011. The reduction reflects the lower value of sales of Jatropha saplings in fiscal 2011 financial year. The impairment is driven by amendments to the USA renewable fuel standard, which requires Jatropha-based biodiesel to be approved, and thus the Board was unable to provide sufficient audit evidence at June 30, 2010 and June 30, 2011 to substantiate the recoverability of these receivables. Thus the Board has taken the decision to fully provide for the non-current receivables at June 30, 2010 and June 30, 2011.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | • | Depreciation and amortization. Depreciation and amortization decreased approximately A$1.7 million (81.0%) from A$2.1 million in fiscal 2010 year to A$0.4 million in fiscal 2011, primarily due to the impairment of the Group's refinery assets in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | • | Finance costs. Finance costs of A$5.3 million for the 2011 fiscal year are in line with the 2010 fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



Income tax.   Income
tax expense decreased from A$29,000 in fiscal 2010 to A$1,000 in fiscal 2011.



(Loss) for the year.   As
a result of the foregoing, our loss before income tax decreased from A$97.8 million in fiscal 2010 to A$21.7 million in fiscal
2011.



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.



41







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 Group is in the process of raising new debt to fund
future operations and is reviewing strategic options to generate funds for the group, either from generating cash from product
sales, new strategic initiatives or sale of assets.



The following table sets forth our consolidated
cash flows since fiscal 2010.



|                                                                 |  | Year ended June 30 |        
|---------------------------------------------------------------- |  | ------------------ | -------
|                                                                 |  | 2012               |        
|                                                                 |  |                    |        
|                                                                 |  |                    |        
|Net cash provided by (used in) operating activities              |  |                    | (4,871 
|Net cash provided by (used in) investing activities              |  |                    | (3,968 
|Net cash provided by (used in) financing activities              |  |                    | (5,461 
|Effect of exchange rate changes on cash held in foreign currency |  |                    | (5     
|Net movement in cash and cash equivalents                        |  |                    | (14,305
|Cash and cash equivalents at the beginning of the year           |  |                    | 15,761 
|Cash and cash equivalents at the end of the year                 |  |                    | 1,456  



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 Jatropha segment. As a result of negative operating cashflow in all segments and group
overheads, the group was cashflow negative for the years. However, cash used in 2012 was A$4.9 million as opposed to cash used
in fiscal year 2012 or 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.



42







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



Fiscal 2011 compared with fiscal 2010

Net cash used in operating activities in
fiscal 2011 and 2010 consisted of losses incurred in operations.



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



Net cash provided from financing activities
was A$19.6 million in fiscal 2011. The money was raised through a public offering in 2011 of 2,785,000 ordinary shares at the price
of US$9.00 dollar per share. The A$19.6 million raised is net of capital raising costs and repayment of borrowings during the year.
In fiscal year 2010, capital raised consisted of A$7.8 million from the issuance of 50 million units (prior to the 50-1 share consolidation
that was effected on April 4, 2011, with each comprising one ordinary share and one warrant to purchase one ordinary share) to
Ir Lee Swee Eng and net proceeds of A$7.7 million from the issue of 30 million (prior to the 50-1 share consolidation) ordinary
shares to various accredited investors in a private placement, less loan repayments in the amount of A$0.6 million.



Impact on liquidity as a result of less than expected
productive acres



Due to the lower than expected yields in
the 2011 Jatropha season, the Company is is ceasing all further Jatropha operations. We intend to divest ourselves of all remaining
Indian operations and assets. The reduction of operations is expected to result in no yield, and hence will affect the profitability
and liquidity of this business segment.



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.



For sales of Jatropha saplings to contract
farmers, the receivable arises and is 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 provision for all 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 may 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 is convertible into four ordinary shares (subject to adjustment for customary events,
such as share consolidation). The notes bear interest at a rate of 4.0% per annum and interest is payable semi-annually.
Mission NewEnergy may 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.



43







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



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. We believe that these are the only two 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, 2012, we had secured loans
of A$ 1.8 million 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.



As of June 30, 2011, we had secured loans
of A$ 2.6 million that relate to our wind mill in India and our offices in Mumbai, India and Kuala Lumpur, Malaysia. These loans
are recourse only to the assets securing the loans.



Other material commitments



Our only material capital expenditures 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 completed, we would owe KNM approximately 30.5 million Ringgit (A$9.5
million), before any late delivery fees and other costs incurred by us on behalf of KNM that may be offset against the outstanding
payments.



Warrants



Over the past three fiscal years, we issued
a total of 150 million units (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 A$11,000, A$168,000 and A$154,000 in fiscal years 2012, 2011 and 2010, respectively.



44







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 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.



| | F. | Tabular Disclosure of Contractual Obligations.
| | -- | ----------------------------------------------



The following table summarizes our contractual
obligations and commitments as of June 30, 2012:



|                              |  | Payments due by period |       
|----------------------------- |  | ---------------------- | ------
|                              |  | Total A$’000           |       
|Operating lease obligations   |  |                        | 3,035 
|Secured loans                 |  |                        | 1,764 
|Convertible notes             |  |                        | 31,101
|Interest on convertible notes |  |                        | 3,288 
|Capital commitments           |  |                        | 3,483 
|Total                         |  |                        | 42,671



Depending on specific market prices for
Jatropha relative to our contracted price, we have a contractual obligation to buy back all seeds from our contract farmers delivered
to Mission’s warehouse. At this point in time it is not possible to reasonably estimate what this value could be.



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                                                   |  | 57  |  | Chairman                                               
|Nathan Mahalingam                                             |  | 55  |  | Chief Executive Officer and Director                   
|Guy Burnett                                                   |  | 44  |  | Chief Financial Officer, Director and Company Secretary
|Datuk Zain Yusuf                                              |  | 73  |  | Director                                               
|Admiral (Ret) Tan Sri Dato’ Seri Mohd Anwar bin Haji Mohd Nor |  | 62  |  | Director                                               
|Arun Bhatnagar                                                |  | 68  |  | Director                                               
|Peter Torre                                                   |  | 40  |  | Director                                               
|James Garton                                                  |  | 36  |  | Head of Corporate Finance/Mergers and Acquisitions     
|Samsudeen Ganny                                               |  | 53  |  | Vice President of Refining (joined on July 1, 2011)    
|Nadason Sinnasami                                             |  | 66  |  | Chief Operating Officer Feedstock Operations           



45







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,
director of OTOC and non-executive chairman of Mission New Energy (both 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.



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, heavy industries and infrastructure development.
He has successfully implemented numerous startup manufacturing operations in Malaysia during his tenure of service with a large
Malaysian conglomerate. 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 acquisitions experience while running his own boutique corporate advisory practice between 2000 and 2004.



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.



Datuk Zain Yusuf.
Datuk Zain has been a non-executive Director of Mission NewEnergy since 2006. Datuk Zain 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. Datuk Zain is a Director of WSA Group of Companies, immediate
past chairman of the Malaysian Australia Business Council and served as a Director of Airod Sdn Bhd, NADI Bhd, Malacca Securities
Sdn Bhd, Faber Group 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 the Malaysian Armed Forces (MAF) to
ascend to its highest military office, the Chief of Defence Force, commanding a strength of nearly 100,000. With nearly 40 years
of military experience with the Royal Malaysian Navy (RMN) and MAF, he has acquired a massive portfolio of achievements.

His outstanding performance extends to the academic arena
as well inclusive of stints at the Naval Staff College (Rhode Island, USA), Navigation and Direction Course and Principal
Warfare Officers, Course (HMS DRYAD, United Kingdom). He also holds a Master of Science in Engineering Business Management
from the University of Warwick, United Kingdom. Tan Sri Anwar has received numerous commendations, awards and accolades in
recognition of his talents, and was bestowed the Panglima Mangku Negara (PMN), which carries the title of ‘Tan
Sri’, by His Majesty the Yang Di-Pertuan Agong (the King of Malaysia). He has also received distinguished medals from
foreign governments such as the Ordre National De La Legion 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 the board of the
Armed Forces Fund Board (LTAT), a multi-billion dollar fund with investments in banking, plantations, petrol retail and
hotels, and is a Director of South East Asia Advisory Board to Rolls Royce PLC.



46







Arun Bhatnagar. Mr.
Bhatnagar, who has been a non-executive Director of Mission NewEnergy since 2009. Mr Bhatnagar first joined the Company as
Chairman of our Indian subsidiary, Mission Biofuels India Pvt Ltd in June 2008. He was the Secretary of the National Advisory
Council, a body tasked with the implementation of the National Common Minimum Program and to provide inputs in the formation
of policy and support to the government in its legislative business. During his long tenure with the government since 1966,
Mr Bhatnagar has served as head or in senior positions in various ministries, amongst others the Ministries of Rural
Development, Energy, Food and Personnel. He also served as Minister (Economics) in the Indian High Commission in UK.



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 provides
corporate secretarial services to a range of listed companies. Prior to establishing Torre Corporate, Mr Torre was a partner and
Chairman of the National Corporate Services Committee of an internationally affiliated firm of Chartered Accountants working within
its corporate services division for over nine years. Mr. Torre is the company secretary of several ASX-listed companies, a director
of Neo Resources Limited and Mineral Commodities Limited and is one of the founding Directors of the charity organisation, “A
Better Life Foundation WA”. Mr Torre was also formerly a Director of Carbine Resources Limited and CI Resources Limited.
Mr Torre holds a Bachelor of Business, is a Chartered Accountant, a Chartered Secretary and is a 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 as Vice 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 the position 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 Methylester Sulphonates (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).



Nadason Sinnasami. Mr. Sinnasami
has been Chief Operating Officer of our Feedstock Operations since September 2010. Mr. Sinnasami is an agricultural graduate from
the Tamil Nadu Agriculture University in India and completed a Masters of Science in Soil Chemistry and Plant Nutrition at the
University Of Newcastle Upon Tyne, England. He commenced his career as an Agronomist with the Agriculture Research and Advisory
Bureau in Kuala Lumpur, Malaysia from 1975 to 1980, and was later with the Federal Land with Development Authority (one of the
largest producers of crude palm oil in Malaysia) from 1981 to 2006, where he was an senior agronomist and from 2000 served as Regional
General Manager responsible for managing 40,000 hectares of palm in West Malaysia and Sarawak. He has published articles discussing
oil palm agronomy and carried out environment and soil feasibility studies for Oil palm, Cocoa and Jatropha production in Malaysia,
Indonesia, India, Burma, West Africa and South America. Mr. Sinnasami is a member of The International Society of Oil Palm Agronomists,
the Malaysian Incorporated Society of Planters and the Malaysian Society of Soil Science.



47







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. However, in connection with the issuance of 1,000,000 units (post consolidation) (each
comprising one ordinary share and one warrant to purchase one ordinary share) to Ir Lee Swee for approximately US$7.2 million in
2009, Ir Lee Swee Eng is entitled to appoint one director. He has not yet appointed a director to Mission NewEnergy. Ir Lee Swee
Eng is the founder and Managing Director of KNM Group Bhd, the parent company of KNM Process Systems Sdn Bhd, which was the EPCC
contractor for our second refinery.



| | B. | Compensation.
| | -- | -------------



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                 |  |  |                               |  |  | Proportion of |    |  | Value of options and performance shares | 
|------------------------------------------------------------ |  | ---------- | ----- |  | ----------------- |  | -- | -------------------- |  |  | ----------------------------- |  |  | ------------- | -- |  | --------------------------------------- | 
|                                                             |  | Salary     |       |  | Non-cash Benefits |  |    | Share based
payments |  |  | employment
Super Contribution |  |  | Total         |    |  | remuneration
performance related        | 
|                                                             |  | $’000      |       |  | $’000             |  |    | $’000                |  |  | $’000                         |  |  | $’000         |    |  | %                                       | 
|Directors                                                    |  |            |       |  |                   |  |    |                      |  |  |                               |  |  |               |    |  | -                                       | 
|Mr Dario Amara                                               |  |            | 100   |  |                   |  | -  |                      |  |  | -                             |  |  |               | 9  |  |                                         | 
|Datuk Zain Yusuf                                             |  |            | 75    |  |                   |  | -  |                      |  |  | -                             |  |  |               | 1  |  |                                         | 
|Mr Nathan Mahalingam                                         |  |            | 288   |  |                   |  | -  |                      |  |  | -                             |  |  |               | -  |  |                                         | 
|Admiral (Ret) Tan Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor |  |            | 50    |  |                   |  | -  |                      |  |  | -                             |  |  |               | 1  |  |                                         | 
|Mr Arun Bhatnagar                                            |  |            | 50    |  |                   |  | 18 |                      |  |  | -                             |  |  |               | -  |  |                                         | 
|Mr Guy Burnett                                               |  |            | 218   |  |                   |  | -  |                      |  |  | -                             |  |  |               | 20 |  |                                         | 
|Mr. Peter Torre                                              |  |            | 50    |  |                   |  | -  |                      |  |  | -                             |  |  |               | 4  |  |                                         | 
|Key management personnel                                     |  |            |       |  |                   |  |    |                      |  |  |                               |  |  |               |    |  |                                         | 
|Mr Samsudeen Ganny1                                          |  |            | 113   |  |                   |  | -  |                      |  |  | 49                            |  |  |               | 14 |  |                                         | 
|Mr James Garton (Group Head of Corporate Finance)            |  |            | 272   |  |                   |  | -  |                      |  |  | -                             |  |  |               | 17 |  |                                         | 
|Mr Sinnasami Nadason (Group Plantation Advisor)              |  |            | 78    |  |                   |  | -  |                      |  |  | -                             |  |  |               | -  |  |                                         | 
|TOTAL                                                        |  |            | 1,294 |  |                   |  | 18 |                      |  |  | 49                            |  |  |               | 66 |  |                                         | 












1Mr Ganny joined the group on 1 July 2011





48







In fiscal year 2011, the aggregate remuneration
we paid and that accrued to our directors and senior management was A$4.7million.



|                                                                 |  | Short
    Term |       |  | Share
    Based |  |   | Post employment   |  |  |                                    |  |  | Proportion
    of remuneration
    performance
    related |       |  | Value
    of options and performance shares as a proportion of remuneration | 
|---------------------------------------------------------------- |  | -------------- | ----- |  | --------------- |  | - | ----------------- |  |  | ---------------------------------- |  |  | ---------------------------------------------------------- | ----- |  | --------------------------------------------------------------------------- | 
|                                                                 |  | Salary         |       |  | Other           |  |   | Non-cash Benefits |  |  | Options
    and performance shares |  |  | Super annuationContribution (1)                            |       |  | Total                                                                       | 
|                                                                 |  | A$’000         |       |  | A$’000          |  |   | A$’000            |  |  | A$’000                             |  |  | A$’000                                                     |       |  | A$’000                                                                      | 
|Dario
    Amara                                                  |  |                | 100   |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | —     |  |                                                                             | 
|Nathan Mahalingam                                                |  |                | 340   |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | 1,324 |  |                                                                             | 
|Guy Burnett                                                      |  |                | 257   |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | 1,347 |  |                                                                             | 
|Datuk Zain
    Yusuf                                             |  |                | 75    |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | —     |  |                                                                             | 
|Admiral
    (Ret) Tan Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor |  |                | 50    |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | —     |  |                                                                             | 
|Arun Bhatnagar                                                   |  |                | 50    |  |                 |  | — |                   |  |  | 15                                 |  |  |                                                            | —     |  |                                                                             | 
|James Garton                                                     |  |                | 311   |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | 572   |  |                                                                             | 
|Kalaiselvan
    Somasundaram                                     |  |                | 76    |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | 2     |  |                                                                             | 
|Mr. Peter
    Torre                                              |  |                | 38    |  |                 |  |   |                   |  |  |                                    |  |  |                                                            |       |  |                                                                             | 
|Mr.
    Sinnasami Nadason                                        |  |                | 62    |  |                 |  | — |                   |  |  | —                                  |  |  |                                                            | —     |  |                                                                             | 
|                                                                 |  |                | 1,359 |  |                 |  | — |                   |  |  | 15                                 |  |  |                                                            | 3,245 |  |                                                                             | 



| | (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 20.75 million (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.



49







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
pari passu 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    |  |             
|1              |  | June 2009     |  |                                  | 559,999    |  |             
|1              |  | June 2009     |  |                                  | 560,002    |  |             
|2              |  | March 2010    |  |                                  | 5,000,00   |  |             
|2              |  | March 2010    |  |                                  | 5,000,00   |  |             
|2              |  | March 2010    |  |                                  | 5,000,00   |  |             
|3              |  | October 2010  |  |                                  | 206,668    |  |             
|3              |  | October 2010  |  |                                  | 206,668    |  |             
|3              |  | October 2010  |  |                                  | 206,668    |  |             
|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.



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 |                           
|1              |  |                                  | 840,000   |  |              | June 30, 2011 |                           
|1              |  |                                  | 840,000   |  |              | June 30, 2012 |                           
|3              |  |                                  | 310,000   |  |              | June 30, 2011 |                           
|3              |  |                                  | 310,000   |  |              | June 30, 2012 |                           
|3              |  |                                  | 310,000   |  |              | June 30, 2013 |                           
|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 pari passu 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.



50







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.



51







| | 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.



52







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.



53







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 2012 financial 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
| | - | --------------------------------------------

54







| | · | the Remuneration and Nomination Committee.
| | - | ------------------------------------------



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. Datuk Zain 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), Datuk Zain 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.



55







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.



56







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, 2012.



Equity settled Options



|              |  | Balance July 1, 2010 |           |  | Balance afterconsolidation at50:12 |  |        | Lapsed |  |  | Balance June 30, 2011 |   |  | New issue |   |  | Balance June 30, 2012 | 
|------------- |  | -------------------- | --------- |  | ---------------------------------- |  | ------ | ------ |  |  | --------------------- | - |  | --------- | - |  | --------------------- | 
|Directors     |  |                      |           |  |                                    |  |        |        |  |  |                       |   |  |           |   |  |                       | 
|Guy Burnett3  |  |                      | 1,750,000 |  |                                    |  | 35,000 |        |  |  | (35,000               | ) |  |           | - |  |                       | 
|Executive     |  |                      |           |  |                                    |  |        |        |  |  |                       |   |  |           |   |  |                       | 
|James Garton4 |  |                      | 1,750,000 |  |                                    |  | 35,000 |        |  |  | (35,000               | ) |  |           | - |  |                       | 
|TOTAL         |  |                      | 3,500,00  |  |                                    |  | 70,000 |        |  |  | (70,000               | ) |  |           | - |  |                       | 












| | 2 | Shareholders approved a share consolidation of 50:1 on March 23, 2011.
| | - | ----------------------------------------------------------------------



| | 3 | Grant date was October 19, 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 June 30, 2011. Prices adjusted to reflect
the impact of the share consolidation.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4 | Grant date was June 25, 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 June 30, 2011. Prices adjusted to reflect the
impact of the share consolidation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





57









2012 Equity settled Performance Rights



|                              |  | Balance
    June 30, 2010 |           |  | New Issue |  |            | Exercised |  |  | Lapsed
    before consolidation |   |  | Balance before
    consolidation of Performance rights |         |   | Balance after
    consolidation |  |           | Lapsed after
    consolidation |  |  | Balance June
    30, 2011 |  |  | New Issue |         |   | Exercised |  |         | Lapsed |  |  | Balance June
    30. 2012 |  |  | Vested and
    unexercised at 30/06/2012 |         
|----------------------------- |  | ------------------------- | --------- |  | --------- |  | ---------- | --------- |  |  | ------------------------------- | - |  | ------------------------------------------------------ | ------- | - | ------------------------------- |  | --------- | ------------------------------ |  |  | ------------------------- |  |  | --------- | ------- | - | --------- |  | ------- | ------ |  |  | ------------------------- |  |  | ---------------------------------------- | --------
|Director                      |  |                           |           |  |           |  |            |           |  |  |                                 |   |  |                                                        |         |   |                                 |  |           |                                |  |  |                           |  |  |           |         |   |           |  |         |        |  |  |                           |  |  |                                          |         
|Nathan Mahalingam             |  |                           | -         |  |           |  | 5,000,000  | 5         |  |  | (3,333,332                      | ) |  |                                                        | -       |   |                                 |  | 1,666,668 |                                |  |  | 33,334                    |  |  |           | -       |   |           |  | 33,334  |        |  |  | -                         |  |  |                                          | (33,334 
|Guy Burnett                   |  |                           | 1,000,000 |  |           |  | 5,000,000  | 6         |  |  | (3,733,332                      | ) |  |                                                        |         |   |                                 |  | 2,266,668 |                                |  |  | 45,334                    |  |  |           | (6,000  | ) |           |  | 39,334  |        |  |  | -                         |  |  |                                          | (33,334 
|                              |  |                           |           |  |           |  |            |           |  |  |                                 |   |  |                                                        |         |   |                                 |  |           |                                |  |  |                           |  |  |           |         |   |           |  |         |        |  |  |                           |  |  |                                          |         
|Executives                    |  |                           |           |  |           |  |            |           |  |  |                                 |   |  |                                                        |         |   |                                 |  |           |                                |  |  |                           |  |  |           |         |   |           |  |         |        |  |  |                           |  |  |                                          |         
|James Garton                  |  |                           | 6,000,000 |  |           |  |            |           |  |  | (3,733,332                      | ) |  |                                                        | -       |   |                                 |  | 2,266,668 |                                |  |  | 45,334                    |  |  |           | (6,000  | ) |           |  | 39,334  |        |  |  | -                         |  |  |                                          | (33,334 
|Senior employees collectively |  |                           | 786,667   |  |           |  | 1,550,000  | 7         |  |  | (546,666                        | ) |  |                                                        | (50,000 | ) |                                 |  | 1,740,001 |                                |  |  | 34,808                    |  |  |           | (13,733 | ) |           |  | 21,075  |        |  |  | 20,000                    |  |  |                                          | (16,675 
|Total                         |  |                           | 7,786,667 |  |           |  | 11,550,000 |           |  |  | (11,346,662                     | ) |  |                                                        | (50,000 | ) |                                 |  | 7,940,005 |                                |  |  | 158,810                   |  |  |           | (25,733 | ) |           |  | 133,077 |        |  |  | 20,000                    |  |  |                                          | (116,677



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.
| | --- | ----------------------------------------------------------------------------------------------





---



5Grant
date was July 6, 2010, share price and fair value on grant date was $13.25. The performance rights vest in equal tranches at July
1, 2010, December 31, 2010 and July 1, 2011 for service.



6Grant date was July 6, 2010,
share price and fair value on grant date was $13.25.The performance rights vest in equal tranches at July 1, 2010, December 31,
2010 and July 1, 2011 for service.



7Grant date was September
28, 2010, share price and fair value on grant date was $9.75. 40% of the performance shares vest in equal tranches at December
31, 2010, June 30, 2011 and December 31, 2011 for service, and 60% of the performance shares vest in equal tranches on achievement
of a Group EPS of A$3.00 by June 30, 2011, EPS of A$7.50 by June 30, 2012 and EPS of A$7.50 by June 30, 2013.



58







| | D. | Employees.
| | -- | ----------



As of June 30, 2012, we had approximately
45 employees. 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    |  |     | 1 |  |           |  | 1 |          |  |  | 3     | 
|Engineering, operations, R&D and information systems |  |     | 0 |  |           |  | 0 |          |  |  | 4     | 



Historic Employees



|For the fiscal year ended June 30, |  | USA |   |  | Australia |  |   | Malaysia |  |  | India | 
|---------------------------------- |  | --- | - |  | --------- |  | - | -------- |  |  | ----- | 
|2010                               |  |     | - |  |           |  | 3 |          |  |  | 57    | 
|2011                               |  |     | 1 |  |           |  | 2 |          |  |  | 65    | 
|2012                               |  |     | 1 |  |           |  | 1 |          |  |  | 7     | 



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, 2012.



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 24,
2012 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.                                                                                                                         



59







|Principle Shareholders (1)                                   |  | Number of Shares |           |  | Percentage | 
|------------------------------------------------------------ |  | ---------------- | --------- |  | ---------- | 
|McDermott Industries Ltd (2)                                 |  |                  | 2,000,000 |  |            | 
|Nadaraja Muthu (3)                                           |  |                  | 1,417,860 |  |            | 
|SLW International LLC(5)                                     |  |                  | 868,448   |  |            | 
|Houston International Insurance Group(6)                     |  |                  | 850,410   |  |            | 
|Directors and Executive Officers:                            |  |                  |           |  |            | 
|Nathan Mahalingam (4)                                        |  |                  | 612,956   |  |            | 
|James Garton                                                 |  |                  | 112,051   |  |            | 
|Guy Burnett                                                  |  |                  | 112,001   |  |            | 
|Dario Amara                                                  |  |                  | 2,000     |  |            | 
|Datuk Zain Yusuf                                             |  |                  | —         |  |            | 
|Arun Bhatnagar                                               |  |                  | —         |  |            | 
|Admiral (Ret) Tan Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor |  |                  | —         |  |            | 
|Peter Torre                                                  |  |                  | —         |  |            | 
|Samsudeen Ganny                                              |  |                  | 10,000    |  |            | 
|Nadasan Sinnasami                                            |  |                  | —         |  |            | 
|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, 7 th 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) 505,908 ordinary shares that would
        be issuable to SLW upon conversion of the Company’s 4.00% convertible 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 October 16, 2012.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (6) | Address of 800 Gessner, Suite 600, Houston, Texas, 77024. Includes 850,410 shares of common stock. Information is based on a Schedule 13G filed with the SEC on February 15, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



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.



60







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.                                                                              



As of October 19, 2012, we had sixty-one
holders of record in the United States with a combined holding of 5,521,152 shares, representing 50.8% 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, 2011 through to June 30, 2012, 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, 2012 and June 30, 2011, respectively.



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.



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 is able to appoint one executive director
to the Board as well as an alternate director. Mission and KNM Group have agreed that Ir Lee Swee Eng is a related party and as
such Ir Lee Swee Eng has conflict of interest, which until such time as the arbitration between KNM and Mission is resolved, prevents
Mission from supporting the promotion of Ir Lee Swee Eng's nominated director.



61







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 15.5% of Mission if all of Ir Lee Swee Eng’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, 2012.



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.



Legal Proceedings



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



A subsidiary within
the Group has called upon a performance bond placed by the contractor who constructed the 100,000 tpa biodiesel plant, due to non-satisfactory
performance. The performance bond and associated claims offset the final amount of approximately A$2m which the contractor is claiming
is due to them. Both parties have agreed to the appointment of an arbitrator to resolve this matter.



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 within
the Group has been assessed for a State Tax with a provisional assessment and penalties raised totaling A$0.16 million. Management
disputes this assessment and is in discussion with the relevant tax authorities seeking clarity on the basis of the assessment.



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.



62







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.



|                                          |  | OTC Bulletin Board |      |  | NASDAQ |  |      | ASX  | 
|----------------------------------------- |  | ------------------ | ---- |  | ------ |  | ---- | ---- | 
|                                          |  | High               |      |  | Low    |  |      | High | 
|                                          |  | US$                |      |  | US$    |  |      | US$  | 
|Fiscal year ended                         |  |                    |      |  |        |  |      |      | 
|June 30, 2012                             |  |                    |      |  |        |  |      |      | 
|First Quarter                             |  |                    | -    |  |        |  | -    |      | 
|Second Quarter                            |  |                    | -    |  |        |  | -    |      | 
|Third Quarter                             |  |                    | 0.14 |  |        |  | 0.06 |      | 
|Fourth quarter (through October 24, 2012) |  |                    | 0.07 |  |        |  | 0.06 |      | 
|June 30, 2011                             |  |                    |      |  |        |  |      |      | 
|First Quarter                             |  |                    | -    |  |        |  | -    |      | 
|Second Quarter                            |  |                    | -    |  |        |  | -    |      | 
|Third Quarter                             |  |                    | -    |  |        |  | -    |      | 
|Fourth Quarter                            |  |                    | -    |  |        |  | -    |      | 
|June 30, 2010                             |  |                    |      |  |        |  |      |      | 
|First Quarter                             |  |                    | -    |  |        |  | -    |      | 
|Second Quarter                            |  |                    | -    |  |        |  | -    |      | 
|Third Quarter                             |  |                    | -    |  |        |  | -    |      | 
|Fourth Quarter                            |  |                    | -    |  |        |  | -    |      | 
|Month ended                               |  |                    |      |  |        |  |      |      | 
|April 2012                                |  |                    | -    |  |        |  | -    |      | 
|May 2012                                  |  |                    | -    |  |        |  | -    |      | 
|June 2012                                 |  |                    | -    |  |        |  | -    |      | 
|July 2012                                 |  |                    | 0.14 |  |        |  | 0.10 |      | 
|August 2012                               |  |                    | 0.11 |  |        |  | 0.07 |      | 
|September 2012                            |  |                    | 0.14 |  |        |  | 0.06 |      | 
|October 2012 (through October 24 2012)    |  |                    | 0.07 |  |        |  | 0.06 |      | 
|Fiscal year ended June 30,                |  |                    |      |  |        |  |      |      | 
|2012 (through October 24, 2012)           |  |                    | 0.07 |  |        |  | 0.06 |      | 
|2011                                      |  |                    | -    |  |        |  | -    |      | 
|2010                                      |  |                    | -    |  |        |  | -    |      | 
|2009                                      |  |                    | -    |  |        |  | -    |      | 
|2008                                      |  |                    | -    |  |        |  | -    |      | 



63







| | 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.



| | 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.



64







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.



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.



65







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.



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.



66







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.



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 or interest 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.



67







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).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



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.



68







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.



| | 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;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



69







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



| | • | 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.



70







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:



71







| | • | 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.



72







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.



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%.



73







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%8. 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.



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.





---



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



74







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.



Credit Risk



Malaysian Operations



Credit risk for receivables at June 30,
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.



75







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 June 30, 2012, 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$0.1 million higher (2011: A$ 0.941 million lower/ A$1.15 higher).



Profit and Loss would have been –
A$ 0.1 million lower/ A$0.1 million higher (2011: A$ 0.941 million lower/ A$1.150 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, 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 fair value interest rate risk,
arises from the long term convertible note debt held by the parent.



Group Sensitivity



At June 30, 2012, 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 (2011: A$ Nil million lower/higher).



Equity would have been – A$ Nil lower/higher
(2011: A$ Nil million lower/higher).



The fair value of convertible notes –
A$ 0.298 million higher/A$ 0,172 million lower (2011: A$ 0.344 million / A$ 0.341 million lower/higher).



Commodity Risk



The Group is exposed to market prices of
input costs into the production of biodiesel and associated by products produced. At period end the group had some product on hand
to be sold.



Group Sensitivity



At June 30, 2012, if the price of these
products had changed by -/+ 10%, with all other variables held constant, the following financial impacts would have been recorded
by the Group:



Effect on post tax profit – A$0.1
million lower / A$0.1 million higher.



Equity would have been –
A$0.1 million lower / A$0.1 million higher.



76







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.



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.



77







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, 2012.
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.
| | -- | ------------------------------------------------------------------------



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, 2012 based 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, 2012, 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, 2012 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.



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.



78







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, 2012 and 2011 were $123,000 and $258,000 , respectively.



All other Fees. A$0 and for the fiscal
year ending 2012 and A$115,000 for a review of the registration statement filed with the U.S. SEC in fiscal year 2011.



Tax Fees. The Company incurred fees
totaling $0 during the fiscal year ended June 30, 2012. The Company incurred fees totaling $0 during the fiscal year ended June
30, 2011.



Audit-Related Fees. A$0 and for the
fiscal years ending 2012 and 2011.



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



Not applicable.



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



79







|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).          
|               |   |                                                                                                                                                                                                                                                       
|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).                                  



80







|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.                                                                                                                                                               
|     |   |                                                                                                                                                                                                                                                                                         
|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.                    

__________



* 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



81







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 30, 2012 | By: | /s/ Guy Burnett |                                                        
|                        |     |                 | Name: Guy Burnett                                      
|                        |     |                 | Title:    Chief Financial Officer and Company Secretary





82











|AUDIT | REPORT
|----- | ------







| | 10 Kings Park Road       
| | -------------------------
| | West Perth WA 6005       
| | PO Box 570               
| | West Perth WA 6872       
| | T+61 8 9480 2000         
| | F+61 8 9322 7787         
| | Einfo.wa@au.gt.com       
| | Wwww.grantthornton.com.au



Report of Independent Registered Public Accounting Firm

To the Members of Mission NewEnergy Limited



We have audited the accompanying consolidated statements of
financial position of Mission NewEnergy Limited and controlled entities (the “Company”) as of 30 June 2011 and 2012,
and the related consolidated income statements and statements of comprehensive income, statements of changes in equity, and statements
of cash flows for each of the three years in the period ended 30 June 2012. 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 the 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. The Company is not required to have,
nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion. An audit also 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 and controlled entities
as of 30 June 2011 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended
30 June 2012, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards
Board.









83











Material
uncertainty regarding continuation as a going concern
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 $4.9 million during the year ended 30 June
2012 and, as of that date, the consolidated entity’s total liabilities exceeded its total assets by $24.4 million. These
conditions, along with other matters as set forth in Note 2 raise substantial doubt about 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.







GRANT THORNTON AUDIT PTY LTD

Chartered Accountants





Perth, 30 October 2012



Grant Thornton Audit Pty Ltd ABN 94 269 609 023

a subsidiary or related entity of Grant Thornton Australia Ltd
ABN 41 127 556 389



Grant Thornton Australia Limited is a member firm within Grant
Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton
Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.



Liability limited by a scheme approved under Professional Standards Legislation



84







CONSOLIDATED GROUP
INCOME STATEMENT



FOR THE YEAR ENDED 30 JUNE 2012



|                                                                                          |  |  | Note |  |       | 2012 |         |       | 2011 |  |         | 2010 | 
|----------------------------------------------------------------------------------------- |  |  | ---- |  | ----- | ---- | ------- | ----- | ---- |  | ------- | ---- | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|                                                                                          |  |  |      |  | $'000 |      |         | $'000 |      |  | $'000   |     
|Sales revenue                                                                             |  |  | 7    |  |       |      | 27,289  |       |      |  | 13,557  |      | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Other income                                                                              |  |  | 7    |  |       |      | 11,016  |       |      |  | 2,869   |      | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Total revenue                                                                             |  |  |      |  |       |      | 38,305  |       |      |  | 16,426  |      | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Changes in Inventory                                                                      |  |  |      |  |       |      | (4,759  | )     |      |  | 5,090   |      | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Cost of materials                                                                         |  |  | 8a   |  |       |      | (21,715 | )     |      |  | (18,959 | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Employee benefits expense                                                                 |  |  | 8b   |  |       |      | (4,186  | )     |      |  | (7,527  | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Net foreign exchange gains/(losses)                                                       |  |  |      |  |       |      | 340     |       |      |  | (1,769  | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Consultants’ expenses                                                                     |  |  |      |  |       |      | (692    | )     |      |  | (328    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Impairment                                                                                |  |  | 5a   |  |       |      | (5,676  | )     |      |  | (5,169  | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Shareholder expenses                                                                      |  |  |      |  |       |      | (252    | )     |      |  | (125    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Travel expenses                                                                           |  |  | 8e   |  |       |      | (691    | )     |      |  | (766    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Research and development                                                                  |  |  |      |  |       |      | (11     | )     |      |  | (168    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Rental expenses                                                                           |  |  |      |  |       |      | (199    | )     |      |  | (176    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Other expenses                                                                            |  |  | 8c   |  |       |      | (2,907  | )     |      |  | (2,493  | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Depreciation and amortisation expenses                                                    |  |  |      |  |       |      | (384    | )     |      |  | (396    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Finance Cost – amortisation                                                               |  |  | 8d   |  |       |      | (1,084  | )     |      |  | (2,382  | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Finance costs                                                                             |  |  |      |  |       |      | (2,159  | )     |      |  | (2,483  | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Profit/(loss) before income tax                                                           |  |  |      |  |       |      | (6,070  | )     |      |  | (21,225 | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Income tax (expense)/benefit                                                              |  |  | 9    |  |       |      | (16     | )     |      |  | 1       |      | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Net (loss)/profit before non-controlling interest                                         |  |  |      |  |       |      | (6,086  | )     |      |  | (21,224 | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Profit/(Loss) attributable to non-controlling interests                                   |  |  |      |  |       |      | 68      |       |      |  | -       |      | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Net (loss)/profit attributable to members of the parent entity from continuing operations |  |  |      |  |       |      | (6,018  | )     |      |  | (21,224 | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Loss for the year from discontinued operations                                            |  |  | 36   |  |       |      | (112    | )     |      |  | (446    | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Loss for the year                                                                         |  |  |      |  |       |      | (6,130  | )     |      |  | (21,670 | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Basic earnings/(loss) per share ($)                                                       |  |  | 11   |  |       |      | (0.69   | )     |      |  | (3.50   | )    | 
|                                                                                          |  |  |      |  |       |      |         |       |      |  |         |      | 
|Diluted earnings/(loss) per share ($)                                                     |  |  | 11   |  |       |      | (0.69   | )     |      |  | (3.50   | )    | 



The accompanying notes form part of this
financial report





85







CONSOLIDATED GROUP STATEMENT OF COMPREHENSIVE INCOME



FOR THE YEAR ENDED 30 JUNE 2012



|                                                                     |  | 2012 $’000 |        |   | 2011 $’000 |  |         | 2010 $’000 | 
|-------------------------------------------------------------------- |  | ---------- | ------ | - | ---------- |  | ------- | ---------- | 
|                                                                     |  |            |        |   |            |  |         |            | 
|(Loss)/Profit for the period                                         |  |            | (6,130 | ) |            |  | (21,670 | )          | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Other comprehensive income                                           |  |            |        |   |            |  |         |            | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Exchange differences on translating foreign operations               |  |            | (195   | ) |            |  | (1,917  | )          | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Gain on convertible note restructure                                 |  |            | -      |   |            |  | 3,209   |            | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Gain on settlement of Series 1 convertible note                      |  |            | 1,473  |   |            |  | -       |            | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Effective portion of change in fair value of cash flow hedge         |  |            | (39    | ) |            |  | 39      |            | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Other comprehensive income/(loss) for the period net of tax          |  |            | 1,239  |   |            |  | 1,331   |            | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Total comprehensive (loss) for the period attributable to the parent |  |            | (4,891 | ) |            |  | (20,339 | )          | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Attributable to non-controlling equity interests                     |  |            | (68    | ) |            |  | -       |            | 
|                                                                     |  |            |        |   |            |  |         |            | 
|Total comprehensive  (loss) for the period                           |  |            | (4,959 | ) |            |  | (20,339 | )          | 



The accompanying notes form part of this
financial report



86







CONSOLIDATED GROUP STATEMENT OF FINANCIAL
POSITION



AS AT 30 JUNE 2012



|                                                     |  |  | Note |  |       | 2012 |          |       | 2011 | 
|---------------------------------------------------- |  |  | ---- |  | ----- | ---- | -------- | ----- | ---- | 
|                                                     |  |  |      |  | $'000 |      |          | $'000 |     
|                                                     |  |  |      |  |       |      |          |       |     
|CURRENT ASSETS                                       |  |  |      |  |       |      |          |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Cash and cash equivalents                            |  |  | 12   |  |       |      | 1,456    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Trade and other receivables                          |  |  | 13   |  |       |      | 4,225    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Biological assets                                    |  |  | 14   |  |       |      | -        |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Inventories                                          |  |  | 15   |  |       |      | 1,192    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Other financial assets                               |  |  | 16   |  |       |      | 581      |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Other assets                                         |  |  | 20   |  |       |      | 204      |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Current tax assets                                   |  |  | 23   |  |       |      | 24       |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Total current assets                                 |  |  |      |  |       |      | 7,682    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Non-current assets held for sale                     |  |  | 36   |  |       |      | 2,286    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|NON-CURRENT ASSETS                                   |  |  |      |  |       |      |          |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Property, plant and equipment                        |  |  | 18   |  |       |      | 681      |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Intangible assets                                    |  |  | 19   |  |       |      | -        |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Deferred tax assets                                  |  |  | 23   |  |       |      | -        |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Other Assets                                         |  |  | 20   |  |       |      | 54       |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Total non-current assets                             |  |  |      |  |       |      | 735      |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|TOTAL ASSETS                                         |  |  |      |  |       |      | 10,703   |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|CURRENT LIABILITIES                                  |  |  |      |  |       |      |          |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Trade and other payables                             |  |  | 21   |  |       |      | 2,175    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Financial Liabilities                                |  |  | 22   |  |       |      | 83       |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Short-term provisions                                |  |  |      |  |       |      | 104      |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Total current liabilities                            |  |  |      |  |       |      | 2,362    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Liabilities included in disposal group held for sale |  |  | 36   |  |       |      | 1,567    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|NON-CURRENT LIABILITIES                              |  |  |      |  |       |      |          |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Financial liabilities                                |  |  | 22   |  |       |      | 31,215   |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Deferred tax liabilities                             |  |  | 23   |  |       |      | -        |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Total non-current liabilities                        |  |  |      |  |       |      | 31,215   |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|TOTAL LIABILITIES                                    |  |  |      |  |       |      | 35,144   |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|NET ASSETS (DEFICIT)                                 |  |  |      |  |       |      | (24,441  | )     |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|EQUITY                                               |  |  |      |  |       |      |          |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Issued capital                                       |  |  | 24   |  |       |      | 110,320  |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Reserves                                             |  |  | 25   |  |       |      | 5,684    |       |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Retained earnings (Accumulated losses)               |  |  |      |  |       |      | (140,377 | )     |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Non-controlling Interests                            |  |  | 35   |  |       |      | (68      | )     |      | 
|                                                     |  |  |      |  |       |      |          |       |      | 
|Total Equity (Deficiency)                            |  |  |      |  |       |      | (24,441  | )     |      | 



The accompanying notes form part of these financial statements.



87







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



CONSOLIDATED GROUP STATEMENT OF CHANGES
IN EQUITY



FOR THE YEAR ENDED 30 JUNE 2012



|                                                                 |  | 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 | 
|---------------------------------------------------------------- |  | ---------------------- | ------ |  | ------------------------------------------ |  | -------- | -------------------------------- |  |  | ---------------------------------------- |  |  | ------------------------- | ------ | - | --------------------------- |  | ------ | ------------------------------ |  |  | ----- | 
|                                                                 |  | $'000                  |        |  | $'000                                      |  |          | $'000                            |  |  | $'000                                    |  |  | $'000                     |        |   | $'000                       |  |        | $'000                          |  |  | $'000 | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Balance as at 30 June  2010                                      |  |                        | 76,634 |  |                                            |  | (117,259 | )                                |  |  | 1,541                                    |  |  |                           | 244    |   |                             |  | 9,146  |                                |  |  | -     | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Changes in Convertible note reserve due
    to restructure9      |  |                        | -      |  |                                            |  | 3,209    |                                  |  |  | -                                        |  |  |                           | -      |   |                             |  | (3,209 | )                              |  |  | -     | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Profit/(Loss) attributable to members of parent entity           |  |                        | -      |  |                                            |  | (21,670  | )                                |  |  | -                                        |  |  |                           | -      |   |                             |  | -      |                                |  |  | -     | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Other comprehensive income                                       |  |                        | -      |  |                                            |  | -        |                                  |  |  | -                                        |  |  |                           | (1,917 | ) |                             |  | -      |                                |  |  | 39    | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Pro-rata expenses for options and performance rights             |  |                        | -      |  |                                            |  | -        |                                  |  |  | 3,327                                    |  |  |                           | -      |   |                             |  | -      |                                |  |  | -     | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Issue of New Shares                                              |  |                        | 20,167 |  |                                            |  | -        |                                  |  |  | -                                        |  |  |                           | -      |   |                             |  | -      |                                |  |  | -     | 
|                                                                 |  |                        |        |  |                                            |  |          |                                  |  |  |                                          |  |  |                           |        |   |                             |  |        |                                |  |  |       | 
|Elimination of non-controlling interest after purchase of shares |  |                        | -      |  |                                            |  | -        |                                  |  |  | -                                        |  |  |                           | -      |   |                             |  | -      |                                |  |  | -     | 










9The restructure was completed in April 2011 where
the majority of note holders agreed to extend the maturity date of the convertible note from May 2012 to May 2014 with a change
in the conversion ratio from 1:1 to 1:4.



88







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



|                                                   |  | Ordinary
    Share Capital |         |  | Retained Earnings
    (AccumulatedLosses) |  |          | Share Based
    Payments Reserve |  |  | Foreign Currency
    Translation Reserve |  |  | Convertible
    Notes Reserve |        |   | Cash flow
    Hedge reserve |  |        | Non- controlling
    Interests |  |  | Total |  
|-------------------------------------------------- |  | -------------------------- | ------- |  | ----------------------------------------- |  | -------- | -------------------------------- |  |  | ---------------------------------------- |  |  | ----------------------------- | ------ | - | --------------------------- |  | ------ | ------------------------------ |  |  | ----- | -
|                                                   |  | $'000                      |         |  | $'000                                     |  |          | $'000                            |  |  | $'000                                    |  |  | $'000                         |        |   | $'000                       |  |        | $'000                          |  |  | $'000 |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Balance as at 30 June 2011                         |  |                            | 96,801  |  |                                           |  | (135,720 | )                                |  |  | 4,868                                    |  |  |                               | (1,673 | ) |                             |  | 5,937  |                                |  |  | 39    |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Gain on settlement of Series 1 Convertible Note    |  |                            | -       |  |                                           |  | 1,473    |                                  |  |  | -                                        |  |  |                               | -      |   |                             |  | (2,254 | )                              |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Gain on conversion of  convertible notes to equity |  |                            | -       |  |                                           |  | -        |                                  |  |  | -                                        |  |  |                               | -      |   |                             |  | (1,038 | )                              |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|(Loss) attributable to members of parent entity    |  |                            | -       |  |                                           |  | (6,130   | )                                |  |  | -                                        |  |  |                               | -      |   |                             |  | -      |                                |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Other comprehensive income                         |  |                            | -       |  |                                           |  | -        |                                  |  |  | -                                        |  |  |                               | (195   | ) |                             |  | -      |                                |  |  | (39   | )
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Conversion of convertible notes to equity          |  |                            | 13,239  |  |                                           |  | -        |                                  |  |  | -                                        |  |  |                               | -      |   |                             |  | -      |                                |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Expenses for options and performance rights        |  |                            | -       |  |                                           |  | -        |                                  |  |  | 39                                       |  |  |                               | -      |   |                             |  | -      |                                |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Issue of Shares to Advisory Board                  |  |                            | 280     |  |                                           |  | -        |                                  |  |  | -                                        |  |  |                               | -      |   |                             |  | -      |                                |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Non-controlling interest                           |  |                            | -       |  |                                           |  | -        |                                  |  |  | -                                        |  |  |                               | -      |   |                             |  | -      |                                |  |  | -     |  
|                                                   |  |                            |         |  |                                           |  |          |                                  |  |  |                                          |  |  |                               |        |   |                             |  |        |                                |  |  |       |  
|Balance as at 30 June
    2012                     |  |                            | 110,320 |  |                                           |  | (140,377 | )                                |  |  | 4,907                                    |  |  |                               | (1,868 | ) |                             |  | 2,645  |                                |  |  | -     |  



89







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



CONSOLIDATED GROUP STATEMENT OF CASH
FLOWS



FOR THE YEAR ENDED 30 JUNE 2012



|                                                                         |  |  | Note |  |  | 2012 $’000 |         |   | 2011 $’000 |  |         | 2010 $’000 | 
|------------------------------------------------------------------------ |  |  | ---- |  |  | ---------- | ------- | - | ---------- |  | ------- | ---------- | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                     |  |  |      |  |  |            |         |   |            |  |         |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Receipts from customers                                                  |  |  |      |  |  |            | 32,232  |   |            |  | 10,128  |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Payments to suppliers and employees                                      |  |  |      |  |  |            | (35,374 | ) |            |  | (22,494 | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Interest received                                                        |  |  |      |  |  |            | 289     |   |            |  | 161     |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Finance costs                                                            |  |  |      |  |  |            | (2,023  | ) |            |  | (2,909  | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Income tax paid                                                          |  |  |      |  |  |            | 5       |   |            |  | 25      |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Net cash (used in) operating activities                                  |  |  | 29   |  |  |            | (4,871  | ) |            |  | (15,089 | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                     |  |  |      |  |  |            |         |   |            |  |         |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Purchase of property, plant and equipment                                |  |  |      |  |  |            | (615    | ) |            |  | (3,957  | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Proceed from sale of equipment                                           |  |  |      |  |  |            | 170     |   |            |  | -       |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Release of performance bond and deposits                                 |  |  |      |  |  |            | 103     |   |            |  | -       |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Acquisition of subsidiary                                                |  |  |      |  |  |            | (950    | ) |            |  | -       |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Advance to related entity                                                |  |  |      |  |  |            | (2,676  | ) |            |  | -       |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Investment in held to maturity investment and deposits                   |  |  |      |  |  |            | -       |   |            |  | (137    | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Net cash (used in) investing activities                                  |  |  |      |  |  |            | (3,968  | ) |            |  | (4,094  | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                     |  |  |      |  |  |            |         |   |            |  |         |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Proceeds from share issue (net of costs)                                 |  |  |      |  |  |            | -       |   |            |  | 20,167  |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|(Repayments)/proceeds from borrowings                                    |  |  |      |  |  |            | (5,461  | ) |            |  | (527    | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Net cash provided by financing activities                                |  |  |      |  |  |            | (5,461  | ) |            |  | 19,640  |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     |  |  |      |  |  |            | (14,300 | ) |            |  | 457     |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Cash and cash equivalents at beginning of the financial year             |  |  |      |  |  |            | 15,761  |   |            |  | 17,155  |            | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|Effects of exchange rate fluctuations of cash held in foreign currencies |  |  |      |  |  |            | (5      | ) |            |  | (1,851  | )          | 
|                                                                         |  |  |      |  |  |            |         |   |            |  |         |            | 
|CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR                       |  |  | 12   |  |  |            | 1,456   |   |            |  | 15,761  |            | 



The accompanying notes form part of these
financial statements.



90







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| | · | that is in the process of finalising the
transfer of a 250,000 tpa (approx. 75 million gallons p.a.) trans-esterification plant constructed by KNM Process Systems Sdn Bhd
to Mission. 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 is reassessing the viability of its
upstream feedstock business in India;
| | - | ------------------------------------------------------------------------------

| | · | 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Basis of preparation
| | -- | --------------------



Statement of compliance



The financial report is a general purpose
financial report which has been prepared in accordance with International Financial Reporting Standards (IFRSs) as 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, suppliers and its customer base.



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.



91







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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.



Going Concern



The Group incurred an operating loss
for the year ended 30 June 2012 of $6.1 million (2011: $21.7 million), with net cash used in operating activities of $4.9
million (2011: 15.1 million). At balance date, the current assets less current liability surplus was $5.3 million (2011: $7.2
million) and the net asset deficiency $24.4 million (2011: $29.7 million). 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).
These factors indicate substantial doubt exists regarding the group’s ability to continue as a going concern.



During the financial year, the Company
has paid A$5 million to fully settle the series one convertible note liability of A$15 million shown in current liabilities at
30 June 2011. At 30 June 2012, the Company has a non-current liability for the series two convertible notes of A$32.8 million (nominal
value).



As announced to the market on the 17th
August 2012, a debt funding package has been agreed in principle with SLW International, LLC (SLW) a substantial convertible note
holder, to provide the Group with a US$5 million line of credit facility. The facility is conditional on the restructure of the
Group’s existing convertible note debt whereby each existing convertible note will be exchanged for a new convertible note.
Please refer to the Subsequent events note (Note 34) for further information on this transaction. The restructure of the convertible
note debt is subject to shareholder approval. The Group has appointed an independent expert to review whether the transaction is
fair and reasonable to shareholders (as required by the ASX listing rules), in order to be able to recommend the transaction to
shareholders. The Independent Expert’s Report and notice of meeting are close to final form. Please refer to the subsequent
events section for details of an application lodged with the Takeovers Panel in regard to this funding arrangement. At the date
of this report, the Takeovers Panel has announced that it has declined to conduct proceedings.



The Directors believe that at the date
of this report the Group has sufficient financial resources at 30 June 2012 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.



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:



| | · | Obtain shareholder approval for the proposed
funding and restructure arrangements with SLW.
| | - | -------------------------------------------------------------------------------------------



| | · | Failing approval of the SLW arrangements,
raise debt or equity funding from other sources.
| | - | ------------------------------------------------------------------------------------------



| | · | Generate positive cash flows from operations.
| | - | ---------------------------------------------



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



| | · | Reduce cash outflows through cost control
measures.
| | - | ---------------------------------------------------



92







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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 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 28 September 2012.



| | 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, Oleovest
PL, Scarborough Beach Holdings, Inc., PJ Trading, LLC, and PJ Trading Pennsylvania, LLC.



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.



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.



93







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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.



94







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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 capitalized 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.



95







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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 capitalized 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 recognized as a liability and amortized 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.



Financial assets at fair value through
profit and loss



A financial asset is classified in this
category if acquired principally for the purpose of selling in the short term or if so designated by management and within the
requirements of AASB 139: Recognition and Measurement of Financial Instruments. Realized and unrealized gains and losses arising
from changes in the fair value of these assets are included in the income statement in the period in which they arise.



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 amortized 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 recognized
initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized
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 amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured
subsequent to initial recognition.



96







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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



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 amortized 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. Un-realized
gains and losses arising from changes in fair value are taken directly to equity.



Financial liabilities



Non-derivative financial liabilities are
recognized at amortized 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 recognized initially at fair value; attributable transaction costs are recognized 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.



97







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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 recognized 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 recognized 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 recognized immediately in profit or loss. When the hedged item is a non-financial
asset, the amount recognized in equity is included in the carrying amount of the asset when the asset is recognized. 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.



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 recognized 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 recognized as an expense when incurred. Development costs are capitalized 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.



98







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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.



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.



99







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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. | 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.



| | q. | Revenue
| | -- | -------



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



100







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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 top 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.



| | 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.



101







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 4. | Standards, amendments and interpretations to existing standards that are not yet effective and
have not been adopted early by the group
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------



At the date of authorisation of these financial
statements, certain new IAS 8.31 standards, amendments and interpretations to existing standards have



been published by the IASB but are not
yet effective, and have not been adopted early by the Group. Management anticipates that all of the relevant pronouncements will
be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements
is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact
on the Group’s financial statements.



IFRS 9 Financial Instruments (IFRS 9)



The IASB aims to replace IAS 39 Financial
Instruments: Recognition and Measurement in its entirety. IFRS 9 is being issued in phases. To date, the chapters dealing with
recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters
are effective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting
are still being developed. The Group’s management have yet to assess the impact of this new standard on the Group’s
consolidated financial statements. However, they do not expect to implement IFRS 9 until all of its chapters have been published
and they can comprehensively assess the impact of all changes.



Consolidation Standards



A package of consolidation standards are
effective for annual periods beginning or after 1 January 2013. Information on these new standards is presented below. The Group’s
management have yet to assess the impact of these new and revised standards on the Group’s consolidated financial statements.



IFRS 10 Consolidated Financial Statements
(IFRS 10)



IFRS 10 supersedes IAS 27 Consolidated
and Separate Financial Statements (IAS 27) and SIC 12 Consolidation – Special Purpose Entities. It revised the definition
of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics
of consolidation and the accounting for any non-controlling interests and changes in control remain the same.



IFRS 11 Joint Arrangements (IFRS 11)



102







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



IFRS 11 supersedes IAS 31 Interests in
Joint Ventures (IAS 31). It aligns more closely the accounting by the investors with their rights and obligations relating to the
joint arrangement. In addition, IAS 31’s option of using proportionate consolidation for joint ventures has been eliminated.
IFRS 11 now requires the use of the equity accounting method, which is currently used for investments in associates.



IFRS 12 Disclosure of Interests in Other
Entities (IFRS 12)



IFRS 12 integrates and makes consistent
the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure
requirements about the risks to which an entity is exposed from its involvement with structured entities. Consequential amendments
to IAS 27 and IAS 28 Investments in Associates and Joint Ventures (IAS 28). IAS 27 now only deals with separate financial statements.
IAS 28 brings investments in joint ventures into its scope. However, IAS 28’s equity accounting methodology remains unchanged.



IFRS 13 Fair Value Measurement (IFRS 13)



IFRS 13 does not affect which items are
required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about
fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The Group’s management
have yet to assess the impact of this new standard.



Amendments to IAS 1 Presentation of Financial
Statements (IAS 1 Amendments)



The IAS 1 Amendments require an entity
to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified
subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It
is applicable for annual periods beginning on or after 1 July 2012. The Group’s management expects this will change the current
presentation of items in other comprehensive income; however, it will not affect the measurement or recognition of such items.



Amendments to IAS 19 Employee Benefits
(IAS 19 Amendments)



The IAS 19 Amendments include a number
of targeted improvements throughout the Standard. The main changes relate to defined benefit plans. They:



• eliminate the ‘corridor method’,
requiring entities to recognise all gains and losses arising in the reporting period



• streamline the presentation of changes
in plan assets and liabilities



103







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



• enhance the disclosure requirements,
including information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation
in them.



The amended version of IAS 19 is effective for financial years
beginning on or after 1 January 2013. The Group’s management have yet to assess the impact of this revised standard on the
Group’s consolidated financial statements.



104







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (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 and for the year ended 30 June 2011. During the twelve months ended 30 June 2012 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



The Group tests annually whether goodwill
has suffered any impairment, in accordance with the accounting policy stated in note 3(i). Goodwill has arisen as a result of the
purchase of equity in Mission Biofuels India Pvt Limited and Oleovest PL.



At 30 June 2012 the Board has reviewed
the carrying value of goodwill relating to the Group’s:



| | · | Feedstock operations. The Board reviewed
the significant assumptions applied in assessing the carrying value at 30 June 2011 and fully impaired goodwill.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Downstream Palm Oil Joint Venture Project.
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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Credit risk of receivables



Malaysian operations



Credit risk for receivables at 30 June
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 poor yield of Jatropha seeds in
the 2011/12 season and the resultant 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.



105







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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’.



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 of the EPCC contractor and yet to be handed over to Mission.



The Board reviews the carrying value of
its refinery assets at each reporting date. The Board had previously determined to write down the carrying value of the refineries
and continues to apply this principal for the 2012 financial year.



In addition to the impairment to 30 June
2011, further impairment has been provided during the year ended 30 June 2012 for capital additions to a value of $2.2 million.



Windmill impairment



At 30 June 2012, 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 the Companies weighted average cost of capital,
adapted for the regions in which the windmills operate. No impairment was provided for in the 2012 financial year.



|                                                |  | June 2012 |       |  | June 2011 |  |       | June 2010 | 
|----------------------------------------------- |  | --------- | ----- |  | --------- |  | ----- | --------- | 
|                                                |  | $000      |       |  | $000      |  |       | $000      | 
|Impairment of refineries                        |  |           | 2,210 |  |           |  | 2,046 |           | 
|                                                |  |           |       |  |           |  |       |           | 
|Impairment of windmills                         |  |           | -     |  |           |  | -     |           | 
|                                                |  |           |       |  |           |  |       |           | 
|Impairment of other assets                      |  |           | 1,108 |  |           |  | 36    |           | 
|                                                |  |           |       |  |           |  |       |           | 
|Impairment of Goodwill                          |  |           | 950   |  |           |  | 1,157 |           | 
|                                                |  |           |       |  |           |  |       |           | 
|Impairment of trade receivables                 |  |           | 1,007 |  |           |  | 1,930 |           | 
|                                                |  |           |       |  |           |  |       |           | 
|Impairment of inventories and biological assets |  |           | 401   |  |           |  | -     |           | 
|                                                |  |           |       |  |           |  |       |           | 
|Total                                           |  |           | 5,676 |  |           |  | 5,169 |           | 



106







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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’.



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 investment
into 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.



| | b. | Biological Asset
| | -- | ----------------



The fair value of the Jatropha Curcas saplings
is determined by reference to independent market prices. Subsequent movements in the fair value of the Jatropha Curcas saplings
are determined through operational reviews of the market prices.



| | 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.



Biological assets



The fair value of biological assets is
based on the market price of Jatropha sapling sales in India.



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.



107







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 7. | Sales revenue
| | -- | -------------





|                                          |  | 2012 $’000 |        |  | 2011 $’000 |  |        | 2010 $’000 | 
|----------------------------------------- |  | ---------- | ------ |  | ---------- |  | ------ | ---------- | 
|                                          |  |            |        |  |            |  |        |            | 
|Sales Revenue                             |  |            |        |  |            |  |        |            | 
|                                          |  |            |        |  |            |  |        |            | 
|-     Sales of goods                      |  |            | 27,289 |  |            |  | 13,557 |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Total revenue                             |  |            | 27,289 |  |            |  | 13,557 |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Other Income                              |  |            |        |  |            |  |        |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Change in fair value of biological assets |  |            | -      |  |            |  | 790    |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Interest received                         |  |            | 289    |  |            |  | 115    |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Gain on convertible note restructure      |  |            | -      |  |            |  | 1,734  |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Gain on settlement of convertible notes   |  |            | 10,300 |  |            |  | -      |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Sundry income                             |  |            | 427    |  |            |  | 230    |            | 
|                                          |  |            |        |  |            |  |        |            | 
|Other income                              |  |            | 11,016 |  |            |  | 2,869  |            | 



During the year the company settled the
outstanding Series One convertible notes for a cash payment of A$5 million. The Series One convertible notes represented a $15
million liability that was due in May 2012. Due to the early repayment Mission has settled the debt at a substantial discount resulting
in a gain of $10,300,000.



During the current financial year, the
company materially completed the Jatropha harvest season. The harvest was significantly lower than company expectations and a detailed
review of the company’s operations was commenced in-light of its cash position and visibility on its Jatropha operations.
The operations have been significantly downsized and the company is now focused on divesting the remaining Indian assets. The company
has decided not to undertake further planting of Jatropha. Due to these results from the operations, no change in fair value revenue
from saplings was recognised during the current financial year.



108







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 8. | Expenses
| | -- | --------



|                                  |  | 2012 $’000 |        |  | 2011 $’000 |  |        | 2010 $’000 | 
|--------------------------------- |  | ---------- | ------ |  | ---------- |  | ------ | ---------- | 
|                                  |  |            |        |  |            |  |        |            | 
|8a)       Cost of materials       |  |            | 21,284 |  |            |  | 18,323 |            | 
|                                  |  |            |        |  |            |  |        |            | 
|Cost of growing biological assets |  |            | 431    |  |            |  | 636    |            | 
|                                  |  |            |        |  |            |  |        |            | 
|Total                             |  |            | 21,715 |  |            |  | 18,959 |            | 



|8b) Employee costs                          |  |  |       |  |  |  |       |  |  |  |       | 
|------------------------------------------- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                                            |  |  |       |  |  |  |       |  |  |  |       | 
|Wages and Salaries                          |  |  | 3,656 |  |  |  | 3,970 |  |  |  | 3,860 | 
|                                            |  |  |       |  |  |  |       |  |  |  |       | 
|Contribution to defined contribution plans  |  |  | 231   |  |  |  | 233   |  |  |  | 170   | 
|                                            |  |  |       |  |  |  |       |  |  |  |       | 
|Equity settled share based payments expense |  |  | 299   |  |  |  | 3,324 |  |  |  | 1,277 | 
|                                            |  |  |       |  |  |  |       |  |  |  |       | 
|                                            |  |  | 4,186 |  |  |  | 7,527 |  |  |  | 5,307 | 



|8c) Other expenses:                |  |  |       |  |  |  |       |  |  |  |       | 
|---------------------------------- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Audit fees                         |  |  | 150   |  |  |  | 204   |  |  |  | 118   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Advertising                        |  |  | 2     |  |  |  | 50    |  |  |  | 31    | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Business acquisition costs         |  |  | 501   |  |  |  | -     |  |  |  | -     | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Computer maintenance & consumables |  |  | 58    |  |  |  | 38    |  |  |  | 46    | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Communication expenses             |  |  | 286   |  |  |  | 343   |  |  |  | 211   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Insurance costs                    |  |  | 251   |  |  |  | 107   |  |  |  | 121   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Legal fees                         |  |  | 291   |  |  |  | 319   |  |  |  | 123   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Plant operating costs              |  |  | 580   |  |  |  | 163   |  |  |  | 254   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Asset maintenance                  |  |  | 137   |  |  |  | 239   |  |  |  | 320   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Other administrative costs         |  |  | 651   |  |  |  | 1,030 |  |  |  | 962   | 
|                                   |  |  |       |  |  |  |       |  |  |  |       | 
|Total                              |  |  | 2,907 |  |  |  | 2,493 |  |  |  | 2,186 | 



109







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|                                                       |  | 2012 $’000 |       |  | 2011 $’000 |  |       | 2011 $’000 | 
|------------------------------------------------------ |  | ---------- | ----- |  | ---------- |  | ----- | ---------- | 
|                                                       |  |            |       |  |            |  |       |            | 
|8d) Finance Costs                                      |  |            |       |  |            |  |       |            | 
|                                                       |  |            |       |  |            |  |       |            | 
|Amortisation of liability portion of convertible notes |  |            | 1,067 |  |            |  | 2,003 |            | 
|                                                       |  |            |       |  |            |  |       |            | 
|Amortisation of convertible note issue costs           |  |            | 17    |  |            |  | 379   |            | 
|                                                       |  |            |       |  |            |  |       |            | 
|Total                                                  |  |            | 1,084 |  |            |  | 2,382 |            | 
|                                                       |  |            |       |  |            |  |       |            | 
|8e) Travel expenses                                    |  |            |       |  |            |  |       |            | 
|                                                       |  |            |       |  |            |  |       |            | 
|Corporate travel                                       |  |            | 274   |  |            |  | 273   |            | 
|                                                       |  |            |       |  |            |  |       |            | 
|Feedstock Logistics                                    |  |            | 417   |  |            |  | 493   |            | 
|                                                       |  |            | 691   |  |            |  | 766   |            | 



| | 9. | Income tax
| | -- | ----------





|                                                                                                                                                            |  |  |    |  | 2012 $’000 |  |        | 2011 $’000 |  |  | 2010 $’000 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- |  | ---------- |  | ------ | ---------- |  |  | ---------- | -
|a.     The components of tax expense comprise                                                                                                               |  |  |    |  |            |  |        |            |  |  |            |  
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|Current tax                                                                                                                                                 |  |  |    |  |            |  | 16     |            |  |  | (1         | )
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|Deferred tax                                                                                                                                                |  |  | 23 |  |            |  | -      |            |  |  | -          |  
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|Over provision in respect of prior years                                                                                                                    |  |  |    |  |            |  | -      |            |  |  | -          |  
|                                                                                                                                                            |  |  |    |  |            |  | 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 (loss) before tax                                                                                                                                |  |  |    |  |            |  | (6,070 | )          |  |  | (21,225    | )
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|Loss for the year from discontinued operations                                                                                                              |  |  |    |  |            |  | (112   | )          |  |  | (446       | )
|Total loss for the year                                                                                                                                     |  |  |    |  |            |  | (6,182 | )          |  |  | (21,671    | )
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|Prima facie tax (benefit)/expense on profit/ (loss) from ordinary activities before income tax at 30%                                                       |  |  |    |  |            |  | (1,855 | )          |  |  | (6,501     | )
|Adjusted for:                                                                                                                                               |  |  |    |  |            |  |        |            |  |  |            |  
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|Tax effect of:                                                                                                                                              |  |  |    |  |            |  |        |            |  |  |            |  
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|-         overseas tax rate differential                                                                                                                    |  |  |    |  |            |  | 267    |            |  |  | 140        |  
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|-         Impairment non-assessable item                                                                                                                    |  |  |    |  |            |  | 995    |            |  |  | 960        |  
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|-         other non-assessable items                                                                                                                        |  |  |    |  |            |  | 609    |            |  |  | 5,400      |  
|                                                                                                                                                            |  |  |    |  |            |  | 16     |            |  |  | (1         | )
|Add:                                                                                                                                                        |  |  |    |  |            |  |        |            |  |  |            |  
|Over provision for income tax in prior year                                                                                                                 |  |  |    |  |            |  | -      |            |  |  | -          |  
|Income tax attributable to entity                                                                                                                           |  |  |    |  |            |  | 16     |            |  |  | (1         | )
|                                                                                                                                                            |  |  |    |  |            |  |        |            |  |  |            |  
|The applicable weighted average effective current tax rates are as follows:                                                                                 |  |  |    |  |            |  | -      | 10         |  |  | -          |  














10
No effective tax rate calculated due to the loss position.



110







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 10. | Auditors’ Remuneration
| | --- | ----------------------



|                                                      |  | 2012 $’000 |     |  | 2011 $’000 |  |     | 2011 $’000 | 
|----------------------------------------------------- |  | ---------- | --- |  | ---------- |  | --- | ---------- | 
|Audit services                                        |  |            |     |  |            |  |     |            | 
|Remuneration of the auditor of the parent entity for: |  |            |     |  |            |  |     |            | 
|-     auditing or reviewing the financial reports     |  |            | 123 |  |            |  | 143 |            | 
|                                                      |  |            |     |  |            |  |     |            | 
|Other services                                        |  |            |     |  |            |  |     |            | 
|                                                      |  |            |     |  |            |  |     |            | 
|- reviewing of the USA SEC registration statement     |  |            | -   |  |            |  | 115 |            | 
|                                                      |  |            |     |  |            |  |     |            | 



| | 11. | Earnings per share
| | --- | ------------------





|a.     Reconciliation of earnings to profit or loss                                                                 |  |  |           |   |  |  |           |   |  |  |           |  
|------------------------------------------------------------------------------------------------------------------- |  |  | --------- | - |  |  | --------- | - |  |  | --------- | -
|                                                                                                                    |  |  |           |   |  |  |           |   |  |  |           |  
|Earnings used in calculation of both ordinary and dilutive EPS                                                      |  |  | (6,130    | ) |  |  | (21,670   | ) |  |  | (97,800   | )
|                                                                                                                    |  |  |           |   |  |  |           |   |  |  |           |  
|b.    Weighted average number of ordinary shares outstanding during 
        the year used in calculating basic EPS |  |  | 8,919,299 |   |  |  | 6,199,265 |   |  |  | 4,711,249 |  
|                                                                                                                    |  |  |           |   |  |  |           |   |  |  |           |  
|Effect of:                                                                                                          |  |  |           |   |  |  |           |   |  |  |           |  
|                                                                                                                    |  |  |           |   |  |  |           |   |  |  |           |  
|- Performance Rights and options                                                                                    |  |  | -         |   |  |  | -         |   |  |  | -         |  
|                                                                                                                    |  |  |           |   |  |  |           |   |  |  |           |  
|Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS             |  |  | 8,919,299 |   |  |  | 6,199,265 |   |  |  | 4,711,249 |  





111







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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.
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):



|                                       |  | 2012 |            |  | 201111 |  |            | 201012 | 
|-------------------------------------- |  | ---- | ---------- |  | ------ |  | ---------- | ------ | 
|                                       |  |      |            |  |        |  |            |        | 
|Issued ordinary shares                 |  |      | 9,452,415  |  |        |  | 8,512,259  |        | 
|                                       |  |      |            |  |        |  |            |        | 
|Convertible notes                      |  |      | 505,904    |  |        |  | 935,579    |        | 
|                                       |  |      |            |  |        |  |            |        | 
|Employee and third party share options |  |      | -          |  |        |  | 7,315      |        | 
|                                       |  |      |            |  |        |  |            |        | 
|Employee performance rights            |  |      | 1,601      |  |        |  | 133,077    |        | 
|                                       |  |      |            |  |        |  |            |        | 
|Share issue options (warrants)         |  |      | 2,995,009  |  |        |  | 2,995,009  |        | 
|                                       |  |      |            |  |        |  |            |        | 
|TOTAL                                  |  |      | 12,954,929 |  |        |  | 12,583,239 |        | 



| | 12. | Cash and cash equivalents
| | --- | -------------------------



|                          |  | 2012 $’000 |       |  | 2011 $’000 | 
|------------------------- |  | ---------- | ----- |  | ---------- | 
|                          |  |            |       |  |            | 
|Cash at bank and in hand  |  |            | 1,420 |  |            | 
|                          |  |            |       |  |            | 
|Short-term bank deposits  |  |            | 36    |  |            | 
|                          |  |            | 1,456 |  |            | 
|Reconciliation of cash    |  |            |       |  |            | 
|                          |  |            |       |  |            | 
|Cash and cash equivalents |  |            | 1,456 |  |            | 
|                          |  |            | 1,456 |  |            | 












11In
order to facilitate a comparison of units to the current year, the units disclosed for 2010 have been adjusted to reflect the 50:1
share consolidation.



12In
order to facilitate a comparison of units to the current year, the units disclosed for 2010 have been adjusted to reflect the
50:1 share consolidation.



112







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 13. | Trade and Other Receivables
| | --- | ---------------------------



|                                        |  | 2012 $’000 |         |   | 2011 $’000 | 
|--------------------------------------- |  | ---------- | ------- | - | ---------- | 
|                                        |  |            |         |   |            | 
|CURRENT                                 |  |            |         |   |            | 
|                                        |  |            |         |   |            | 
|Trade receivables                       |  |            | 1,089   |   |            | 
|                                        |  |            |         |   |            | 
|Other receivables13                     |  |            | 3,136   |   |            | 
|                                        |  |            |         |   |            | 
|Less: Impairment provision              |  |            | -       |   |            | 
|                                        |  |            |         |   |            | 
|TOTAL                                   |  |            | 4,225   |   |            | 
|                                        |  |            |         |   |            | 
|NON – CURRENT                           |  |            |         |   |            | 
|                                        |  |            |         |   |            | 
|Trade receivables                       |  |            | 18,772  |   |            | 
|                                        |  |            |         |   |            | 
|Less: Impairment provision              |  |            | (16,589 | ) |            | 
|                                        |  |            |         |   |            | 
|Less: Discount charge                   |  |            | (2,183  | ) |            | 
|                                        |  |            |         |   |            | 
|TOTAL                                   |  |            | -       |   |            | 
|                                        |  |            |         |   |            | 
|Impairment provision                    |  |            |         |   |            | 
|                                        |  |            |         |   |            | 
|Opening Balance:                        |  |            | 17,745  |   |            | 
|                                        |  |            |         |   |            | 
|Charge for the year                     |  |            | 1,007   |   |            | 
|                                        |  |            |         |   |            | 
|Foreign currency translation difference |  |            | (2,163  | ) |            | 
|                                        |  |            |         |   |            | 
|Closing Balance                         |  |            | 16,589  |   |            | 



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.










13
Included 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.



113







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 14. | Biological Assets
| | --- | -----------------



Mission Biofuels India Pvt Limited grows
Jatropha Curcas saplings from seeds. The Jatropha Curcas saplings meet the definition of a biological asset and are carried on
statement of financial position at fair value, with fair value being determined with reference to the existing arms length sales
transactions with a large number of geographically disbursed contract farmers, and other readily available market information on
the fair value of these saplings. At 30 June 2012, Mission Biofuels India Pvt Limited had NIL (2011: 1.5 million) saplings mature
enough to plant on hand in its controlled nurseries. During the current financial year, the company materially completed the Jatropha
harvest season. The harvest was significantly lower than company expectations and a detailed review of the company’s operations
was commenced in-light of its cash position and visibility on its Jatropha operations. The operations have been significantly downsized
and the company is now focussed on divesting the remaining Indian assets. The company has decided not to undertake further planting
of Jatropha. Due to these results from the operations, no change in fair value revenue from saplings was recognised during the
current financial year, and all biological assets held on balance sheet at 30 June 2011 have been impaired.



|                                                        |  | 2012 $’000 |     |   | 2011 $’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



The Group is subject to laws and regulations
in various countries in which it operates. The Group has established environmental policies and procedures aimed at compliance
with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that
the systems in place are adequate to manage those risks.



Supply and demand risk



The Group is exposed to risks arising from
fluctuations in the price and sales volume of Jatropha Curcas saplings. Where possible the Group manages this risk by aligning
its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Group’s
pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand.



114







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Climate and other risks



The Group’s Jatropha Curcas nurseries
are exposed to the risk of damage from climatic changes, diseases, fires and other natural forces. The Group has extensive processes
in place aimed at monitoring and mitigating those risks, including regular nursery health inspections and industry pest and disease
surveys.



| | 15. | Inventories
| | --- | -----------



|                               |  | 2012 $’000 |       |  | 2011 $’000 | 
|------------------------------ |  | ---------- | ----- |  | ---------- | 
|                               |  |            |       |  |            | 
|CURRENT                        |  |            |       |  |            | 
|                               |  |            |       |  |            | 
|Raw Material and stores - cost |  |            | 577   |  |            | 
|                               |  |            |       |  |            | 
|Finished goods – cost          |  |            | 615   |  |            | 
|                               |  |            |       |  |            | 
|Work in progress – cost        |  |            | -     |  |            | 
|                               |  |            | 1,192 |  |            | 



The above is shown at the lower of cost
and net realizable value.



| | 16. | Other Financial Assets
| | --- | ----------------------



|Current                           |  |  |     |  |  |  |     | 
|--------------------------------- |  |  | --- |  |  |  | --- | 
|                                  |  |  |     |  |  |  |     | 
|Held to maturity financial assets |  |  | -   |  |  |  | 1   | 
|                                  |  |  |     |  |  |  |     | 
|Other financial assets            |  |  | 581 |  |  |  | 177 | 
|                                  |  |  | 581 |  |  |  | 178 | 



115







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 17. | Investments in subsidiaries and Jointly controlled entities
| | --- | -----------------------------------------------------------



A  Controlled Entities Consolidated



|                                            |  | Country of    |           |  | Percentage Owned (%) | 
|------------------------------------------- |  | ------------- | --------- |  | -------------------- | 
|                                            |  | Incorporation |           |  | 2012                 | 
|Parent Entity:                              |  |               |           |  |                      | 
|                                            |  |               |           |  |                      | 
|Mission NewEnergy Limited                   |  |               | Australia |  |                      | 
|                                            |  |               |           |  |                      | 
|Subsidiaries of Mission NewEnergy Limited:  |  |               |           |  |                      | 
|                                            |  |               |           |  |                      | 
|Mission Biotechnologies Sdn Bhd             |  |               | Malaysia  |  |                      | 
|                                            |  |               |           |  |                      | 
|Mission Biofuels Sdn Bhd                    |  |               | Malaysia  |  |                      | 
|                                            |  |               |           |  |                      | 
|Enviro Mission Sdn Bhd                      |  |               | Malaysia  |  |                      | 
|                                            |  |               |           |  |                      | 
|Mission Agro Energy Limited                 |  |               | Mauritius |  |                      | 
|                                            |  |               |           |  |                      | 
|Mission NewEnergy USA LLC,14                |  |               | USA       |  |                      | 
|                                            |  |               |           |  |                      | 
|PJ Trading Pennsylvania, LLC15              |  |               | USA       |  |                      | 
|                                            |  |               |           |  |                      | 
|PJ Trading, LLC16                           |  |               | USA       |  |                      | 
|                                            |  |               |           |  |                      | 
|Oleovest PL                                 |  |               | Singapore |  |                      | 
|                                            |  |               |           |  |                      | 
|Subsidiaries of Mission Agro Energy Limited |  |               |           |  |                      | 
|                                            |  |               |           |  |                      | 
|Mission Biofuels India Private Limited      |  |               | India     |  |                      | 



|b.Jointly controlled entities |  |  |  |  |  |  |  |  |  |  |  | 
|----------------------------- |  |  |  |  |  |  |  |  |  |  |  | 



|Subsidiaries of Mission Biofuels India Private Limited |  |  |       |  |  |  |    |  |  |  |    | 
|------------------------------------------------------ |  |  | ----- |  |  |  | -- |  |  |  | -- | 
|                                                       |  |  |       |  |  |  |    |  |  |  |    | 
|Mission Agro Diesel (India) Private Limited            |  |  | India |  |  |  | 51 |  |  |  | 51 | 










14 Mission
NewEnergy USA LLC (formerly Scarborough Beach Holdings, LLC), being a dormant entity, was deregistered on 10 September
2012



15
PJ Trading Pensylvania, LLC, being a dormant entity, was deregistered on 23 July 2012



16
PJ Trading, LLC, being a dormant entity, was deregistered on 9 August 2012



116







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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.



The details of the investment in Oleovest
PL are as follows:



|                                                             |  |  | $’000 |  
|------------------------------------------------------------ |  |  | ----- | -
|                                                             |  |  |       |  
|Fair value of consideration and settled in cash              |  |  | 1,418 |  
|                                                             |  |  |       |  
|Less: Acquisition cost                                       |  |  | (468  | )
|                                                             |  |  |       |  
|Net fair value of consideration and settled in cash          |  |  | 950   |  
|                                                             |  |  |       |  
|Recognized amount of identifiable net assets and liabilities |  |  | NIL   |  
|                                                             |  |  |       |  
|Goodwill on acquisition                                      |  |  | 950   |  



Please refer to Note 5a for a discussion
on the review of goodwill for impairment.



117







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 18. | Property Plant and Equipment
| | --- | ----------------------------



|                                                            |  | Land and Building |       |   | Office Equipment |  |     | Computer Equipment and
    software |  |  | Motor Vehicle |   |  | Plant and Equipment |     |   | Asset Under Construction |  |        | Biodiesel Plant |  |  | Total  |  
|----------------------------------------------------------- |  | ----------------- | ----- | - | ---------------- |  | --- | ----------------------------------- |  |  | ------------- | - |  | ------------------- | --- | - | ------------------------ |  | ------ | --------------- |  |  | ------ | -
|                                                            |  | $’000             |       |   | $’000            |  |     | $’000                               |  |  | $’000         |   |  | $’000               |     |   | $’000                    |  |        | $’000           |  |  | $’000  |  
|                                                            |  |                   |       |   |                  |  |     |                                     |  |  |               |   |  |                     |     |   |                          |  |        |                 |  |  |        |  
|Cost at 30 June 2010                                        |  |                   | 1,641 |   |                  |  | 374 |                                     |  |  | 847           |   |  |                     | 217 |   |                          |  | 5,761  |                 |  |  | 44,103 |  
|Additions                                                   |  |                   | -     |   |                  |  | 92  |                                     |  |  | 90            |   |  |                     | -   |   |                          |  | -      |                 |  |  | 2,470  |  
|Foreign Currency Translation                                |  |                   | (250  | ) |                  |  | (59 | )                                   |  |  | (161          | ) |  |                     | (30 | ) |                          |  | (985   | )               |  |  | (6,081 | )
|Disposal                                                    |  |                   | -     |   |                  |  | (4  | )                                   |  |  | -             |   |  |                     | -   |   |                          |  | -      |                 |  |  | -      |  
|Cost at 30 June 2011                                        |  |                   | 1,391 |   |                  |  | 403 |                                     |  |  | 776           |   |  |                     | 187 |   |                          |  | 4,776  |                 |  |  | 40,492 |  
|Additions                                                   |  |                   | -     |   |                  |  | 25  |                                     |  |  | 43            |   |  |                     | -   |   |                          |  | -      |                 |  |  | 673    |  
|Foreign Currency Translation                                |  |                   | (104  | ) |                  |  | (46 | )                                   |  |  | 286           |   |  |                     | (2  | ) |                          |  | (760   | )               |  |  | (653   | )
|Held for Sale (Current Asset)                               |  |                   | (515  | ) |                  |  | -   |                                     |  |  | -             |   |  |                     | -   |   |                          |  | (3,998 | )               |  |  | -      |  
|Disposal                                                    |  |                   | (189  | ) |                  |  | (3  | )                                   |  |  | (150          | ) |  |                     | (53 | ) |                          |  | -      |                 |  |  |        |  
|Cost at 30 June 2012                                        |  |                   | 583   |   |                  |  | 379 |                                     |  |  | 955           |   |  |                     | 132 |   |                          |  | 18     |                 |  |  | 40,512 |  
|                                                            |  |                   |       |   |                  |  |     |                                     |  |  |               |   |  |                     |     |   |                          |  |        |                 |  |  |        |  
|Accumulated Depreciation
    and Impairment                 |  |                   |       |   |                  |  |     |                                     |  |  |               |   |  |                     |     |   |                          |  |        |                 |  |  |        |  
|Accumulated Depreciation and Impairment at 30
    June 2010 |  |                   | 96    |   |                  |  | 143 |                                     |  |  | 532           |   |  |                     | 102 |   |                          |  | 2,391  |                 |  |  | 43,472 |  
|Depreciation for the year  (continuing operation)           |  |                   | 41    |   |                  |  | 74  |                                     |  |  | 131           |   |  |                     | 41  |   |                          |  | 2      |                 |  |  | -      |  
|Depreciation for the year (discontinued operation)          |  |                   | -     |   |                  |  | -   |                                     |  |  | -             |   |  |                     | -   |   |                          |  | 166    |                 |  |  | -      |  
|Impairment                                                  |  |                   | -     |   |                  |  | -   |                                     |  |  | 15            |   |  |                     | -   |   |                          |  | 283    |                 |  |  | 2,045  |  
|Foreign Currency Translation                                |  |                   | (17   | ) |                  |  | (22 | )                                   |  |  | (94           | ) |  |                     | (17 | ) |                          |  | (431   | )               |  |  | (5,980 | )
|Disposal                                                    |  |                   | -     |   |                  |  | (2  | )                                   |  |  | -             |   |  |                     | -   |   |                          |  | -      |                 |  |  | -      |  
|Accumulated Depreciation
    and Impairment at 30 June 2011 |  |                   | 120   |   |                  |  | 193 |                                     |  |  | 584           |   |  |                     | 126 |   |                          |  | 2,411  |                 |  |  | 39,537 |  





118







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|Accumulated Depreciation
    and Impairment 
    contd.     |  | Land
    and Building |       |   | Office
    Equipment |  |     | Computer
    Equipment and software |  |  | Motor
    Vehicle |   |  | Plant
    and Equipment |     |   | Asset
    Under Construction |  |        | Biodiesel
    Plant |  |  | Total  |  
|----------------------------------------------------------- |  | --------------------- | ----- | - | -------------------- |  | --- | ----------------------------------- |  |  | ----------------- | - |  | ----------------------- | --- | - | ---------------------------- |  | ------ | ------------------- |  |  | ------ | -
|                                                            |  | $’000                 |       |   | $’000                |  |     | $’000                               |  |  | $’000             |   |  | $’000                   |     |   | $’000                        |  |        | $’000               |  |  | $’000  |  
|Accumulated Depreciation and Impairment
    at 30 June 2011 |  |                       | 120   |   |                      |  | 193 |                                     |  |  | 584               |   |  |                         | 126 |   |                              |  | 2,411  |                     |  |  | 39,537 |  
|                                                            |  |                       |       |   |                      |  |     |                                     |  |  |                   |   |  |                         |     |   |                              |  |        |                     |  |  |        |  
|Depreciation for the year (continuing operation)            |  |                       | 36    |   |                      |  | 73  |                                     |  |  | 154               |   |  |                         | 34  |   |                              |  | -      |                     |  |  | -      |  
|                                                            |  |                       |       |   |                      |  |     |                                     |  |  |                   |   |  |                         |     |   |                              |  |        |                     |  |  |        |  
|Depreciation for the year (discontinued operation)          |  |                       | -     |   |                      |  | -   |                                     |  |  | -                 |   |  |                         | -   |   |                              |  | 131    |                     |  |  | -      |  
|Impairment                                                  |  |                       | -     |   |                      |  | 63  |                                     |  |  | 359               |   |  |                         | -   |   |                              |  | -      |                     |  |  | 1,300  |  
|Foreign Currency Translation                                |  |                       | (17   | ) |                      |  | (27 | )                                   |  |  | (22               | ) |  |                         | (2  | ) |                              |  | (396   | )                   |  |  | (325   | )
|Held for Sale (Current Asset)                               |  |                       | (98   | ) |                      |  | -   |                                     |  |  | -                 |   |  |                         | -   |   |                              |  | (2,128 | )                   |  |  | -      |  
|Disposal                                                    |  |                       | -     |   |                      |  | (2  | )                                   |  |  | (168              | ) |  |                         | (38 | ) |                              |  | -      |                     |  |  | -      |  
|Accumulated Depreciation
    and Impairment at 30 June 2012 |  |                       | 41    |   |                      |  | 300 |                                     |  |  | 907               |   |  |                         | 120 |   |                              |  | 18     |                     |  |  | 40,512 |  
|                                                            |  |                       |       |   |                      |  |     |                                     |  |  |                   |   |  |                         |     |   |                              |  |        |                     |  |  |        |  
|Carrying Amounts                                            |  |                       |       |   |                      |  |     |                                     |  |  |                   |   |  |                         |     |   |                              |  |        |                     |  |  |        |  
|At 30 June 2011                                             |  |                       | 1,271 |   |                      |  | 210 |                                     |  |  | 192               |   |  |                         | 61  |   |                              |  | 2,365  |                     |  |  | 955    |  
|At 30 June 2012                                             |  |                       | 542   |   |                      |  | 79  |                                     |  |  | 48                |   |  |                         | 12  |   |                              |  | -      |                     |  |  | -      |  



Impairment loss



Refer to note 5, Critical Accounting estimates
for a detailed discussion on the impairment of assets.



Assets under construction



These related primarily to the second biodiesel
plant under construction in Malaysia. At 30 June 2012 the transfer of this plant to Mission and final payment is under arbitration.
See note 26 on capital commitments relating to this 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 2012 (Contd.)



| | 19. | Intangible Assets
| | --- | -----------------



|                                     |  | 2012 $’000 |      |   | 2011 $’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 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
| | --- | ------------



|CURRENT           |  |  |     |  |  |  |     | 
|----------------- |  |  | --- |  |  |  | --- | 
|                  |  |  |     |  |  |  |     | 
|Prepayments       |  |  | 204 |  |  |  | 354 | 
|                  |  |  | 204 |  |  |  | 354 | 
|Non-Current       |  |  |     |  |  |  |     | 
|                  |  |  |     |  |  |  |     | 
|Security Deposits |  |  | 54  |  |  |  | 702 | 
|                  |  |  | 54  |  |  |  | 702 | 



| | 21. | Trade and Other Payables
| | --- | ------------------------



|CURRENT                              |  |  |       |  |  |  |       | 
|------------------------------------ |  |  | ----- |  |  |  | ----- | 
|                                     |  |  |       |  |  |  |       | 
|Unsecured liabilities:               |  |  |       |  |  |  |       | 
|                                     |  |  |       |  |  |  |       | 
|Trade payables                       |  |  | 1,293 |  |  |  | 6,335 | 
|                                     |  |  |       |  |  |  |       | 
|Interest accrued                     |  |  | 646   |  |  |  | 247   | 
|                                     |  |  |       |  |  |  |       | 
|Sundry payables and accrued expenses |  |  | 236   |  |  |  | 477   | 
|                                     |  |  | 2,175 |  |  |  | 7,059 | 



120







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 22. | Financial Liabilities
| | --- | ---------------------



|                                                     |  | 2012 $’000 |        |   | 2011 $’000 | 
|---------------------------------------------------- |  | ---------- | ------ | - | ---------- | 
|CURRENT                                              |  |            |        |   |            | 
|                                                     |  |            |        |   |            | 
|Secured loans                                        |  |            | 83     |   |            | 
|                                                     |  |            |        |   |            | 
|Convertible Notes                                    |  |            |        |   |            | 
|                                                     |  |            |        |   |            | 
|- Nominal value (unsecured)                          |  |            | -      |   |            | 
|                                                     |  |            |        |   |            | 
|- Equity portion of convertible note                 |  |            | -      |   |            | 
|                                                     |  |            |        |   |            | 
|- Unamortised costs of issues                        |  |            | -      |   |            | 
|                                                     |  |            |        |   |            | 
|- Amortisation of equity portion                     |  |            | -      |   |            | 
|                                                     |  |            | 83     |   |            | 
|Liabilities included in disposal group held for sale |  |            | 1,567  |   |            | 
|                                                     |  |            |        |   |            | 
|NON-CURRENT                                          |  |            |        |   |            | 
|                                                     |  |            |        |   |            | 
|Secured loans                                        |  |            | 114    |   |            | 
|                                                     |  |            |        |   |            | 
|Convertible Notes (unsecured)                        |  |            |        |   |            | 
|                                                     |  |            |        |   |            | 
|- Nominal value (unsecured)                          |  |            | 32,884 |   |            | 
|                                                     |  |            |        |   |            | 
|- Equity portion of convertible note                 |  |            | (2,644 | ) |            | 
|                                                     |  |            |        |   |            | 
|- Amortisation of equity portion                     |  |            | 861    |   |            | 
|                                                     |  |            | 31,215 |   |            | 



The secured loans and liabilities included
in disposal group held for sale above relate to financing of the windmills in India and an office in Malaysia. These assets are
held as security against these loans.



Convertible notes



At 30 June 2012 the following convertible
notes were in existence:



121







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|                                                                                                                                                   |  | Series 2 notes |                             
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------------------------
|Units – post consolidation                                                                                                                         |  |                | 505,904                     
|                                                                                                                                                   |  |                |                             
|Maturity date                                                                                                                                      |  |                | 16 May 2014                 
|                                                                                                                                                   |  |                |                             
|Interest rate per annum                                                                                                                            |  |                | 4                           
|                                                                                                                                                   |  |                |                             
|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 4 ordinary shares
|                                                                                                                                                   |  |                |                             
|Conversion price                                                                                                                                   |  | $              | 16.25                       



| | 23. | Tax
| | --- | ---



|                                     |  | 2012 $’000 |     |   | 2011 $’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                                |  |            | -   |   |            | 
|                                     |  |            | -   |   |            | 



122







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|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 unrealized 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                                                                                     |  |  | - |  |  |  | - | 



123







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|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 $3.8 million to date are not brought to account. In addition, deferred tax assets for deductible temporary differences of A$0.1
million and deferred tax liabilities for temporary differences of $0.7 million have not been brought to account.



124







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 24. | Issued Capital
| | --- | --------------



Fully paid ordinary shares



|                                      |  | 2012  |         |  | 2011  | 
|------------------------------------- |  | ----- | ------- |  | ----- | 
|                                      |  | $’000 |         |  | $’000 | 
|                                      |  |       |         |  |       | 
|Share Capital (Issued and authorised) |  |       | 110,320 |  |       | 



|Ordinary shares                                               |  | Number |           |  | Number |      
|------------------------------------------------------------- |  | ------ | --------- |  | ------ | -----
|                                                              |  |        |           |  |        |      
|At the beginning of reporting period                          |  |        | 8,512,259 |  |        |      
|                                                              |  |        |           |  |        |      
|Ordinary shares issued                                        |  |        |           |  |        |      
|                                                              |  |        |           |  |        |      
|-  July 2011                                                  |  |        | 18,444    |  |        |      
|                                                              |  |        |           |  |        |      
|- January 2012                                                |  |        | 10,168    |  |        |      
|                                                              |  |        |           |  |        |      
|Shares issued on performance right conversion during the year |  |        | 116,004   |  |        |      
|                                                              |  |        |           |  |        |      
|Subtotal                                                      |  |        | 8,656,875 |  |        |      
|                                                              |  |        |           |  |        |      
|Share consolidation                                           |  |        | -         |  |        |      
|                                                              |  |        |           |  |        |      
|Rounding adjustments                                          |  |        | -         |  |        |      
|                                                              |  |        |           |  |        |      
|Revised ordinary shares post share consolidation              |  |        | 8,656,875 |  |        |      
|                                                              |  |        |           |  |        |      
|Share issue pursuant to Nasdaq listing – April 2011           |  |        | -         |  |        | bold;
|                                                              |  |        |           |  |        |      
|Shares issued from conversion of convertible notes            |  |        | 795,540   |  |        |      
|                                                              |  |        |           |  |        |      
|At reporting date                                             |  |        | 9,452,415 |  |        |      










17Shareholders
approved a share consolidation of 50:1 on 23 March 2011.



125







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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:



|                                 |  | 2012 |           |  | 2011 | 
|-------------------------------- |  | ---- | --------- |  | ---- | 
|Warrants – from share issues     |  |      | 2,995,009 |  |      | 
|                                 |  |      |           |  |      | 
|Employee and third party options |  |      | -         |  |      | 
|                                 |  |      |           |  |      | 
|Employee performance rights      |  |      | 1,600     |  |      | 
|                                 |  |      |           |  |      | 
|Total                            |  |      | 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 development 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 will be 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.



126







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



The convertible notes include the following
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).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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 redeemed 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.



127







Mission New Energy Limited and Controlled
Entities

(ABN 63 117 065 719)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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
| | --- | -------------------------------





|                                   |  | 2012 $’000 |       |  | 2011 $’000 | 
|---------------------------------- |  | ---------- | ----- |  | ---------- | 
|a.     Operating Lease Commitments |  |            |       |  |            | 
|- not later than 12 months         |  |            | 154   |  |            | 
|- between 12 months and 5 years    |  |            | 849   |  |            | 
|- greater than 5 years             |  |            | 2,032 |  |            | 
|                                   |  |            | 3,035 |  |            | 



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 1st
March 2006 to 30th December 2027. The rental value increases by 10%, commencing 1 January 2007, and subsequently every
three years, starting 1 January 2010. Every 3 years, commencing 1st January 2007, the annual rental will be increased
by 10%.



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 1st June 2007 to 31st 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 1st January 2013, the annual
rental will be increased by 10%.



Lease Commitments– India



Mission Biofuels India Pvt Limited has
entered into cancellable lease agreements for the office premises, godown (warehouse), guest house and car, renewable by mutual
consent on mutually agreeable terms. The company has entered into a number of lease agreements throughout India. Lease terms
range between 3 and 36 months.



128









Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Capital Expenditure Commitments



|                                                  |  | 2012 $’000 |       |  | 2011 $’000 | 
|------------------------------------------------- |  | ---------- | ----- |  | ---------- | 
|Capital expenditure commitments contracted for: - |  |            |       |  |            | 
|Acquisition and installation biodiesel plants18   |  |            | 3,483 |  |            | 
|Other                                             |  |            | -     |  |            | 
|                                                  |  |            | 3,483 |  |            | 



| | 27. | Contingent Liabilities
                                                                    and Contingent Assets
| | --- | ----------------------------------------------------------------------------------------------------------------



A subsidiary within the group has called
upon a performance bond placed by the contractor who constructed the 100,000 tpa biodiesel plant, due to non-satisfactory performance.
The performance bond and associated claims offset the final amount of approximately A$2m which the contractor is claiming is due
to them. Both parties have agreed to the appointment of an arbitrator to resolve this matter.



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 within the Group has been
assessed for a State Tax with a provisional assessment and penalties raised totalling A$0.16 million. Management disputes this
assessment and is in discussion with the relevant tax authorities seeking clarity on the basis of the assessment.



The Group is not aware of any other contingent
liabilities or contingent assets as at 30 June 2012.





---



18 This value is net of late
delivery charges and other costs the Group believes are eligible to offset against the completion payments of the second biodiesel
plant.



129







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 28. | Segment Reporting
| | --- | -----------------



|                                      |  | Biodiesel Refining (Malaysia) |        |    | Jatropha (India) |  |     | Power generation (India) |  |  | Downstream Palm Oil Project (Indonesia) |    |  | Unallocated |   |  | Consolidated (Continuing Operations) | 
|------------------------------------- |  | ----------------------------- | ------ | -- | ---------------- |  | --- | ------------------------ |  |  | --------------------------------------- | -- |  | ----------- | - |  | ------------------------------------ | 
|                                      |  | 2012 $’000                    |        |    | 2012 $’000       |  |     | 2012 $’000               |  |  | 2012 $’000                              |    |  | 2012 $’000  |   |  | 2012 $’000                           | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Primary Reporting — Business Segments |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Revenue                               |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Revenue from external customers       |  |                               | 27,265 | 19 |                  |  | 24  | 20                       |  |  | 489                                     | 21 |  |             | - |  |                                      | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Interest received                     |  |                               | 60     |    |                  |  | 11  |                          |  |  | -                                       |    |  |             | - |  |                                      | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Other revenue                         |  |                               | 360    |    |                  |  | 67  |                          |  |  | -                                       |    |  |             | - |  |                                      | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Total segment revenue                 |  |                               | 27,685 |    |                  |  | 102 |                          |  |  | 489                                     |    |  |             | - |  |                                      | 
|                                      |  |                               |        |    |                  |  |     |                          |  |  |                                         |    |  |             |   |  |                                      | 
|Changes in Inventory                  |  |                               | (4,786 | )  |                  |  | 27  |                          |  |  | -                                       |    |  |             | - |  |                                      | 





---



19Sales from the refining business unit are primarily
to two customers in 2012 and two customer in 2011.



20 Sales of biological assets are to a large number
of individual contract farmers.



21Power generation revenue is from one customer.



130







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 28. | Segment Reporting
| | --- | -----------------



|                                                       |  | Biodiesel Refining (Malaysia) |         |   | Jatropha (India) |  |        | Power generation (India) |  |  | Downstream Palm Oil Project (Indonesia) |   |  | Unallocated |      |   | Consolidated (Continuing Operations) | 
|------------------------------------------------------ |  | ----------------------------- | ------- | - | ---------------- |  | ------ | ------------------------ |  |  | --------------------------------------- | - |  | ----------- | ---- | - | ------------------------------------ | 
|                                                       |  | 2012 $’000                    |         |   | 2012 $’000       |  |        | 2012 $’000               |  |  | 2012 $’000                              |   |  | 2012 $’000  |      |   | 2012 $’000                           | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Costs of materials                                     |  |                               | (21,367 | ) |                  |  | (348   | )                        |  |  | (110                                    | ) |  |             | -    |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Employee benefits expense                              |  |                               | (1,190  | ) |                  |  | (817   | )                        |  |  | -                                       |   |  |             | -    |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Impairment                                             |  |                               | (2,699  | ) |                  |  | (919   | )                        |  |  | -                                       |   |  |             | -    |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Depreciation and amortisation                          |  |                               | (179    | ) |                  |  | (125   | )                        |  |  | (131                                    | ) |  |             | -    |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Interest expense                                       |  |                               | (598    | ) |                  |  | -      |                          |  |  | (360                                    | ) |  |             | -    |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Other expenses                                         |  |                               | (1,734  | ) |                  |  | (563   | )                        |  |  | -                                       |   |  |             | (454 | ) |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Segment result before tax                              |  |                               | (4,868  | ) |                  |  | (2,643 | )                        |  |  | (112                                    | ) |  |             | (454 | ) |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Profit/loss from ordinary activities before income tax |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Income tax expense                                     |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|                                                       |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 
|Net profit/(loss)                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |      |   |                                      | 



131







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 28. | Segment Reporting
| | --- | -----------------



|                                              |  | Biodiesel Refining (Malaysia) |       |  | Jatropha (India) |  |     | Power generation (India) |  |  | Downstream Palm Oil Project (Indonesia) |  |  | Unallocated |       |  | Consolidated (Continuing Operations) | 
|--------------------------------------------- |  | ----------------------------- | ----- |  | ---------------- |  | --- | ------------------------ |  |  | --------------------------------------- |  |  | ----------- | ----- |  | ------------------------------------ | 
|                                              |  | 2012 $’000                    |       |  | 2012 $’000       |  |     | 2012 $’000               |  |  | 2012 $’000                              |  |  | 2012 $’000  |       |  | 2012 $’000                           | 
|                                              |  |                               |       |  |                  |  |     |                          |  |  |                                         |  |  |             |       |  |                                      | 
|Non-current Segment assets                    |  |                               | 574   |  |                  |  | 156 |                          |  |  | -                                       |  |  |             | -     |  |                                      | 
|                                              |  |                               |       |  |                  |  |     |                          |  |  |                                         |  |  |             |       |  |                                      | 
|Total Segment assets                          |  |                               | 4,319 |  |                  |  | 774 |                          |  |  | 1,944                                   |  |  |             | 2,731 |  |                                      | 
|                                              |  |                               |       |  |                  |  |     |                          |  |  |                                         |  |  |             |       |  |                                      | 
|Segment liabilities                           |  |                               | 1,386 |  |                  |  | 242 |                          |  |  | 1,567                                   |  |  |             | -     |  |                                      | 
|                                              |  |                               |       |  |                  |  |     |                          |  |  |                                         |  |  |             |       |  |                                      | 
|Acquisitions of property, plant and equipment |  |                               | 732   |  |                  |  | 46  |                          |  |  | -                                       |  |  |             | -     |  |                                      | 



132







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|                                      |  | Biodiesel Refining (Malaysia) |         |   | Jatropha (India) |  |        | Power generation (India) |  |  | Downstream Palm Oil Project (Indonesia) |   |  | Unallocated |   |  | Consolidated (Continuing Operations) | 
|------------------------------------- |  | ----------------------------- | ------- | - | ---------------- |  | ------ | ------------------------ |  |  | --------------------------------------- | - |  | ----------- | - |  | ------------------------------------ | 
|                                      |  | 2011 $’000                    |         |   | 2011 $’000       |  |        | 2011 $’000               |  |  | 2011 $’000                              |   |  | 2011 $’000  |   |  | 2011 $’000                           | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Primary Reporting — Business Segments |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Revenue                               |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Revenue from external customers       |  |                               | 13,468  |   |                  |  | 89     |                          |  |  | 523                                     |   |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Interest received                     |  |                               | 36      |   |                  |  | -      |                          |  |  | -                                       |   |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Other revenue                         |  |                               | 200     |   |                  |  | 820    |                          |  |  | -                                       |   |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Total segment revenue                 |  |                               | 13,704  |   |                  |  | 909    |                          |  |  | 523                                     |   |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Changes in Inventory                  |  |                               | 5,101   |   |                  |  | (11    | )                        |  |  | -                                       |   |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Costs of materials                    |  |                               | (18,452 | ) |                  |  | (507   | )                        |  |  | (118                                    | ) |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Employee benefit expense              |  |                               | (1,235  | ) |                  |  | (1,179 | )                        |  |  | -                                       |   |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Impairment                            |  |                               | (2,046  | ) |                  |  | (1,966 | )                        |  |  | (262                                    | ) |  |             | - |  |                                      | 
|                                      |  |                               |         |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Depreciation and amortisation         |  |                               | (217    | ) |                  |  | (132   | )                        |  |  | (166                                    | ) |  |             | - |  |                                      | 



133







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



|                                                       |  | Biodiesel Refining (Malaysia) |        |   | Jatropha (India) |  |        | Power generation (India) |  |  | Downstream Palm Oil Project (Indonesia) |   |  | Unallocated |   |  | Consolidated (Continuing Operations) | 
|------------------------------------------------------ |  | ----------------------------- | ------ | - | ---------------- |  | ------ | ------------------------ |  |  | --------------------------------------- | - |  | ----------- | - |  | ------------------------------------ | 
|                                                       |  | 2011 $’000                    |        |   | 2011 $’000       |  |        | 2011 $’000               |  |  | 2011 $’000                              |   |  | 2011 $’000  |   |  | 2011 $’000                           | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Interest expense                                       |  |                               | (50    | ) |                  |  | -      |                          |  |  | (423                                    | ) |  |             | - |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Other expenses                                         |  |                               | (1,362 | ) |                  |  | (1,429 | )                        |  |  | -                                       |   |  |             | - |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Segment result before tax                              |  |                               | (4,557 | ) |                  |  | (4,315 | )                        |  |  | (446                                    | ) |  |             | - |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Profit/loss from ordinary activities before income tax |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Income tax expense                                     |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Net profit/(loss)                                      |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Non-current segment assets                             |  |                               | 3,080  |   |                  |  | 252    |                          |  |  | 2,892                                   |   |  |             | - |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Total Segment assets                                   |  |                               | 10,528 |   |                  |  | 1,955  |                          |  |  | 2,379                                   |   |  |             | - |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Segment liabilities                                    |  |                               | 6,209  |   |                  |  | 687    |                          |  |  | 2,278                                   |   |  |             | - |  |                                      | 
|                                                       |  |                               |        |   |                  |  |        |                          |  |  |                                         |   |  |             |   |  |                                      | 
|Acquisitions of property, plant and equipment          |  |                               | 2,702  |   |                  |  | 135    |                          |  |  | -                                       |   |  |             | - |  |                                      | 



134







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (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.



Intersegment Transfers



Segment revenues, expenses and results
exclude transfers between segments.



Business and Geographical Segments



The Group has four key business segments.
The Group’s business segments are located in Malaysia, Indonesia, India 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, the downstream palm oil project is located
in Indonesia, the Jatropha business segment is located in India along with the Power generation segment.



135







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 29. | Cash Flow Information
| | --- | ---------------------



|Reconciliation of Cash Flow from Operations with Profit (loss) after Income
    Tax               |  | 2012 $’000 |         |   | 2011 $’000 | 
|------------------------------------------------------------------------------------------------- |  | ---------- | ------- | - | ---------- | 
|                                                                                                  |  |            |         |   |            | 
|Profit / (Loss) after income tax before non-controlling interests                                 |  |            | (6,198  | ) |            | 
|                                                                                                  |  |            |         |   |            | 
|Non cash flows in profit / (loss)                                                                 |  |            |         |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Depreciation of plant and equipment                                                               |  |            | 516     |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Amortisation of Convertible Note Costs                                                            |  |            | 17      |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Gain on the settlement/restructure of Convertible Note                                            |  |            | (10,300 | ) |            | 
|                                                                                                  |  |            |         |   |            | 
|Amortisation of Equity portion of Convertible Note                                                |  |            | 1,067   |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Provision for employee benefits                                                                   |  |            | 11      |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Impairment of Trade Receivables                                                                   |  |            | 1,007   |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Impairment of assets                                                                              |  |            | 4,268   |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Impairment of inventories                                                                         |  |            | 402     |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Share based payment expense                                                                       |  |            | 299     |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Net cash provided by / (used in) operating activities
    before change in assets and liabilities |  |            | (8,911  | ) |            | 
|                                                                                                  |  |            |         |   |            | 
|Change in assets and liabilities                                                                  |  |            |         |   |            | 
|                                                                                                  |  |            |         |   |            | 
|- (Increase) decrease in receivables                                                              |  |            | 3,954   |   |            | 
|                                                                                                  |  |            |         |   |            | 
|- (Increase) decrease in inventories                                                              |  |            | 4,759   |   |            | 
|                                                                                                  |  |            |         |   |            | 
|- (Increase) decrease in biological assets                                                        |  |            | -       |   |            | 
|                                                                                                  |  |            |         |   |            | 
|- (Increase) decrease in other assets                                                             |  |            | 230     |   |            | 
|                                                                                                  |  |            |         |   |            | 
|- (Increase) decrease in deferred tax and current tax                                             |  |            | 6       |   |            | 
|                                                                                                  |  |            |         |   |            | 
|- Increase (decrease) in creditors and accruals                                                   |  |            | (4,691  | ) |            | 
|                                                                                                  |  |            |         |   |            | 
|Foreign Currency Adjustments                                                                      |  |            | (218    | ) |            | 
|                                                                                                  |  |            |         |   |            | 
|                                                                                                  |  |            | 4,040   |   |            | 
|                                                                                                  |  |            |         |   |            | 
|Cash (used in) operations                                                                         |  |            | (4,871  | ) |            | 



136







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Cash flows from discontinued operations
(being the Windmill segment) are a net operating cash profit of $0.02 million for the period ended 30 June 2012 ($0.02 million
loss for 30 June 2011).



Credit Standby Facilities with Banks



|                |  | 2012 $’000 |        |   | 2011 $’000 | 
|--------------- |  | ---------- | ------ | - | ---------- | 
|                |  |            |        |   |            | 
|Loan facilities |  |            | 1,764  |   |            | 
|                |  |            |        |   |            | 
|Amount utilised |  |            | (1,764 | ) |            | 
|                |  |            |        |   |            | 
|                |  |            | -      |   |            | 



Facilities at June 2012 relate term loans
for the funding of various items of Property, Plant and Equipment. The loan terms range from three to four years with interest
rates from 3.4% to 19.09%. These loans do not have an option to extend.



137







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 30. | Interests and Remuneration
                                                                    of Key Management Personnel
| | --- | --------------------------------------------------------------------------------------------------------------------------



|                         |  | 2012 $000 |       |  | 2011 $000 | 
|------------------------ |  | --------- | ----- |  | --------- | 
|                         |  |           |       |  |           | 
|Salaries                 |  |           | 1,329 |  |           | 
|                         |  |           |       |  |           | 
|Non-cash benefits        |  |           | 18    |  |           | 
|                         |  |           |       |  |           | 
|Post employment benefits |  |           | 66    |  |           | 
|                         |  |           |       |  |           | 
|Share based payments     |  |           | 49    |  |           | 
|                         |  |           |       |  |           | 
|Total                    |  |           | 1,462 |  |           | 

Equity settled Options



|               |  | Balance 1/7/2010 |           |  | Balance afterconsolidation at50:122 |  |        | Lapsed |  |  | Balance 30/6/2011 |   |  | New issue |   |  | Balance 30/6/2012 | 
|-------------- |  | ---------------- | --------- |  | ----------------------------------- |  | ------ | ------ |  |  | ----------------- | - |  | --------- | - |  | ----------------- | 
|Directors      |  |                  |           |  |                                     |  |        |        |  |  |                   |   |  |           |   |  |                   | 
|Guy Burnett23  |  |                  | 1,750,000 |  |                                     |  | 35,000 |        |  |  | (35,000           | ) |  |           | - |  |                   | 
|Executive      |  |                  |           |  |                                     |  |        |        |  |  |                   |   |  |           |   |  |                   | 
|James Garton24 |  |                  | 1,750,000 |  |                                     |  | 35,000 |        |  |  | (35,000           | ) |  |           | - |  |                   | 
|TOTAL          |  |                  | 3,500,000 |  |                                     |  | 70,000 |        |  |  | (70,000           | ) |  |           | - |  |                   | 





---



22Shareholders approved
a share consolidation of 50:1 on 23 March 2011.



23Grant date was 19 October 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 30 June 2011. Prices adjusted to reflect the
impact of the share consolidation.



24Grant date was 25 June 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 30 June 2011. Prices adjusted to reflect the
impact of the share consolidation.



138







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Equity settled Performance rights



|                              |  | Balance30/6/2010 |           |  | New Issue |  |            | Exercised |  |  | Lapsedbeforeconsolidation |     |  | Balancebeforeconsolidation ofPerformance rights |         |   | Balanceafterconsolidation |  |           | Lapsedafterconsolidation |  |  | Balance30/06/2011 |  |  | NewIssue |         |   | Exercised |  |         | Lapsed |  |  | Balance30/06/2012 |    |  | Vested andunexercisedat30/06/2012 |         
|----------------------------- |  | ---------------- | --------- |  | --------- |  | ---------- | --------- |  |  | ------------------------- | --- |  | ----------------------------------------------- | ------- | - | ------------------------- |  | --------- | ------------------------ |  |  | ----------------- |  |  | -------- | ------- | - | --------- |  | ------- | ------ |  |  | ----------------- | -- |  | --------------------------------- | --------
|Director                      |  |                  |           |  |           |  |            |           |  |  |                           |     |  |                                                 |         |   |                           |  |           |                          |  |  |                   |  |  |          |         |   |           |  |         |        |  |  |                   |    |  |                                   |         
|Nathan Mahalingam             |  |                  | -         |  |           |  | 5,000,000  | 25        |  |  | (3,333,332                | )   |  |                                                 | -       |   |                           |  | 1,666,668 |                          |  |  | 33,334            |  |  |          | -       |   |           |  | 33,334  |        |  |  | -                 |    |  |                                   | (33,334 
|Guy Burnett                   |  |                  | 1,000,000 |  |           |  | 5,000,000  | 26        |  |  | (3,733,332                | )   |  |                                                 |         |   |                           |  | 2,266,668 |                          |  |  | 45,334            |  |  |          | (6,000  | ) |           |  | 39,334  |        |  |  | -                 |    |  |                                   | (33,334 
|                              |  |                  |           |  |           |  |            |           |  |  |                           |     |  |                                                 |         |   |                           |  |           |                          |  |  |                   |  |  |          |         |   |           |  |         |        |  |  |                   |    |  |                                   |         
|Executives                    |  |                  |           |  |           |  |            |           |  |  |                           |     |  |                                                 |         |   |                           |  |           |                          |  |  |                   |  |  |          |         |   |           |  |         |        |  |  |                   |    |  |                                   |         
|James Garton                  |  |                  | 6,000,000 |  |           |  |            |           |  |  | (3,733,332                | )   |  |                                                 | -       |   |                           |  | 2,266,668 |                          |  |  | 45,334            |  |  |          | (6,000  | ) |           |  | 39,334  |        |  |  | -                 |    |  |                                   | (33,334 
|Senior employees collectively |  |                  | 786,667   |  |           |  | 1,550,000  | 27        |  |  | (546,666                  | )   |  |                                                 | (50,000 | ) |                           |  | 1,740,001 |                          |  |  | 34,808            |  |  |          | (13,733 | ) |           |  | 21,075  |        |  |  | 20,000            | 28 |  |                                   | (16,675 
|Total                         |  |                  | 7,786,667 |  |           |  | 11,550,000 |           |  |  | (11,346,662               | )29 |  |                                                 | (50,000 | ) |                           |  | 7,940,005 |                          |  |  | 158,810           |  |  |          | (25,733 | ) |           |  | 133,077 |        |  |  | 20,000            |    |  |                                   | (116,677





---



25Grant
date was 6 July 2010, share price and fair value on grant date was $13.25. The performance rights vest in equal tranches at 1/7/2010,
31/12/2010 and 1/7/2011 for service.



26Grant
date was 6 July 2010, share price and fair value on grant date was $13.25.The performance rights vest in equal tranches at 1/7/2010,
31/12/2010 and 1/7/2011 for service.



27Grant date was 28
September 2010, share price and fair value on grant date was $9.75. 40% of the performance shares vest in equal tranches at 31/12/2010,
30/06/2011 and 31/12/2011 for service, and 60% of the performance shares vest in equal tranches on achievement of a Group EPS
of A$3.00 by 30 June 2011, EPS of A$7.50 by 30 June 2012 and EPS of A$7.50 by 30 June 2013.



28Grant 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.



29The weighted average
exercise price was $11.21 for performance rights exercised in 2011.



30The weighted average
exercise price was $5.47 for performance rights exercised in 2012.



139







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Ordinary shares held by key management
personnel



|                           |  | Balance
    30/6/2010 |         |  | Exercised
    pursuant to
    performance rights |  |         | Disposed |  |  | Balance
    30/06/2011 |  |  | Exercised
    pursuant to
    performance rights |         |  | Disposed |  |         | Balance
    30/06/2012 | 
|-------------------------- |  | --------------------- | ------- |  | ------------------------------------------------ |  | ------- | -------- |  |  | ---------------------- |  |  | ------------------------------------------------ | ------- |  | -------- |  | ------- | ---------------------- | 
|Dario Amara                |  |                       | 2,000   |  |                                                  |  | -       |          |  |  | -                      |  |  |                                                  | 2,000   |  |          |  | -       |                        | 
|Nathan Mahalingam          |  |                       | 512,955 |  |                                                  |  | 66,667  |          |  |  | -                      |  |  |                                                  | 579,622 |  |          |  | 33,334  |                        | 
|Guy Burnett                |  |                       | 4,000   |  |                                                  |  | 74,667  |          |  |  | -                      |  |  |                                                  | 78,667  |  |          |  | 33,334  |                        | 
|James Garton               |  |                       | 4,050   |  |                                                  |  | 74,667  |          |  |  | -                      |  |  |                                                  | 78,717  |  |          |  | 33,334  |                        | 
|Samsudeen Ganny            |  |                       | -       |  |                                                  |  | -       |          |  |  | -                      |  |  |                                                  | -       |  |          |  | 10,000  |                        | 
|Kalaiselvan Somasundaram31 |  |                       | 1,600   |  |                                                  |  | 800     |          |  |  | -                      |  |  |                                                  | 2,400   |  |          |  | -       |                        | 
|Total                      |  |                       | 524,605 |  |                                                  |  | 216,801 |          |  |  | -                      |  |  |                                                  | 741,406 |  |          |  | 110,002 |                        | 



Refer to the Remuneration report for full details on key management
personnel remuneration and benefits





---



31Mr Kalaiselvan
resigned on 1 July 2011



140







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 31. | Related Parties
| | --- | ---------------



|                                                                                                                                                                       |  | 2012 $’000 |       |  | 2011 $’000 | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ----- |  | ---------- | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Transactions between related parties are on a normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. |  |            |       |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Transactions with related parties:                                                                                                                                     |  |            |       |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Other Related Parties                                                                                                                                                  |  |            |       |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Management fee charged to Mission Biotechnologies Sdn Bhd, a 100% owned subsidiary company                                                                             |  |            | 627   |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Management fee charged to Mission Biofuels Sdn Bhd, a 100% owned subsidiary company                                                                                    |  |            | 940   |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Sale of Jatropha crude oil between Mission’s controlled subsidiaries                                                                                                   |  |            | -     |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Increase in investment by Mission NewEnergy Ltd in Mission Biofuels India PL, via Mission Agro Energy Ltd                                                              |  |            | 2,400 |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Increase in investment by Mission NewEnergy Ltd in Mission Biofuels SB                                                                                                 |  |            | -     |  |            | 
|                                                                                                                                                                       |  |            |       |  |            | 
|Increase in investment by Mission NewEnergy Ltd in Mission biotechnologies SB                                                                                          |  |            | -     |  |            | 



141







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Inter Company Loan Balances



|                                |  |                                  |  | 2012  $’000 |        |  | 2011 $’000 | 
|------------------------------- |  | -------------------------------- |  | ----------- | ------ |  | ---------- | 
|Loan From                       |  | Loan To                          |  |             | Amount |  |            | 
|Mission New Energy Ltd          |  | Mission Agro Energy Ltd          |  |             | 551    |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission New Energy Ltd          |  | Mission Biotechnologies Sdn Bhd  |  |             | 4,100  |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission New Energy Ltd          |  | Mission Biofuels Sdn Bhd         |  |             | 1,202  |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission New Energy Ltd          |  | Oleovest PL                      |  |             | 2,739  |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission New Energy Ltd          |  | PT Sinergi Oleo Nusantara        |  |             | 45     |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission Biotechnologies Sdn Bhd |  | Mission Agro Energy Ltd          |  |             | 100    |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission Biofuels Sdn Bhd        |  | Mission Biotechnologies Sdn Bhd  |  |             | -      |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission Biotechnologies Sdn Bhd |  | Mission Biofuels Sdn Bhd         |  |             | -      |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission Biotechnologies Sdn Bhd |  | Mission Biofuels (India) Pvt Ltd |  |             | 69     |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission Biotechnologies Sdn Bhd |  | Oleovest Pte Ltd                 |  |             | 4      |  |            | 
|                                |  |                                  |  |             |        |  |            | 
|Mission Biotechnologies Sdn Bhd |  | PT Sinergi Oleo Nusantara        |  |             | 76     |  |            | 

All intercompany loans from the parent
entity have been fully provided for, except for the loan to Oleovest PL.



| | 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.



142







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Fair value of financial instruments



|                                     |  | Carrying amount $,000 |        |  | Fair Value $,000 | 
|------------------------------------ |  | --------------------- | ------ |  | ---------------- | 
|                                     |  |                       |        |  |                  | 
|Financial assets                     |  |                       |        |  |                  | 
|                                     |  |                       |        |  |                  | 
|Cash and cash equivalents            |  |                       | 1,456  |  |                  | 
|                                     |  |                       |        |  |                  | 
|Other Financial Assets               |  |                       | 581    |  |                  | 
|                                     |  |                       |        |  |                  | 
|Receivables (Current)                |  |                       | 4,225  |  |                  | 
|                                     |  |                       |        |  |                  | 
|Financial liabilities                |  |                       |        |  |                  | 
|                                     |  |                       |        |  |                  | 
|Trade and other payables             |  |                       | 2,175  |  |                  | 
|                                     |  |                       |        |  |                  | 
|Current loans                        |  |                       | 83     |  |                  | 
|                                     |  |                       |        |  |                  | 
|Non-current loans and equity portion |  |                       | 31,215 |  |                  | 



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 fair value interest
rate risk, arises from the long term convertible note debt held by the parent.



Group sensitivity



At 30 June 2012, 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
                                                                                                          (2011: A$ Nil million
                                                                                                          lower/higher)
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Equity
                                                                                                          would have been –
                                                                                                          A$ Nil million lower/higher
                                                                                                          (2011: A$ Nil million
                                                                                                          lower/higher)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The
                                                                                                          fair value of convertible
                                                                                                          notes – A$ 0.298
                                                                                                          million higher/A$ 0.172
                                                                                                          million and lower (2011:
                                                                                                          A$ 0.344 million / A$
                                                                                                          0.341 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.



143







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



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 2012, 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$0.1 million higher (2011: A$ 0.941 million lower/ A$1.15 million higher)



Profit and Loss would have been –
A$ 0.1 million lower/ A$0.1 million higher (2011: A$ 0.941 million lower/ A$1.15 million higher)



Hedging of Foreign Currency Risk



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



Credit risk



Malaysian operations



Credit risk for receivables at 30 June
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.



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.



144







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



Commodity Risk



The Group is exposed to market prices
of input costs into the production of biodiesel and associated by products produced. At period end the group had some product
on hand to be sold.



Group sensitivity



At 30 June 2012, if the price of these
products had changed by -/+ 10%, with all other variables held constant, the following financial impacts would have been recorded
by the Group;



Effect on post tax profit – A$0,1
million lower / A$0.1 million higher



Equity would have been – A$0.1 million lower / A$0.1
million higher



145







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR
ENDED 30 JUNE 2012 (Contd.)



Financial Instruments
(cont’d)



|Liquidity risk                                                |  |       |        |  |       |  |        | Weighted Average Interest Rate | 
|------------------------------------------------------------- |  | ----- | ------ |  | ----- |  | ------ | ------------------------------ | 
|                                                              |  | 2012  |        |  | 2011  |  |        | 2012                           | 
|                                                              |  | $'000 |        |  | $'000 |  |        | %                              | 
|Financial Assets:                                             |  |       |        |  |       |  |        |                                | 
|Cash and cash equivalents                                     |  |       | 1,456  |  |       |  | 15,761 |                                | 
|Other financial assets                                        |  |       | 581    |  |       |  | 178    |                                | 
|Loans and Receivables                                         |  |       | 4,225  |  |       |  | 6,583  |                                | 
|                                                              |  |       | 6,262  |  |       |  | 22,522 |                                | 
|Financial Liabilities summarized by contractual
    maturity: |  |       |        |  |       |  |        |                                | 
|Current debt                                                  |  |       |        |  |       |  |        |                                | 
|Floating Interest Rate                                        |  |       | 1,650  |  |       |  | 494    |                                | 
|Fixed Interest Rate                                           |  |       | -      |  |       |  | 14,413 |                                | 
|Non Interest Bearing                                          |  |       | 2,175  |  |       |  | 7,059  |                                | 
|Total Current Debt                                            |  |       | 3,825  |  |       |  | 21,966 |                                | 
|                                                              |  |       |        |  |       |  |        |                                | 
|Non-current debt                                              |  |       |        |  |       |  |        |                                | 
|                                                              |  |       |        |  |       |  |        |                                | 
|Floating Interest Rate (1 to 3 Years)                         |  |       | 114    |  |       |  | 2,064  |                                | 
|Floating Interest Rate (4 to 5 Years)                         |  |       | -      |  |       |  | -      |                                | 
|Fixed Interest Rate (1 to 3 Years)                            |  |       | 31,101 |  |       |  | 42,223 |                                | 
|Fixed Interest Rate (4 to 5
    Years)                        |  |       | -      |  |       |  | -      |                                | 
|Total Non-Current Debt                                        |  |       | 31,215 |  |       |  | 44,287 |                                | 

The Group manages
liquidity risk by monitoring forecast cash flows and ensuring that adequate cash is maintained.



146







Mission New
Energy Limited and Controlled Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 33. | Parent entity information
| | --- | -------------------------



|                                                                                                                 |  | 2012  |          |   | 2011  | 
|---------------------------------------------------------------------------------------------------------------- |  | ----- | -------- | - | ----- | 
|                                                                                                                 |  |       |          |   |       | 
|Information relating to Mission NewEnergy Limited:                                                               |  | $’000 |          |   | $’000 | 
|                                                                                                                 |  |       |          |   |       | 
|Current assets                                                                                                   |  |       | 887      |   |       | 
|                                                                                                                 |  |       |          |   |       | 
|Total assets                                                                                                     |  |       | 892      |   |       | 
|                                                                                                                 |  |       |          |   |       | 
|Current liabilities                                                                                              |  |       | (848     | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|Total liabilities                                                                                                |  |       | (31,948  | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|Net asset (deficit)/surplus                                                                                      |  |       | (31,057  | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|Issued capital                                                                                                   |  |       | 110,215  |   |       | 
|                                                                                                                 |  |       |          |   |       | 
|Retained loss                                                                                                    |  |       | (141,191 | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|Share based payments reserve                                                                                     |  |       | 4,907    |   |       | 
|                                                                                                                 |  |       |          |   |       | 
|Convertible notes reserve                                                                                        |  |       | 2,645    |   |       | 
|                                                                                                                 |  |       |          |   |       | 
|Total shareholders’ equity                                                                                       |  |       | (31,057  | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|(Loss)/profit of the parent entity                                                                               |  |       | (7,633   | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|Total comprehensive income of the parent entity                                                                  |  |       | (7,633   | ) |       | 
|                                                                                                                 |  |       |          |   |       | 
|Details of any guarantees entered into by the parent entity in relation to the debts of its subsidiaries *       |  |       | 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 2012.



147







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 34. | Subsequent events
| | --- | -----------------



Other than the matters mentioned below,
there have been no significant subsequent events up until the date of signing this Financial Report.



Mission, through its subsidiary, Oleovest
PL, has served a notice of termination to PT Perkebunan Nusantara III (“Persero”) (“PTPN III”) an Indonesian
state owned enterprise for breach of material obligations under the Joint Venture & Shareholders’ Agreement.



Mission was formally de-listed from the
NASDAQ Global Market. Mission continues to trade on the Australian Stock Exchange (ASX) under the symbol “MBT”.



A debt funding package as referred to
above has been agreed in principle with SLW International, LLC (SLWI) a substantial convertible note holder, to provide the company
with a US$5 million line of credit facility (“Facility”).



Under the terms of the Facility, the company
may draw up to US$5 million over the 24 month term of the Facility. At maturity or default, the company must repay the principal
amount outstanding plus twenty five percent of the maximum principal amount reached during the term of the Facility, or US$1 million,
whichever is greater. The Facility will be secured through a first priority security over all assets of the company, and if required
by the lender, the company’s subsidiaries and (or alternatively) security over the shares of the subsidiaries of the company,
and the Facility may not be used for any capital expenditure or debt service. Funds will be advanced in one or more tranches as
agreed by the lender and all payments by the company of any material amount shall be subject to lender approval. In addition to
certain restrictions on activities of the company, the company shall be obligated to repay all or part of the then outstanding
amount upon the receipt by the company or its subsidiaries of funds related to the sale or other disposal of any material assets.
No such sale or disposal of assets may occur without the express and written prior approval of the lender. The lender will have
the right to appoint a Director to the Board and the company is required to maintain the ongoing employment of Mr. Nathan Mahalingam
as Chief Executive Officer.



The company has agreed to deal exclusively
with the lender for funding while completing the conditions to close, which include finalising definitive Facility documentation,
definitive security documentation, shareholder approval, no material adverse change in respect of Mission’s operations and
the restructure of the convertible note debt.



The company has also taken to shareholder
for approval to convert each existing convertible note, by way of an exchange offer, whereby each existing convertible note will
be exchanged for a new convertible note. The key difference between an existing convertible note and a new convertible note is
that the new note will bear no coupon/interest payments, will have a conversion ratio of one note to four hundred and thirty three
ordinary shares and the condition that any proceeds from the sale of material assets will be first applied on a pro-rata basis
towards settlement of the principal amount outstanding under the new convertible notes.



If the Convertible Note restructure is
successful all further interest payment obligations of the company under the existing convertible notes would be removed and further,
if the new convertible notes were to be converted to equity, the company would no longer be liable to repay its debt under such
convertible notes which currently totals more than A$32 million. Instead of repaying the notes, the Company would issue approximately
219 million shares equal to approximately ninety six percent of the total issued shares of the company following the issue.



148







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



On 19 September 2012, a shareholder filed
an application with the Takeovers Panel, seeking an interim order that Mission not proceed with the finalisation of the SLW definitive
facility documents and definitive security documentation (as referred to above in the Financial Position section), until the Panel
application is dealt with and a final order that, the term sheet be cancelled, or alternatively cancelled to the extent that it
requires Mission to deal exclusively with SLW for funding and restricts Mission from dealing with its assets. The Company agreed
to not proceed with finalisation of definitive facility documents and definitive security documentation and to not dispatch to
Mission shareholders any notice of meeting relating to seeking shareholder approval for the proposed convertible note restructure
announced to the Australian Securities Exchange on 17 August 2012 until the Takeover Panel application is dealt with. On the 8
October Mission announced a placement of 1,417,860 ordinary shares at A$0.0705 raising approximately A$100,000 and also announced
that the SLWI facility was no longer contingent upon the convertible note restructure. On the 16th October 2012 Mission
lodged a Notice of Meeting of Shareholders to approve the convertible note restructure. On 3 October 2012 (and again on the 19
October 2012) the Takeover Panel announced that it has declined to conduct proceedings.

The Board has approved management to sell
non-core assets. At the date of this report a sale and purchase agreement to sell the Refining office has been signed.



| | 35. | Non-controlling Interests
| | --- | -------------------------



|               |  | 2012 $’000 |    |  | 2011 $’000 | 
|-------------- |  | ---------- | -- |  | ---------- | 
|Issued Capital |  |            | 70 |  |            | 
|Reserves       |  |            | -  |  |            | 
|Retained loss  |  |            | 68 |  |            | 



The non-controlling interest has a 15%
(2011: N/A) equity holding in Oleovest PL.



149







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 36. | Non-current assets held
                                                                    for sale and discontinued operations
| | --- | --------------------------------------------------------------------------------------------------------------------------------



The Board has resolved to sell non-core
assets in India, being the windmills and office complex in India. Accordingly these assets have been classified as non-current
assets held for sale.



The revenue, expenditure and carrying
amount of the assets and liabilities in this disposal group are summarised as follows:



|Discontinued operations – Power generation segment                          |  | 2012 $’000 |       |   | 2011 $’000 | 
|--------------------------------------------------------------------------- |  | ---------- | ----- | - | ---------- | 
|                                                                            |  |            |       |   |            | 
|Revenue                                                                     |  |            | 489   |   |            | 
|                                                                            |  |            |       |   |            | 
|Cost of materials                                                           |  |            | (110  | ) |            | 
|                                                                            |  |            |       |   |            | 
|Depreciation                                                                |  |            | (131  | ) |            | 
|                                                                            |  |            |       |   |            | 
|Impairment                                                                  |  |            | -     |   |            | 
|                                                                            |  |            |       |   |            | 
|Finance Costs                                                               |  |            | (360  | ) |            | 
|                                                                            |  |            |       |   |            | 
|Net loss from discontinued operations attributable to members of the parent |  |            | (112  | ) |            | 
|                                                                            |  |            |       |   |            | 
|Non-current assets classified as held for sale                              |  |            |       |   |            | 
|                                                                            |  |            |       |   |            | 
|- Property, Plant and Equipment – power generation segment                  |  |            | 1,869 |   |            | 
|                                                                            |  |            |       |   |            | 
|- Property, Plant and Equipment – jatropha segment                          |  |            | 417   |   |            | 
|                                                                            |  |            |       |   |            | 
|Liabilities classified as held for sale                                     |  |            |       |   |            | 
|                                                                            |  |            |       |   |            | 
|- Financial liabilities – power generation segment                          |  |            | 1,567 |   |            | 
|                                                                            |  |            |       |   |            | 
|- Financial liabilities – jatropha segment                                  |  |            | -     |   |            | 

The assets in this disposal
group are actively being marketed for sale and are expected to be sold within the forthcoming twelve months.



| | 37. | Authorisation of financial
                                                                    statements
| | --- | ---------------------------------------------------------------------------------------------------------



The consolidated financial statements for the year ended 30
June 2012 (including comparatives) were approved by the board of directors on 28 September 2012.



Nathan Mahalingam

Director



150







Mission New Energy Limited and Controlled
Entities



(ABN 63 117 065 719)



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012 (Contd.)



| | 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                    
|          |                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                     
|          | Enviro Mission 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





151