ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. - Annual Report 2013

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FULL YEAR RESULT FOR YEAR ENDED 30 JUNE 2013

Friday, 30 August 2013: Environmental Clean Technologies Limited (ASX:ESI) attaches the company’s Financial Report for the year ended 30 June 2013.

For Further Information Contact:

Ashley Moore – Managing Director +61 3 9909 7684 or [email protected]

About ECT

ECT is in the business of commercialising leading-edge coal and iron making technologies which are capable of delivering financial and environmental benefits.

We are focused on advancing a portfolio of technologies , which have significant market potential globally.

ECT’s business plan is to pragmatically commercialise these technologies and secure sustainable, profitable income streams through licencing and other commercial mechanisms.

About Coldry

When applied to lignite and some sub-bituminous coals, the relatively simple Coldry beneficiation process produces a black coal equivalent (BCE) in the form of pellets. Coldry pellets have equal or superior energy value to many black coals and produce lower CO2 emissions than raw lignite.

About MATMOR

The MATMOR process has the potential to revolutionise primary iron making.

MATMOR is a simple, low cost, low emission, production technology, utilising the patented MATMOR retort, which enables the use of cheaper feedstocks to produce primary iron.

Level 7, 530 Little Collins Street, Melbourne Vic, 3000 Australia | Phone +613 9909 7684 | www.ectltd.com.au | ABN 28 009 120 405 Listed on the Australian Stock Exchange (ASX:ESI)

Appendix 4E

Lodged with the ASX under Listing Rule 4.3

Year Ended 30 June 2013

(Previous corresponding period: Year ended 30 June 2012)

RESULTS FOR ANNOUNCEMENT TO THE MARKET

ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED (ASX CODE: ESI)

Friday, 30 August 2013 : Environmental Clean Technologies Limited (ASX:ESI) is pleased to provide the Company’s audited final results for the year ended 30 June 2013.

				$
Revenuefrom ordinary activities	UP	92%	TO	1,314,914
Lossfrom ordinaryactivities after tax	DOWN	2%	TO	5,444,185
Lossfor theperiod attributable to members	DOWN	2%	TO	5,444,185

Explanation of Results

The net loss for the consolidated group after income tax attributable to entity holders of the parent entity was $5,444,185 (2012: $5,549,700). Cash receipts increased following the receipt a substantially increased Research and Development tax refund in line with the increased expenditure on the commercialisation of the Coldry and Matmor technologies. The 2013 period net loss was driven by costs associated with the Design for Tender programme, increased plant operating costs associated with process testing in association with Arup and a decrease in employment costs compared with the previous year.

Dividends

No payments made or declared for the year ended 30 June 2013.

Financial Statements

Refer to the attached Financial Report for the year ended 30 June 2013.

NTA Backing 2013 2012 Net tangible assets per share (0.18) cents (0.06) cents

Level 7, 530 Little Collins Street, Melbourne Vic, 3000 Australia | Phone +613 9909 7684 | www.ectltd.com.au | ABN 28 009 120 405 Listed on the Australian Stock Exchange (ASX:ESI)

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Controlled entities acquired:

Coldry Demonstration Plant Pty Ltd – 19 March 2013

Coldry Master License Pty Ltd – 19 March 2013

Audit

The accounts have been audited for the year ended 30 June 2013. The audit report includes an emphasis of matter in relation to going concern.

Other information required by Listing Rule 4.3A

The remainder of the information requiring disclosure to comply with Listing Rule 4.3A is contained below, in Director’s Report, Financial Report and ASX announcement.

Annual General Meeting

It is planned to hold the 2013 Annual General Meeting in November 2013.

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Appendix 4E - Financial Report - 30 June 2013

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Financial Report

As at 30 June 2013

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Contents ............................................................................................................................................................ 2 Company Details ............................................................................................................................................... 3 Corporate Governance Statement .................................................................................................................... 4 Directors’ Report ............................................................................................................................................... 8 Remuneration Report (Audited) ...................................................................................................................... 16 Auditor’s independence declaration ................................................................................................................ 22 Annual financial statements ............................................................................................................................ 23 Consolidated Statement of Profit or Loss and Other Comprehensive Income ............................................... 24 Consolidated Statement of Financial Position ................................................................................................ 25 Consolidated Statement of Changes in Equity ............................................................................................... 26 Consolidated Statement of Cash Flows .......................................................................................................... 27 Notes to and Forming Part of the Consolidated Financial Statements ........................................................... 28 Directors’ Declaration ...................................................................................................................................... 57 Independent Auditor’s Report ......................................................................................................................... 58 Corporate Directory ......................................................................................................................................... 60

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Company Details

Directors

Ashley Moore Managing Director (appointed Managing Director 20 March 2013) Stephen Carter Non-executive Director Iain McEwin Non-executive Director Glenn Fozard Non-executive Director (appointed 17 July 2013) Lloyd Thomson Non-executive Director (appointed 22 August 2013) Michael Davies Chairman (retired 20 August 2013) Post the report date, the Director’s have decided to rotate the chairman’s role on a meeting-to-meeting basis.

Secretary

Adam Giles (appointed 4 December 2012)

Principal Registered Office in Australia

Suite 712

530 Little Collins St Melbourne Victoria 3000

Share Register

Security Transfer Registrars Pty Ltd

770 Canning Highway Applecross Western Australia 6153

Auditors

BDO East Coast Partnership

Level 14

140 William Street Melbourne Victoria 3000

Bankers

National Australia Bank Limited

3/330 Collins Street Melbourne Victoria 3000

Securities Exchange

Australian Securities Exchange

Level 4

North Tower

Rialto

525 Collins Street

Melbourne Victoria 3000

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Financial Report - 30 June 2013

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Corporate Governance Statement

The Environmental Clean Technologies Limited (ECT) Board is committed to protecting shareholders’ interests and keeping investors fully informed about the performance of the Company’s business. The Directors have undertaken to perform their duties with honesty, integrity, care and diligence, according to the law and in a manner that reflects the highest standards of governance. The Company’s corporate governance benchmark and that of the Board is the ASX Corporate Governance Council’s ‘Revised Principles of Good Corporate Governance and Recommendations’ (“ASX Corporate Governance Guidelines”) and the Company’s conformity or otherwise is reported in the following Corporate Governance Statement and, where appropriate, elsewhere in the Company’s report. Further information regarding our corporate governance and Board practices can be found at the Company’s website, www.ectltd.com.au.

The Board of ECT provides strategic direction, guidance and oversight of management, facilitates accountability to the Company’s shareholders through defined roles and responsibilities for the Board and executive management, and ensures that there is a balance of power and appropriate authorisations to avoid any individual having sole authority. The specific responsibilities of the Board are as follows.

Appointment of the Managing Director or Chief Executive;
Assessment of ECT’s management performance, measured against clearly identified objectives;
Preservation of the integrity and credibility of ECT’s businesses;
Prudent management of shareholders’ funds;
Evaluation of opportunities for value-creating growth;
Involvement in the planning and review of the Company’s strategic direction;
Approval of short and long term business plans;
Ensuring that there are effective environmental, health and safety procedures in place; and
Approval of half-year and annual reports.

The Board delegates many of its responsibilities to the Managing Director (Chief Executive) who is responsible to the Board for the day-to-day management of the Company. The relationship between the Board and management is a partnership that is crucial to the Company’s long-term success. The separation of responsibilities between the Board and management is clearly understood and respected. Importantly for ensuring the integrity of the accounts the Managing Director provides a management representation letter to the Board for the financial statements that certifies that the Company’s financial statements present a true and fair view of the results and the financial position of the Company and are in accordance with relevant accounting standards.

In addition, the Board has received a statement from the Managing Director that the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating efficiently in all material aspects in relation to financial reporting risks.

The following statement outlines the principal corporate governance practices followed throughout the financial year.

Shareholders

The shareholders of the Company elect Directors at the Annual General Meeting in accordance with the Constitution. All Directors are subject to re-election by rotation within three years, other than the Managing Director.

The Annual General meetings are held in Melbourne. Shareholders have the opportunity to express their views, ask questions about Company business and vote on other items of business for resolution by shareholders at the Annual General Meeting. It is proposed to hold the 2013 Annual General Meeting in November 2013 on a date to be announced. The time and venue will be advised with the Notice of Annual General Meeting. At the 2013 AGM Director rotation, election and re-election will be managed pursuant to the Company’s Constitution.

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Communication with Shareholders

ECT is committed to complying with the continuous disclosure obligations of the Corporations Act and the Australian Securities Exchange Listing Rules. The Board recognises the significance of relevant and timely disclosure and has developed a Continuous Disclosure Policy that is available from the Corporate Governance section of the Company’s website at www.ectltd.com.au.

ECT keeps the market informed through the annual report, half yearly report, and periodic update reports and by disclosing material developments to the Australian Securities Exchange (ASX) and the media as they occur. From time to time, briefings and site visits are arranged to give those who advise shareholders and interested stakeholders a better understanding of the Company’s operating facilities. In conducting briefings, ECT takes care to ensure that any price sensitive information released is made available to all shareholders and the market at the same time. These announcements are lodged with the ASX and then posted on the Company’s website at www.ectltd.com.au.

Composition of the Board

The Board is structured to deliver tangible results in the commercialisation of the Coldry and Matmor technologies. The Directors review the Board’s performance and structure on an on-going basis to ensure that the Board has the appropriate mix of expertise and experience, albeit the Company will continue to appoint an additional Non-executive Director to round out the mix of expertise of the Directors.

Post the report date, the Company appointed Mr Glenn Fozard and Mr Lloyd Thomson as Non-executive Directors.

As at 30 June 2013 the Board comprised a Managing Director and three Independent Non-executive Directors. The Independent Directors have no relationship with management or the Company that would interfere with the exercise of their independent judgment and are free from any interest or other relationship, which could materially interfere with their ability to act in the best interests of the Company. The Independent Non-executive Directors have, at times, provided consulting services to the Company to assist in the capital raising and other important activities, but these services are quite separate from their role as directors and are not seen by the Board as compromising their independence. At the present stage of the Company’s development it is considered appropriate to have a Board that is hands on and integrally involved in the operations of the Company.

The Board as currently constituted has the range of skills, knowledge and experience necessary to govern the Company and understand the economic sectors in which the Company operates. As noted above, the Company is continuously evaluating the mix of expertise of the Directors.

Board Committees

To assist in the execution of its responsibilities, the Board has four committees. All of the current Directors are members of each committee other than the Remuneration and Nominations Committee, which comprised two Non-executive Directors, and the Audit and Risk Committee that comprises the Nonexecutive Directors and the Managing Director. It is planned that, with recent Board changes, the membership and charter of each of the Board committees will be reviewed and updated. The Company Secretary provides secretariat services for each of the Committees and the Board.

Audit and Risk Committee

Independent director, Stephen Carter currently chairs the Audit and Risk Committee with Iain McEwin and Mike Davies (now retired) also served as a member until his date of retirement. There is no CFO but an internal accountant who, with the assistance of the Managing Director, is responsible for the preparation of financial reporting packages for the Board. External accounting firm, RSM Bird Cameron is called upon to provide services as and when required. The committee meets with the Company’s auditors, BDO East Coast Partnership, who attend meetings on at least a bi-annual basis prior to finalising the half year and year-end financial statements.

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The charter of the Audit and Risk Committee is shown in the Corporate Governance Policy on the Company’s website and its responsibilities include assisting the Board to fulfil its fiduciary responsibilities by:

Considering the effectiveness of the accounting and internal control systems and management reporting, which are designed to safeguard company assets;
Serving as an independent and objective party to review the financial information;
Reviewing the accounting policies adopted within the Group;
Reviewing the quality of the external audit function; and
Establishing and maintaining a risk identification process, effective risk management and reporting.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee was chaired by Iain McEwin and is now chaired by Glenn Fozard with independent director Stephen Carter serving as the other member. This committee has the responsibility of advising the full Board on matters pertaining to executive remuneration and incentive programs and overseeing Board and Executive performance via evaluation against key performance indicators, considering the on-going requirements of the Board and the appointment of new directors if considered appropriate.

Strategic Planning Committee

The Strategic Planning Committee was chaired by Mike Davies (now retired) with all the other directors serving as members. The committee structure is under review with a new chair to be appointed. This committee has the responsibility for the development and maintenance of the Company’s strategic plan. As noted earlier, this and other Board Committees membership and charter are being reviewed and, as necessary, updated.

Capital Management Committee

The Capital Management Committee is chaired by Stephen Carter with all the other directors serving as members. The Committee was formed to consider various funding options available to the Company to finance the development and commercialisation of the Coldry and Matmor technologies and meet ongoing working capital requirements.

Independent Professional Advice

All Directors have the right of access to relevant Company information and the Company’s executives, and subject to prior consultation with the Chairman, may, at the Company’s expense, seek independent professional advice regarding their responsibilities. During the year the Board did avail itself to external legal advice.

Internal Controls and Management of Risks

The management of risk is important in the creation of shareholder value and is a priority for the Board and management. The Company has a framework in place to safeguard the Company’s assets and interests and ensure that business risks are identified and properly managed. This includes procedures and limits to manage financial risk associated with exposures to foreign currencies and financial instruments. To assist in discharging this responsibility the Board has in place a control framework, which includes the following:

An annual business plan, approved by the Directors, incorporating financial and non-financial key performance indicators;
Regular reporting to the Board on a number of key areas including safety, health, insurance and legal matters;
Adoption of clearly defined guidelines for capital expenditure including annual budgets, detailed appraisal and review procedures, levels of authority and due diligence requirements where businesses are being acquired or divested; and
A comprehensive insurance program, including risk assessment analysis and plans to mitigate identifiable or foreseeable risks.

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Ethical Standards

The Company has established procedures and guidelines to ensure that the highest ethical standards, corporate behaviour and accountability are maintained. The Board has a Code of Conduct for Directors, which establishes guidelines for their conduct in matters such as ethical standards and conflicts of interests.

The Code is based on that developed by the Australian Institute of Company Directors and is published in the Corporate Governance section of the Environmental Clean Technologies Limited website at www.ectltd.com.au.

The Directors note the new ASX Corporate Governance Council Recommendation for companies is to establish a policy concerning diversity. The Company does not comply with this recommendation nor does it expect to in the near term. The establishment of policies regarding the structure and make-up of the Company’s workforce prior to establishing the commerciality of the Company’s technology is considered by the Directors to be premature. The company does not, at this stage, have any female staff or Directors.

Directors’ Share Dealings

The Company has a Securities Trading Policy, which establishes rules for Directors and senior management in dealing in the Company’s securities consistent with the requirements of the ASX Listing Rules and Guidance Notes.

The Directors’ Securities Trading Policy includes the following:

Directors must consult with the Chairman of the Board before dealing in shares or other securities of the Company
Dealings (whether purchases or sales) in the Company’s shares or other securities by related persons may not be carried out other than the period commencing two days and ending 30 days following the date of announcement of the Company’s annual or half yearly results or a major announcement leading, in the opinion of the Board, to a fully informed market.
A copy of the Environmental Clean Technologies Limited Securities Trading Policy is available from the About ECT – Corporate Governance section of the Company’s website at www.ectltd.com.au.

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Directors’ Report

The Directors submit their report on the consolidated entity consisting of Environmental Clean Technologies Limited (the Company) and the entities it controlled for the year ended 30 June 2013. Environmental Clean Technologies Limited and its controlled entities together are referred to as Environmental Clean Technologies or the consolidated entity or ECT in this Financial Report.

Directors

Unless indicated otherwise, the following persons were Directors of Environmental Clean Technologies Limited during the whole or part of the financial year and until the date of this report, unless noted otherwise:

Mr Michael Davies – Diploma Civil Engineering, Graduate of Macquarie University Advanced Management Program; Executive Chairman, retired from Executive Service in March 2013, and retired from the Board 20 August 2013
Mr Ashley Moore – BEng(Chem), MIEAust, CPEng, MAICD; Chief Operating Officer, Executive Director, appointed Managing Director from 20 March 2013
Mr Stephen Carter – MBA, Dip Co. Dir., Dip App. Sc. FAICD
Mr Iain McEwin
Mr Glenn Fozard – BBus (Int. Trade), BA (Psych); appointed 17 July 2013
Mr Lloyd Thomson – FCPA; appointed 22 August 2013

Post the report date, the Director’s have decided to rotate the chairman’s role on a meeting-to-meeting basis.

Company Secretary

Mr John Osborne – BSc, FRMIT (Management), DipAppCorpGov, ACIS, FFTA; Retired 4 December 2012
Mr Adam Giles – Appointed 4 December 2012

Principal Activities

Coldry Process

The Coldry process is ECT’s first technology proven to be commercially viable as an economic method of dewatering brown coal to produce a black coal equivalent.

Once applied, the mechanically simple Coldry process produces pellets that are stable, easily stored, can be transported and are of equal or higher energy value than black coal. Essentially, the Coldry process works through the destruction of internal porous structures, allowing the expulsion of water from lignite and subbituminous coals. The process entails the following steps:

Screening and adding a small quantity of water to the raw coal
Attritioning and extrusion of a plasticised coal paste mixture
Warm air toughening of the extruded mixture on a conditioning conveyer prior to packed bed dryer entry
Removal of coal moisture in a packed bed dryer (with optional collection capability)
Stockpiling of high energy Coldry pellets ready for use or transport

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The pellets can then be used in electricity generation in black or brown coal power stations and coal conversion applications. Existing brown coal power stations that consume Coldry pellets can immediately gain benefits without the need for significant modifications to plant infrastructure including:

Emissions savings
Reduced ash costs
Access to increased water supply and drought mitigation
Improved thermal efficiency

These factors also drive the business case for deployment of super critical black coal technologies with their ensuing efficiency and financial benefits, on brown coal mines. New power stations can also be built with confidence that they can secure supply of a ‘Black Coal Equivalent’ based on abundant, under exploited, brown coal reserves that perform extremely well with next generation gasification technologies. The high chemical reactivity of Coldry pellets delivers higher yield per tonne of coal and enables the products to be used as an ideal front-end feedstock solution for coal-to-oil technologies, eliminating the need for costly and energy intensive drying.

The Coldry process delivers a ‘Gateway technology’ that enables an ideal front-end feedstock solution for numerous new technology applications.

Matmor Process

Matmor is a clean, low-emission, one-step process for producing high-grade primary iron using brown coal to displace the need for coking coals as used in the incumbent blast furnace process.

The Matmor process is positioned to fundamentally change primary iron making, creating a high-grade iron product from brown coal and ferrous media such as iron ore, mill scale or other iron bearing wastes or tailings. The core change lies in the design of our simple, low cost, low emission, patented Matmor retort using lower cost, alternative raw materials. Essentially the process involves blending brown coal (lignite) with iron ore or other ferrous metal bearing media to form a paste that is dewatered using the Coldry process. The pellets are then fed into a simple low cost, low emission patented Matmor retort where the remaining moisture is removed, the coal volatiles are driven off and the iron oxides are reduced to metal. The advantages of the Matmor process over existing steel making processes are:

Replacement of expensive metallurgical coal with low cost, abundant lignite
Replacement of expensive high grade Iron Ore (60%+Fe) with lower grade Iron Ore
Capital equipment is estimated at 50% less than traditional blast furnaces
Process requires significantly less heat / energy
Able to recover baghouse dust, millscale and other waste materials
Can be adapted to recover other metals e.g. Nickel, Titanium, Chromium

Intellectual Property

In June 2009, the Company purchased the Coldry intellectual property from the Calleja Group after approval from the members at a General Meeting on 4 March 2009. The Calleja Group remains the owner of the Matmor technology but ECT has an exclusive right with the Calleja Group, under a Participation Agreement, through its subsidiary Asia Pacific Coal and Steel Pty Ltd to licence the Matmor technology and ultimately purchase that intellectual property as well.

The Coldry process is covered by patents, or pending patents in all major markets with significant brown coal deposits.

The sole remaining patent of interest for Coldry yet to be granted is India. This is progressing through the Indian national system.

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Significant Changes in the State of Affairs and Key Events During the Year

The following significant changes in the state of affairs of the company occurred during the financial year:

On 19 July 2012 the Company advised that the ‘Monash Capital transaction’ approved under resolution 4 at the General Meeting on 27 April 2012 experienced delays. In the event of delays beyond 26 July 2012, Monash Capital Group Pty Ltd (Monash Capital) proposed a contingency program comprising the issuance of up to 300,000,000 Fully Paid Ordinary Shares (ESI) at $0.02, with 300,000,000 Options (ESIO).

The Company advised interim-funding measures, in the form of a “FAST Finance” loan through Greenard Willing would be provided through a $1 million advance against the expected R&D tax concession that was due in October-November 2012.

On 26 July 2012 the Company advised that it received $500,000 in part satisfaction of the $4 million placement as approved at the General Meeting on 27 April 2012. The Company received correspondence from Monash Capital advising that the balance of the payment would take the form of the contingency offer from Monash Capital in the form of a Converting Loan totalling $6 million instead of $4 million, effectively achieving a 50% premium over the terms previously approved.
On 6 August 2012 the Company advised that it would apply for part of a $90 million government-funding package, The Advanced Lignite Demonstration Program (ALDP), which was designed to accelerate the development and commercialisation of new lignite upgrading technologies in the Latrobe Valley.
On 8 October 2012 the Company advised that it received a notification that its European Patent application had been issued as a formal patent, no. 1680637. The Company also advised that it had accepted a “FAST Finance” loan through Greenard Willing, against $1 million from the R&D tax concession that was due in October – November 2012. As a result of the extensive work completed on the Design for Tender, the R&D tax concession was lodged with a value of $1.3 million. The Company also advised that it had exercised the option to “top up” the “FAST Finance” by receiving an additional $300,000 of funding.
On 9 November 2012 the Company advised of the receipt of the cash rebate for its Research and Development expenditures through the Australian Taxation Office. Funds totalling $1.293 million were received as per the R&D Rebate rebate for the Design for Tender (DFT) work plans, aimed at developing a detailed design for the Coldry technology at commercial scale.
On 9 November 2012 the Company advised that it had received the official certificate for its Canadian Coldry Patent No 2540285.
On 21 November 2012 the Company advised that it had executed an agreement in favour of its engineering development partner Arup for the placement of a Strategic Deliverable Bond for up to $2,500,000 in order to deliver the balance of the DFT program and other pre-construction engineering works associated with the development of the Coldry technology. The Company also advised that it submitted a detailed Expression of Interest (EOI) in accordance with the program requirements of the Advanced Lignite Demonstration Program (ALDP).
On 28 November 2012 the Company advised that K-Coal Co., Ltd (K-Coal) signed a Letter of Intent (LOI) to provide 5% equity in the Coldry Commercial Demonstration Plant (CDP) and that the LOI obliges equity participation in subsequent Commercial Scale Plant (CSP) subject to certain conditions.
On 4 December 2012 the Company advised the appointment of Adam Giles as Company Secretary of the Company and its subsidiaries, which followed the resignation of John Osborne as Company Secretary of the ECT group of companies.
On 13 December 2012 the Company advised that its EOI for the ALDP had been shortlisted and that it was invited to submit a response to the Request for Proposal (RFP).
On 4 February 2013 the Company advised that it had finalised a “FAST Finance” loan of $1,700,000 and placement of $506,515 managed through Greenard Willing and Platinum Road. The FAST Finance loan was an advance against the expected R&D tax concession due in October-November 2013. The Company had previously established a $1,300,000 FAST Finance loan facility (announcements 19 July and 8 October 2012). This loan was satisfied via a combination of cash repayment, issuance of ECT securities and some loans being rolled forward into the new $1.7m loan.

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On 18 February 2013 the Company advised that the DFT scope associated with the CSP had been strategically realigned to the ALDP objectives to deliver a design for the CDP. Initial cost estimation had commenced internally in collaboration with Arup and construction partner McConnell Dowell. This initial estimation activity was part of an iterative process aimed at providing increasing levels of accuracy and to highlight further value engineering and design improvement opportunities.
On 1 March 2013 the Company advised that Resolution 6 of the 2012 AGM, relating to investment in the Company by Monash Capital Group, expired at close of business on 28 February 2013 without the execution by Monash.
On 20 March 2013 the Company advised that the submission for the ALDP was lodged on 19 March 2013 at 2pm. Following the short-listing of the EOI on 13 December 2012, the Company in conjunction with key partners Arup and McConnell Dowell have developed a comprehensive submission in support of the application for funding. The Company also advised that effective April 2013, Mr Michael Davies ceased to be the Managing Director and Executive Chairman and would continue as Chairman. The Board announced the appointment of Mr Ashley Moore as Managing Director.

Review of Operations

The consolidated results for the financial year were:

The consolidated results for the financial year were:
Consolidated results	2013 $	2012 $
Revenue	1,314,914	686,266
Loss before income tax	(5,444,185)	(5,549,700)
Net loss attributable to the members of Environmental Clean Technologies Ltd	(5,444,185)	(5,549,700)
Basic loss per share (cents)	(0.33)	(0.43)
Diluted loss per share (cents)	(0.33)	(0.43)

Operational Highlights

Engineering expense was $1.138m higher versus 2012 due to the engineering works running through the full 2013 fiscal year compared to only part of the prior year
R&D Rebate was $0.656m greater than 2012 due to the higher spend on qualifying R&D activity
Corporate and employee costs were $0.685m lower in 2013 due to lower consultant costs and decreased employee and travel expense

Coldry

The Design for Tender program, which began in November 2011, proceeded through its various stages in this fiscal year (2012/13). Key milestones included:

Pilot plant operational validation and data gathering
Options development focusing on cost and efficiency in terms of Capex and Opex
Detailed modelling of the process to refine the energy-mass balance
Iterative design work culminating in significant capital estimate reductions e.g. a ‘back-to-back’ modular design delivering significant cost savings
Optimisation – value engineering and refinement of the operational parameters delivering refined operational cost estimates
Detailed design – across the spectrum of engineering documentation and drawings necessary to build the plant, providing the detail required for each plant area to be ‘Construction Ready’
Cost estimation – iterative cost estimates and tendering of key components to deliver a robust capital estimate

In the completion of these activities, the Company progressively refined the operating scope for the Arup design activities. While the work originally commenced as a general design effort targeting a 2mtpa Coldry commercial plant, it was pragmatically focussed on the core needs to demonstrate first, followed by commercial scale. The Commercial Demonstration Plant thus became the centre of the program, with a

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progressive increase in the level of detail to provide increased levels of certainty of success at the critical Demonstration stage.

Thus, the completion of the “Design for Tender” stage was announced on 18 February 2013, with the more recent announcement of “Construction Ready” design status on 20 August 2013.

Additionally, it must be noted that while the announcement of the combined Victorian State and Federal Government Advanced Lignite Demonstration Program (ALDP) did not change the underlying activities in progress, it did lend a certain structure and sequence to ensure maximum value could be leveraged from the on-going Arup design works to ECT’s applications under the program.

On 3 August 2012, the combined Victorian State and Federal Governments formally launched the ALDP. On 6 August 2012, ECT announced it intended to submit an application. On 21 November 2012, the Company announced it had submitted the formal Expression of Interest (EOI) as required under the program guidelines. Following on from that, the Company advised that it had been successfully shortlisted through the EOI process, and had been invited to provide a response to the more detailed Request for Proposal (RFP). On 20 March 2013, the Company advised that it had submitted its RFP response in accordance with the program guidelines. Since that time, the Company has cooperated with the Department managing the ALDP and has engaged in multiple discussions regarding the submission. The evaluation process continues, with the program outcomes yet to be advised to participants.

As the Arup design built progressive levels of detail of the Coldry process – in terms of equipment definition, as well as in terms of process operating conditions and the resulting cost and complexity implications, ECT was progressively better able to substantively engage with prospective future customers for the Coldry technology.

Matmor

As reported last year, running in parallel with our Coldry testing of Indian coals, we have run a series of assessments of Matmor’s effectiveness while utilising Indian lignites, and in some cases, Indian iron ore and iron bearing waste streams. These have been, in every instance, successful. Commercial discussions relating to next steps continue.

ECT has continued to evaluate other coals in the Matmor process, but more importantly, has continued to explore the basic footprint of Matmor with respect to non-ferrous metals.

While in this last year we have paused our significant commercialisation development of the Matmor technology pending Coldry advancement, we have continued to build our basic understanding of those elements that can be recovered via the Matmor process. We continue to uncover further value opportunities, though at this stage only at bench scale.

Coal Asset Development

Following your company’s securing of rights to coal contained within EL5119, development work to delineate the resource has not yet begun. The formal agreements for Native Title arrangements were completed late this financial year, and initial planning for development works have commenced.

Dividends

No dividends were paid or recommended by the Directors.

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Matters subsequent to the end of the financial year

There have been a number of significant events occurring after the reporting date also shown in Note 26.

On 5 July 2013 the Company advised that Coldry engineering work would advance to ‘ConstructionReady’ phase. To support the advancement of the engineering works, the Company and Arup agreed to extend the maximum amount of the Strategic Deliverable Bond by another $1.4 million. The Company also announced that it participated in the early assessment stages of the advanced R&D program announced by India’s Neyveli Lignite Corporation. The Company successfully passed through the Expression of Interest stage and submitted a more detailed proposal for NLC’s lignite-dewatering project.
On 17 July 2013 the Company advised the appointment of Mr Glenn Fozard to the Board as a NonExecutive Director.
On 29 July 2013 the Company advised that Directors elected to forego the share-based component of their remuneration for the 2012/13 financial year.
On 20 August 2013 the Company advised that engineering firm Arup had completed the design and engineering for its Coldry demonstration plant to ‘Construction Ready’ status. The Company also announced the retirement of Mr Michael Davies, having led the completion of this significant outcome for ECT’s shareholders.
On 22 August 2013 the Company advised the appointment of Mr Lloyd Thomson to the Board as a NonExecutive Director.

Likely Developments and Expected Results of Operations

Coldry

Delivery of the Coldry Commercial Demonstration Plant (CDP) is your Company’s number one objective.

To that end, we are developing parallel pathways to deliver the CDP:

Victoria: to be located within the Loy Yang precinct, and integrated into the Loy Yang power station
India: potentially at Neyveli

Of importance in delivering an accelerated and more substantial Victorian project is the Advanced Lignite Demonstration Program, though this is – as of this date – still within the selection phase of its deliberations.

Matmor

The Company is focused on advancing Coldry as our lead technology, which is a necessary sequencing given that the Coldry process is required to deliver the feedstock for Matmor.

Matmor is positioned to commence the next steps in scale-up on the commercialisation pathway:

Pre-feasibility and expanded testing works at the Test Plant to prepare the design briefing to support commencement of Pilot Plant design
Pilot Plant design program
Pilot Plant construction and operations

The search for the most appropriate technical and financial partner for Matmor continues.

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Information on Directors

Details of the Directors' qualifications and experience are set out as follows:

Mr Ashley Moore BEng(Chem), MIEAust, CPEng, MAICD Managing Director

Ashley is a Chartered Professional Engineer, with extensive experience in all facets of manufacturing, plant operations, supply chain management, sales and marketing and major project delivery from more than 25 years in the industry. Ashley joined ECT in October 2009 as Business Manager, Coldry. Ashley was appointed to the role of Chief Operating Officer of the Company in August 2011, and then to Managing Director earlier this year following the retirement of Mr Davies from that role.

Mr Moore is not and has not been a director of any other publicly listed company in the past three years. He is currently a member of the Strategic Planning Committee, Capital Management Committee and Audit and Risk Committee.

Mr Stephen Carter MBA, Dip Co. Dir., Dip App. Sc., FAICD Non-executive Director

Stephen has extensive experience in delivering strategic projects including the commissioning of Crown Casino, the commercial preparation for the integration of Ansett/Air New Zealand, delivery of a multi-million dollar funding package for the redevelopment of the Melbourne Showgrounds, the review and transformation of Air New Zealand’s engineering division and the commercial repositioning of Spotlight Pty Ltd.

Mr Carter is not and has not been a director of any other publicly listed company in the past three years. He was appointed as Director of the Company in May 2009 and is currently the Chairman of the Capital Management Committee and Audit and Risk Committee and a member of the Remuneration and Nomination Committee and Strategic Planning Committee.

Mr Iain McEwin

Non-executive Director

Iain has considerable business experience in the ownership and operation of his own business as a supplier to the building and construction industry. Iain is a key Shareholder in ECT.

Mr McEwin is not and has not been a director of any other publicly listed company in the past three years. He was appointed a Director of the Company in July 2011 and is Chairman of the Remuneration and Nomination Committee and a member of the Audit and Risk Committee, Strategic Planning Committee and Capital Management Committee.

Mr Glenn Fozard BBus (Int. Trade), BA (Psych) Non-executive Director, Appointed 17 July 2013

Glenn has a strong commercial background and extensive experience in finance and capital markets at both Board and Executive level. With a deep understanding of tailored financial solutions for SMEs in the Cleantech and Agricultural sectors, he supports ECT with valuable guidance in the technology development, risk management and capital raising areas.

Mr Fozard is not and has not been a director of any other publicly listed company in the past three years. He was appointed a Director of the Company in July 2013.

Mr Lloyd Thomson FCPA Non-executive Director, Appointed 22 August 2013

Lloyd has extensive business management experience, with comprehensive knowledge of finance & capital markets, as well as new business development and risk management. He is the Company’s largest single shareholder.

Mr Thomson is not and has not been a director of any other publicly listed company in the past three years. He was appointed a Director of the Company in August 2013.

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Mr Michael Davies, Dip Civil (Eng), Grad Macquarie University Adv Mgt Program Managing Director, Chairman, Retired 20 August 2013

Mike is an experienced senior manager having spent fourteen years in General Manager and CEO/Managing Director roles. Mike’s career included time with Caterpillar Inc., Caterpillar dealers including Hastings Deering Limited, Gough Group (New Zealand) Limited and Joy Mining Machinery Australia Limited before commencing his consulting business.

Mr Davies is not and has not been a director of any publicly listed company in the past three years. He was appointed a Director of the Company in July 2011 and became Managing Director and Executive Chairman in August 2011. He retired from his Managing Director role in March 2013, and from the Board in August 2013. He was the Chairman of the Strategic Planning Committee and a member of the Audit and Risk Committee and Capital Management Committee until his retirement from the Board.

Company Secretary

Mr Adam Giles appointed 4 December 2012

Adam is the Company’s longest serving employee, and also holds the position of Operations Manager. With twenty years experience in business across public and private sectors, his management and new technology commercialisation experience is a strong fit with ECT. He has held no directorships of publicly listed companies at any time during the past three years.

Mr John Osborne BSc, FRMIT (Management), DipAppCorpGov, ACIS Resigned 4 December 2012

Mr Osborne provided company secretarial services to the company on a part time basis through his consultancy company KLVR Pty Ltd. Mr Osborne has over 35 years of financial, commercial and company secretarial experience with listed companies and in consulting roles. He has held no directorships of publicly listed companies at any time during the past three years.

Meetings of Directors

During the year ended 30 June 2013, the number of meetings of the Board of Directors and of each Board Committee and the number of meetings attended by each of the Directors who held office in the year are as follows:

	Board Meetings	Board Meetings	Audit and Risk Committee	Audit and Risk Committee	Remuneration and Nomination Committee	Remuneration and Nomination Committee
	No. eligible to attend	No. Attended	No. eligible to attend	No. Attended	No. eligible to attend	No. Attended
Michael Davies (retired 20 August 2013)	14	14	2	2	-	-
Stephen Carter	14	14	2	2	3	3
Iain McEwin	14	14	2	2	3	3
Ashley Moore	14	14	-	-	-	-

	Capital Management Committee	Capital Management Committee	Strategic Planning Committee	Strategic Planning Committee
	No. eligible to attend	No. eligible to attend	No. eligible to attend	No. Attended
Michael Davies (retired 20 August 2013)	4	4	5	5
Stephen Carter	4	4	5	5
Iain McEwin	4	4	5	5
Ashley Moore	4	4	5	5

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Remuneration Report (Audited)

Principles used to determine the nature and amount of remuneration

The Board through the Remuneration and Nomination Committee is responsible for making recommendations on remuneration packages and policies applicable to the Board members and senior executives of the Company. The Company has in the past provided equity based short term and long-term incentive based upon achievement of pre-determined performance criteria. At the 2012 Annual General Meeting the Shareholders provided approval for an Executive and Director Incentive Plan to facilitate the provision of equity based remuneration to key management personnel and Directors. The approval of this plan expires 13 November 2014. In respect of the fiscal year ended 30 June 2013, the Directors elected not to take their entitlement under this plan.

The Board’s remuneration policy is to ensure the remuneration package properly reflects the person’s duties and responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of the highest quality. Directors and executives’ remuneration is arrived at after consideration of the level of expertise each director and executive brings to the Company, the time and commitment required to efficiently and effectively perform the required tasks and after reference to payments made to directors and executives in similar positions in other companies.

Service Agreements

No directors were appointed on service agreements during the year in their capacity as directors. Each director has a written agreement governing his service as a director of the Company and separate agreements, where appropriate, for the discharge of executive responsibilities or the provision of other services. There are no termination benefits payable to directors or executives.

Mr Stephen Carter is engaged, via his company Carter Jacobs and Associates Pty Ltd, to provide specific services in respect of capital raising activities for the Company at a daily charge-out rate is $1,500 plus GST.

The Company engaged Mr John Osborne to support the Company’s secretarial functions. The agreement with the Company was with KLVR Pty Ltd, the entity through which Mr Osborne provided consultancy services. This arrangement has concluded.

Senior Executive Pay

The Remuneration and Nominations Committee of the Board is responsible for determining remuneration and nomination policies in respect of key management personnel. In establishing such policies the Committee is guided by external remuneration surveys and industry practices, commensurate with the scale and size of the company’s operations. The remuneration levels are reviewed regularly to ensure the company remains competitive as an employer.

The company has employment agreements with all Executives. These contracts are capable of termination in accordance with standard employment terms.

The terms of the contract are open ended although the company retains the right to terminate a contract immediately by making payment equal to the period in lieu of notice.

The following Executives have specific contract terms:

Mr Davies was engaged as Managing Director and Executive Chairman of the Company as an employee of the Company, discharging the duties of Managing Director and Executive Chairman and his remuneration was $22,500 per month plus $12,500 of shares per quarter to be issued quarterly. The shares, issue of which was approved by shareholders at the AGM in 2012, were to be allotted within the first week following the end of each quarter and priced at the VWAP for the last 5 trading days of each quarter. Mr Davies relinquished these shares as announced to the ASX on 29 July 2013. Mr Davies provided notice to the company of his resignation as Managing Director, and served his notice period prior to his retirement from the Board in August 2013.

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Mr Moore is an employee of the Company and has served as COO, and now Managing Director. As COO, he had a remuneration of $201,600 per annum plus superannuation. Upon taking the Managing Director role, his remuneration increased to $250,000, inclusive of superannuation. There were no other benefits or any further emolument for acting as an Executive Director in the year ended 30 June 2013. Mr Moore is eligible to participate in the Executive and Director Incentive Scheme that grants bonuses to key management personnel on the basis of achievement against performance benchmarks agreed by the Board. The bonuses are granted annually and are in the form of cash and / or shares to eligible employees. No bonuses were achieved in the fiscal year ending 30 June 2013. Mr Moore’s employment may be terminated by either party providing 3 (employee) or 6 (company) months written notice of termination.

Other than the above, or as disclosed elsewhere in the remuneration report, no executives are subject to specific contract arrangements.

At the 2012 Annual General Meeting approval was provided for the Company’s Executive and Director Incentive Plan (the Plan). This enables the Company to grant bonuses in cash or securities on an annual basis to key management personnel to reward performance against benchmarks agreed by the Board. Shareholders approval of the Plan means that any securities so issued will not be counted against the 15% limit on placements without shareholders approval as required under the ASX Listing Rules. No bonuses were achieved in the fiscal year ended 30 June 2013.

Non-executive Director Remuneration

Effective 1 July 2012 the base fee payable to Non-executive Directors for discharging their duties as Directors was $75,000 per annum each, being $50,000 in cash and $25,000 in shares, for which shareholders provided approval at the 2012 Annual General Meeting. Shares to the value of $6,250 were to be issued to each Non-executive Director in respect of each Relevant Quarter. Directors Carter and McEwin relinquished their right to be issued shares as announced to the ASX on 29 July 2013.

With recent changes in Board structure and numbers, Director remuneration has been adjusted as follows:

Board Position	Remuneration
Non-Executive Director	$50,000 pa base
Chairman	$15,000 pa additional
Audit and Risk Committee Chair	$5,000 pa additional
Nomination and Governance Committee Chair	$5,000 pa additional

Details of remuneration

Details of the remuneration of the directors and the key management personnel of ECT and the Environmental Clean Technologies Ltd Group are set out in the following tables.

The key management personnel of both ECT and the Environmental Clean Technologies Limited Group for the 2013 financial year were:

Mr Ashley Moore – Managing Director (appointed Managing Director 20 March 2013)
Mr Stephen Carter – Non-executive Director
Mr Iain McEwin – Non-executive Director
Mr Michael Davies – Managing Director and Executive Chairman (retired as Managing Director 20 March 2013, retired from the Board 20 August 2013)
Mr Adam Giles – Company Secretary (appointed 4 December 2012)
Mr John Osborne – Company Secretary (resigned 4 December 2012)

In the 30 June 2013 financial year, the directors consider that there are only three individuals who meet the definition of executive. All directors and executives are employed by the parent entity and are all key management personnel.

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2012-13	Short-term benefits	Short-term benefits	Short-term benefits	Post-employment benefits	Post-employment benefits
	Cash Salary, and Directors fees	Consulting fees	Non- monetary benefits	Super- annuation	Termination benefit	Total
Directors	$	$	$	$	$	$
S Carter	50,000	154,000	-	-	-	204,000
I McEwin	50,000	-	-	-	-	50,000
Executives
M Davies	283,286	-	-	13,725	-	297,011
A Moore	206,922	-	-	16,632	-	223,554
J Osborne	-	43,288	-	-	-	43,288
A Giles	139,100	-	-	12,519	-	151,619
Total	729,308	197,288	-	42,876	-	969,472

2011-12	Short-term benefits	Short-term benefits	Short-term benefits	Post-employment benefits	Post-employment benefits	Share- based payment
	Cash Salary, and Directors fees	Consulting fees	Non- monetary benefits	Super- annuation	Termination benefit	Shares/ Options	Total
Directors	$	$	$	$	$	$	$
J Hutchinson (resigned 5/7/11)	3,517	-	-	-	-	-	3,517
D Woodall (resigned 8/7/11)	1,142	-	-	-	-	-	1,142
D Brockenshire (resigned 4/7/11)	428	-	-	-	-	-	428
S Carter	47,162	163,000	-	-	-	-	210,162
I McEwin	44,999	41,250	-	-	-	-	86,249
Executives
K Galtos (resigned 15/8/11)	58,230	-	-	3,944	137,557*	35,000	234,731
M Davies	6,430	351,856	-	-	-	-	358,286
A Moore	191,891	-	-	17,270	-	-	209,161
J Osborne	-	88,204	-	-	-	-	88,204
Total	353,799	644,310	-	21,214	137,557	35,000	1,191,880

*Termination benefit consists of a cash payment of $137,557 and shares to the value of $35,000 issued to the former chief executive officer Mr Kosmas Galtos under a deed of settlement made in August 2011.

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The proportion of remuneration linked to performance and the fixed proportion are as follows:

	Fixed Remuneration	Fixed Remuneration	At Risk – Short Term Incentives	At Risk – Short Term Incentives	At Risk – Long Term Incentives	At Risk – Long Term Incentives
	2013	2012	2013	2012	2013	2012
Directors	$	$	$	$	$	$
S Carter	100%	100%	- %	- %	- %	- %
I McEwin	100%	100%	- %	- %	- %	- %
Executives
A Moore	100%	100%	- %	- %	- %	- %
M Davies (resigned)	100%	100%	- %	- %	- %	- %
J Osborne (resigned)	100%	100%	- %	- %	- %	- %
A Giles	100%	-	- %	- %	- %	- %
J Hutchinson	-	100%	- %	- %	- %	- %
D Woodall	-	100%	- %	- %	- %	- %
D Brockenshire	-	100%	- %	- %	- %	- %
K Galtos	-	100%	- %	- %	- %	- %

Share-based Compensation

In the financial year ended 30 June 2013 there were no issues of shares or options in the company provided as remuneration to any director or executive or former director or executive of Environmental Clean Technologies Limited.

Mike Davies, Stephen Carter and Iain McEwin elected to forego their share-based remuneration entitlement for the financial year ended 30 June 2013.

In the year ended 30 June 2012 the Company issued to Mr Kosmas Galtos, the Chief Executive who resigned in August 2011, 3.5 million new fully paid ordinary shares in February 2012 as part of the Company’s agreement with Mr Galtos following his resignation. The fair value of these shares was determined by reference to the share price at the time of agreement. The approval in April 2011 to issue Mr Galtos with 823,045 new fully paid ordinary shares was deferred at the request of Mr Galtos and remained unissued at 30 June 2011 and the issue did not proceed as part of the Company’s agreement with Mr Galtos following his resignation. The Board did not grant any Long Term Incentive rights to any executive in the 2012 financial year.

Consolidated entity performance and link to remuneration

The factors that are considered to affect total shareholders return are summarised below:

	2009 $	2010 $	2011 $	2012 $	2013 $
Share price at financial year end ($)	0.068	0.032	0.010	0.019	0.007
Basic earnings per share (cents per share)	(0.14)	(0.54)	(0.38)	(0.43)	(0.33)

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The earnings of the consolidated entity for the five years to 30 June 2013 are summarised below:

	2009 $	2010 $	2011 $	2012 $	2013 $
Sales Revenue	273,811	884,085	274,987	686,266	1,314,914
EBITDA	(2,842,959)	(2,764,054)	(2,502,282)	(4,910,789)	(4,938,052)
EBIT	(2,985,153)	(3,358,560)	(3,073,761)	(5,491,142)	(5,477,784)
Loss after income tax	(3,358,932)	(3,728,403)	(3,121,709)	(5,549,700)	(5,444,185)

The company’s remuneration policy seeks to reward staff members for their contribution to achieving significant milestones but there is no direct link between remuneration paid and growth in the company’s share price or financial performance.

Retirement, Election and Continuation in Office of Directors

In accordance with the Constitution of Environmental Clean Technologies Limited, at each Annual General Meeting one-third (or a number nearest one-third, rounded up) of the number of Directors (excluding any other Director appointed by the Directors either to fill a casual vacancy or as an addition to the existing Directors) must retire by rotation; and

any other Director who has held office for three years or more since last being elected; and
any other Director appointed to fill a casual vacancy or as an addition to the existing Directors.

Accordingly, at the 2012 Annual General Meeting Stephen Carter and Ashley Moore retired as directors by rotation and, being eligible, offered themselves for re-election and were re-elected. Most recently at an EGM held on 23 August 2013, Glenn Fozard was elected a director of the company.

The aggregate non-executive director remuneration is determined by a general meeting. The most recent determination was at the Annual General Meeting held on 10 September 2008 where the shareholders approved an aggregate remuneration of $250,000 for the work undertaken by Non-executive Directors in their capacity as non-executive directors. Mr Carter, in addition to discharging his responsibilities as nonexecutive director is also engaged by the Company to provide special services on a consultancy basis, primarily in the area of Capital raising management.

Voting and Comments Made at the Company’s 2012 Annual General Meeting

(AGM)

At the 2012 AGM, 59% of the proxy votes were recorded against the adoption of the Remuneration Report. The vote by show of hands did not reverse this, constituting a ‘first strike’ under section 250R of the Corporations Act.

Subsequent feedback from shareholders highlighted dissatisfaction with respect to fees paid to Directors for ‘other’ services. The Company’s response has been to introduce additional governance and oversight policy, as well as additional transparency measures. Shareholders provided their support for these changes via approval of Resolution 3 at the Company’s EGM held on 23 August 2013.

(End of Audited Remuneration Report)

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Share Options and Share Holdings

At the date of this report, the following options to acquire Ordinary shares of the company were on issue:

	Number	Exercise Price	Expiry Date	Number Vested
Unlisted ordinary options	20,000,000	$0.05	14/12/2014	20,000,000	-
Listed options (ESIO)	871,885,303	$0.02	16/01/2014	871,885,303	-
	891,885,303			891,885,303	-

For more information on the share and options holdings of Directors refer to note 22.

Insurance and Indemnities of Officers and Directors

The Company has not, during or since the financial year, in respect of any person who is or has been a director, officer or auditor of the company or a related body corporate, indemnified or made any relevant agreement for indemnifying against a liability incurred as a director, officer or auditor, including costs and expenses in successfully defending legal proceedings. Directors and Officers Liability Insurance premiums paid during the year ended 30 June 2013 amount to $22,970 (2012: 22,513) (ex GST).

Environmental Regulation

With respect to current activities, the Company is not the subject of environmental regulations. However, as the Company considers commencement of operations through the Coldry Commercial Demonstration plant, this status will change. Appropriate planning is in place to manage this transition.

Proceedings on behalf of the Company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

Non Audit Services

No non-audit services were provided by BDO East Coast Partnership or related practices during the year.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22.

Signed at Melbourne this 30 August 2013 in accordance with a resolution of the directors.

Ashley Moore Managing Director

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Auditor’s independence declaration

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Annual financial statements

Consolidated Statement of Profit or Loss and Other Comprehensive Income ............................................... 24 Consolidated Statement of Financial Position ................................................................................................ 25 Consolidated Statement of Changes in Equity ............................................................................................... 26 Consolidated Statement of Cash Flows .......................................................................................................... 27 Notes to and Forming Part of the Consolidated Financial Statements ........................................................... 28 Directors’ Declaration ...................................................................................................................................... 57 Independent Auditor’s Report ......................................................................................................................... 58 Corporate Directory ......................................................................................................................................... 60

These financial statements include the consolidated financial statements for the consolidated entity consisting of Environmental Clean Technologies Limited (ECT) and its subsidiaries. The financial statements are presented in Australian dollars, which is ECT’s functional and presentational currency.

ECT Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Suite 712

530 Little Collins Street

Melbourne Victoria 3000

A description of the nature of the consolidated entity’s operations and its principal activities are included in the Review of Operations section on page 11 and Principal Activities section on page 8, both of which are not part of these financial statements.

Through the use of the Internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial statements, and other information are available on our website.

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Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2013

Notes Revenue from continuing operations 4 Interest Research and Development Tax Refunds Gain on sale of furniture and fittings Other Income Expenses Corporate Costs Depreciation and Amortisation Employee Benefits Expense Finance and Borrowing Costs Legal Costs Sales and Marketing Occupancy Expense Design for Tender Engineering Costs Travel and Accommodation Movement of earn out provision Other Expenses Loss before income tax 5 Income tax expense 6 Loss after Income tax attributable to the owners of Environmental Clean Technologies Limited Other Comprehensive Income Total Comprehensive Loss attributable to the owners of Environmental Clean Technologies Limited Loss per share (EPS) from continuing operations attributable to the owners of Environmental Clean Technologies Limited Basic loss per share 18 Diluted loss per share 18	CONSOLIDATED 2013 2012 $ $
	22,831 28,686 1,292,083 654,085 - 3,000 - 495
	1,314,914 686,266
	(295,732) (509,131) (539,732) (580,353) (1,411,267) (1,756,332) (878,203) (346,983) (101,838) (416,823) (302,466) (263,190) (125,164) (133,662) (2,682,344) (1,544,190) (281,158) (527,062) (138,541) (264,320) 72,403 165,159 (75,057) (59,079)
	(5,444,185) (5,549,700)
	- -
	(5,444,185) (5,549,700)
	- -
	(5,444,185) (5,549,700)
	2013 Cents 2012 Cents
	(0.33) (0.43) (0.33) (0.43)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

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Consolidated Statement of Financial Position

As at 30 June 2013

Notes CURRENT ASSETS Cash and Cash Equivalents 7 Trade and Other Receivables 8 Other Current Assets 9 Total Current Assets NON-CURRENT ASSETS Investments accounted for using the equity method 10 Property, Plant and Equipment 11 Intangible Assets 12 Total Non-Current Assets Total Assets CURRENT LIABILITIES Trade and Other Payables 14 Other Financial Liabilities 16 Employee Benefits 15 Total Current Liabilities NON-CURRENT LIABILITIES Other Financial Liabilities 16 Employee Benefits 15 Total Non-Current Liabilities Total Liabilities NET ASSETS EQUITY Contributed Equity 17 Accumulated losses 18 TOTAL EQUITY	CONSOLIDATED 2013 2012
	$ $ 627,115 285,872 131,459 109,590 118,002 130,764
	876,576 526,226
	2 2 120,328 177,425 7,680,000 8,160,000
	7,800,330 8,337,427
	8,676,906 8,863,653
	1,044,425 1,024,153 2,754,612 - 62,602 72,902
	3,861,639 1,097,055
	417,058 489,461 14,730 7,882
	431,788 497,343
	4,293,427 1,594,398
	4,383,479 7,269,255
	52,076,821 49,518,412 (47,693,342) (42,249,157)
	4,383,479 7,269,255

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

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Consolidated Statement of Changes in Equity

For the year ended 30 June 2013

For the year ended 30 June 2013
	Issued Capital	Reserves	Accumulated Losses	Total Equity
	$	$	$	$
Balance at 1 July 2011	44,989,191	221,033	(36,957,591)	8,252,633
Loss after income tax expense for the year	-	-	(5,549,700)	(5,549,700)
Other comprehensive income for the year, net of
tax	-	-	-	-
Total comprehensive loss for the year	-	-	(5,549,700)	(5,549,700)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs	4,529,221	-	-	4,529,221
Equity component of convertible notes issued	-	37,101	-	37,101
Transfer (from)/to reserves	-	(258,134)	258,134	-
Balance at 30 June 2012	49,518,412	-	(42,249,157)	7,269,255

Balance at 1 July 2012	49,518,412	-	(42,249,157)	7,269,255
Loss after income tax expense for the year	-	-	(5,444,185)	(5,444,185)
Other comprehensive income for the year, net of
tax	-	-	-	-
Total comprehensive loss for the year	-	-	(5,444,185)	(5,444,185)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs	2,558,409	-	-	2,558,409
Balance 30 June 2013	52,076,821	-	(47,693,342)	4,383,479

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Consolidated Statement of Cash Flows

For the year ended 30 June 2013

Notes CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Research and Development Tax Refunds Payments to trade creditors, other creditors and employees (inclusive of goods and services tax) Interest received Net cash used in operating activities 24 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Payments for property, plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Issue of shares for cash Arup Bond Received Receipt Fast Finance Funding Fast Finance Funding Repaid Net cash from financing activities Net increase/(decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year CASH AND CASH EQUIVALANTS AT THE END OF THE FINANCIAL YEAR 7	CONSOLIDATED 2013 2012 $ $
	1,292,083 654,085 (5,216,866) (4,972,258) 22,831 28,686
	(3,901,952) (4,289,487)
	- 3,000 (2,635) (7,777)
	(2,635) (4,777)
	223,227 3,909,483 2,300,000 - 1,911,955 - (189,352) -
	4,245,830 3,909,483
	341,243 (384,781) 285,872 670,653
	627,115 285,872

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

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Notes to and Forming Part of the Consolidated Financial Statements

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1. Summary of Significant Accounting Policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are those of the consolidated entity consisting of Environmental Clean Technologies Limited and its controlled entities. Separate financial statements for Environmental Clean Technologies Ltd as an individual entity are no longer presented as a consequences of a change to the Corporation Act 2001, however limited financial information for Environmental Clean Technologies Limited as an individual entity is included in note 27.

These accounts were approved by the board of directors on 30 August 2013 and therefore only include information up until this date.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, and Interpretations issued by of the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities.

All new, revised or amending Accounting Standards and Interpretations that are mandatory for the year ended 30 June 2013 have been adopted. There were no significant changes to the company’s accounting policies.

Compliance with IFRSs

The consolidated financial statements of the Environmental Clean Technologies Limited group comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Historical cost convention

These financial statements have been prepared under the historical cost convention.

Critical accounting estimates

The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2.

(b) Going concern

For the year ended 30 June 2013 the consolidated entity had an operating loss before tax of $5,444,185, negative cash flow from operating activities of $3,901,952, and net current liabilities of $2,985,063. Furthermore, the consolidated entity does not have a source of revenue and is reliant on equity capital or loans from third parties to meet their operating costs. These conditions indicate a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern.

The ability of the consolidated entity to continue as a going concern is dependent upon a number of factors, one being the continuation and availability of funds. The financial statements have been prepared on the basis that the consolidated entity is a going concern, which contemplates the continuity of normal business activity, realisation of assets and the settlement of liabilities in the normal course of business.

To this end, the consolidated entity is expecting to fund ongoing obligations as follows:

i. On 23 August 2013, ECT Shareholders approved all prior issued shares, as well as the issuance and conversion of shares covered by the Arup Strategic Deliverable Bond. This provides the company with the ability to call upon up to 25% of its issued share capital. Consequently, the Company intends to undertake additional capital raisings to ensure sufficient funds are available to deliver on Company objectives as required.

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ii. Included in trade and other payables at 30 June 2013 are amounts owing to Arup Pty Ltd totaling approximately $750,000, with payment of these liabilities to be funded from the Arup Strategic Deliverable Bond. Considering activity and invoicing subsequent to the report date, approximately $500,000 headroom exists with the Bond to support the Company’s internal commercialisation activities and to support working capital requirements.
iii. The Company expects to receive additional funding of in excess of $1 million from R&D tax refunds during the 30 June 2014 financial year. The Directors are of the opinion that further funding from additional FAST finance loans could be obtained by Company and drawn down against current and planned expenditure.
iv. The Company continues to receive assurances and written guidance from Monash Capital Group Pty Ltd that they are making progress on their capital raising with respect to the planned $6 million equity placement.
v. As at 30 June 2013 the Company has on issue 871,885,303 listed options (ESIO) that can be converted by option holders to ordinary shares in the company at an exercise price of two cents per share on or before 14 January 2014. In the event that the share price is sufficient to encourage holders to convert and should all options be converted into shares, the Company would raise $17.4 million.

The cash flow forecasts prepared by management demonstrate that it has sufficient cash flows to meet its commitments over the next twelve months, subject to the above.

Should the consolidated entity be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessarily incurred should the consolidated entity not continue as a going concern.

(c) Principles of consolidation

Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Environmental Clean Technologies Limited (“company” or “parent entity”) as at 30 June 2013 and the results of all subsidiaries for the year then ended. Environmental Clean Technologies Limited and its subsidiaries together are referred to in these financial statements as the group or the consolidated entity.

Subsidiaries are all entities over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

The acquisition of Asia Pacific Coal & Steel Pty Limited (“APCS”) on 25 May 2006 was treated as a reverse acquisition in accordance with AASB 3 – Business Combinations whereby APCS is considered the accounting acquirer on the basis that APCS is the controlling entity in the transaction. As a result, APCS is the continuing entity for consolidated accounting purposes and the legal parent Environmental Clean Technologies Ltd is the accounting subsidiary.

Investments in subsidiaries are accounted for at cost in the separate financial statements of Environmental Clean Technologies.

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(d) Segment Reporting

The consolidated entity has applied AASB 8 Operating Segments , which requires the entity to identify operating segments and disclose segment information on the basis of internal reports that are provided to, and reviewed by, the chief operating decision maker of the consolidated entity to allocate resources and assess performance. In the case of the consolidated entity the chief operating decision maker is the Board of Directors.

(e) Foreign currency translation

Transactions and balances

Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

(f)

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group’s activities as described below. The group bases its estimates on historical results, taking into consideration, the type of customer, the type of transaction and the specifics of each arrangement.

Interest Revenue

Interest revenue is recognised using the effective interest rate method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

(g)

Income tax

The income tax expense for the year is the tax payable on the current period’s taxable income based on the income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

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

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

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Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if there are offsetting deferred tax liabilities or it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Tax consolidation legislation

Environmental Clean Technologies Limited and its wholly owned Australian controlled entities have formed a tax consolidated group under the tax consolidation regime.

The head entity, Environmental Clean Technologies Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax-consolidated group continues to be a stand-alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Environmental Clean Technologies Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax-consolidated group.

Assets or liabilities arising under tax funding agreements with the tax-consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned taxconsolidated entities.

Research and Development Tax Refund

A refund of eligible research and development expenditure is claimed under the Research and Development Tax Refund scheme.

(h) Leases

Operating lease payments are charged as an expense in the period in which they are incurred.

(i) Research and development expenditure

Expenditure in respect of research and development is charged to profit or loss as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development.

(j) Impairment of assets

Non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable but at least on an annual basis. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

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(k) Cash and cash equivalents

For the purpose of presentation in the Consolidated Statement of Cash Flows, cash and cash equivalents includes cash deposits held on call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(l) Trade and other receivables

Trade receivables are recognised initially at fair value and thereafter are measured at amortised cost, using the effective interest method, less provision for impairment. They are non-derivative financial assets with fixed or determinable amounts not quoted in an active market and are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts, which are known to be uncollectible, are written off by reducing the carrying amount directly. An allowance for doubtful receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

(m) Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

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. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repair and maintenance items are charged to profit or loss during the reporting period in which they are incurred.

Depreciation is calculated on a straight-line basis for all plant and equipment, with the exception of plant under construction, net of their residual values, over their estimated useful lives. Estimates of remaining useful lives are made on a regular basis. The useful lives of each item of property, plant and equipment is as follows:

Plant and Equipment	15 years
Furniture and Fittings	10 years
Office Equipment	3 years

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 (note 1(j)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

(n) Intangible Assets

Patents and Intellectual Property have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.

Amortisation is calculated using the straight-line method, over the estimated useful lives of 20 years. The method and useful lives of finite life intangible assets are renewed annually.

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(o) Trade and Other Payables

Trade and other payables represent liabilities for goods and services provided prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 45 days of recognition.

(p) Interest Bearing Liabilities

Interest bearing liabilities are initially recognised at fair value (less transaction costs) and subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit and loss over the period of the borrowing using the effective interest rate method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Interest bearing liabilities are removed from the Consolidated Statement of Financial Position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Interest bearing liabilities are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(q) Finance Costs

Finance costs are recognised as expenses in the period in which they are incurred except where they are incurred in the construction of a qualifying asset in which case the finance costs are capitalised as part of the asset during the period of time that is required to complete and prepare the asset for its intended use or sale.

(r) Provisions

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(s) Employee benefits

Short-term obligations

Liabilities for salaries and wages, including non-monetary benefits, and annual leave expected to be settled within 12 months of the end of reporting period are recognised in respect of employees’ services up to the end of reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. All other short-term employee benefit obligations are presented as payables.

Other long-term employee benefit obligations

The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the non-current provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by the employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments

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are discounted using market yields at the end of the reporting period on national Government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Superannuation

All employees of the group are entitled to benefits from the group’s superannuation plan on retirement, disability or death. The group has a defined contribution section within its plan. The defined contribution section receives fixed contributions from group companies and the group’s legal or constructive obligation is limited to these contributions. The employees of the parent entity are all members of the defined contribution section of the group’s plan.

Contributions to the employee superannuation plan are charged as expenses as the contributions are paid or become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(t) Earnings Per Share

Basic Earnings per Share

Basics earnings per share is calculated by dividing the profit attributable to the owners of Environmental Clean Technologies Limited, excluding any costs of servicing equity other then ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted Earnings per Share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(u) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

If the entity reacquires its own equity instruments, for example, as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

(v) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Consolidated Statement of Financial Position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(w) New standards and interpretations issued but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2013 reporting periods. The Group does not anticipate early adoption of any of the reporting requirements stated below and does not expect these requirements to have any material effect on the Groups financial statements.

AASB 9 Financial Instruments, 2009-11 Amendments to Australian Accounting Standards arising from AASB 9,2010-7 Amendments to Australian Accounting Standards arising from AASB 9 and 2012-6 Amendments to Australian Accounting Standards arising from AASB9

This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2015 and completes phase I of the IASB's project to replace IAS 39 (being the

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international equivalent to AASB 139 'Financial Instruments: Recognition and Measurement'). This standard introduces new classification and measurement models for financial assets, using a single approach to determine whether a financial asset is measured at amortised cost or fair value. To be classified and measured at amortised cost, assets must satisfy the business model test for managing the financial assets and have certain contractual cash flow characteristics. All other financial instrument assets are to be classified and measured at fair value. This standard allows an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-fortrading) in other comprehensive income, with dividends as a return on these investments being recognised in profit or loss. In addition, those equity instruments measured at fair value through other comprehensive income would no longer have to apply any impairment requirements nor would there be any ‘recycling’ of gains or losses through profit or loss on disposal. The accounting for financial liabilities continues to be classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity’s own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. The consolidated entity will adopt this standard from 1 July 2015 but the impact of its adoption is yet to be assessed by the consolidated entity.

AASB 10 Consolidated Financial Statements

This standard is applicable to annual reporting periods beginning on or after 1 January 2013. The standard has a new definition of ‘control’. Control exists when the reporting entity is exposed, or has the rights, to variable returns (e.g. dividends, remuneration, returns that are not available to other interest holders including losses) from its involvement with another entity and has the ability to affect those returns through its ‘power’ over that other entity. A reporting entity has power when it has rights (e.g. voting rights, potential voting rights, rights to appoint key management, decision making rights, kick out rights) that give it the current ability to direct the activities that significantly affect the investee’s returns (e.g. operating policies, capital decisions, appointment of key management). The consolidated entity will not only have to consider its holdings and rights but also the holdings and rights of other shareholders in order to determine whether it has the necessary power for consolidation purposes. The adoption of this standard from 1 July 2013 is not likely to have a significant impact on the company.

AASB 11 Joint Ventures

This standard is applicable to annual reporting periods beginning on or after 1 January 2013. The standard defines which entities qualify as joint ventures and removes the option to account for joint ventures using proportional consolidation. Joint ventures, where the parties to the agreement have the rights to the net assets will use equity accounting. Joint operations, where the parties to the agreements have the rights to the assets and obligations for the liabilities will account for the assets, liabilities, revenues and expenses separately, using proportionate consolidation. The adoption of this standard from 1 July 2013 will not have a material impact on the consolidated entity.

AASB 127 Separate Financial Statements (Revised)

AASB 128 Investments in Associates and Joint Ventures (Reissued)

These standards are applicable to annual reporting periods beginning on or after 1 January 2013. They have been modified to remove specific guidance that is now contained in AASB 10, AASB 11 and AASB 12. The adoption of these revised standards from 1 July 2013 will not have a material impact on the consolidated entity.

AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011)

This revised standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The amendments eliminate the corridor approach for the deferral of gains and losses; streamlines the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhances the disclosure requirements for defined benefit plans. The amendments also changed the definition of short-term employee benefits, from 'due to' to 'expected to' be settled within 12 months. This will require annual leave that is not expected to be wholly settled within 12 months to be discounted allowing for expected salary levels in the future period when the leave is expected to be taken. The adoption of the revised standard from 1 July 2013 is not expected to have a material impact on the consolidated entity.

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AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirement

These amendments are applicable to annual reporting periods beginning on or after 1 July 2013, with early adoption not permitted. They amend AASB 124 'Related Party Disclosures' by removing the disclosure requirements for individual key management personnel ('KMP'). The adoption of these amendments from 1 July 2014 will remove the duplication of information relating to individual KMP in the notes to the financial statements and the directors report. As the aggregate disclosures are still required by AASB 124 and during the transitional period the requirements may be included in the Corporations Act or other legislation, it is expected that the amendments will not have a material impact on the consolidated entity.

AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards

The amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The amendments make numerous consequential changes to a range of Australian Accounting Standards and Interpretations, following the issuance of AASB 10, AASB 11, AASB 12 and revised AASB 127 and AASB 128. The adoption of these amendments from 1 July 2013 will not have a material impact on the consolidated entity.

AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities

The amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The disclosure requirements of AASB 7 'Financial Instruments: Disclosures' (and consequential amendments to AASB 132 'Financial Instruments: Presentation') have been enhanced to provide users of financial statements with information about netting arrangements, including rights of set-off related to an entity's financial instruments and the effects of such rights on its statement of financial position. The adoption of the amendments from 1 July 2013 will increase the disclosures by the consolidated entity.

AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities

The amendments are applicable to annual reporting periods beginning on or after 1 January 2014. The amendments add application guidance to address inconsistencies in the application of the offsetting criteria in AASB 132 'Financial Instruments: Presentation', by clarifying the meaning of "currently has a legally enforceable right of set-off"; and clarifies that some gross settlement systems may be considered to be equivalent to net settlement. The adoption of the amendments from 1 July 2014 will not have a material impact on the consolidated entity.

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle

The amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The amendments affect five Australian Accounting Standards as follows: Confirmation that repeat application of AASB 1 (IFRS 1) 'First-time Adoption of Australian Accounting Standards' is permitted; Clarification of borrowing cost exemption in AASB 1; Clarification of the comparative information requirements when an entity provides an optional third column or is required to present a third statement of financial position in accordance with AASB 101 'Presentation of Financial Statements'; Clarification that servicing of equipment is covered by AASB 116 'Property, Plant and Equipment', if such equipment is used for more than one period; clarification that the tax effect of distributions to holders of equity instruments and equity transaction costs in AASB 132 'Financial Instruments: Presentation' should be accounted for in accordance with AASB 112 ‘Income Taxes’; and clarification of the financial reporting requirements in AASB 134 'Interim Financial Reporting' and the disclosure requirements of segment assets and liabilities. The adoption of the amendments from 1 July 2013 will not have a material impact on the consolidated entity.

AASB 2012-9 Amendment to AASB 1048 arising from the Withdrawal of Australian

Interpretation 1039

This amendment is applicable to annual reporting periods beginning on or after 1 January 2013. The amendment removes reference in AASB 1048 following the withdrawal of Interpretation 1039. The adoption of this amendment will not have a material impact on the consolidated entity.

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AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments

These amendments are applicable to annual reporting periods beginning on or after 1 January 2013. They amend AASB 10 and related standards for the transition guidance relevant to the initial application of those standards. The amendments clarify the circumstances in which adjustments to an entity’s previous accounting for its involvement with other entities are required and the timing of such adjustments. The adoption of these amendments will not have a material impact on the consolidated entity.

AASB 12 Disclosure of Interests in Other Entities

This standard is applicable to annual reporting periods beginning on or after 1 January 2013. It contains the entire disclosure requirement associated with other entities, being subsidiaries, associates and joint ventures. The disclosure requirements have been significantly enhanced when compared to the disclosures previously located in AASB 127 ‘Consolidated and Separate Financial Statements’, AASB 128 ‘Investments in Associates’, AASB 131 ‘Interests in Joint Ventures’ and Interpretation 112 ‘Consolidation – Special Purpose Entities’. The adoption of this standard from 1 July 2013 will significantly increase the amount of disclosures required to be given by the consolidated entity such as significant judgements and assumptions made in determining whether it has a controlling or non-controlling interest in another entity and the type of non-controlling interest and the nature and risks involved.

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13

This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The standard provides a single robust measurement framework, with clear measurement objectives, for measuring fair value using the ‘exit price’ and it provides guidance on measuring fair value when a market becomes less active. The ‘highest and best use’ approach would be used to measure assets whereas liabilities would be based on transfer value. As the standard does not introduce any new requirements for the use of fair value, its impact on adoption by the consolidated entity from 1 July 2013 should be minimal, although there will be increased disclosures where fair value is used.

2. Critical accounting estimates and judgements

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

(a) Critical accounting estimates and assumptions

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

(i) Income taxes

The group is subject to income taxes in Australia. The group estimates its tax liabilities based on the understanding of the tax laws and advice from tax experts. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period such determinations are made.

In addition, the group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which the unused tax losses can be utilised.

(ii) Life of Intangible asset

The group estimates the effective life of patents and intellectual property to be 20 years and amortises these asset on a straight-line basis. Where the resulting effective life differs from that recognised, the impact will be recorded in profit or loss in the period such determinations are made,

(iii) Estimated impairment of non-current assets

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

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(b) Critical judgements in applying the entity’s accounting policies

(i) Fair value estimate of debt and equity portions of Convertible notes

AASB 132 “Financial Instruments: Disclosure and Presentation” and AASB 139 “Financial Instruments: Recognition and Measurement” requires that convertible notes require separate accounting of the fair value of the debt and equity portions of the financial instruments. The fair value of the debt portion of the financial instrument is calculated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar pure debt financial instruments. The Group has therefore been required to make assumptions regarding the relevant current market interest rate that is available to the Group.

ii) Impairment of non-financial assets other than goodwill and other indefinite life intangible assets

The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs to sell value-in-use calculations, which incorporate a number of key estimates and assumptions.

iii) Earn out provision

The earn out provision is recognised and measured at the present value of the estimated future cash flows to be made in respect of the reporting date. In determining the present value of the liability, estimates of expected timing and quantities of production are taken into consideration.

3. Segment Information

Business and Geographical Segments

The Group has adopted AASB 8 Operating Segments whereby segment information is presented using a “management approach”, i.e. segment information is provided on the same basis as information used for internal reporting purposes by the board of directors. A segment is a component of the consolidated entity that engages in business activities to provide products or services within a particular economic environment. The company operates predominantly in the environmental and energy industry, and a single geographic segment being Australia. The board of directors assess the operating performance of the group based on management reports that are prepared on this basis. At regular intervals, the board is provided management information at a group level for the group’s cash position, the carrying values of intangible assets and a group cash forecast for the next twelve months of operation. On this basis, no segment information is included in these financial statements.

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4. Revenue and Other Income

CONSOLIDATED

Interest Received Research and Development Tax Refund Net gain on sale of furniture and fittings Other Income 5. Expenses Loss before income tax from continuing operations includes the following specific expenses: Depreciation Amortisation Finance and Borrowing Costs: Interest, Finance and Related Charges Finance Costs on Convertible Note Unwinding of Discount on Convertible Note Finance Costs – Arup Strategic Deliverable Bond Design for Tender Engineering Costs Superannuation Expense Rental Expense Relating to Operating Leases: Minimum Lease Payments	2013 2012 $ $
	22,831 28,686 1,292,083 654,085 - 3,000 - 495
	1,314,914 686,266
	CONSOLIDATED 2013 2012 $ $ 59,732 100,353 480,000 480,000 566,142 60,635 - 202,281 - 84,067 312,061 - 878,203 346,983 2,682,344 1,544,190 281,158 527,062 79,487 67,777 55,059 46,440

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6. Income Tax Expense


Income Tax Expense (a) Income Tax Expense Current tax Deferred tax Deferred income tax expense included in income tax expense comprises: Decrease in deferred tax assets Decrease in deferred tax liabilities (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax expense Tax at the Australian tax rate of 30% (2012 – 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Finance Costs Amortisation Research and Development Share Based Payments Other Deferred tax asset movement not recognised Income tax expense (c) Gross deferred tax asset balance not recognised – potential benefit at 30% attributable to tax losses Consists of: Gross deferred tax assets attributable to: Tax losses at 30% Temporary differences Less offset against deferred tax liability Deferred tax asset	CONSOLIDATED 2013 2012 $ $ - - - - - - 144,000 144,000 (144,000) (144,000) - - (5,444,185) (5,549,700)
	(1,633,256) (1,664,910) 80,866 85,904 144,000 144,000 (387,625) (188,150) - 10,500 795 (1,232) 1,795,220 1,613,888
	- -
	4,242,795 2,180,477 5,583,197 4,733,578 963,598 (105,101) (2,304,000) (2,448,000)
	4,242,795 2,180,477

Further details on deferred tax assets and deferred tax liabilities are provided at note 13.

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7. Current Assets – Cash and Cash Equivalents

Cash at bank and on hand 8. Current Assets – Trade and Other Receivables Goods and services tax (GST) receivable Receivables are not past due and are not impaired 9. Current Assets – Other	CONSOLIDATED 2013 2012 $ $
	627,115 285,872
	CONSOLIDATED 2013 2012 $ $
	131,459 109,590

Current Assets – Other
Deposits Paid Other Debtors Prepayments Loan – Coldry East Kalimantan Non-Current Assets – Investments accounted for using the equity method Shares in Victoria Coldry Pty Ltd (50% interest) Shares in Coldry East Kalimantan Pty Ltd (50% interest)		CONSOLIDATED 2013 2012 $ $
		13,146 24,561 1,714 1,714 86,087 87,434 17,055 17,055
		118,002 130,764
		CONSOLIDATED 2013 2012 $ $
		1 1 1 1
		2 2

10.[Non-Current Assets – Investments accounted for using ] the equity method

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11. Non-Current Assets - Property, Plant and Equipment

2013 *Total* *P&E* $ $ CONSOLIDATED Balance as at 1 July 2012 177,425 163,570 Additions 2,635 - Disposals - - Depreciation expense (59,732) (52,996) Balance as at 30 June 2013 120,328 110,574 2012 *Total* *P&E* $ $ CONSOLIDATED Balance as at 1 July 2011 270,001 242,360 Additions 7,777 - Disposals - - Depreciation expense (100,353) (78,790) Balance as at 30 June 2012 177,425 163,570 Plant and Equipment – at cost Less: Accumulated depreciation Furniture and Fixtures – at cost Less: Accumulated depreciation Office Equipment – at cost Less: Accumulated depreciation Total property, plant and equipment	2013 *Total* *P&E* $ $ CONSOLIDATED Balance as at 1 July 2012 177,425 163,570 Additions 2,635 - Disposals - - Depreciation expense (59,732) (52,996) Balance as at 30 June 2013 120,328 110,574 2012 *Total* *P&E* $ $ CONSOLIDATED Balance as at 1 July 2011 270,001 242,360 Additions 7,777 - Disposals - - Depreciation expense (100,353) (78,790) Balance as at 30 June 2012 177,425 163,570 Plant and Equipment – at cost Less: Accumulated depreciation Furniture and Fixtures – at cost Less: Accumulated depreciation Office Equipment – at cost Less: Accumulated depreciation Total property, plant and equipment	CONSOLIDATED 2013 2012 $ $
		765,251 765,251 (654,677) (601,681)
		110,574 163,570
		5,971 4,335 (3,470) (2,312)
		2,501 2,023
		56,236 55,237 (48,983) (43,405)
		7,253 11,832
		120,328 177,425
		*F&F* OE $ $
	177,425 163,570 2,635 - - - (59,732) (52,996)	2,023 11,832 1,636 999 - - (1,158) (5,578)
	120,328 110,574	2,501 7,253
	*Total* *P&E* $ $ 270,001 242,360 7,777 - - - (100,353) (78,790)	*F&F* OE $ $ 9,376 18,265 - 7,777 - - (7,353) (14,210)
	177,425 163,570	2,023 11,832

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12. Non-Current Assets - Intangibles

12. Non-Current Assets - Intangibles
Patents/Intellectual property – at cost Less: Accumulated amortisation Reconciliation of Intangible Asset: Balance at the beginning of year Amortisation expense Balance at the end of year 13. Deferred Tax Deferred Tax Asset Deferred Tax Liability	CONSOLIDATED 2013 2012 $ $
	9,600,000 9,600,000 (1,920,000) (1,440,000)
	7,680,000 8,160,000
	8,160,000 8,640,000 (480,000) (480,000)
	7,680,000 8,160,000
	CONSOLIDATED 2013 2012 $ $
	2,304,000 2,448,000 (2,304,000) (2,448,000)
	- -

The consolidated entity has recognised a deferred tax liability of $2,304,000 (2012: 2,448,000) as a result of the recognition of the Coldry Patents/Intellectual Property upon consolidation of the Coldry Unit Trust, amortised over its useful life of 20 years. The parent company has sufficient losses available to recognise a deferred tax asset to offset the tax liability recognised on consolidation. A deferred tax asset of $2,304,000 (2012: $2,448,000) has been recognised in the company accounts and offset against the deferred tax liability in the consolidated accounts.

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14. Current Liabilities – Trade and Other Payables

Current Liabilities – Trade and Other Payables
Trade Payables Other Payables	CONSOLIDATED 2013 2012 $ $
	882,145 377,652 162,280 646,501
	1,044,425 1,024,153

Fair value

Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.

Interest rate, foreign exchange and liquidity risk

Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 25.

15. Current and Non-Current Liabilities – Employee Benefits

Current: Employee Provisions Non-Current: Employee Provisions	CONSOLIDATED 2013 2012 $ $
	62,602 72,902
	62,602 72,902
	CONSOLIDATED 2013 2012 $ $
	14,730 7,882
	14,730 7,882

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16. Other Financial Liabilities

Current

Fast Finance (i) Arup Strategic-Deliverable Bond (ii) Non-current Earn Out Creditor Total Non-current Liabilities	CONSOLIDATED 2013 2012 $ $
	1,587,945 - 1,166,667 -
	2,754,612 -
	417,058 489,461 417,058 489,461

(i) The key terms of the Fast Finance loan are as follows:
a. Term – 12 months b. Repayment – Cash in full from the R&D Tax Rebate refund c. Interest rate – 15% payable upfront
d. Distribution fee – 5%
(ii) The key terms of the Arup Strategic Deliverable Bond are as follows: a. Amount - $3,900,000
b. Term – 12 months
c. Interest rate – 0% d. Convertibility – 90% of the lowest daily VWAP of the preceding 5 days trade

17. Contributed Equity

Balance at beginning of financial year Issue of shares Balance at end of financial year Reconciliation of share movements Balance at 30 June 2012 Placements Balance at 30 June 2013	49,518,412 44,989,191 2,558,409 4,529,221
	52,076,821 49,518,412
	No of shares $ 1,571,593,752 49,518,412 252,724,379 2,558,409
	1,824,318,131 52,076,821

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Date	Details	Shares Issued	Balance	Consideration
1-Jul-12	Opening Balance		1,571,593,752	$49,518,412
26-Jul-12	Monash placement	37,500,000	1,609,093,752	$500,000
09-Oct-12	FAST Financing interest and fees	2,625,000	1,611,718,752	$31,500
21-Nov-12	Fees payable on Arup Bond	5,555,556	1,617,274,308	$75,000
06-Feb-13	Conversion of Fast Finance Loan	29,198,543	1,646,472,851	$264,539
06-Feb-13	Placement	12,911,362	1,659,384,213	$125,000
06-Feb-13	FAST Financing interest and fees	13,796,909	1,673,181,122	$116,977
19-Feb-13	Arup Bond (1st conversion)	83,453,878	1,756,635,000	$750,000
22-May-13	Arup Bond (2nd conversion)	19,072,018	1,775,707,018	$150,000
07-Jun-13	Arup Bond (3rd conversion)	27,777,778	1,803,484,796	$200,000
26-Jun-13	Arup Bond (4th conversion)	20,833,335	1,824,318,131	$150,000
	Adjustment for Arup Bond Finance Cost	-	-	$195,393
30-Jun-13	ClosingBalance		1,824,318,131	$52,076,821

These ordinary shares give the holder voting rights in the company and entitle the holder to dividend distributions in proportion to the number of and amounts paid on the shares held.

Share Options

At 30 June 2013 the following options to acquire Ordinary shares of the company were on issue:

	Number	Exercise Price	Expiry Date	Number Vested	Number Unvested
Unlisted ordinary options	20,000,000	$0.05	14/12/2014	20,000,000	-
ESIO	871,885,303	$0.02	16/01/2014	871,885,303	-

Capital management

The Group's objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to minimise the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital by reference to cash flow forecasts in relation to operating revenue and expenditure. The Group also monitors its capital expenditure requirements to identify any additional capital required.

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18. Reserves and Accumulated Losses Reserves Share option reserve Convertible notes reserve Total reserves Convertible note equity reserve Opening balance Equity component of convertible notes issue Transfer of reserve to accumulated losses Closing balance Accumulated Losses Opening balance Loss after income tax expense for the year Transfer from reserves Closing balance Earnings per Share: (a) Reconciliation of earnings used in calculating loss per share Loss attributable to the ordinary owners of the Company used in calculating basic and diluted loss per share (b)Weighted average number of shares used as the denominator Weighted average number of ordinary shares on issue used in the calculation of basic and diluted loss per share Movements in reserves were: Share option reserve Opening balance Fair value of options issued during the year Transfer of fair value of options expired to accumulated losses Closing balance	CONSOLIDATED 2013 2012 $ $
	- - - -
	- -
	CONSOLIDATED 2013 2012 $ $
	- 9,375 - - - (9,375)
	- -
	CONSOLIDATED 2013 2012 $ $
	- 211,658 - 37,101 - (248,759)
	- -
	CONSOLIDATED 2013 2012 $ $
	(42,249,157) (36,957,591) (5,444,185) (5,549,700) - 258,134
	(47,693,342) (42,249,157)
	2013 $ 2012 $ (5,444,185) (5,549,700) 2013 Number 2012 Number 1,668,061,771 1,263,826,451

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At 30 June 2013 there were 891,885,303 (2012: 851,760,303) share options that could be potentially dilutive in the future if the company was not in a loss-making position. Of these options, 871,885,303 are listed and are exercisable at 2.0c per option and 20,000,000 are unlisted and are exercisable at 5.0c per option.

Since 1 July 2013, 183,485,495 new shares and nil listed options (ESIO) have been issued.

19. Controlled Entities

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1.

Name Parent entity Environmental Clean Technologies Limited Controlled entities Asia Pacific Coal and Steel Pty Ltd Enermode Pty Ltd Maddingley Coldry Unit Trust ECT Coldry Pty Ltd ACN 109 941 175 Pty Ltd (Maddingley Coldry Pty Ltd) ECT Fuels Pty Ltd ECT China Ltd Coldry Demonstration Plant Pty Ltd Coldry Master License Pty Ltd	Country of Incorporation Equity Holding 2013 2012 % %
	Australia Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Hong Kong 100% 100% Australia 100% - Australia 100% -

20. Commitments and Contingencies

Participant’s agreement with Maddingley Associates

(a) Capital Commitment

On 29 July 2005 Asia Pacific Coal and Steel Limited (“APCS”) signed a participant’s agreement with Maddingley Associates with the objective for APCS to licence and commercialise the Coldry and Matmor technology owned by Maddingley Associates.

This agreement was then subject to a deed of variation following the acquisition of 100% of the equity of APCS by Environmental Clean Technologies Limited on 25 May 2006.

As part of the participant’s agreement and deed of variation, APCS and ECT have committed to complete agreed milestones along an agreed critical path. A Deed of Variation was entered into on 30 June 2009 to extend the milestones for the development and construction of the first Matmor plant to 31 December 2014 and not 31 December 2011 as per the original milestones. The commitments and date of achievement of the milestones are as follows:

Commence construction of the 6000 tonne per annum Matmor Steel Plant by 31 December 2012.
Complete construction of the Matmor Steel Plant by 31 December 2014.

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(b) Contingent liability

The Maddingley agreement and subsequent deeds of variation state that should the agreement be terminated by any reason other than breach or default on the part of Maddingley Associates, then APCS will grant to Maddingley Associates an option to buy the following for $1:

The benefits of all contracts, licences and sublicense’s entered into in relation to the Licenced Technology;
All right, title and interest of APCS relating to the Matmor Licensed Technology;
All right, title and interest of APCS in any improvements at JBD Industrial Park including any modifications or upgrades to the Coldry Pilot Plant;
All the leasehold or other interest of APCS to JBD Industrial Park or any part thereof.

As part of the fulfilment of the agreement is dependent on the completion of future events noted above there is a potential loss to the consolidated entity if the group fails to meet the obligations and Maddingley exercise the option to purchase the Coldry Pilot Plant upgrades for $1. At 30 June 2013 the upgrades had a net book value of $110,574 (2012: $163,570).

(c) Contingent Commitment to issue equity

As announced to the ASX on 23 May 2012, ECT acquired an interest to Coal exploration licence EL5119. As part of the arrangements, an issue of 3,000,000 shares to the intermediary, Podium International Pty Ltd was agreed, contingent upon the formal issuance of the Exploration licence and a suitable sub-licence being provided to the Company. These milestones were completed in June 2013, though the shares were not formally issued until after the reporting period had ended. These shares have since been issued, as reported to the ASX on 17 July 2013.

21. Remuneration of Auditors

During the year the following fees were paid/payable to the auditor of the Company and its related practices:

Audit or review of the financial statements Other Services	CONSOLIDATED 2013 2012 $ $
	67,145 62,341 - -
	67,145 62,341

22. Key Management Personnel Disclosures

Directors

The following persons were directors of the Company during the financial year:

Michael Davies – Executive Chairman / Managing Director (Resigned 20 August 2013)
Stephen Carter – Non-Executive Director
Iain McEwin – Non-executive Director
Ashley Moore – Chief Operating Officer / Managing Director

Other key management personnel

In addition, the following persons had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year:

John Osborne – Company Secretary (Resigned 04 December 2012)

Adam Giles – Company Secretary (Appointed 04 December 2012)

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Key management personnel compensation

management personnel compensation
Short-term employee benefits Post-employment benefits Share-based payments Termination Benefits	CONSOLIDATED 2013 2012 $ $
	926,596 998,109 42,876 21,214 - 35,000 - 137,557
	969,472 1,191,880

Further information on key management personnel can be found in the Remuneration Report within the Director’s Report.

Equity instrument disclosures relating to key management personnel

(i) Options provided as remuneration and shares issued on exercise of such options

Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in the Remuneration Report within the Director’s Report.

(ii) Option holdings

The number of options over ordinary shares in the parent company held during the financial year by each director and other key management personnel of the Group, including their personally related parties, are set out below:

2013

2013
	Balance at start of the year	Granted as compensation	Other changes	Balance at end of the year	Vested and exercisable	Unvested
I McEwin	38,412,637	-	-	38,412,637	38,412,637	-
A Moore	583,335	-	-	583,335	583,335	-
A Giles (appointed 4 December 2012)	3,896,977	-	-	3,896,977	3,896,977	-

2012

	Balance at start of the year	Granted	Other	Balance at end of the year	Vested and exercisable	Unvested
I McEwin (appointed – 11 July 2011)	22,790,920 1	-	15,621,717 2	38,412,637	38,412,637	-
A Moore (appointed – 17 July 2011	- 1	-	583,335 2	583,335	583,335	-
D Brockenshire (Resigned – 4 July2011)	550,000	-	(550,000 3)	-	-	-
J Hutchinson (Resigned – 5 July2011)	550,000	-	(550,000 3)	-	-	-
K Galtos (Resigned – 15 August 2011)	3,191,176	-	(3,191,176) 4	-	-	-
Notes:

Holdings (Indirect and direct) as at date of appointment as a Director on 11 July 2011.
Options acquired as part of subscription for new shares in the 2011 Rights Issue.
Holdings (Indirect and direct) as at date of resignation.
Options lapsed upon resignation.

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(iii) Directors and Executives equity holding:

The number of shares in the parent entity held during the financial year by each Director and other Key Management personnel of the group, including personally related parties, are set out below:

2013

2013
	Balance at the start of year	Other	Balance at the end of the year
I McEwin	53,108,581	-	53,108,581
A Moore	2,916,668	-	2,916,668
A Giles	13,138,6091	-	13,138,609

2012

2012
	Balance at the start of year	Other	Balance at the end of the year
I McEwin (appointed – 11 July 2011)	21,865,1481	31,243,4332	53,108,581
A Moore (appointed – 17 July 2011	1,750,0001	1,166,6682	2,916,668
D Brockenshire (Resigned – 4 July, 2011)	935,000	935,0003	-
J Hutchinson (Resigned – 5 July, 2011)	2,119,519	2,119,5193	-
K Galtos (Resigned – 15 August 2011)	2,110,294	2,110,2943	-

Notes:

Holdings (indirect and direct) as at date of appointment as Director/Secretary.
Shares acquired as part of subscription for new shares in the 2011 Rights Issue.
Holdings (indirect and direct) as at date of resignation.

23. Related party transactions

(a) Parent entities

The legal and ultimate parent entity within the Group is Environmental Clean Technologies Limited.

(b) Subsidiaries

Interests in subsidiaries are set out in note 19.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 22 and the Remuneration Report in the Director’s Report.

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24. Notes to the Statement of Cash Flows

Reconciliation of loss after income tax to net cash flows from operations Loss after income tax expense for the year Adjustments for: Depreciation and amortisation Unwinding of earn out creditor Finance costs on convertible note Unwinding of discount on convertible note Arup Bond transaction costs Expense settled by share issue Net gain on disposal of furniture and fittings Changes in assets and liabilities: Decrease in trade and other debtors Increase/(decrease) in trade and other payables (Decrease)/increase in employee benefits Net cash outflow from operating activities		CONSOLIDATED 2013 2012 $ $ (5,444,185) (5,549,700) 539,732 580,353 (72,403) (165,159) - 202,281 - 84,067 312,061 - - 77,000 - (3,000) (9,107) (86,339) 775,402 570,314 (3,452) 696
		(3,901,952) (4,289,487)

25. Financial Instruments

Financial risk management objectives

The Group’s operations expose it to various financial risks including market, credit and liquidity risks. Risk management programmes and policies are employed to mitigate the potential adverse effects of these exposures on the results of the Group.

Financial risk management is carried out by the Board and Managing Director on a regular basis by reviewing current and potential sources of funding, cash flow and operating/capital expenditure forecasts, to manage credit, liquidity and cash flow risk.

(a) Market risk

Foreign exchange risk

The Group’s operations are currently solely within Australia, and therefore are not exposed to any foreign exchange risk.

Interest rate risk

The Group currently has minimal exposure to interest rate risk.

As at the end of reporting period, the Group had no variable rate borrowings.

Fluctuations in interest rates will not have any material risk exposure to the cash held in bank deposits at variable rates.

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(b) Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as exposures to customers, including outstanding receivables. For banks and financial institutions, only major Australian banking institutions are used. For customers, individual risk limits are set based on internal or external ratings in accordance with limits set by the Board.

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of the financial assets. The company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the company.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group aims at maintaining flexibility in funding by keeping committed funding options available to meet the Group’s needs.

Maturities of financial liabilities

The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

30 June 2013

30 June 2013
	Weighted average interest rate	Less than 3 months	3 months to 1 year	1 - 5 years	5 + Years	Total
	%	$	$	$	$	$
Trade and other payables	-	1,044,425	-	-	-	1,044,425
Fast Finance	15	-	1,700,000	-	-	1,700,000
Earn Out Creditor	-	-	-	3,000,000	-	3,000,000

30 June 2012

30 June 2012
	Weighted average interest rate	Less than 3 months	3 months to 1 year	1 - 5 years	5 + Years	Total
	%	$	$	$	$	$
Trade and other payables	-	1,024,153	-	-	-	1,024,153
Earn Out Creditor	-	-	-	3,000,000	-	3,000,000

(d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition, measurement and disclosure purposes.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

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26. Events after the reporting period

On 5 July 2013 the Company advised that Coldry engineering work would advance to ‘constructionready’ phase. To support the advancement of the engineering works, the Company and Arup agreed to extend the maximum amount of the Strategic Deliverable Bond by another $1.4 million. The Company also announced that it participated in the early assessment stages of the advanced R&D program announced by India’s Neyveli Lignite Corporation. The Company successfully passed through the Expression of Interest stage and submitted a more detailed proposal for NLC’s lignite-dewatering project.
On 17 July 2013 the Company advised the appointment of Mr Glenn Fozard to the Board as a NonExecutive Director.
On 29 July 2013 the Company advised that Directors elected to forego the share-based remuneration component of for the 2012/13 financial year.
On 20 August 2013 the Company advised that engineering firm Arup had completed the design and engineering for its Coldry demonstration plant to ‘construction ready’ status. The Company also announced the retirement of Mr Michael Davies, having led the completion of this significant outcome for ECT’s shareholders.
On 22 August 2013 the Company advised the appointment of Mr Lloyd Thomson to the Board as a NonExecutive Director.

It is ECT’s intention to have its 2013 Annual General Meeting during November 2013 at a time and venue to be advised.

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27. Parent Entity Information

The following information has been extracted from the books and records of the parent and has been prepared in accordance with applicable accounting standards.

a) Financial Information Loss from ordinary activities after tax Total Comprehensive Income Current Assets Non Current Assets Total Assets Current Liabilities Non Current Liabilities Total Liabilities Net Assets Issued Capital Accumulated Losses Total Equity	2013 2012 $ $
	(4,964,184) (5,069,700)
	(4,964,184) (5,069,700)
	844,661 526,226 9,752,244 9,777,426
	10,596,905 10,303,652
	3,861,639 1,104,938 431,788 489,461
	4,293,427 1,594,399
	6,303,478 8,709,253
	55,368,747 52,810,338 (49,065,269) (44,101,085)
	6,303,478 8,709,253

b)

Guarantees

Environmental Clean Technologies Ltd has not issued any guarantees to any subsidiaries.

c)

Other Commitments

Environmental Clean Technologies Ltd has no commitments to acquire property, plant and equipment.

As announced to the ASX on 23 May 2012, ECT acquired an interest to Coal exploration licence EL5119. As part of the arrangements, an issue of shares to the intermediary, Podium International Pty Ltd was agreed, contingent upon the formal issuance of the Exploration licence and a suitable sub-licence being provided to the Company. These milestones were completed in June 2013, though the shares were not formally issued until after the reporting period had ended. These shares have since been issued, as reported to the ASX on 17 July 2013.

d)

Contingent Liabilities

Environmental Clean Technologies Limited has no contingent liabilities.

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28. Commitments

ommitments
Lease commitments – operating Committed at the reporting date but not recognised as liabilities, payable: Within one year One to five years More than five years	CONSOLIDATED 2013 2012 $ $
	38,889 42,375 38,889 42,375 - -
	77,778 84,750

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Directors’ Declaration

In the directors’ opinion:

a) the financial statements and notes set out on pages 23 to 56 are in accordance with the Corporations Act 2001, including:
i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
ii. giving a true and fair view of the consolidated entity's financial position as at 30 June 2013 and of its performance for the financial year ended on that date; and
iii. complying with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1(a) to the financial statements; and
b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

The directors have been given the declarations by the Managing Director required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the directors.

On behalf of the Directors.

Ashley Moore Managing Director

Melbourne

Date: 30 August 2013

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Independent Auditor’s Report

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Page 59 of 60

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Corporate Directory

Directors	Stephen Carter
	Iain McEwin
	Ashley Moore
	Glenn Fozard
	(appointed 17 July 2013)
	Lloyd Thomson
	(appointed 22 August 2013)
Secretary	Adam Giles
	(appointed 4 December 2012)
Principal registered office in Australia	Suite 712
	530 Little Collins Street
	Melbourne Victoria 3000
Share registers	Security Transfer Registrars Pty Ltd
	770 Canning Highway
	Applecross Western Australia 6153
Auditors	BDO East Coast Partnership
	Level 14
	140 William Street
	Melbourne Victoria 3000
Accountants	RSM Bird Cameron
	Level 8, Rialto
	525 Collins Street
	Melbourne Victoria 3000
Solicitors	Norton Rose Fulbright
	RACV Tower, 485 Bourke St
	Melbourne Victoria 3000
Exchange listings	Environmental Clean Technologies
	Limited’s shares are listed on the
	Australian Securities Exchange.
	www.asx.com.au(ESI)
Website	www.ectltd.com.au

Page 60 of 60

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AI assistant

ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Annual Report 2013

64819_rns_2013-08-29_5da29afa-b501-40a0-a14f-6a44fbb56b8b.pdf

FULL YEAR RESULT FOR YEAR ENDED 30 JUNE 2013

For Further Information Contact:

About ECT

About Coldry

About MATMOR

Lodged with the ASX under Listing Rule 4.3

Year Ended 30 June 2013

(Previous corresponding period: Year ended 30 June 2012)

RESULTS FOR ANNOUNCEMENT TO THE MARKET

ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED (ASX CODE: ESI)

Explanation of Results

Dividends

Financial Statements

Controlled entities acquired:

Audit

Other information required by Listing Rule 4.3A

Annual General Meeting

Contents

Company Details

Directors

Secretary

Principal Registered Office in Australia

Share Register

Auditors

Bankers

Securities Exchange

Corporate Governance Statement

Shareholders

Communication with Shareholders

Composition of the Board

Board Committees

Audit and Risk Committee

Remuneration and Nomination Committee

Strategic Planning Committee

Capital Management Committee

Independent Professional Advice

Internal Controls and Management of Risks

Ethical Standards

Directors’ Share Dealings

Directors’ Report

Directors

Company Secretary

Principal Activities

Coldry Process

Matmor Process

Intellectual Property

Significant Changes in the State of Affairs and Key Events During the Year

Review of Operations

Operational Highlights

Coldry

Matmor

Coal Asset Development

Dividends

Matters subsequent to the end of the financial year

Likely Developments and Expected Results of Operations

Coldry

Matmor

Information on Directors

Mr Ashley Moore BEng(Chem), MIEAust, CPEng, MAICD Managing Director

Mr Stephen Carter MBA, Dip Co. Dir., Dip App. Sc., FAICD Non-executive Director

Mr Iain McEwin

Non-executive Director

Mr Glenn Fozard BBus (Int. Trade), BA (Psych) Non-executive Director, Appointed 17 July 2013

Mr Lloyd Thomson FCPA Non-executive Director, Appointed 22 August 2013

Mr Michael Davies, Dip Civil (Eng), Grad Macquarie University Adv Mgt Program Managing Director, Chairman, Retired 20 August 2013

Company Secretary

Mr Adam Giles appointed 4 December 2012

Mr John Osborne BSc, FRMIT (Management), DipAppCorpGov, ACIS Resigned 4 December 2012

Meetings of Directors

Remuneration Report (Audited)

Principles used to determine the nature and amount of remuneration

Service Agreements

Senior Executive Pay

Non-executive Director Remuneration

Details of remuneration

Share-based Compensation

Consolidated entity performance and link to remuneration

ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. Annual Report 2013