Environmental Clean Technologies Limited ABN 28 009 120 405

Annual Financial Report - 30 June 2021

Environmental Clean Technologies Limited Corporate directory 30 June 2021

Corporate directory 30 June 2021
Directors	Glenn Fozard - Managing Director
	Ashley Moore - Executive Director (retired 2 September 2021)
	James Blackburn - Non-Executive Director
	Hon. Neil O’Keefe - Non-Executive Director (appointed 9 December 2020; retired 2
	September 2021)
	David Smith - Non-Executive Director (retired 15 January 2021)
	Jason Marinko – Chairman, Non-Executive Director (appointed 2 September 2021)
	Tim Wise – Non Executive Director (appointed 2 September 2021)
Company secretary	Adam Giles (appointed 17 July 2020)
	Martin Hill (resigned 17 July 2020)
Registered office	388 Punt Road
	South Yarra, VIC, 3141
	Australia
Principal place of business	388 Punt Road
	South Yarra, VIC, 3141
	Australia
Share register	Automic Registry Services
	Level 3, 50 Holt Street
	Surry Hills, NSW, 2010
	Phone 1300 288 664 (within Australia); +61 2 9698 5414 (outside Australia)
	www.automic.com.au
Auditor	BDO Audit Pty Ltd
	Tower 4, Level 18
	727 Collins Street
	Melbourne, VIC, 3008
Bankers	National Australia Bank Limited
	3/330 Collins Street
	Melbourne, VIC, 3000
Stock exchange listing	Environmental Clean Technologies Limited shares are listed on the Australian Securities
	Exchange (ASX code: ECT)
Website	www.ectltd.com.au
Corporate Governance Statement	The directors and management are committed to conducting the business of Environmental
	Clean Technologies Limited in an ethical manner and in accordance with the highest
	standards of corporate governance. Environmental Clean Technologies Limited has adopted
	and has substantially complied with the ASX Corporate Governance Principles and
	Recommendations (Fourth Edition) ('Recommendations') to the extent appropriate to the size
	and nature of its operations.
	The Company’s Corporate Governance Statement, which sets out the corporate governance
	practices that were in operation during the financial year and identifies and explains any
	Recommendations that have not been followed, as well as the ASX Appendix 4G, are
	released to the ASX on the same date the Annual Report is released. The Corporate
	Governance Statement and Committee Charters can be found on the Company’s website at
	http://www.ectltd.com.au/about-us/corporate-governance/

Environmental Clean Technologies Limited Directors' report 30 June 2021

The directors present their report, together with the financial statements of Environmental Clean Technologies Limited ('the Company' or 'parent entity') and its controlled entities (collectively 'the consolidated entity') for the year ended 30 June 2021.

Directors

The following persons were directors of Environmental Clean Technologies Limited during the whole of the financial year and up to the date of this report, unless otherwise stated:

Glenn Fozard - Managing Director
Ashley Moore - Executive Director (retired 2 September 2021)
James Blackburn - Non-Executive Director
Hon. Neil O’Keefe - Non-Executive Director (appointed 9 December 2020; retired 2 September 2021)
David Smith - Non-Executive Director (retired 15 January 2021)
Jason Marinko – Chairman, Non-Executive Director (appointed 2 September 2021)
Tim Wise – Non Executive Director (appointed 2 September 2021)

Principal activities

During the financial period, the principal continuing activities of the consolidated entity consisted of investment, research, development, and the commercialisation of technologies which bridge the gap between today’s use of resources and tomorrow’s zero-emissions future with an emphasis on the energy and resource sectors. Such activities included:

redeveloping and rebuilding the Bacchus March plant following a fire in October 2019 that caused significant damage; and
managing the development of, and extracting value from, the consolidated entity's intellectual property.

Bacchus Marsh redevelopment and rebuild project

A project to redevelop and rebuild the Company’s high volume test facility at Bacchus Marsh was commenced at the beginning of the 2020 financial year.

Comprised of capacity improvements to the former Coldry pilot plant and the addition of new plant and equipment to produce highvalue energy products like char and solid fuel, the project constitutes a small-scale commercial demonstration of the Company’s proprietary low rank coal drying technology aimed at delivering project objectives and monetising the Company’s existing assets.

Successful completion of the project objectives is expected to enable commercial outcomes via the sale of solid fuel and char product. With the potential to generate revenues exceeding $5 million per annum and delivering up to $3 million a year in net cashflow, successful achievement of the project objectives will support the ongoing research, development and commercialisation of the Company’s suite of technologies.

The R&D objectives of the project include:

Scale up from Coldry pilot scale including:
Fully bespoke 5-pass conditioning system
Incorporation of higher capacity primary processing train
Packed bed dryer capacity and efficiency redesigns
Recovery and utilisation of waste energy from the char kiln
Integration with waste energy application, being the char kiln, to provide drying energy for the Coldry process
Utilisation of syngas produced from the char kiln
Production of solid fuel Coldry pellets, to target specification
Production of char from solid fuel Coldry pellets, to target specification
Trial of polyfluoroalkyl substances (PFAS) soil remediation within the same assembly

Coldry Process

The Coldry process is low temperature, low pressure and therefore a low-cost method of de-watering low-rank coal to produce an upgraded black coal equivalent. The process is currently poised to progress from pilot-scale to demonstration-scale allowing technoeconomic validation ahead of intended broader commercial roll-out.

The Coldry process produces pellets that are stable, easily stored, can be transported, and are of equal or higher energy value than many black coals. When used in energy generation, Coldry pellets have a significantly lower CO ₂ footprint than the low-rank coal from which they are made, providing a compelling emissions abatement solution.

The Coldry process also acts as a ‘gateway technology’, making an ideal front-end feedstock that enables numerous higher value upgrading applications such as coal to oil, gas and iron production. When integrated with the HydroMOR process, the Coldry process provides an essential and cost effective front-end drying and pelletising solution that enables the world's first and only low-rank coal based primary iron production method.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Essentially, the Coldry process combines two mechanisms to achieve efficient, cost-effective de-watering; brown coal densification; and waste heat utilisation. Brown coal densification is achieved through the destruction of the internal porous structures, mobilising the structurally trapped water within low-rank coal. Waste heat utilisation provides ‘free’ evaporative energy to remove the moisture, thereby minimising paid energy input, resulting in net energy uplift and net CO ₂ reductions.

HydroMOR (previously Matmor) Process

HydroMOR is an improved version of the previously named Matmor process which is a cleaner, lower-emission, one-step process for producing high-grade primary iron, using low-rank coal to displace the need for coking coal, as used in the incumbent blast furnace process.

HydroMOR is an improvement over the existing Matmor process, deriving further advantage from its unique raw material base, especially the hydrocarbon-rich low-rank coals used in the role of reductant. The process derives its name from the utilisation of hydrogen to enhance the reduction process used to produce metals from ore.

The HydroMOR process leverages a fundamentally different chemical pathway compared to the incumbent blast furnace process, enabling the use of alternative raw materials, providing a lower-cost primary iron making alternative.

HydroMOR creates a high-grade iron product from low-rank coal and ferrous media such as iron ore, mill scale or other iron bearing wastes or tailings. The process involves blending low-rank coal with iron ore or other metal oxide bearing media to form a paste that is dewatered using the Coldry process. The ‘composite’ pellets are then fed into the Company's simple low cost, low emission, patented retort (vertical shaft furnace) where the remaining moisture is removed, the coal volatiles are harnessed and the iron oxides are reduced to metal.

The HydroMOR process operates below 1000 degrees Celsius, compared to a blast furnace which operates at around 1500 degrees Celsius. Lower temperature operation requires less energy input and results in less thermal stress on the plant, enabling lower cost materials to be used in its construction.

HydroMOR metal product is an ideal feedstock for the production of specific grades and forms of iron and steel, via secondary processes such as electric arc, induction furnace or fully integrated steel making.

The benefits the Company sees in the application of the HydroMOR process include further reductions in capital cost due to its ability to achieve the required metal reduction at a lower temperature, and operating savings in terms of raw material efficiency improvements, as well as decreased CO ₂ intensity. With the capital cost savings being applied to carbon offsets, this brings closer the potential of carbon emissions neutral steel production.

CDP Waste-to-Energy

The Company announced on 10 July 2019 that it had completed the purchase of a catalytic de-polymerisation (CDP) technology which is capable of producing automotive diesel from a range of hydrocarbon-based inputs including various waste and hydrocarbon streams such as waste timber, end-of-life plastics and low-rank coal.

The ECT Group is yet to devote further resources to the development of this activity as the focus has been on the rebuild of the Bacchus Marsh facility.

Intellectual property

The consolidated entity owns both the Coldry and HydroMOR intellectual property. Aspects of the Coldry process are covered by patents in all major markets with significant brown coal deposits.

In November 2017, the Company submitted a Patent Cooperation Treaty application following the submission of an Australian provisional patent application in November 2016. This is the next step in the intellectual property protection of the Company’s new HydroMOR technology platform. The filing sets in place the timetable for the subsequent national based process for IP protection, where individual patent submissions will be made in each geography of interest.

Due to its intrinsic reliance on Coldry for feedstock preparation, HydroMOR is afforded an additional degree of protection via Coldry patents. In markets where neither Coldry nor HydroMOR patents exist, the Company will employ other IP protection strategies.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Equity Lending Facility ('ELF')

During the year, ECT Finance Ltd ('ECTF'), a subsidiary of the Company, continued to manage its portfolio of ELF loans to the previous owners of unlisted options and ECTOE options. The ELF for unlisted options was wound up on 30 June 2021, one month earlier than the original expiry date of 31 July 2021 with the agreement of all parties as it was known that the loans would not be repaid given the Company’s share price. New ELFs were established using the Company’s shares as security that were issued as part of the shortfall from the non-renounceable rights issue as well as shares that were forfeited when borrowers decided not to repay ELFs that were associated with the ESIOA and ESIOB option series.

Dividends

There were no dividends paid, recommended or declared during the current or previous financial year.

Review of operations

The loss for the consolidated entity after providing for income tax amounted to $1,869,725 (30 June 2020: $2,067,973).

Major Highlights:

ECT Finance Limited

(i) Equity Lending Facilities

In July and August 2017, the consolidated entity's subsidiary, ECT Finance Ltd, entered into limited recourse loans with optionholders allowing them to obtain finance to exercise ESIOA and ESIOB options. Where the principal balance of the loan at the end of the loan term was less than the initial loan balance, shares were released to the borrower. 35,704,636 shares were released to borrowers in these circumstances. Loans secured by 916,407,834 shares defaulted on 31 July 2020, being the expiry date of the loan arrangements, as borrowers decided not to repay the loans. These shares were used as security for 4 new ELFs along with a further 383,592,166 new shares that were approved for issue at the Company’s AGM on 15 January 2021. Therefore, a total of 1,300,000,000 shares secured these ELFs which have a term of 2 years and expire on 15 January 2023.

In 2020, ECT Finance Ltd advanced an ELF loan to the value of $750,000 to Mr Iain McEwin which was initially secured by 750,000,000 ECT fully paid ordinary shares and 300,000,000 ECTOE options. This loan enabled Mr McEwin to subscribe for the balance of the shortfall of shares and options in connection to the non-renounceable rights issue made by the Company during the year. This subscription was made under arrangement with ECT with the intention of subsequently transferring the shares and options issued to him to service providers contracted to rebuild the Bacchus Marsh facility. During 2021, 274,679,966 shares and 106,658,654 ECTOE options had been transferred to creditors associated with the Bacchus Marsh rebuild or other general creditors. The loan was due to expire on 10 May 2021 and has been extended by one year.

At 31 July 2020, the total value of the loan book was $2,110,200 (including interest accrued and capitalised, and management fees capitalised to the loans to 31 July 2020). The value of security held was $805,000 (based on a $0.001 share price). The loans in respect of the ESIOA and ESIOB options expired on 31 July 2020. The loans in respect of the unlisted options were due to expire on 31 July 2021, however by mutual agreement between ECTF and the borrowers, the loans were wound up prior to the end of the financial year. Interest rates across each of the loans can vary according to payment methods. For accounting purposes pursuant to accounting standards, the ELF loans and the related shares issued are not recognised but are treated as the issue of options (refer to note 18 to the financial statements for further details). Notwithstanding this, the loans represent funds owed to ECT Finance Ltd by shareholders pursuant to commercial and legal contracts.

Environmental Clean Technologies Limited

(ii) Receipt of research and development tax incentive and repayment of Brevet loan balance

On 16 September 2020, the Company received the full amount of the research and development tax incentive receivable recognised in the financial statements at 30 June 2020 amounting to $899,612.

(iii) Capital raising activities

During the year the Company undertook capital raisings via a share placement and a share purchase plan (SPP). The share placement raised $1,500,000 and was completed in April 2021. The SPP concluded in June 2021 and raised $394,600.

Environmental Clean Technologies Limited Directors' report 30 June 2021

(iv) High Volume Test Facility (HVTF)

In October 2019, the Company’s HVTF in Bacchus Marsh was substantially damaged by a fire. Plans were announced to upgrade the facility whereby the Coldry capacity will be increased to 25,000 tonnes per annum. Much of this production will then be directed to the char market. Char serves two key markets; as a smokeless fuel (e.g. BBQ fuel) and as a carburiser, used in specialty metallurgical applications.

The successful delivery of these upgrades and subsequent realisation of potential sales is estimated to deliver net positive cashflow from operations that may be used to advance the Company’s suite of technologies along the commercialisation pathway.

The project has been divided into two phases:

Phase 1 - Coldry process scale up:

(1) Design, construction, installation and individual commissioning of each key stage of the process, including primary processing train, conditioning system and drying system; and
(2) Integration of the plant and equipment across each key stage of the process to establish continuous, steady state operations.

Phase 2 – Char plant installation and integration:

(1) Design, procurement, installation and individual commissioning of the char kiln; and
(2) Integration of the char kiln with the Coldry process to establish continuous, steady state operations and waste energy utilisation for drying.
(3) Trial of alternative applications utilising existing process assembly (e.g. PFAS remediation)

Phase 1 of the project is substantially complete .

(v) Expiry of options

ECTOC options (originally called ESIOC options) were bonus options issued to shareholders on the basis of one option for every four shares held as at 21 July 2017. This resulted in the issue of 846,088,751 ECTOC options with an exercise price of $0.045 and expiry date of 31 July 2019. These options expired on 31 July 2019.

Financial results:

The reportable loss for the consolidated entity was lower at $1,869,725 compared to the prior year loss of $2,067,973.

Sales Other income (excluding interest) Impairment and write offs Remeasurement of financial liabilities Loss on debt extinguishment Other operating costs (excluding interest, depreciation and amortisation) EBITDA Depreciation and amortisation Finance costs Interest revenue Net (loss) for year	2021 $ - 1,298,452 - (470,744) - (2,278,224)	2020 $ 87,454 2,964,770 (170,690) 53,073 (664,297) (3,342,230)	Change Change $ % (87,454) (100%) (1,666,318) (56%) 170,690 (100%) (523,817) (987%) 664,297 (100%) 1,064,006 (32%) (378,596) 65,799 (17%) 511,487 (83%) (442) (9%) 198,248
	(1,450,516)	(1,071,920)
	(320,809) (102,888) 4,488	(386,608) (614,375) 4,930
	(1,869,725)	(2,067,973)

There were no sales of by-products from the consolidated entity’s research and development activities during the year as a result of the fire at the high volume test facility at Bacchus Marsh in October 2019. In the prior year, sales included the supply of Coldry test product to its first ‘steam and boiler package’ customer.

Environmental Clean Technologies Limited Directors' report 30 June 2021

The 'Other Income' category of $1,298,452 (2020: $2,964,770) predominantly includes insurance proceeds of $593,012 (2020: $1,905,560) as a result of the Bacchus Marsh plant fire and AusIndustry research and development tax incentive of $554,768 (2020: $924,448). The research and development tax incentive on the purchase of qualifying capital items has been offset against their carrying values. It is therefore recognised as a reduction to the capital items’ cost rather than as income.

Total operating costs (excluding impairment and write off expense, depreciation and amortisation, remeasurement of financial liabilities, loss on debt extinguishment and finance costs) decreased by $1,064,006 due to the fire at our Bacchus Marsh facility which resulted in production activities ceasing and construction activities commence.

Finance costs decreased by $511,487 as a result of the reduction in borrowings during the year.

Depreciation and amortisation decreased by $65,799. This is made up of a decrease in depreciation of $17,430 and a reduction in amortisation of $48,369. The decrease in amortisation was due to the CDP assets acquired in July 2019 being fully amortised in the prior year. Depreciation and amortisation are non-cash expense items.

Finally, the change in fair value of financial liabilities represents the combined movement in the Coldry earn-out creditor (the present value of future commitments associated with the purchase of the Coldry intellectual property in 2009) and the Matmor deferred consideration (the present value associated with the purchase of the Matmor Test Plant assets in 2014). There was a net increase in the combined liabilities resulting in a loss on remeasurement for the year amounting to $470,744.

Coronavirus (COVID-19) Pandemic

The financial results for the year ended 30 June 2021 were impacted by COVID-19. The main impact was considerable delays on the shipping of equipment from overseas suppliers. All equipment sourced from overseas has now been received. These shipping delays lead to construction delays at Bacchus Marsh. There were other less significant delays in terms of being able to complete some tasks during periods of lockdown.

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the consolidated entity during the financial year.

Matters subsequent to the end of the financial year

Capital restructure

To implement an improved capital structure for the Company moving forward, the Company has (following shareholder approval) consolidated its issued capital on a 10 to 1 basis. The Company will also conduct an unmarketable parcel sale facility which will provide the Company with the ability to rationalise small holdings. The Company currently has over 4,000 shareholders, and the Company expects that the unmarketable parcel sale facility will reduce the administrative burden and cost on the Company, and (together with the Consolidation) implement a more appropriate capital structure for the Company moving forward.

Sale of wood briquettes

In July 2021, the Company commenced selling wood briquettes. The wood briquettes are made from recycled Australian timber and are being marketed under the name ‘Wood247’. Briquettes are predominantly sold in 240L and 100L wheelie bins but are also available in 10kg bags.

ECTOE options

On 14 July 2021, the Company issued 50,000,000 ECTOE options to the shareholders that participated in the share placement. These options were issued on the same terms as the existing ECTOE options.

Coronavirus (COVID-19) pandemic

The consequences of the Coronavirus (COVID-19) pandemic are continuing to be felt around the world, and its impact on the Company, if any, has been reflected in its published results to date. Whilst it would appear that control measures and related government policies have started to mitigate the risks caused by COVID-19, it is not possible at this time to state that the pandemic will not subsequently impact the Company's operations going forward. The Company now has experience in the swift implementation of business continuation processes should future lockdowns of the population occur, and these processes continue to evolve to minimise any operational disruption. Management continues to monitor the situation both locally and internationally.

Share and option issues

On 30 August 2021 the Company issued the following equities that are all related to the Company’s capital raising via a share placement and a share purchase plan announced 7 April 2021:

Environmental Clean Technologies Limited Directors' report 30 June 2021

35,000,000 fully paid ordinary shares issued to the lead manager that are secured by an ELF of $700,000 plus interest and expires 3 years from the date of issue;
75,000,000 ECTOE options expiring 17 February 2023 to the lead manager on the basis of 1 option for every 2 shares issued under the share placement; and
9,000,000 fully paid ordinary shares and 3,000,000 ECTOE options expiring 17 February 2023 to the lead manager which represents the 6% capital raising fee.

Board changes

On 3 September 2021 the Company announced the following changes to the composition of the board:

Jason Marinko and Tim Wise were appointed as non-executive directors. Mr Marinko has been elected as Chairman;
Ashley Moore and the Hon. Neil O'Keefe resigned as executive and non-executive directors respectively; and
Glenn Fozard has moved into the position of Managing Director.

Ashley Moore will continue as ECT’s Chief Engineer, and the Company will engage Mr O’Keefe on a consulting basis to continue to assist the Company with its government relations strategy.

$3 million promissory note raising

The Company also announced on 3 September 2021 that it has received firm commitments for a promissory note raising from a syndicate of sophisticated and professional investors.

Proceeds from the promissory note raising will be utilised:

to complete the construction of the Company's small-scale Coldry demonstration and char plant in Bacchus Marsh;
to enable the Company to assess complementary acquisition and business development opportunities; and
for working capital purposes.

Settlement of the promissory note, and the issue of the promissory notes is set to occur in early September 2021.

Subject to the Company obtaining shareholder approval, 100 free attaching listed options in the ECTOE class of securities will also be granted for every $1 promissory note subscribed. These options have an exercise price of 3 cents and expire on 17 February 2023.

Mr Marinko and Mr Wise are both holders of promissory notes to the value of $50,000 and $25,000 respectively.

The Company issued the following equities that related to the promissory note capital raising:

15,000,000 ECTOE options expiring 17 February 2023 and 18,000,000 fully paid ordinary shares to the lead manager;
15,000,000 ECOTE options expiring 17 February 2023 to the lead manager.

The Company will propose to members the issue of the following equities at the next annual general meeting:

3,000,000 ECTOE options expiring 17 February 2023 to the lead manager; and
300,000,000 ECTOE options expiring 17 February 2023 and 300,000,000 fully paid ordinary shares to the lenders who participated in the promissory note should members agree to the conversion of the promissory notes to equity.

No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

Likely developments and expected results of operations

Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.

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 Demonstration Plant, this status will change. Appropriate planning is in place to manage this transition.

Information on directors

The following information is reported as at the date of this directors' report.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Environmental Clean Technologies Directors' report 30 June 2021	Limited
Name:	Glenn Fozard
Title:	Managing Director
Qualifications:	B.Bus (Int. Trade), BA (Psych)
Experience and expertise:	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 the Company with
	valuable guidance in the technology development, risk management and capital raising
	areas. Glenn is the founding partner of Greenard Willing, a specialist financial advisory firm.
	Glenn held an advisory position with the Company prior to becoming a director in 2013.
Other current directorships:	None
Former directorships (last 3 years):	None
Special responsibilities:	Member of Audit and Risk Committee
Interests in shares:	8,806,668 ordinary shares
Interests in options:	2,102,223 ECTOE options expiring 17 February 2023
Name:	Ashley Moore
Title:	Executive Director (retired 2 September 2021) & Chief Engineer
Qualifications:	BEng(Chem), MIEAust, CPEng, NER, APEC Engineer, IntPE(Aus), MAICD
Experience and expertise:	Ashley is a seasoned chemical industry professional with extensive experience in all facets of
	manufacturing, supply chain, sales and industrial marketing. He holds an honours degree in
	chemical engineering from the University of Melbourne and has more than thirty years of
	industry experience in Australia and internationally. His career started with global specialty
	chemical manufacturing firm Cabot Corporation in Australia and proceeded to include
	assignments in various parts of the manufacturing field in the U.S.A., U.K., Japan, Indonesia
	and Malaysia. He covered roles ranging from plant operations & engineering, design &
	construction and commissioning, and later included marketing and technical sales. In 2005,
	he joined Delta EMD, a global specialty chemical firm in the downstream minerals sector
	responsible for sales, marketing and supply chain. Ashley joined ECT in 2009 as Business
	Manager, was appointed to the role of Chief Operating Officer in 2011, Managing Director in
	2013, and later Chairman of one of ECT’s subsidiaries.
Other current directorships:	None
Former directorships (last 3 years):	None
Special responsibilities:	Former chair of Audit and Risk Committee
Interests in shares:	16,483,360 ordinary shares
Interests in options:	1,560,000 ECTOE options expiring 17 February 2023
Name:	James Blackburn
Title:	Non-Executive Director
Qualifications:	BAppSci, GradDip. (Governance)
Experience and expertise:	Mr Blackburn has a strong executive background as a corporate development practitioner
	with over 20 years’ experience in governance, operational, and technical roles across
	research, investment and corporate services disciplines.
Other current directorships:	None
Former directorships (last 3 years):	None
Special responsibilities:	None
Interests in shares:	2,500,001 ordinary shares
Interests in options:	Nil
Name:	Hon. Neil O'Keefe
Title:	Non-Executive Director (appointed 9 December 2020; retired 2 September 2021)
Qualifications:	BEc, Trained Secondary Teachers Certificate
Experience and expertise:	Neil has a unique background, which includes 45 years of public and private sector
	experience including 17 years as a highly regarded Federal MP from 1984 until 2001. He has
	local, state, national and international experience in capital and finance, infrastructure,
	transport, trade, media, water, energy, telecommunications, agriculture and resources.
Other current directorships:	None
Former directorships (last 3 years):	None
Special responsibilities:	Former member of Audit and Risk Committee
Interests in shares:	2,577,634 ordinary shares
Interests in options:	Nil

Environmental Clean Technologies Limited Directors' report 30 June 2021

Environmental Clean Technologies Directors' report 30 June 2021	Limited
Name:	David Smith
Title:	Non-Executive Director (retired 15 January 2021)
Qualifications:	BCom, LLB (Hons), GAICD
Experience and expertise:	David has a strong legal and commercial background, having practised commercial law for
	nearly 30 years including over 21 years as a partner in national firms. He is currently a
	partner in the intellectual property and technology group at Gadens Lawyers. He has assisted
	many companies with protecting their intellectual property, IP commercialisation agreements,
	collaborative research agreements and international negotiations. David chairs the
	Company’s Audit and Risk Committee. Best Lawyers named David as 2018 Lawyer of the
	year – Privacy and Data Security Law for Melbourne, Australia. He is also currently listed as
	a “Best Lawyer” for Intellectual Property Law, Information Technology Law and Gaming Law.
	David is a past President of Bicycle Network and is a graduate of the Australian Institute of
	Company Directors (AICD).
Other current directorships:	None
Former directorships (last 3 years):	None
Special responsibilities:	Former chair of Audit and Risk Committee
Interests in shares:	Nil
Interests in options:	Nil
Name:	Jason Marinko
Title:	Non-Executive Director (appointed 2 September 2021)
Qualifications:	BCom, FFin, GAICD, MBA
Experience and expertise:	Mr Marinko is an experienced public company CEO, Director and Chairman, with expertise in
	the technology and investment banking industries and a proven track record in leading
	technologies to commercialisation. His experience includes being the Executive Chairman of
	geospatial imagery company Spookfish Limited, where he oversaw the company from its
	ASX listing through to its eventual sale to North American industry leader, EagleView
	Technologies Inc and its U.S. private equity partners. In addition, Mr Marinko was previously
	CEO of Little World Beverages Limited and an Executive Director at ASX-listed logistics
	technology company, Yojee Limited, and is currently a Non-Executive Director of legal tech
	innovator, Immediation Limited. He has extensive corporate finance experience and holds an
	MBA from INSEAD Business School in France and is a graduate of the Australian Institute
	of Company Directors.
Other current directorships:	None
Former directorships (last 3 years):	Yojee Limited (ASX: YOJ), Spookfish Limited (ASX: SFI)
Special responsibilities:	Chairman of the board
Interests in shares:	Nil
Interests in options:	Nil
Name:	Tim Wise
Title:	Non-Executive Director (appointed 2 September 2021)
Qualifications:	BSc.
Experience and expertise:	Mr Wise is an experienced entrepreneur and Company Director with particular expertise in
	the energy, industrial innovation and technology sectors has more than 20 years’ experience
	in public companies and capital markets. He was the founder and former CEO of Kalina
	Power Ltd (ASX:KPO) and The Tap Doctor, and is currently an Executive Director at Phos
	Energy Limited and a Non-Executive Director of Tamaska Oil and Gas Limited (ASX:TMK),
	Graft Polymer plc and Melchor Pty Ltd. He has a Bachelor of Science from the University of
	Western Australia.
Other current directorships:	Tamaska Oil and Gas Limited (ASX: TMK)
Former directorships (last 3 years):	None
Special responsibilities:	None
Interests in shares:	Nil
Interests in options:	Nil

'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated.

'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Company secretaries

Adam Giles was appointed to the position of Company Secretary on 17 July 2020 and has over 20 years' business and management experience across both private and public sectors. His long term involvement with the development of the Company’s technologies provides valuable background which helps to inform strategic direction.

Martin Hill resigned as Company Secretary on 17 July 2020.

Meetings of directors

The number of meetings of the Company's Board of Directors ('the Board') and of the Audit and Risk Committee held during the year ended 30 June 2021, and the number of meetings attended by each director were:

	Full Board		Audit and Risk	Committee
	Attended Held		Attended	Held
Glenn Fozard	13	13	4	4
Ashley Moore	13	13	4	4
James Blackburn	12	13	-	-
Neil O'Keefe	7	7	2	2
David Smith	6	6	2	2

Held: represents the number of meetings held during the time the director held office.

Retirement, election and continuation in office of directors

In accordance with the Constitution of the Company, at each Annual General Meeting ('AGM'), one-third (or a number nearest to onethird and rounded up) of the directors (excluding a director appointed to either fill a casual vacancy or as an addition to the existing directors) must retire by rotation as well as 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. Such directors can offer themselves for re-election.

At the 2020 AGM (held on 15 January 2021) of the Company, Ashley Moore was re-elected.

Remuneration report (audited)

The remuneration report details the key management personnel (KMP) remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.

KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the consolidated entity, directly or indirectly, including all directors.

The remuneration report is set out under the following main headings:

Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel

Principles used to determine the nature and amount of remuneration

The Board’s remuneration policy is to ensure the remuneration package properly reflects the KMP’s duties and responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of the highest quality. KMP 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 KMPs in similar positions in other companies.

The non-executive directors are responsible for the executive reward framework and making recommendations on remuneration packages and policies applicable to the Board members and senior executives of the Company. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders and is consistent with market best practice. It is the aim of the Board that the executive reward structure satisfies appropriate corporate governance guidelines such that it is competitive and reasonable, acceptable to shareholders, aligns remuneration with KMP performance indicators, and is transparent to all stakeholders.

In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Non-executive directors' remuneration

Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Board. The Board may, from time to time, receive advice from independent remuneration consultants to ensure that non-executive directors' remuneration is appropriate and in line with the market. Non-executive directors do not receive share options or other incentives.

The aggregate non-executive director remuneration is determined at a general meeting. Effective 1 July 2012, the base fee payable to non-executive directors for discharging their duties as directors was capped at $75,000 per annum each, being $50,000 in cash and $25,000 in shares, for which shareholders provided approval at the 2012 AGM.

Directors receive $50,000 per annum in remuneration. At the Company’s AGM held in January 2021, shareholders approved directors receiving half of their remuneration in shares and half in cash. This arrangement commenced 1 February 2021. Shares have been issued at $0.001 per share. As the Company undertook a 10:1 share consolidation in July 2021, subsequent shares will be issued at $0.01 per share.

Pursuant to a General Meeting held on 23 August 2013, the following 'Non-Executive Directors’ Remuneration Policy' with respect to remunerating non-executive directors of the Company for providing extra services on behalf of the Company or its business was approved. During the year this policy was extended to executive directors.

Any remuneration paid to a non-executive director must be reasonable given the circumstances of the Company and the responsibilities of the non-executive director;
Wherever practicable, the Company will obtain an independent quotation or estimate from an appropriate independent party in respect of those additional services;
If the non-executive director is an appropriate person to perform those additional services, the remuneration must be benchmarked against any such quotation or estimate obtained by the Company;
The Managing Director (or if absent, their delegate) must report to the Board on the budgetary impact to the Company of the proposed engagement of the non-executive director. Any engagement of a non-executive director to provide those additional services must be unanimously approved by all directors (other than the non-executive director providing services);
The non-executive director must report in writing to the Board at the completion of the additional services in such form as the Board may reasonably require;
All amounts paid to non-executive directors in respect of providing those additional services will be disclosed in the annual financial statements of the Company; and
The above policy also applies to entities associated with a director, where the additional services of the non-executive director are provided through that entity.

Executive remuneration

The Board is responsible for determining remuneration and nomination policies in respect of KMP. In establishing such policies, the Board is guided by external remuneration surveys and industry practices, commensurate with the scale and size of the Company’s operations. The Chairman does not make any decisions relating to his own remuneration. The remuneration levels are reviewed regularly to ensure the Company remains competitive as an employer.

Executive remuneration and reward framework

The executive remuneration and reward framework has four components which comprise an executive's total remuneration:

base pay and non-monetary benefits;
consulting fees;
share-based payments; and
other remuneration such as superannuation and long service leave.

Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, is reviewed annually by the Board based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remuneration levels.

Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive.

The short-term incentives ('STI') program is designed to align the targets of the business units with the targets of those executives in charge of meeting those targets. STI payments may be granted to executives based on specific annual targets and key performance indicators (KPIs) being achieved. KPIs include profit contribution, customer satisfaction, leadership contribution and project management. There were no STI's granted during the year.

The long-term incentives ('LTI') include long service leave and shares or options.

Consolidated entity performance and link to remuneration

Remuneration for certain individuals is directly linked to performance of the consolidated entity.

Use of remuneration consultants

A remuneration consultant was not used during the year ended 30 June 2021.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Voting and comments made at the Company's 2020 Annual General Meeting ('AGM')

At the 2020 AGM, 96.2% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2020. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.

The function of reviewing and approving director and executive remuneration is undertaken by the Board.

It is relevant to the discussion of remuneration that the consolidated entity is experiencing a substantial growth in the scope and complexity of its operations commensurate with implementation of its major strategic projects.

The Board has taken a number of steps recently to ensure that the Company’s remuneration structures remain appropriate in the context of both the Company’s operations and the level of responsibility and accountability that resides within director and executive roles. This activity has included:

All executive position descriptions, against which remuneration and performance are assessed, were updated in the financial year 2020 to reflect and respond to changes in core functions and responsibilities of these roles. These will be reviewed again in the following financial year. Inclusive in this process is a review and assessment of remuneration.
The Company, under guidance of the Board, periodically reviews its current and future staffing structure and executive leadership which supports the Company’s strategic plan.
Any planned or additional executive recruitment programs will continue to be implemented in consultation with professional recruitment firms who, as part of this service, benchmark employee salaries to specific industries and broader market measures.

Throughout the financial year 2021, the Board has continued to assess its need for additional skilled resources and to measure this need against the additional costs of further appointments.

The Board will continue to review and assess its practices in this regard and ensure that it maintains the quality and depth of resources needed to execute its strategic plan.

The Board is confident that the Company's remuneration levels appropriately balance the need to pay competitive remuneration to attract quality personnel to a company of this nature, and retain them, against the Company's philosophy of "frugal innovation". This is a difficult balance to strike and the Board will continue to review it.

Details of remuneration

The KMP of the consolidated entity during the current financial year consisted of the following persons:

Glenn Fozard - Managing Director
Ashley Moore - Executive Director and Chief Engineer
James Blackburn - Non-Executive Director
Neil O’Keefe - Non-Executive Director (appointed 9 December 2020)
David Smith - Non-Executive Director (retired 15 January 2021)
Adam Giles - Company Secretary (appointed 17 July 2020)

Amounts of remuneration

Details of the remuneration of the KMP of the consolidated entity are set out in the following tables.

2021 Non-Executive Directors: James Blackburn(iii) Neil O’Keefe(iv) David Smith(iv) Executive Directors: Glenn Fozard(i) Ashley Moore(ii) Other KMP: Martin Hill Adam Giles(iv)	Short-term benefits Cash salary Consulting Non- and fees fees monetary $ $ $ 36,362 - - - 17,674 - 24,932 - - 39,800 192,647 - 39,817 160,606 - - 193,718 - - 140,385 -	Short-term benefits Cash salary Consulting Non- and fees fees monetary $ $ $ 36,362 - - - 17,674 - 24,932 - - 39,800 192,647 - 39,817 160,606 - - 193,718 - - 140,385 -	Short-term benefits Cash salary Consulting Non- and fees fees monetary $ $ $ 36,362 - - - 17,674 - 24,932 - - 39,800 192,647 - 39,817 160,606 - - 193,718 - - 140,385 -	Post- employment benefits Super- annuation $ 3,454 - 2,368 - - - -	Long-term benefits Leave Benefits $ - - - - - - -	Share- based payments Equity- settled $ 10,417 10,417 - 16,151 10,417 14,393 -	Total $ 50,233 28,091 27,300 248,598 210,840 208,111 140,385
	140,911	705,030	-	5,822	-	61,795	913,558

Environmental Clean Technologies Limited Directors' report 30 June 2021

(i) Glenn Fozard's remuneration consists of a fixed fee for being a director and consulting fees for the provision of executive services excluding GST.
(ii) Ashley Moore's remuneration consists of a fixed fee for being a director and consulting fees for the provision of executive services, excluding GST.
(iii) James Blackburn's remuneration consists of a fixed fee.
(iv) Represents remuneration up to time of retirement or from date of appointment as applicable.

2020 Non-Executive Directors: David Smith James Blackburn(iii) Barry Richards Executive Directors: Glenn Fozard(i) Ashley Moore(ii) Other KMP: Martin Hill	Short-term benefits Cash salary Consulting Non- and fees fees monetary $ $ $ 49,726 - - 93,052 - - 8,333 - - 55,500 155,953 - 38,052 117,320 - 60,882 102,492 -	Short-term benefits Cash salary Consulting Non- and fees fees monetary $ $ $ 49,726 - - 93,052 - - 8,333 - - 55,500 155,953 - 38,052 117,320 - 60,882 102,492 -	Short-term benefits Cash salary Consulting Non- and fees fees monetary $ $ $ 49,726 - - 93,052 - - 8,333 - - 55,500 155,953 - 38,052 117,320 - 60,882 102,492 -	Post- employment benefits Super- annuation $ 4,724 8,840 - - 3,615 5,784	Long-term benefits Leave Benefits $ - 17,273 - - 57,705 787	Share- based payments Equity- settled $ - - - - - -	Total $ 54,450 119,165 8,333 211,453 216,692 169,945
	305,545	375,765	-	22,963	75,765	-	780,038

(i) Glenn Fozard's remuneration consists of a fixed fee for being a director, consulting fees for the provision of executive services excluding GST.
(ii) Ashley Moore's remuneration consists of a fixed fee for being a director, consulting fees for the provision of executive services, excluding GST, and a 2% interest discount on his ELF loans. Leave benefits paid are the payout of accrued leave entitlements when employment ceased.
(iii) James Blackburn's remuneration consists of a fixed fee.

For the financial year, the proportions of fixed remuneration and remuneration that is linked to performance are as follows:

For the financial year, the proportions of fixed re	muneration and remuneration that is	linked to perform	ance are as follo	ws:
	Fixed	Fixed
	remuneration	remuneration	At risk - LTI	At risk - LTI
Name	2021	2020	2021	2020
Non-Executive Directors:
James Blackburn	100%	100%	-	-
Neil O'Keefe	100%	-	-	-
David Smith	100%	100%	-	-
Barry Richards	-	100%	-	-
Executive Directors:
Glenn Fozard	100%	100%	-	-
Ashley Moore	100%	100%	-	-
Other KMP:
Martin Hill	100%	100%	-	-
Adam Giles	100%	100%	-	-

Service agreements

The Company has service agreements with Glenn Fozard and Ashley Moore. The new agreements are capable of being terminated. The terms of the contracts will be for two years although the Company retains the right to terminate a contract immediately by making payment equal to the period in lieu of notice. KMP have no entitlement to termination payments in the event of removal for misconduct.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Directors' report 30 June 2021
Name:	Glenn Fozard
Title:	Managing Director
Agreement commenced:	1 July 2020
Term of agreement:	2 years
Details:	Executive remuneration consists of a fixed fee of $50,000 for being a director and consulting
	fees for executive duties which are capped at $17,500 plus GST per month. No leave or
	superannuation is payable under this contract. The contract may be terminated by either
	party providing three months written notice.
Name:	Ashley Moore
Title:	Executive Director & Chief Engineer
Agreement commenced:	1 July 2020
Term of agreement:	2 year
Details:	Executive remuneration consists of a fixed fee of $50,000 for being a director and consulting
	fees for executive duties which are capped at $17,500 plus GST per month. No leave or
	superannuation is payable under this contract. The contract may be terminated by either
	party providing three months written notice.

Share-based compensation

Issue of shares

Details of shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2021 are set out below. At the Company’s 2020 AGM, directors were each granted 25,000,000 shares at $0.001 per share in lieu of the payment of $25,000 in cash for directors’ fees. All shares were issued and one twelfth of the shares vest each month from 1 February 2021 until 31 January 2022 with the remaining balance held in escrow until vesting. As at 30 June 2021 each director had 14,583,334 shares in escrow.

14,583,334 shares in escrow.
		Shares
Name	Grant date	vested	Issue price	$
Glenn Fozard	15 January 2021	10,416,666	$0.0010	10,416
Ashley Moore	15 January 2021	10,416,666	$0.0010	10,416
James Blackburn	15 January 2021	10,416,666	$0.0010	10,416
Neil O'Keefe	15 January 2021	10,416,666	$0.0010	10,416

During the year the following options were transferred to KMP as part settlement of invoices for consulting services. These options were transferred from an Equity Lending Facility. The terms and conditions of these options are as follows:

		Number of		Total value
Name	Grant date	options issued	Fair value	$
Glenn Fozard	30 June 2021	1,022,221	$0.00111	1,135
Martin Hill	28 May 2021	3,527,766	$0.00108	3,810

Options granted are ECTOE options with an exercise price of $0.003 and expiry date of 17 February 2023. These options were granted as part settlement of a invoice for consulting services.

Performance rights

There were no performance rights over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2021.

Additional information

The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below:

	2021	2020	2019	2018	2017
	$	$	$	$	$
Income	1,302,940	3,057,154	1,760,773	1,838,563	2,392,705
EBITDA	(1,450,516)	(1,071,920)	(8,065,329)	(4,052,141)	(1,273,462)
EBIT	(1,771,325)	(1,458,528)	(8,666,333)	(4,930,085)	(3,971,071)
Loss after income tax	(1,869,725)	(2,067,973)	(8,903,016)	(5,133,685)	(4,357,282)

Environmental Clean Technologies Limited Directors' report 30 June 2021

The factors that are considered to affect total shareholders return ('TSR') are summarised below:

	2021	2020	2019	2018	2017
Share price at financial year end ($)	0.002	0.001	0.013	0.012	0.012
Basic loss per share (cents per share)	(0.023)	(0.047)	(0.250)	(0.151)	(0.154)

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 given that the Company is essentially still engaged in a research and development phase of operations.

Additional disclosures relating to key management personnel

Shareholding

The number of shares in the Company held during the financial year by each director and other members of KMP of the consolidated entity, including their personally related parties, is set out below:

Ordinary shares Glenn Fozard(i),(ii) Ashley Moore(ii),(iii) James Blackburn Neil O'Keefe Martin Hill(i) Adam Giles	Balance at the start of the year 100,000,000 121,185,065 - 776,328 6,900,000 42,780,935	Received as part of remuneration 10,416,666 10,416,666 10,416,666 10,416,666 - -	Additions 3,066,666 18,750,000 - - 10,583,300 -	Other movements (40,000,000) (101,483) - - - -	Balance at the end of the year 73,483,332 150,250,248 10,416,666 11,192,994 17,483,300 42,780,935
	271,642,328	41,666,664	32,399,966	(40,101,483)	305,607,475

(i) Additions were as a result of settlement of consulting fee invoices from shares previously held in an ELF.

(ii) Other movements were the forfeiture of shares that were held as security for borrowings via an ELF that the directors chose not to repay.

(iii) Additions were as a result of participation in the Company’s share purchase plan on the same terms and conditions as other shareholders.

Option holding

The number of options over ordinary shares in the Company held during the financial year by each director and other members of KMP of the consolidated entity, including their personally related parties, is set out below:

Options over ordinary shares Glenn Fozard Ashley Moore Martin Hill Adam Giles	Balance at the start of the year 20,000,000 15,600,000 2,000,000 9,098,078	Issued 1,022,221 - 3,527,766 -	Exercised - - - -	Expired/ forfeited/ other - - - -	Balance at the end of the year 21,022,221 15,600,000 5,527,766 9,098,078
	46,698,078	4,549,987	-	-	51,248,065

All options additions during the financial year were from the settlement of consulting invoices from shares previously held in an ELF .

ELF Loans

In July 2017 Glenn Fozard was advanced $450,000 under the ELF for the exercise of 50,000,000 options at $0.009 each. Principal paid during the year was $nil (2020: $20,952). Interest paid during the year was $nil (2020: $13,146). Loans secured by 40,000,000 shares defaulted as at 31 July 2020 as the loans were not fully repaid.

In July 2017 Ashley Moore was advanced $339,249 under the ELF for the exercise of 36,073,950 options at $0.009 each and 972,223 options at $0.015 each. Principal paid during the year was $nil (2020: $nil). Interest paid during the year was $nil (2020: $nil). A loan secured by 972,223 shares defaulted as at 31 July 2020 as the loan was not fully repaid. At the end of the loan term, principal payments totalling $13,061 had been made by Mr Moore on this loan. On terms and conditions available to all ELF borrowers, this resulted in the release of 870,740 shares from holding lock and the forfeiture of 101,483 shares.

Environmental Clean Technologies Limited Directors' report 30 June 2021

Other transactions with key management personnel and their related parties

During the year, Ashley Moore agreed to participate in the share purchase plan on the same terms and conditions available to all shareholders.

The Company entered into a rental agreement for a new forklift with Mr Fozard in the prior financial year. The agreement was for a 12 month term with monthly payments of $750 per month plus GST which has since been extended on a month-to-month basis. This arrangement replaced a prior rental agreement for a less suitable and older forklift with another supplier which was costing the Company $753 per month.

This concludes the remuneration report, which has been audited.

Shares under option

Unissued ordinary shares under option are as follows:

		Exercise	Number
	Expiry date	price	under option
Listed ordinary options (ECTOE)	17 February 2023	$0.0030	1,920,206,487

The options table above does not include the in-substance issue of options (ELF Options) relating to arrangements involving the issue of shares financed by limited recourse loans. Accounting for such as an in-substance issue of options is a requirement of accounting standards.

No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate.

Shares under performance rights

There were no unissued ordinary shares of Environmental Clean Technologies Limited under performance rights outstanding at the date of this report.

Shares or interests issued on the exercise of options

In the previous financial year, shares were issued that were financed by the ELF of ECT Finance Ltd. The details of this facility are disclosed within the Annual Report (refer to note 18 and note 19 of the financial statements for details). Shares issued under the ELF are held as security and remain restricted from trading by the shareholder until the debt issued to the respective shareholder has been repaid and the shares released. These shares are accounted for as the in-substance issue of options for accounting purposes.

During the year ended 30 June 2021, a total of 310,384,602 (2020: 41,666,666) shares were released after having been held within the ELF as security. A further 916,407,834 shares were forfeited by shareholders as their ELFs were not repaid by the expiry date of 31 July 2020.

On 10 May 2020 the Company commenced a new ELF using the remaining 750,000,000 shortfall shares from the non-renounceable rights issue. The term of this ELF was 1 year and had been extended by a further year. Since the commencement of this ELF 274,679,966 shares have been released to suppliers in lieu of payments in cash. Two of these suppliers are Glenn Fozard and Martin Hill who are KMP of the Company (refer KMP disclosures above). A total of 475,320,034 shares were held as security for this ELF at 30 June 2021. As the Company undertook a 10:1 share consolidation subsequent to the end of the financial year, total shares held as security for the ELFs as at the date of this report is 47,532,005.

The 916,407,834 shares were subsequently used as security for 4 new ELFs commencing 15 January 2021 for a term of 2 years. At the Company’s AGM the issue of a further 383,592,166 shares was approved which would also be used as security for these ELFs. Total shares held as security for these ELFs on 30 June 2021 was 1,300,000,000 (130,000,000 shares post share consolidation and as the date of this report).

As at 30 June 2021, there were therefore 1,775,320,034 (177,532,005 shares post share consolidation as at the date of this report) (2020: 55,000,000) shares on issue and held as security where monies (principal and interest loans) are owing to the Company. Should loans remain unpaid at expiry, ECTF has recourse to those shares held as security and may settle the outstanding debt with the borrower via a number of mechanisms including but not limited to a) disposal of shares on the market with the proceeds used to repay the loan and b) selective buy-back in exchange for debt forgiveness by the parent company.

Shares issued on the exercise of performance rights

There were no ordinary shares of Environmental Clean Technologies Limited issued on the exercise of performance rights during the year ended 30 June 2021 and up to the date of this report.

Indemnity and insurance of officers

The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith.

Environmental Clean Technologies Limited Directors' report 30 June 2021

During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium.

Indemnity and insurance of auditor

The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

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

There were no non-audit services provided during the financial year by the auditor.

Officers of the Company who are former partners of BDO Audit Pty Ltd

There are no officers of the Company who are former partners of BDO Audit Pty Ltd.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 follows this Directors' report.

Auditor

BDO Audit Pty Ltd continues in office in accordance with the Corporations Act 2001.

This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.

On behalf of the directors

==> picture [88 x 56] intentionally omitted <==

_________ Glenn Fozard Executive Chairman

27 September 2021 Melbourne

Collins Square, Tower Four Level 18, 727 Collins Street Melbourne VIC 3008 GPO Box 5099 Melbourne VIC 3001 Australia

Tel: +61 3 9603 1700 Fax: +61 3 9602 3870 www.bdo.com.au

==> picture [78 x 31] intentionally omitted <==

DECLARATION OF INDEPENDENCE BY KATHERINE ROBERTSON TO THE DIRECTORS OF ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED

As lead auditor of Environmental Clean Technologies Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been:

No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Environmental Clean Technologies Limited and the entities it controlled during the period.

==> picture [155 x 30] intentionally omitted <==

Katherine Robertson Director

BDO Audit Pty Ltd

Melbourne, 27 September 2021

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

Environmental Clean Technologies Limited Contents 30 June 2021

Environmental Clean Technologies Limited Contents 30 June 2021
Statement of profit or loss and other comprehensive income	20
Statement of financial position	21
Statement of changes in equity	22
Statement of cash flows	23
Notes to the financial statements	24
Directors' declaration	58
Independent auditor's report to the members of Environmental Clean Technologies Limited	59
Shareholder information	63

General information

The financial statements comprise those of Environmental Clean Technologies Limited as a consolidated entity consisting of Environmental Clean Technologies Limited ('the Company') and the entities it controlled at the end of, or during, the year (together referred to as 'the consolidated entity'). The financial statements are presented in Australian dollars, which is the consolidated entity's functional and presentation currency.

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

388 Punt Road South Yarra, VIC, 3141

Australia

A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 September 2021. The directors have the power to amend and reissue the financial statements.

Environmental Clean Technologies Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2021

Note Revenue 4 Other income 5 Interest revenue calculated using the effective interest method Total income Expenses Corporate costs Engineering and pilot plant costs Remeasurement of financial liabilities 6 Depreciation and amortisation expense 6 Employee benefits expense 6 Sales and marketing Finance costs 6 Legal costs Occupancy expense Travel and accommodation Impairment of receivables Loss on debt extinguishment 6 Write-off of assets Total expenses Loss before income tax expense Income tax expense 7 Loss after income tax expense for the year attributable to the owners of Environmental Clean Technologies Limited 20 Other comprehensive income for the year, net of tax Total comprehensive loss for the year attributable to the owners of Environmental Clean Technologies Limited Basic loss per share 32 Diluted loss per share 32	Consolidated 2021 2020 $ $ - 87,454 1,298,452 2,964,770 4,488 4,930	Consolidated 2021 2020 $ $ - 87,454 1,298,452 2,964,770 4,488 4,930
	1,302,940	3,057,154
	(1,466,058) (411,867) (470,744) (320,809) (125,860) (107,284) (102,888) (80,863) (68,996) (17,296) - - -	(1,403,054) (754,783) 53,073 (386,608) (664,634) (145,459) (614,375) (117,165) (211,018) (46,117) (109,668) (664,297) (61,022)
	(3,172,665)	(5,125,127)
	(1,869,725) -	(2,067,973) -
	(1,869,725) -	(2,067,973) -
	(1,869,725)	(2,067,973)
	Cents (0.023) (0.023)	Cents (0.047) (0.047)

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

Environmental Clean Technologies Limited Statement of financial position As at 30 June 2021

Note Assets Current assets Cash and cash equivalents Trade and other receivables 8 Inventories Other Total current assets Non-current assets Property, plant and equipment 9 Right-of-use assets 10 Intangibles 11 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 12 Borrowings 13 Lease liabilities Provisions 14 Other financial liabilities 15 Total current liabilities Non-current liabilities Borrowings 16 Lease liabilities Provisions Other financial liabilities 17 Total non-current liabilities Total liabilities Net assets Equity Issued capital 18 Reserves 19 Accumulated losses 20 Total equity	Consolidated 2021 2020 $ $ 1,014,490 1,104,781 2,276,858 966,669 84,703 - 49,102 58,413	Consolidated 2021 2020 $ $ 1,014,490 1,104,781 2,276,858 966,669 84,703 - 49,102 58,413
	3,425,153	2,129,863
	2,551,603 636,702 254,250	293,370 782,296 -
	3,442,555	1,075,666
	6,867,708	3,205,529
	1,757,005 1,285,558 147,871 6,079 3,857	125,582 28,930 122,827 - 227
	3,200,370	277,566
	- 547,324 517 1,797,532	26,519 689,889 210 1,330,418
	2,345,373	2,047,036
	5,545,743	2,324,602
	1,321,965	880,927
	81,091,892 118,285 (79,888,212)	78,605,405 495,698 (78,220,176)
	1,321,965	880,927

The above statement of financial position should be read in conjunction with the accompanying notes

Environmental Clean Technologies Limited Statement of changes in equity For the year ended 30 June 2021

Issued capital $ 73,686,351 - -	Reserves $ 444,005 - -	Accumulated losses $ (76,152,203) (2,067,973) -	Total equity $ (2,021,847) (2,067,973) -
- 180,021 4,739,033 -	- - - 51,693	(2,067,973) - - -	(2,067,973) 180,021 4,739,033 51,693
78,605,405	495,698	(78,220,176)	880,927
Issued capital $ 78,605,405 - -	Reserves $ 495,698 - -	Accumulated losses $ (78,220,176) (1,869,725) -	Total equity $ 880,927 (1,869,725) -
- 41,667 570,222 1,874,598 - -	- 118,285 (570,222) - (201,689) 276,213	(1,869,725) - - - 201,689 -	(1,869,725) 159,952 - 1,874,598 - 276,213
81,091,892	118,285	(79,888,212)	1,321,965

The above statement of changes in equity should be read in conjunction with the accompanying notes

Environmental Clean Technologies Limited Statement of cash flows For the year ended 30 June 2021

Note Cash flows from operating activities Receipts from customers (inclusive of GST) Research and development tax incentive (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Government grants (COVID-19) Interest received Interest and other finance costs paid Net cash used in operating activities 29 Cash flows from investing activities Payments for property, plant and equipment 9 Payments for intangibles 11 Insurance recoveries Net cash from/(used in) investing activities Cash flows from financing activities Proceeds from issue of shares 18 Payment of equity raising costs 18 Proceeds from issue of options Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year	Consolidated 2021 2020 $ $ 37,389 133,697 899,612 1,511,621 (1,792,770) (3,329,633) 113,283 83,094 4,488 4,622 (102,888) (210,316)	Consolidated 2021 2020 $ $ 37,389 133,697 899,612 1,511,621 (1,792,770) (3,329,633) 113,283 83,094 4,488 4,622 (102,888) (210,316)
	(840,886)	(1,806,915)
	(2,821,877) - 593,012	(275,234) (48,369) 1,882,130
	(2,228,865)	1,558,527
	1,894,600 (20,002) - 1,259,070 (28,930) (125,278)	1,770,544 - 51,693 1,188,270 (1,958,502) (86,060)
	2,979,460	965,945
	(90,291) 1,104,781	717,557 387,224
	1,014,490	1,104,781

The above statement of cash flows should be read in conjunction with the accompanying notes

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. 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.

New or amended Accounting Standards and Interpretations adopted

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Going concern

For the financial year ended 30 June 2021, the consolidated entity had an operating net loss after tax of $1,869,725 (2020: $2,067,973), net cash outflows from operating activities of $840,886 (2020: net cash outflows of $1,806,915), net current assets at the reporting date of $224,783 (2020: net current assets of $1,852,297) and net assets of $1,321,965 (2020: net assets of $880,927). The consolidated entity currently does not have a material source of revenue and is reliant on receipt of research and development tax incentives, ELF loan repayments, equity capital or loans from third parties to meet its operating costs.

The ability to continue as a going concern is dependent upon a number of factors, one being the continuation and availability of funds. The reliance on future funding described above indicates a material uncertainty that may cast significant doubt about the consolidated entity's ability to continue as a going concern. The financial statements have been prepared on the basis that the consolidated entity is a going concern which contemplates the continuity of its business, 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:

utilisation of its current cash resources;
drawdowns against expected new lending facilities;
principal paid and interest earned from current or new ELF debt arrangements (treated as capital injections);
issuance of the Company's securities under ASX Listing Rule 7.1;
government grants; and
revenue from Bacchus Marsh once the rebuild is completed.

Based on the above information and cash flow forecasts prepared, the directors are of the opinion that the consolidated entity is well positioned to meet its objectives and obligations going forward and therefore that the basis upon which the financial statements are prepared is appropriate in the circumstances.

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.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for forprofit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').

Historical cost convention

The financial statements have been prepared under the historical cost convention except for financial assets and liabilities at fair value through profit or loss, derivative financial instruments and contingent consideration that has been measured at fair value.

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity'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.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Reclassifications of prior information

Comparatives

Certain comparatives have been reclassified to align with current period presentation. There was no effect on the loss for the period, net asset position or cash flows.

Differences in ASX Appendix 4E reported cash flows

Certain cash flows that were included in the Consolidated Statement of Cash Flows of the Appendix 4E Preliminary Final Report lodged with the ASX for the year ended 30 June 2021 which were classified as ‘Payments for property plant and equipment’ have been reclassified to ‘Payments to suppliers and employees’ to provide a more accurate presentation of the consolidated entity's cash flows. As a result of this reclassification, when compared to the Appendix 4E, ‘Payments for property plant and equipment’ has decreased by $824,829 and ‘Payments to suppliers and employees’ has increased by the same amount.

Parent entity information

In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 27.

Principles of consolidation

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 2021 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 'consolidated entity'.

Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity 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 consolidated entity.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and noncontrolling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

Operating segments

Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.

Foreign currency translation

The financial statements are presented in Australian dollars, which is Environmental Clean Technologies Limited's functional and presentation currency.

Foreign currency transactions

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 financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Revenue recognition

The consolidated entity recognises revenue as follows:

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability.

Sale of goods

Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery.

Rendering of services

Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed price or an hourly rate.

Research and development tax incentive

The consolidated entity has adopted the income approach to accounting for research and development tax offsets pursuant to AASB 120 'Accounting for Government Grant and Disclosure of Government Assistance' whereby the incentive is recognised in profit or loss on a systematic basis over the periods in which the consolidated entity recognises the eligible expenses.

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Other revenue

Other revenue is recognised when it is received or when the right to receive payment is established.

Government subsidies (COVID-19)

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the consolidated entity will comply with all attached conditions. Government grants are recognised in profit or loss over the period necessary to match with the costs that they are intended to compensate. The consolidated entity received government grants as a result of COVID-19 during the year. The grants are recognised as other income and are included in note 5.

Research and development expenditure

Expenditure in respect of research and development is charged to profit or loss as incurred. Development costs will be capitalised if and when: it is probable that the project will be a success considering its commercial and technical feasibility; the consolidated entity is able to use or sell the asset; the Group has sufficient resources and intent to complete the development; and its costs can be measured reliably.

Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

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

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

Environmental Clean Technologies Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'stand-alone taxpayer' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group.

In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary 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. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.

Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, 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.

Trade and other receivables

A receivable for the research and development tax incentive receivable is recognised at the time that the eligible expenditure has been incurred and the consolidated entity has reasonable certainty that the amounts will be received.

Inventories

Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Property, plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

For the purposes of establishing the expected useful life, assets are defined as either ‘commercial’ or ‘research and development’.

Depreciation is charged to write off the net cost of each item of property, plant and equipment over its expected useful life. Depreciation of plant and equipment is calculated on a diminishing value basis whilst depreciation of furniture and fittings and office equipment is calculated on a straight-line basis. The useful life of each class of asset is as follows:

Plant and equipment 3 to 10 years - Furniture and fittings 3 years - Office equipment 3 years

Depreciation of research and development assets is calculated on a straight line basis to write off the net cost of each item of plant and equipment over its expected useful life within a defined research and development program context as follows:

Coldry research and development plant and equipment upgrades

3 - 10 years

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

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.

Right-of-use assets

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.

The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

Intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Research and development

Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity has sufficient resources and intent to complete the development; and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years.

Intellectual property

Significant costs associated with intellectual property are deferred and amortised on a straight-line basis over the period of their expected benefit being their estimated useful life of 20 years.

Right of access - mining

Costs in relation to payments to a supplier allowing the supplier to upgrade mining plant in return for the secure supply of raw material to the consolidated entity are accounted for as the acquisition of a right of access which will be amortised from the date of commencement of supply for a period of five years being the term of the contract.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Trade and other payables

Trade and other payables represents liabilities for goods and services provided to the consolidated entity 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 30 days of recognition.

Borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

Lease liabilities

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Variable lease payments include rent concessions in the form of rent forgiveness or a waiver as a direct consequence of the COVID-19 pandemic and which relate to payments originally due on or before 30 June 2021.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

Financial liabilities - deferred and contingent consideration

Deferred and contingent consideration liabilities are initially recognised at fair value. At each reporting date, the deferred consideration liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a corresponding gain or loss to profit or loss.

Finance costs

Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred, including interest on short-term and long-term borrowings. The unwinding of the discount on the present value of future cash flows associated with deferred consideration and earn-out provisions is recognised as finance costs.

Employee benefits

Short-term employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

Other long-term employee benefits

The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date 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 are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Share-based payments

Equity-settled share-based compensation benefits are provided to employees.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price.

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.

For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.

Issued capital

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.

Business combinations

The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. There were no business combinations occurring during the current or comparative periods.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 1. Significant accounting policies (continued)

Earnings per share

Basic earnings per share

Basic 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 than 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.

Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the 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 tax authority is included in other receivables or other payables in the 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 tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.

New Accounting Standards and Interpretations not yet mandatory or early adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2021. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.

Note 2. Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.

Coronavirus (COVID-19) pandemic

Fair value measurement hierarchy

The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective.

The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs.

Estimation of useful lives of assets

The consolidated entity estimates the effective life of intellectual property to be 20 years and amortises these assets 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.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 2. Critical accounting judgements, estimates and assumptions (continued)

Impairment of non-financial assets

The consolidated entity assesses impairment of non-financial 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 of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.

Income tax

The consolidated entity is subject to income taxes in Australia. The consolidated entity 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.

Earn-out provision - Coldry

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 using a discount rate of 22% (2020: 33%). In determining the present value of the liability, estimates of expected timing and quantities of production are taken into consideration.

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Lease term

The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated entity's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances.

Deferred consideration - Matmor

The deferred consideration liability has been calculated based on discounted cash flow projections out to February 2023 using a discount rate of 30% (2020: 26%). The projections used in calculating the liability include consideration of events as disclosed at note 17 that would trigger a cash outflow pursuant to the deferred consideration structure. At each reporting date, the deferred consideration liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a corresponding gain or loss to profit or loss. The increase in the liability resulting from the passage of time or the change in discount rate is recognised as a finance cost.

Research and development tax offset

The consolidated entity adopts the income approach to accounting for the research and development tax offset pursuant to AASB 120 'Accounting for Government Grants and Disclosure of Government Assistance'. The directors have concluded that the consolidated entity has developed sufficient systems and knowledge to allow reasonable assurance to be obtained with respect to the measurement and recognition of tax rebates receivable at the time of incurring eligible expenses.

Note 3. Operating segments

Identification of reportable operating segments

The consolidated entity's operating segment is based on the internal reports that are reviewed and used by the Board of Directors (being the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. The consolidated entity operates predominantly in the environmental and energy industry, and a single geographic segment being Australia.

The CODM reviews operating performance of the consolidated entity based on management reports that are prepared. At regular intervals, the CODM is provided management information at a consolidated entity level for the consolidated entity’s cash position, the carrying values of intangible assets and a consolidated entity cash forecast for the next 12 months of operation. On this basis, no segment information is included in these financial statements.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 4. Revenue

Sales of product Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Major product lines Coldry Geographical regions Australia Timing of revenue recognition Goods transferred at a point in time Note 5. Other income	Consolidated 2021 2020 $ $ - 87,454	Consolidated 2021 2020 $ $ - 87,454
	Consolidated 2021 2020 $ $ - 87,454
	-	87,454
	-	87,454

Research and development tax incentive Insurance recoveries Government grants (COVID-19) Rent concessions (COVID-19) Other income Other income	Consolidated 2021 2020 $ $ 554,768 924,448 593,012 1,905,560 113,283 95,594 - 38,968 37,389 200	Consolidated 2021 2020 $ $ 554,768 924,448 593,012 1,905,560 113,283 95,594 - 38,968 37,389 200
	1,298,452	2,964,770

Research and development tax incentive

The Company has recognised a receivable related to the research and development tax incentive of $1,971,535 at 30 June 2021 (2020: $899,612) which relates to eligible expenditure. An amount of $1,416,766 of the incentive received or receivable has been deferred and offset against the cost of plant and equipment and intangible asset acquisitions. Refer note 9 and note 11.

Insurance recoveries

The consolidated entity received $593,012 of insurance proceeds during the year ended 30 June 2021 as a result of the fire which occurred at the Bacchus Marsh facility in 2019.

Government grants (COVID-19)

The consolidated entity received JobKeeper support payments as grants from the Australian Government during the year of $21,350 (2020: $6,000) which were passed on to eligible employees. These have been recognised as grant income in the periods in which the related employee benefits were recognised as an expense.

The consolidated entity recognised grants from the Australian Government amounting to $37,500 (2020: $89,594) as part of the government's ‘Boosting Cash Flow for Employers’ scheme. These amounts have been recognised as grant income on the basis that there was reasonable assurance that the Company would comply with any conditions attached.

Other government grants of $54,433 were received from the Victorian Government which related to a variety of activities.

Rent concessions (COVID-19)

Rent concessions represent the amount of rent that landlords agreed to waive at the Company’s Bacchus Marsh and South Yarra premises. There were no concessions received during the year.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 6. Expenses

Loss before income tax includes the following specific expenses: Depreciation Plant and equipment Office equipment Buildings right-of-use assets Total depreciation Amortisation Intellectual property - Waste-to-energy Total depreciation and amortisation Loss on settlement of debt Loss on conversion of securitised loans to equity (note 13) Loss on conversion of convertible notes to equity (note 13) Net loss on conversion of trade and other payables to equity Total loss on settlement of debt Remeasurement of financial liabilities Remeasurement of deferred consideration for Matmor assets Remeasurement of Coldry earn-out provision Loss on fair value remeasurement of convertible note derivatives Total remeasurement of financial liabilities Finance costs Interest and finance charges paid/payable on lease liabilities Interest and facility costs Capital raising costs Finance costs expensed Employee benefits expense Defined contribution superannuation expense Other employee benefits Total employee benefits expense	Consolidated 2021 2020 $ $ 163,624 177,255 3,833 5,536 153,352 155,448	Consolidated 2021 2020 $ $ 163,624 177,255 3,833 5,536 153,352 155,448
	320,809	338,239
	-	48,369
	320,809	386,608
	- - -	192,076 386,712 85,509
	-	664,297
	(55,055) 525,799 -	(295,513) 227,803 14,637
	470,744	(53,073)
	38,426 64,462 -	46,755 515,630 51,990
	102,888	614,375
	14,745 111,115	53,104 611,530
	125,860	664,634

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 7. Income tax expense

Income tax expense Deferred tax assets attributable to temporary differences Deferred tax assets attributable to carried forward tax losses Total deferred tax assets not recognised Aggregate income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax expense Tax at the statutory tax rate of 26% (2020: 27.5%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Repairs and maintenance Research and development Share based payments Non-taxable government grants Unrealised foreign exchange movements Sundry items Current year tax losses not recognised Current year temporary differences not recognised Income tax expense Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at 25% (2020: 26%)	Consolidated 2021 2020 $ $ 607,666 33,670 (62,944) (52,402) (544,722) 18,732	Consolidated 2021 2020 $ $ 607,666 33,670 (62,944) (52,402) (544,722) 18,732
	-	-
	(1,869,725)	(2,067,973)
	(486,129) (117,000) 1,048,692 113,403 (16,250) 2,006 -	(568,693) - 314,448 252,665 (17,188) - 36
	544,722 62,944 (607,666)	(18,732) 52,402 (33,670)
	-	-
	Consolidated 2021 2020 $ $ 25,460,418 25,225,732
	6,365,105	6,558,690

The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed.

The corporate tax rate applicable to base rate entities reduced from 27.5% to 26% for the 2020-21 income year and further reduces to 25% prospectively from the 2021-22 income year. The Company qualifies as a base rate entity as it has a turnover of less than $50 million and less than 80% of its assessable income is derived from base rate entity passive income. The Company has remeasured its deferred tax balances, and any unrecognised potential tax benefits arising from carried forward tax losses, based on the effective tax rate that is expected to apply in the year the temporary differences are expected to reverse or benefits from tax losses realised. The impact of the change in tax rate on deferred tax balances has been recognised as tax expense in profit or loss or as an adjustment to equity to the extent to which the deferred tax relates to items previously recognised outside profit or loss.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 7. Income tax expense (continued)

Deferred tax assets net of deferred tax liabilities not recognised Deferred tax assets not recognised comprises temporary differences attributable to: Employee benefits Accrued expenses Plant and equipment Finance costs Intangible assets Provision for earn-out (Coldry) Matmor liability Right-of-use asset Total deferred tax assets net of deferred tax liabilities not recognised	Consolidated 2021 2020 $ $ 1,715 58 43,790 8,250 (572,298) 213,458 45,219 54,590 2,141,995 2,259,757 393,056 271,137 (266,116) (266,329) 15,208 8,366	Consolidated 2021 2020 $ $ 1,715 58 43,790 8,250 (572,298) 213,458 45,219 54,590 2,141,995 2,259,757 393,056 271,137 (266,116) (266,329) 15,208 8,366
	1,802,569	2,549,287

The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised in the statement of financial position as the recovery of this benefit is uncertain.

Note 8. Current assets - trade and other receivables

Other receivables Research and development tax incentive receivable BAS receivable	Consolidated 2021 2020 $ $ - 67,057 1,971,535 899,612	Consolidated 2021 2020 $ $ - 67,057 1,971,535 899,612
	1,971,535	966,669
	305,323	-
	2,276,858	966,669

Allowance for expected credit losses

There were no allowances for expected credit losses on receivables recognised as at reporting date. Amounts written off as not recoverable during the year were $nil (2020: $109,668).

Note 9. Non-current assets - property, plant and equipment

Plant and equipment - at cost Less: Accumulated depreciation Fixtures and fittings - at cost Less: Accumulated depreciation Office equipment - at cost Less: Accumulated depreciation	Consolidated 2021 2020 $ $ 8,066,712 5,651,071 (5,516,730) (5,361,288)	Consolidated 2021 2020 $ $ 8,066,712 5,651,071 (5,516,730) (5,361,288)
	2,549,982	289,783
	12,102 (12,102)	12,102 (12,102)
	-	-
	43,338 (41,717)	41,471 (37,884)
	1,621	3,587
	2,551,603	293,370

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 9. Non-current assets - property, plant and equipment (continued)

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Plant and equipment $ 232,259 295,802 (61,023) (177,255)	Office equipment $ 6,261 2,862 - (5,536)	Total $ 238,520 298,664 (61,023) (182,791)
289,783 2,920,106 (1,221,016) 724,733 (163,624)	3,587 1,867 - - (3,833)	293,370 2,921,973 (1,221,016) 724,733 (167,457)
2,549,982	1,621	2,551,603

Land and buildings - right-of-use Less: Accumulated depreciation	Consolidated 2021 2020 $ $ 945,502 937,744 (308,800) (155,448)	Consolidated 2021 2020 $ $ 945,502 937,744 (308,800) (155,448)
	636,702	782,296

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Additions Reassessment of asset on lease extension Depreciation expense Balance at 30 June 2020 Reassessment of asset on change in terms Depreciation expense Balance at 30 June 2021	Land and buildings $ - 973,384 (35,640) (155,448)
	782,296 7,758 (153,352)
	636,702

During the year ended 30 June 2020, additions to the right-of-use assets during the year were $973,384 as a result of the adoption of AASB 16 on 1 July 2019. The asset was recognised at a value equivalent to the lease liability in accordance with the practical expedients for initial recognition provided for in AASB 16. An incremental borrowing rate of 5% was been adopted for the purposes of present value calculations.

Such assets represent the value of rights conveyed to the consolidated entity pursuant to its leases of land and buildings for its offices (remaining lease term, including option for extension of 60 months as at 30 June 2021) and pilot plant facility (remaining lease term, including option for extension of 46 months as at 30 June 2021).

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 11. Non-current assets - intangibles

Coldry IP - at cost Less: Accumulated amortisation Less: Impairment Waste-to-energy IP - at cost Less: Accumulated amortisation Right of access to mine	Consolidated 2021 2020 $ $ 9,600,000 9,600,000 (4,800,000) (4,800,000) (4,800,000) (4,800,000)	Consolidated 2021 2020 $ $ 9,600,000 9,600,000 (4,800,000) (4,800,000) (4,800,000) (4,800,000)
	-	-
	48,369 (48,369)	48,369 (48,369)
	-	-
	254,250	-
	254,250	-

Reconciliations of Intellectual property

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Additions Amortisation expense Balance at 30 June 2020 Additions R&D tax incentive offset Balance at 30 June 2021	Waste-to- energy $ - 48,369 (48,369)	Right of access - mining $ - - -	Total $ - 48,369 (48,369)
	- - -	- 450,000 (195,750)	- 450,000 (195,750)
	-	254,250	254,250

Coldry intellectual property ('Coldry IP')

The Coldry IP represents the patented technology related to Coldry acquired by the consolidated entity in 2009. It is the most advanced of all the Company’s technologies and while the asset has been fully impaired in order to comply with relevant accounting standards, the consolidated entity is of the view that this IP remains one of the its most valuable assets. Coldry is currently in the early stages of commercialisation and was being manufactured and sold prior to the fire at the plant. Coldry is also the cornerstone of all other technologies that the consolidated entity is developing such as Matmor, HydroMOR and COHgen. The consolidated entity expects, after further research and development, that Coldry will also be a pivotal part of the commercialising of the recently acquired waste-to-energy technology.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 11. Non-current assets - intangibles (continued)

The recognition and value of the Coldry IP, being an intangible asset, must be considered annually in accordance with the requirements of AASB 136 'Impairment of Assets'. An impairment test must be conducted if there are indicators of impairment, in which case the entity shall estimate the recoverable amount of the asset. The recoverable amount shall be the higher of the fair value less cost of sale and value in use. Assessments performed under AASB 136 using a value-in-use model did not support the carrying value of the Coldry IP. The asset was fully impaired in the year ended 30 June 2019.

Assessments of the Coldry IP fair value less cost of sale and the value in use will be conducted in future accounting periods. Should these assessments warrant a reversal of the impairment loss recognised in the year ended 30 June 2019, a revaluation increase will be recognised in accordance with relevant accounting standards.

Waste-to-energy intellectual property ('WTE IP')

On 2 July 2019, the consolidated entity entered into an Asset Sale Agreement to acquire the WTE IP technology known as the Catalytic De-Polymerisation Process (CDP) capable of producing automotive diesel from a range of inputs including various waste streams, such as construction wood-waste and end-of-life plastics. Completion date for the acquisition was 8 July 2019.

Right-of-access - mining

During the year, the Company entered into an agreement with Energy Australia to secure supply of lignite on favourable pricing terms. The consideration paid to Energy Australia will be used to upgrade its plant to facilitate product supply to the Company.

Note 12. Current liabilities - trade and other payables

Trade payables Other payables	Consolidated 2021 2020 $ $ 1,544,142 85,227 212,863 40,355	Consolidated 2021 2020 $ $ 1,544,142 85,227 212,863 40,355
	1,757,005	125,582

Refer to note 21 for further information on financial instruments.

Note 13. Current liabilities - borrowings

RnD Funding Loan Equipment finance	Consolidated 2021 2020 $ $ 1,259,039 - 26,519 28,930	Consolidated 2021 2020 $ $ 1,259,039 - 26,519 28,930
	1,285,558	28,930

Refer to note 21 for further information on financial instruments.

RnD Funding loan

The RnD Funding loan relates to a facility agreement that provided for funding based on the value of the anticipated AusIndustry Tax Incentive program for the respective financial year and is secured by the research and development tax rebate provided to the Company under the research and development tax incentive program.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 13. Current liabilities - borrowings (continued)

Securitised loan payable

2020 : ECT Finance Ltd (ECTF) obtained a debt facility of $1 million from Challenge Bricks & Roofing Pty Ltd in 2019 secured by granting a security interest over the ELF loans which are in the legal form of limited-recourse loans in the accounts of ECTF. The loan had a term of 12 months and incurred interest at the rate of 16.6% p.a. During the comparative year, the consolidated entity entered into an arrangement with the lender to settle outstanding debt in exchange for the issue of shares and options in the Company.

Carrying value of securitised loans at time of conversion to equity less fair value of shares in the Company issued to settle debt(i) less fair value of options in the Company issued to settle debt(i) Loss on conversion of debt to equity	Consolidated 2021 2020 $ $ - 643,832 - (614,638) - (221,270)	Consolidated 2021 2020 $ $ - 643,832 - (614,638) - (221,270)
	-	(192,076)

(i) There were 643,831,970 shares and 257,532,788 options (ECTOE) issued by the Company to settle the value of the securitised loans. The fair value of the shares issued was $0.001 being listed share price at the time of conversion. Options were valued at $0.0009 each using an option pricing model.

Convertible notes

2020 : The lender had issued ECTF a 12 month $800,000 debt instrument by way of a convertible note. Interest was calculated daily at the rate of 15% per annum on the outstanding balance. The lender had the option to convert the loan amount into fully paid Environmental Clean Technology (ECT) ordinary shares at any time of their choosing prior to expiry. The rate of conversion was set at the lesser of: $0.015 per ECT share; and a 20% discount to the 30-day volume weighted average price (VWAP) of ECT shares prior to requesting to convert the loan. The conversion feature of the notes represents a derivative financial liability which was accounted for separately. During the comparative year, the loan was fully converted into shares and options in the Company through the lender subscribing for shares and options in the non-renounceable rights issue.

Carrying value of conversion derivative at time of conversion Carrying value of convertible note liability at time of conversion less fair value of shares in the Company issued to settle debt(ii) less fair value of options in the Company issued to settle debt(ii) Loss on settlement of convertible notes	Consolidated 2021 2020 $ $ - 271,750 - 1,024,500 - (1,237,472) - (445,490)	Consolidated 2021 2020 $ $ - 271,750 - 1,024,500 - (1,237,472) - (445,490)
	-	(386,712)

(ii) There were 1,296,250,000 shares and 518,500,000 options (ECTOE) issued by the Company to settle the value of the convertible notes. The fair value of the shares issued was $0.001 being the listed share price at the time of conversion. Options were valued at $0.0009 each using an option pricing model.

Equipment finance

The assets pledged as security for the equipment finance are represented by the underlying assets subject to financing. Financing of certain plant and equipment is over terms ranging from 2 to 5 years at interest rates of approximately 6%.

Note 14. Current liabilities - provisions

	Consolidated	Consolidated
	2021	2020
	$	$
Annual leave	6,079		-

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 15. Current liabilities - other financial liabilities

Earn-out provision - Coldry Refer to note 17 for further details. Note 16. Non-current liabilities - borrowings

Consolidated	Consolidated
2021	2020
$	$
3,857		227

Equipment finance	Consolidated 2021 2020 $ $ - 26,519

Refer to note 21 for further information on financial instruments.

Assets pledged as security

The assets pledged as security for such borrowings is represented by the underlying assets subject to financing. Financing is over one item of plant and equipment and is repayable over a term of 5 years with an interest rates of approximately 6%.

Note 17. Non-current liabilities - other financial liabilities

Earn-out provision - Coldry Deferred consideration - Matmor	Consolidated 2021 2020 $ $ 1,507,894 985,725 289,638 344,693	Consolidated 2021 2020 $ $ 1,507,894 985,725 289,638 344,693
	1,797,532	1,330,418

Deferred consideration - Matmor

As part consideration for the acquisition of the Matmor asset, deferred consideration of $3.5 million of cash was incurred. The timing of paying consideration up to the cash amount of $3.5 million to Matmor Steel is dependent upon if, and when, issued options of the Company are exercised as well as the various milestones being met. The consideration will become payable through combination of any of the following triggers, and at the amounts attributed to each trigger, until the liability has been satisfied:

(a) 50% of proceeds received by the Company from exercise of ECT Options up to a cash amount of $1 million

(b) a minimum of 15% of proceeds received by the Company from exercise of ECT Options thereafter

(d) $500,000 on the Matmor Pilot Plant operations achieving an agreed steady state as well as conversion targets

(e) $1 million on signing of a binding contract for construction of a commercial scale Matmor plant

(f) first collection of revenue in any form from commercialisation of Matmor technology

At reporting date, a total of $2,000,215 (2020: $2,000,215) has been repaid under triggers (a) and (b) which were satisfied in prior years. In measuring the value of the liability, management have estimated when the remaining milestones will likely be achieved. At each reporting date, the deferred consideration liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a corresponding gain or loss to profit or loss. The increase in the liability resulting from the passage of time or the change in discount rate is recognised as a finance cost.

Earn-out provision - Coldry

The earn-out provision represents deferred consideration payable related to the acquisition of the Coldry intellectual property from the Maddingley Group. The consideration payable is calculated based on $0.50 per projected processed tonne of Coldry pellets and is discounted at a rate of 22% (2020: 33%). The total consideration payable is $3,000,000 plus applicable interest at the Reserve Bank of Australia cash rate.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 18. Equity - issued capital

Ordinary shares - fully paid Treasury shares ELF shares	2021 Shares 10,000,929,918 55,000,000 1,775,320,034	Consolidated 2020 2021 Shares $ 7,843,920,316 81,091,892 - - 1,757,112,470 -	Consolidated 2020 2021 Shares $ 7,843,920,316 81,091,892 - - 1,757,112,470 -	2020 $ 78,605,405 - -
	11,831,249,952	9,601,032,786	81,091,892	78,605,405

Ordinary share capital

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Details Date Balance 1 July 2019 Release of ELF shares 19 July 2019 Transfer from deferred share capital 27 July 2019 Release of ELF shares 13 August 2019 Release of ELF shares 12 September 2019 Release of ELF shares 13 November 2019 Issue of shares via non-renounceable rights issue 10 May 2020 Costs of non-renounceable rights issue 10 May 2020 Share based payments 10 May 2020 Balance 30 June 2020 Release of ELF shares 31 July 2020 Issue of new shares (director remuneration - vested) 4 March 2021 Issue of new shares (director remuneration - not vested) 4 March 2021 Release from ELF (share based payment) 16 March 2021 Issue of new shares (share placement) 15 April 2021 Release from ELF (share based payment) 30 April 2021 Release from ELF (share based payment) 21 May 2021 Release from ELF (share based payment) 26 May 2021 Issue of new shares (share purchase plan) 15 June 2021 Equity raising costs Balance 30 June 2021	Shares Issued Issue price 3,726,737,257 8,333,333 $0.0040 25,000,000 $0.0200 12,500,000 $0.0040 8,333,333 $0.0030 12,500,000 $0.0010 4,050,516,393 $0.0012 - $0.0000 - $0.0000 7,843,920,316 35,704,636 $0.0082 41,666,664 $0.0010 58,333,336 $0.0000 3,066,666 $0.0015 1,500,000,000 $0.0010 34,550,000 $0.0010 226,480,000 $0.0010 10,583,300 $0.0010 246,625,000 $0.0016 - $0.0000 10,000,929,918	$ 73,186,354 33,333 499,997 50,000 25,000 12,500 4,819,090 (80,057) 59,188
		78,605,405 294,009 41,667 - 4,600 1,500,000 34,550 226,480 10,583 394,600 (20,002)
		81,091,892

During the year, the Company raised $1,500,000 through a placement of 1,500,000,000 fully paid ordinary shares to sophisticated and professional investors at an issue price of $0.001 per share. For every three shares issued under the Placement, the Company issued one free attaching ECTOE option exercisable at $0.003 and expiring 17 February 2023.

ELF share capital

The Company's subsidiary, ECT Finance Ltd, has entered into limited recourse loans with option-holders (Participants) allowing them to obtain finance to exercise share options issued by the Company. Shares in ECT were issued on exercise of options in accordance with the Loan and Security Agreement (the Agreement) of the Equity Lending Facility (ELF).

All shares issued pursuant to the ELF and which are financed by limited recourse loans are considered, for accounting purposes, to be options issued. As a result, neither the value of the loans receivable, nor the value of shares issued, are recognised in the financial statements. Where the Company receives funds from Participants in the form of principal or interest, such amounts are treated as the receipt of option premium and recognised in the option reserve until the loan is settled (refer to note 19). Loans expire within 2-3 years from issue and interest is charged at commercial rates of interest.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 18. Equity - issued capital (continued)

Notwithstanding any other provision of the ELF, each Participant has a legal and beneficial interest in the ELF shares issued to them except that any dealings with those ELF shares by the Participant is restricted in accordance with the Agreement. ELF shares rank equally with all existing ordinary shares of the Company from the date of issue in respect of all rights issues, bonus issues, dividends and other distributions to, or entitlements of, ordinary shareholders. On termination of the loan facility, the Participant may elect to settle the loan or default on the loan and the Company would enforce the return of the ELF shares back to the Company, subject to requirements of the Corporations Act and as outlined in the Agreement signed by each borrower. Shares issued will only be recognised in equity after a participant's loan is repaid and shares are released to the holder.

The face value of limited recourse loans that had been issued at reporting date was $2,050,000 (2020: $13,386,069) and interest accrued on such loans was $85,050 (2020: $2,745,625).

As at reporting date there are 1,775,320,034 (2020: 1,757,112,470) shares held as security against these loans (ELF Shares) and therefore there are ELF Options of the same amount deemed to be on issue.

ELF share capital movements are as follows:

Opening balance of ELF shares on issue Shares released during year * ELF shares issued during year Transfers to Treasury Shares on expiry of ELF Loans Closing balance of ELF shares on issue	Consolidated 2021 2020 1,757,112,470 1,048,779,136 (310,384,602) (41,666,666) 1,300,000,000 750,000,000 (971,407,834) -	Consolidated 2021 2020 1,757,112,470 1,048,779,136 (310,384,602) (41,666,666) 1,300,000,000 750,000,000 (971,407,834) -
	1,775,320,034	1,757,112,470

Included in the release of shares are shares issued to suppliers to the Bacchus Marsh rebuild. The value of services was valued at $276,213 (note 19) and such amount was applied to the full settlement of ELF loans thereby releasing share capital. Refer to items designated as 'Release from ELF (share based payment)' in the ordinary share capital reconciliation table above.

During the year, the Company established an ELF with Kaai Capital who were appointed as the Lead Manager to the Company's share placement during that occurred during April and May 2020. The Company issued 350,000,000 shares to Kaai (or its nominees). The term of the ELF is 3 years, during which time Kaai may elect to pay the Company $700,000 (being a deemed price of $0.002 per Share) plus any interest and fees, subject to the terms of the ELF, to satisfy the loan and have the holding lock lifted. If the Lead Manager does not pay this amount by the due date, these Shares may be cancelled.

Issue date 31 July 2017; expiry date 31 July 2020	Exercise price	Movement	Balance
Opening balance at 1 July 2020	$0.012		952,112,470
Exercised during year ended 30 June 2021	$0.008	(35,704,636)	916,407,834
Expired during year ended 30 June 2021		(916,407,834)	nil
Issue date 31 July 2018; expiry date 31 July 2021	Exercise price	Movement	Balance
Opening balance 1 July 2020	$0.015		55,000,000
Termination of ELF (transfer to Treasury shares)		(55,000,000)	nil
Issue date 10 May 2020, expiry date 10 May 2023	Exercise price	Movement	Balance
Opening balance 1 July 2020	$0.001	750,000,000	750,000,000
Share based payments during year ended 30 June 2021	$0.001	(274,679,966)	475,320,034
Issue date 10 May 2020, expiry date 10 May 2023	Exercise price	Movement	Balance
Initial issue	$0.001	1,300,000,000	1,300,000,000

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 18. Equity - issued capital (continued)

Treasury share capital

Treasury shares are shares in the Company that are held by ECT Finance Ltd, a subsidiary of the Company, prior to their allocation to shareholders under equity loan funding (ELF) arrangements with shareholders.

Details Date Balance 1 July 2019 Balance 30 June 2020 Transfer from ELF expired loan arrangements 31 July 2020 Transfer from treasury shares to ELF 4 March 2021 Transfer from ELF expired loan arrangements 30 June 2021 Balance 30 June 2021	Shares Issue price - - 916,407,834 $0.0000 (916,407,834) $0.0000 55,000,000 $0.0000 55,000,000	$ -
		- - - -
		-

ECTOE Options on issue

Details of ECTOE options on issue during the year are as follows:

	Exercise price	Movement	Balance
Initial issue	$0.003	1,758,722,154	1,758,722,154
Share based payments during year ended 30 June 2020	$0.003	161,484,333	1,920,206,487
Options issued as part of ELF during year ended 30 June 2021	-	520,000,000	2,440,206,487
Share-based payments during year ended 30 June 2021	$0.001	106,658,654	2,546,865,141

Share buy-back

There is no current on-market share buy-back.

Capital risk management

The consolidated entity's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.

Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents.

In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity monitors capital by reference to cash flow forecasts in relation the operating revenue and expenditure. The consolidated entity also monitors its capital expenditure requirements to identify any additional capital required.

The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current parent entity's share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.

The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year.

Note 19. Equity - reserves

Options reserve	Consolidated 2021 2020 $ $ 118,285 495,698

Options reserve

The balance of the options reserve recognises the value of consideration received for options issued that remain unexercised. Such options may include those issued as share-based payments and receipt of principal and interest on ELF loan repayments which are treated as receipt of option premium for accounting purposes (refer to note 18 for further details). Movements in the reserve are provided below.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 19. Equity - reserves (continued)

Movements in options reserves

Movements in each class of options reserve during the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Receipt of premium Balance at 30 June 2020 Receipt of premium * Exercise of options (refer note 18) Expiry of options Share based payments (note 33) Balance at 30 June 2021	ECTOE options reserve $ - -	ELF reserve $ 444,005 51,693	Total $ 444,005 51,693
	- - - - 118,285	495,698 276,213 (570,222) (201,689) -	495,698 276,213 (570,222) (201,689) 118,285
	118,285	-	118,285

During the year, the consolidated entity received services to the value of $276,213 relating to the rebuild of the Bacchus Marsh plant. Such services were treated as the settlement of ELF loans and therefore an exercise of ELF options which released share capital to the suppliers.

ECTOE options reserve

The ECTOE options reserve is used to recognise the value of ECTOE listed options provided to employees, directors and suppliers as part of their compensation for services and/or goods received. Refer to note 18 for details of ECTOE options on issue. Refer to note 33 for details of share-based payments.

ELF reserve

Where the company receives funds from ELF Participants in the form of principal or interest, such amounts are treated as the receipt of option premium and recognised in the ELF reserve until the loan is settled

Note 20. Equity - accumulated losses

Accumulated losses at the beginning of the financial year Loss after income tax expense for the year Transfer from options reserve Accumulated losses at the end of the financial year	Consolidated 2021 2020 $ $ (78,220,176) (76,152,203) (1,869,725) (2,067,973) 201,689 -	Consolidated 2021 2020 $ $ (78,220,176) (76,152,203) (1,869,725) (2,067,973) 201,689 -
	(79,888,212)	(78,220,176)

Note 21. Financial instruments

Financial risk management objectives

The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk.

Risk management is carried out by senior finance executives ('Finance') under policies approved by the Board. These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and, when considered necessary, hedges financial risks within the consolidated entity's operating units. Finance reports to the Board on a regular basis.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 21. Financial instruments (continued)

Market risk

Foreign currency risk

The majority of the consolidated entity's operations are within Australia. A subsidiary located in India does not currently expose the consolidated entity to any significant foreign exchange risk.

Price risk

The consolidated entity is not exposed to any significant price risk.

Interest rate risk

The consolidated entity has minimal exposure to interest rate risk.

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

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. 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 reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not currently have any material credit risk exposure to any single debtor or group of debtors.

The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking information that is available.

Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year.

Liquidity risk

Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.

The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. The consolidated entity aims at maintaining flexibility in funding by keeping committed funding options available to meet the consolidated entity’s needs.

Financing arrangements

Under the RnD Funding arrangement, the Company is entitled to draw down amounts of up to 80% of the estimated research and development tax incentive receivable.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 21. Financial instruments (continued)

Remaining contractual maturities

The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.

1 year or less $ 1,544,142 212,863 - 179,276 3,856 1,259,039	Between 1 and 2 years $ - - - 181,417 8,166 -	Between 2 and 5 years $ - - 156,493 414,018 438,617 -	Over 5 years $ - - 133,145 - 1,061,112 -	Remaining contractual maturities $ 1,544,142 212,863 289,638 774,711 1,511,751 1,259,039
3,199,176	189,583	1,009,128	1,194,257	5,592,144
1 year or less $ 85,227 40,355 - 227 160,954 33,731	Between 1 and 2 years $ - - - 4,337 177,752 21,718	Between 2 and 5 years $ - - 225,796 484,564 591,117 -	Over 5 years $ - - 118,900 496,824 - -	Remaining contractual maturities $ 85,227 40,355 344,696 985,952 929,823 55,449
320,494	203,807	1,301,477	615,724	2,441,502

The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.

Cash flows related to settlement of the Coldry earn-out provision are based on timing of forecast production output upon which payment is calculated.

Settlement of the Matmor deferred consideration is dependent upon commercial outcomes, the actual timing of which cannot be determined. The timing of liability payments provided in the table above is consistent with the assumptions made in calculation of the liability. Future cash flows have been discounted at 30% (2020: 26%) in determining recognised carrying values within the financial statements.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 22. Fair value measurement

Fair value hierarchy

The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability

Level 1 $ - - -	Level 2 $ - - -	Level 3 $ 289,638 3,857 1,507,894	Total $ 289,638 3,857 1,507,894
-	-	1,801,389	1,801,389
Level 1 $ - - -	Level 2 $ - - -	Level 3 $ 344,693 227 985,725	Total $ 344,693 227 985,725
-	-	1,330,645	1,330,645

There were no transfers between levels during the financial year.

The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature.

The fair value of financial liabilities is estimated by discounting the forecast cash flows required to discharge the liability at the current market interest rate that is available for similar financial liabilities. Movements in the fair value of the financial liabilities are disclosed in their respective notes.

Valuation techniques for fair value measurements categorised within level 3

The above financial liabilities have been valued using a discounted cash flow model and/or option pricing models. Refer to the respective note for further details.

Level 3 assets and liabilities

Movements in level 3 assets and liabilities during the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Disposals Remeasurement recognised in profit or loss Balance at 30 June 2020 Remeasurement recognised in profit or loss Balance at 30 June 2021	Deferred consideration Matmor assets $ 656,581 - (311,888)	Earn-out provision Coldry IP $ 741,772 - 244,180	Conversion derivative in convertible note $ 186,654 (186,654) -	Total $ 1,585,007 (186,654) (67,708)
	344,693 (55,055)	985,952 525,799	- -	1,330,645 470,744
	289,638	1,511,751	-	1,801,389

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 22. Fair value measurement (continued)

The unobservable inputs and sensitivities of level 3 liabilities are as follows:

Description	Unobservable inputs	Potential range	Sensitivity
Coldry earn-out provision	Discount rate	17% - 27% (22% used)	A change in this rate of 5% would have an effect of:
			+5%: decreasing the carrying value of the liability by
			$304,194 (and decreasing the loss); and -5%:
			increasing the carrying value of the liability by
			$402,830 (and increasing the loss).
	Timing of production to	July 2021 onwards	The rate of payment of the earn-out liability is linked
	discharge liability		to the expected timing of plant production.
			Obligations are currently forecast to commence this
			year, escalating in forward years through small-scale
			commercial scale up. A change in timing of the
			commercial scale commencement of + 1 year from
			that currently forecast would reduce the loss and
			liability by $552,599.
Matmor deferred	Discount rate	25% - 35% (30% used)	A change in this rate of 5% would have an effect of:
consideration			+5%: decreasing the carrying value of the liability by
			$100,179 (and decreasing the loss); and -5%:
			increasing the carrying value of the liability by
			$80,669 (and increasing the loss).
	Timing of significant	July 2021 to June 2028	Should the next major trigger event and subsequent
	trigger events		events be delayed by + 1 year from that currently
			forecast, that would reduce the loss and liability by
			$90,620.

Reasonably possible changes in inputs used in calculating the derivative liability would not produce a materially different valuation.

Note 23. Key management personnel disclosures

Compensation

The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below:

Short-term benefits Post-employment benefits Long-term benefits Share-based payments	Consolidated 2021 2020 $ $ 845,941 681,310 5,822 22,963 - 75,765 61,795 -	Consolidated 2021 2020 $ $ 845,941 681,310 5,822 22,963 - 75,765 61,795 -
	913,558	780,038

As approved at the Company's Annual General Meeting (AGM) held on 15 January 2021, shares in the Company were issued to each director in lieu of $25,000 of directors' fees that would have been paid in cash. The shares are held in escrow and will be released to directors monthly in arrears commencing 1 February 2021. The grant date fair value of the shares issued was $0.001 ($100,000 in aggregate) which will vest over the next 12 months. 5 months’ have vested so the share based expense for the year relating to this grant of shares is $41,664. A further $20,131 has been recognised as a share based payment which relates to the settlement of consulting invoices. Refer to note 26 and the Directors Report for further details.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 24. Remuneration of auditors

During the financial year the following fees were paid or payable for services provided by BDO Audit Pty Ltd, the auditor of the Company:

Audit services - BDO Audit Pty Ltd Audit or review of the financial statements Note 25. Commitments Equipment finance Committed at the reporting date and recognised as liabilities, payable: Within one year One to five years Total commitment Less: Future finance charges Net commitment recognised as liabilities Patent commitments * Committed at the reporting date but not recognised as liabilities, payable: Within one year One to five years More than five years	Consolidated 2021 2020 $ $ 95,285 90,053	Consolidated 2021 2020 $ $ 95,285 90,053
	Consolidated 2021 2020 $ $ 30,920 33,731 - 30,919
	30,920 (4,401)	64,650 (9,201)
	26,519	55,449
	- 56,192 12,356	46,996 191,972 183,757
	68,548	422,725

Patent commitments represent maintenance payments pursuant to the registered patents of both Coldry and Matmor.

Royalty commitments

The Company has entered into agreements which require it to pay certain royalties on production of its Coldry and Matmor technologies. These royalties arise pursuant to the:

Coldry Equity Sale Deed (2009); and
Matmor Royalty Payment Deed (2014).

The Company is committed to make certain royalty payments in the event that commercial value is derived from the application of the technologies as follows:

from production utilising the Coldry technology of Coldry pellets, a royalty rate of $A0.50 per tonne, which is increased by CPI each anniversary of the agreement. For 2021, this now stands at $A0.5182 per tonne (2020: $A0.5166). This royalty is payable for a period of twenty years following commencement of payments; and
from revenue achieved through commercialisation and deployment of Matmor technology, less valid deductions as required under any technology licence, the Company should pay 3%. This royalty is payable in perpetuity.

Note 26. Related party transactions

Parent entity

Environmental Clean Technologies Limited is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 28.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 26. Related party transactions (continued)

Key management personnel

Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the directors' report.

Transactions with related parties

The following transactions occurred with related parties:

	Consolidated	Consolidated
	2021	2020
	$	$
Other transactions:
Payments made to the Company pursuant to ELF by key management personnel *	-	26,926

Represents payments that were due to Mr Glenn Fozard for provision of consulting services in August and September 2019 that were settled by crediting his Equity Lending Facility (ELF) Loan rather than being settled in cash.

Receivable from and payable to related parties

The following balances are outstanding at the reporting date in relation to transactions with related parties:

	Consolidated	Consolidated
	2021	2020
	$	$
Current payables:
Trade payables to key management personnel(i)	33,264		-

(i) The following trade payables (inclusive of GST) were owing to related parties at reporting date:

$825 to Glenn Fozard for the hire of a forklift
$14,524 to Adam Giles for consulting fees
$3,329 to Ashley Moore for director’s fees and reimbursement of expenses
$14,586 to Martin Hill for consulting fees

Loans to/from related parties Equity Lending Facility (ELF) Loans

In July 2017, Glenn Fozard was advanced $450,000 under the ELF for the exercise of 50,000,000 options at $0.009 each. Principal paid during the year was $nil (2020: $20,952). Interest paid during the year was $nil (2020: $13,146). Loans secured by 40,000,000 shares defaulted as at 31 July 2020 as the loans were not fully repaid.
In July 2017, Ashley Moore was advanced $339,249 under the ELF for the exercise of 36,073,950 options at $0.009 each and 972,223 options at $0.015 each. Principal paid during the year was $nil (2020: $nil). Interest paid during the year was $nil (2020: $nil). A loan secured by 972,223 shares defaulted as at 31 July 2020 as the loan was not fully repaid. At the end of the loan term, principal payments totalling $13,061 had been made by Mr Moore on this loan. On terms and conditions available to all ELF borrowers, this resulted in the release of 870,740 shares from holding lock and the forfeiture of 101,483 shares.

Note 27. Parent entity information

Set out below is the supplementary information about the parent entity.

Statement of profit or loss and other comprehensive income

Loss after income tax Total comprehensive loss	Parent 2021 2020 $ $ (1,195,574) (1,389,375)	Parent 2021 2020 $ $ (1,195,574) (1,389,375)
	(1,195,574)	(1,389,375)

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 27. Parent entity information (continued)

Statement of financial position

Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Options reserve Accumulated losses Total equity	Parent 2021 2020 $ $ 3,083,889 2,199,660	Parent 2021 2020 $ $ 3,083,889 2,199,660
	6,526,444	3,275,326
	3,121,146	193,339
	5,466,519	2,240,375
	80,001,690 (77,022) (78,864,743)	78,605,416 300,390 (77,870,855)
	1,059,925	1,034,951

Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2021 and 30 June 2020.

Capital and other commitments

The parent entity has operating lease, patent, equipment finance and royalty commitments payable (not recognised as liabilities). Refer to note 25 for details.

Significant accounting policies

The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following:

Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries and income from associates are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment.

Note 28. Interests in subsidiaries

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

		Ownership	interest
	Principal place of business /	2021	2020
Name	Country of incorporation	%	%
Asia Pacific Coal and Steel Pty Ltd	Australia	100.00%	100.00%
Enermode Pty Ltd	Australia	100.00%	100.00%
ECT Coldry Pty Ltd	Australia	100.00%	100.00%
A.C.N. 109 941 175 Pty Ltd	Australia	100.00%	100.00%
Environmental Clean Technologies Development and
Services India Private Ltd	India	100.00%	100.00%
ECT Finance Ltd	Australia	100.00%	100.00%
ECT Waste-to-Energy Pty Ltd	Australia	100.00%	100.00%

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 29. Reconciliation of loss after income tax to net cash used in operating activities

Loss after income tax expense for the year Adjustments for: Depreciation and amortisation Write off of non-current assets Share-based payments Revaluation of financial liabilities Finance costs - non-cash Inventory write downs Insurance proceeds classified as investing cash flows Impairment of trade receivables Loss on revaluation of financial derivatives Research and development incentives deferred Equity raising costs Loss on settlement of debt Rent concessions Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Increase in inventories Decrease/(increase) in prepayments Increase/(decrease) in trade and other payables Increase/(decrease) in employee benefits Net cash used in operating activities Note 30. Non-cash investing and financing activities Acquisition of plant and equipment - payables (net of R&D incentive receivable) Right-of-use assets - reassessment Right of access to mine (net of R&D incentive receivable)	Consolidated 2021 2020 $ $ (1,869,725) (2,067,973) 320,809 386,608 - 61,026 416,165 180,021 470,745 (67,709) - 404,060 32,146 - (593,012) (1,905,560) - 109,668 - 14,637 1,416,766 - 20,002 - - 664,297 - (38,968) (1,310,189) 634,728 (116,847) - 9,272 (12,862) 356,596 (29,460) 6,386 (139,428)	Consolidated 2021 2020 $ $ (1,869,725) (2,067,973) 320,809 386,608 - 61,026 416,165 180,021 470,745 (67,709) - 404,060 32,146 - (593,012) (1,905,560) - 109,668 - 14,637 1,416,766 - 20,002 - - 664,297 - (38,968) (1,310,189) 634,728 (116,847) - 9,272 (12,862) 356,596 (29,460) 6,386 (139,428)
	(840,886)	(1,806,915)
		Consolidated 2021 $ 824,829 7,758 254,250
		1,086,837

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 31. Changes in liabilities arising from financing activities

Consolidated Balance at 1 July 2019 Net cash used in financing activities Recognition on adoption of AASB 16 Lease repayments Conversion to equity Lease reassessment Rent concessions Balance at 30 June 2020 Net cash from financing activities Interest accrued Lease repayments Other changes Balance at 30 June 2021	R&D Funding loans $ 1,028,806 (1,028,806) - - - - -	Securitised loan payable $ 408,141 - - - (408,141) - -	Convertible note $ 790,636 - - - (790,636) - -	Lease liabilities $ - - 973,384 (86,060) - (35,640) (38,968)	Equipment finance $ 84,379 (28,930) - - - - -	Total $ 2,311,962 (1,057,736) 973,384 (86,060) (1,198,777) (35,640) (38,968)
	- 1,259,039 - - -	- - - - -	- - - - -	812,716 - 38,426 (162,478) 6,531	55,449 - 4,801 (33,731) -	868,165 1,259,039 43,227 (196,209) 6,531
	1,259,039	-	-	695,195	26,519	1,980,753

Note 32. Earnings per share

Loss after income tax attributable to the owners of Environmental Clean Technologies Limited Basic loss per share Diluted loss per share	Consolidated 2021 2020 $ $ (1,869,725) (2,067,973)	Consolidated 2021 2020 $ $ (1,869,725) (2,067,973)
	Cents (0.023) (0.023)	Cents (0.047) (0.047)

At 30 June 2021, there were 1,775,320,034 shares held as security which are subject to the repayment of ELF loans. For accounting purposes, these ELF loans and the related shares issued are treated as an in-substance issue of options. The ELF shares issued are therefore not included in the Basic EPS calculation. All options were considered anti-dilutive and excluded from the calculations above. All partly paid shares on issue are also treated in the same way as options and hence considered dilutive for the purposes the calculation.

Weighted average number of ordinary shares used in calculating basic loss per share Weighted average number of ordinary shares used in calculating diluted loss per share	Number 8,269,794,193	Number 4,358,959,986
	8,269,794,193	4,358,959,986

All options on issue are out-of-the-money at reporting date and therefore considered anti-dilutive for the purposes of the diluted EPS calculation and therefore not included.

Note 33. Share-based payments

Set out below are summaries of shares and options granted under share-based payment arrangements.

ECT Shares

Shares in ECT provided as share based payments were as follows:

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 33. Share-based payments (continued)

Element of financial statements containing share-based payments: Corporate costs expense Engineering and pilot plant expense Plant and equipment capitalised	Total value $ 2021 56,850 34,550 226,480	Total value $ 2020 164,354 - -
	317,880	164,354

The total number of shares issued during the year relating to the settlement of share-based payment arrangements was 374,679,966 (2020: 85,187,325).

The average issue price of shares relating to share-based payment arrangements was $0.001 (2020: $0.002)

Options

ECTOE options provided as share based payments were as follows:

Element of financial statements containing share-based payments: Corporate costs expense Engineering and pilot plant expense Plant and equipment capitalised	Total value $ 2021 4,945 12,783 100,557	Total value $ 2020 15,667 - -
	118,285	15,667

The total number of options issued during the year relating to the settlement of share-based payment arrangements was 106,658,654 (2020: 17,408,263).

The average issue price of shares relating to share-based payment arrangements was $0.001 (2020: $0.001).

The total share based payment expense recognised for the year was $104,183 (2020: $180,021).

Further details in relation to share based payments is as follows:

(a) Issue of shares to key management personnel

As approved at the Company's Annual General Meeting (AGM) held on 15 January 2021, shares in the Company were issued to directors in lieu of $25,000 of directors' fees that would have been paid in cash on 1 February 2021. The shares are held in escrow and will be released to directors quarterly in arrears. The grant date fair value of the shares issued was $0.001 each or $100,000 in aggregate which is expensed over the vesting period of 1 year. The total expense for the year was $41,664.

(b) Transfer of shares and options for the acquisition of goods and the provision of services

During the year, the Company transferred shares and ECTOE options to suppliers of goods and services from the ELF that was established specifically for this purpose (refer ‘Review of Operations’ in the Directors’ Report).

The total number of shares transferred was 316,346,633 with an aggregate value of $317,880 and which was either recognised as a share-based payment expense in profit or loss or capitalised depending on the nature of the good or service provided.

The total number of options transferred was 106,658,654 with an aggregate value of $118,285 and which was also recognised as a share-based payment expense in profit or loss or capitalised depending on the nature of the good or service provided. The fair value of the options was determined on grant date using a binomial options pricing model.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 33. Share-based payments (continued)

(c) Shares issued to shareholder suppliers

During 2020, the Company received general support services from a shareholder. The shareholder was remunerated through the release of 41,666,666 shares from their ELF loan facility. As a result, such shares were recognised as issued share capital of the Company. Shares were issued at an average price of $0.0026 and the total value of shares issued was $120,833. Refer to note 18.

During 2020, a shareholder was issued 43,520,659 shares and 17,408,263 ECTOE options with a total value of $59,188. These equities were issued in recognition of the shareholder managing the transfer of equities to contractors involved in the rebuild of the Bacchus Marsh facility. The options have been recognised as a share based payment expense with the balance credited to the options reserve. Refer to note 19.

Note 34. Events after the reporting period

Capital restructure

Sale of wood briquettes

ECTOE options

On 14 July 2021, the Company issued 50,000,000 ECTOE options to the shareholders that participated in the share placement. These options were issued on the same terms as the existing ECTOE options.

Coronavirus (COVID-19) pandemic

Share and option issues

On 30 August 2021 the Company issued the following equities that are all related to the Company’s capital raising via a share placement and a share purchase plan announced 7 April 2021:

35,000,000 fully paid ordinary shares issued to the lead manager that are secured by an ELF of $700,000 plus interest and expires 3 years from the date of issue;
75,000,000 ECTOE options expiring 17 February 2023 to the lead manager on the basis of 1 option for every 2 shares issued under the share placement; and
9,000,000 fully paid ordinary shares and 3,000,000 ECTOE options expiring 17 February 2023 to the lead manager which represents the 6% capital raising fee.

Board changes

On 3 September 2021 the Company announced the following changes to the composition of the board:

Jason Marinko and Tim Wise were appointed as non-executive directors. Mr Marinko has been elected as Chairman;
Ashley Moore and the Hon. Neil O'Keefe resigned as executive and non-executive directors respectively; and
Glenn Fozard has moved into the position of Managing Director.

Environmental Clean Technologies Limited Notes to the financial statements 30 June 2021

Note 34. Events after the reporting period (continued)

Jason Marinko is an experienced public company CEO, director and chairman, with expertise in the technology and investment banking industries and a proven track record in leading technologies to commercialisation. His experience includes being the Executive Chairman of geospatial imagery company Spookfish Limited, where he oversaw the company from its ASX listing through to its eventual sale to North American industry leader, EagleView Technologies Inc and its U.S. private equity partners. In addition, Mr Marinko was previously CEO of Little World Beverages Limited and an executive director at ASX-listed logistics technology company, Yojee Limited, and is currently a non-executive director of legal tech innovator, Immediation Limited. He has extensive corporate finance experience and holds an MBA from INSEAD Business School in France and is a graduate of the Australian Institute of Company Directors.

Tim Wise is an experienced entrepreneur and company director with particular expertise in the energy, industrial innovation and technology sectors. He has more than 20 years’ experience in public companies and capital markets. He was the founder and former CEO of Kalina Power Ltd (ASX:KPO) and The Tap Doctor, and is currently an executive director at Phos Energy Limited and a nonexecutive director of Tamaska Oil and Gas Limited (ASX:TMK), Graft Polymer plc and Melchor Pty Ltd. He has a Bachelor of Science from the University of Western Australia.

Ashley Moore will continue as ECT’s Chief Engineer, and the Company will engage Mr O’Keefe on a consulting basis to continue to assist the Company with its government relations strategy.

$3 million promissory note raising

The Company also announced on 3 September 2021 that it has received firm commitments for a promissory note raising from a syndicate of sophisticated and professional investors.

Proceeds from the promissory note raising will be utilised:

to complete the construction of the Company's small-scale Coldry demonstration and char plant in Bacchus Marsh;
to enable the Company to assess complementary acquisition and business development opportunities; and
for working capital purposes.

Settlement of the promissory note, and the issue of the promissory notes is set to occur in early September 2021.

Mr Marinko and Mr Wise are both holders of promissory notes to the value of $50,000 and $25,000 respectively.

The Company issued the following equities that related to the promissory note capital raising:

15,000,000 ECTOE options expiring 17 February 2023 and 18,000,000 fully paid ordinary shares to the lead manager for the promissory note fee;
150,000,000 ECTOE options expiring 17 February 2023 to the lead managers for the lead manager fee.

The Company will propose to members the issue of the following equities at the next annual general meeting:

3,000,000 ECTOE options expiring 17 February 2023 to the lead manager; and
300,000,000 ECTOE options expiring 17 February 2023 and 300,000,000 fully paid ordinary shares to the lenders who participated in the promissory note should members agree to the conversion of the promissory notes to equity.

Environmental Clean Technologies Limited Directors' declaration 30 June 2021

In the directors' opinion:

the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and
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 required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.

On behalf of the directors

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_________ Glenn Fozard Executive Chairman 27 September 2021 Melbourne

Collins Square, Tower Four Level 18, 727 Collins Street Melbourne VIC 3008 GPO Box 5099 Melbourne VIC 3001 Australia

Tel: +61 3 9603 1700 Fax: +61 3 9602 3870 www.bdo.com.au

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INDEPENDENT AUDITOR'S REPORT

To the members of Environmental Clean Technologies Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Environmental Clean Technologies Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001 , including:

(i) Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and
(ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter.

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Valuation of the Coldry earn-out provision & Matmor deferred consideration

Key audit matter

How the matter was addressed in our audit

Refer to notes 15 and 17 for the Group’s current and non-current other financial liabilities, as well as note 2 “Earn-out provision - Coldry” and “Deferred consideration - Matmor” under critical accounting judgments, estimates and assumptions.

The acquisition agreement for the Coldry Intellectual Property in 2009 included an earn-out liability capped at $3 million plus interest payable on forecast production from the projected Coldry plant (50c/tonne residual payments on commercial sales).

The Matmor deferred consideration is based on probabilities of conversion of certain options issued and other milestone payments as per the Matmor asset acquisition agreement. This consideration is capped at $3.5 million.

The valuation and completeness of the Coldry earn-out provision and Matmor deferred consideration recognized within the financial statements were determined based on significant judgments and estimates in respect of discount rates and forecast production, with each supported by underlying assumptions.

We have considered this area as a key audit matter due to amounts involved being material; and the inherent subjectivity associated in assessing the critical judgements, estimates and assumptions noted above.

In addressing this matter, we performed a number of procedures including the following:

Reviewing the calculations (discounted cash flow models) prepared by management in relation to both the Coldry earn-out provision and Matmor deferred consideration to ensure the methodology adopted is consistent with requirements of AASB 9 Financial Instruments .
With assistance from our internal BDO corporate finance experts, assessing the appropriateness of the discount factors used in the discounted cash flow models.
Checking the mathematical accuracy of the calculations to the Coldry earn-out provision calculation and assessing the reasonableness of the underlying assumptions used by management in relation to the forecast production outcomes.
Evaluating the probabilities and the underlying assumptions used by management in relation to forecast milestone payments as per the Matmor asset acquisition agreement for reasonableness.
Assessing the adequacy of the disclosures made in the financial statements in relation to the Coldry earn-out provision and Matmor deferred consideration.

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Revenue recognition of Research and Development tax incentive (R&D Tax Rebate)


*Key audit matter*	*How the matter was addressed in our audit*

Refer to note 5 for “Research and development	In addressing this matter, we performed a
tax incentive” under the other income of the	number of procedures including the following:
Group and note 1 “Research and development tax incentive” under “Revenue recognition” in significant accounting policies.	•	Assessed the processes and controls in place for recording and calculating the expenditures subject to the R&D Tax
Accuracy of calculation of the R&D Tax Rebate is		Rebate claim.
considered a key risk area associated with our audit, together with ensuring it is appropriately accounted for in accordance with the	•	Performed analytical procedures over the R&D Tax Rebate revenue recognised during
requirements of Australian Accounting Standard		the year.
AASB 120_Accounting for Government Grants and_	•	Obtained supporting documentation to
Disclosure of Government Assistance.		confirm the recognition of the R&D Tax
We have considered this a key audit matter due to the amounts involved being material; and the inherent subjectivity associated with the calculation of the R&D Tax Rebate.		Rebate as income is appropriate in accordance with the requirements of AASB 120_Accounting for Government Grants and_ Disclosure of Government Assistance.
	•	Reviewed the R&D Tax Rebate calculations
		prepared by management’s independent
		expert to ensure such calculations have
		been performed on a reasonable basis in
		conjunction with our internal BDO indirect-
		tax experts.

Other information

The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

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In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf

This description forms part of our auditor’s report.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 10 to 16 of the directors’ report for the year ended 30 June 2021.

In our opinion, the Remuneration Report of Environmental Clean Technologies Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001 .

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

BDO Audit Pty Ltd

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Katherine Robertson Director

Melbourne, 27 September 2021

Environmental Clean Technologies Limited Shareholder information 30 June 2021

The shareholder and optionholder information set out below was applicable as at 9 September 2021.

Distribution of equitable securities

Analysis of number of equitable security holders by size of holding:

Ordinary shares % of total Number shares of holders issued 425 0.01 722 0.19 523 0.34 1,676 5.88 793 93.58	Ordinary shares % of total Number shares of holders issued 425 0.01 722 0.19 523 0.34 1,676 5.88 793 93.58	Options over ordinary shares % of total Number options of holders issued 36 - 88 0.07 62 0.12 198 2.22 185 97.59	Options over ordinary shares % of total Number options of holders issued 36 - 88 0.07 62 0.12 198 2.22 185 97.59
4,139	100.00	569	100.00
2,668	2.44	311	1.03

Twenty largest quoted equity security holders

The names of the twenty largest security holders of quoted equity securities are listed below.

ECT Ordinary shares

LJ & K Thomson Pty Ltd (LJT & KT Super Fund A/C) Iain Robert McEwin Superior Coatings (Aust) Pty Ltd Challenge Bricks & Roofing Pty Ltd Ronald Raymond Thompson & Brittany Reed Joyce (Challenge Roofing Pty Ltd SF A/C) Challenge Roofing Pty Ltd (Thompson Family A/C) Blue Olive Capital Pty Ltd (Blue Olive Fund A/C) Maddingley Brown Coal Pty Ltd (Maddingley Mine A/C) Cameron Lloyd Thomson A & K Moore Nominees Pty Ltd (Moore Superannuation A/C) Godin Corp Pty Ltd (Seven A/C) Satya Venkat Chavali Kojin Pty Ltd Chunyan Niu Bin Liu Romfal Sifat Pty Ltd (The Fizmail Family A/C) KAAI Pty Ltd Alitime Nominees Pty Ltd Geoffrey David Thompson Elgar Park Pty Ltd (Elgar Park Super Fund A/C)	Number of ordinary shares held 220,000,000 73,432,070 51,649,630 47,546,544 35,600,302 26,537,600 22,000,000 21,989,196 13,973,894 13,045,859 12,500,000 10,624,276 10,500,000 10,372,477 10,000,000 9,253,889 8,600,000 8,280,000 8,191,767 7,880,727	% of total ordinary shares issued 17.93 5.98 4.21 3.87 2.90 2.16 1.79 1.79 1.14 1.06 1.02 0.87 0.86 0.85 0.81 0.75 0.70 0.67 0.67 0.64
	621,978,231	50.67

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Environmental Clean Technologies Limited Shareholder information 30 June 2021

ECTOE Options

LJ & K Thomson Pty Ltd (LJT & KT Super Fund A/C) Iain Robert McEwin Superior Coatings (Aust) Pty Ltd Godin Corp Pty Ltd (Seven A/C) Romfal Sifat Pty Ltd (The Fizmail Family A/C) Tellaro Pty Ltd Arkyn Pty Ltd (Kovani A/C) Challenge Bricks & Roofing Pty Ltd Ronald Raymond Thompson & Brittany Reed Joyce (Challenge Roofing PL SF A/C) Blue Olive Capital Pty Ltd (Blue Olive Fund A/C) Maddingley Brown Coal Pty Ltd (Maddingley Mine A/C) Cameron Lloyd Thomson Geoffrey David Thompson Kojin Pty Ltd Bin Liu Holland Strategic Wealth Pty Ltd (Hollands Family A/C) Gazump Resources Pty Ltd Kaai Pty Ltd Anid Pty Ltd (Anid Super Fund A/C) Zero Nominees Pty Ltd	Number of ECTOC options held 76,133,334 30,134,162 25,814,200 20,916,666 20,616,667 18,750,000 18,750,000 18,218,260 12,000,000 7,333,333 6,262,664 6,132,148 3,900,747 3,500,000 3,333,334 3,000,000 2,869,575 2,866,667 2,040,000 2,000,000	% of total ECTOC options issued 20.46 8.10 6.94 5.62 5.54 5.04 5.04 4.90 3.23 1.97 1.68 1.65 1.05 0.94 0.90 0.81 0.77 0.77 0.55 0.54
	284,571,757	76.50

Unquoted equity securities

There are no unquoted equity securities issued.

Substantial holders

Substantial holders in the Company are set out below:

Substantial holders Substantial holders in the Company are set out below:
	Number of	% of total
	ordinary	ordinary
	shares held	shares issued
LJ & K Thomson Pty Ltd (LJT & KT Super Fund A/C)	223,500,000	18.21%
Challenge Bricks and Roofing Pty Ltd	125,081,700	10.19%
Iain Robert McEwin	109,684,446	8.94%

Voting rights

The voting rights attached to ordinary shares are set out below:

Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Options

Options do not convey any rights to the holder with respect to voting unless such options are exercised and ordinary shares are issued.

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AI assistant

ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Annual Report 2021

64819_rns_2021-09-27_8453fcc5-d816-41e2-9831-cd2c52d92335.pdf

Environmental Clean Technologies Limited ABN 28 009 120 405

Annual Financial Report - 30 June 2021

Directors

Principal activities

Bacchus Marsh redevelopment and rebuild project

Coldry Process

HydroMOR (previously Matmor) Process

CDP Waste-to-Energy

Intellectual property

Equity Lending Facility ('ELF')

Dividends

Review of operations

Major Highlights:

(i) Equity Lending Facilities

Environmental Clean Technologies Limited

(iii) Capital raising activities

(iv) High Volume Test Facility (HVTF)

(v) Expiry of options

Financial results:

Coronavirus (COVID-19) Pandemic

Significant changes in the state of affairs

Matters subsequent to the end of the financial year

Capital restructure

Sale of wood briquettes

ECTOE options

Coronavirus (COVID-19) pandemic

Share and option issues

Board changes

$3 million promissory note raising

Likely developments and expected results of operations

Environmental regulation

Information on directors

Company secretaries

Meetings of directors

Retirement, election and continuation in office of directors

Remuneration report (audited)

Principles used to determine the nature and amount of remuneration

Non-executive directors' remuneration

Executive remuneration

Executive remuneration and reward framework

Consolidated entity performance and link to remuneration

Use of remuneration consultants

Voting and comments made at the Company's 2020 Annual General Meeting ('AGM')

Details of remuneration

Amounts of remuneration

Service agreements

Share-based compensation

Issue of shares

Performance rights

Additional information

Additional disclosures relating to key management personnel

Shareholding

Option holding

ELF Loans

Other transactions with key management personnel and their related parties

This concludes the remuneration report, which has been audited.

Shares under option

Shares under performance rights

Shares or interests issued on the exercise of options

Shares issued on the exercise of performance rights

Indemnity and insurance of officers

Indemnity and insurance of auditor

Proceedings on behalf of the Company

Non-audit services

Officers of the Company who are former partners of BDO Audit Pty Ltd

Auditor's independence declaration

Auditor

DECLARATION OF INDEPENDENCE BY KATHERINE ROBERTSON TO THE DIRECTORS OF ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED

BDO Audit Pty Ltd

General information

Environmental Clean Technologies Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2021

Environmental Clean Technologies Limited Statement of changes in equity For the year ended 30 June 2021

Note 1. Significant accounting policies

New or amended Accounting Standards and Interpretations adopted

Going concern

Basis of preparation

Historical cost convention

ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. Annual Report 2021