ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Interim / Quarterly Report 2013

Feb 25, 2014

Environmental Clean Technologies Limited Appendix 4D Half-year report

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1. Company details

Name of entity: Environmental Clean Technologies Limited ABN: 28 009 120 405 Reporting period: For the half-year ended 31 December 2013 Previous period: For the half-year ended 31 December 2012

2. Results for announcement to the market

				$
Revenues from ordinary activities	up	25.6%	to	1,641,495
Loss from ordinary activities after tax attributable to the owners of
Environmental Clean Technologies Limited	down	50.5%	to	(935,623)
Loss for the half-year attributable to the owners of Environmental Clean
Technologies Limited	down	50.5%	to	(935,623)

Dividends

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

Comments

The loss for the consolidated entity after providing for income tax amounted to $935,623 (31 December 2012: $1,891,705).

Refer to the 'Review of operations' within the Directors' report for further commentary on the results.

3. Net tangible assets

Net tangible assets per ordinary security	Reporting period Cents (0.07)	Previous period Cents (0.01)

4. Control gained over entities

Not applicable.

5. Loss of control over entities

Not applicable.

6. Dividends

Current period

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

Previous period

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

Environmental Clean Technologies Limited Appendix 4D Half-year report

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7. Dividend reinvestment plans

The following dividend or distribution plans are in operation:

The last date(s) for receipt of election notices for the dividend or distribution plans:

Not applicable.

8. Details of associates and joint venture entities

8. Details of associates and joint venture entities
	Reporting	entity's	Contribution to profit/(loss)
	percentage	holding	(where material)
	Reporting	Previous	Reporting	Previous
	period	period	period	period
Name of associate / joint venture	%	%	$	$
Victoria Coldry Pty Ltd	50.00%	50.00%	-	-
Coldry East Kalimantan Pty Ltd	50.00%	50.00%	-	-
ECT China Ltd	50.00%	50.00%	-	-
Group's aggregate share of associates and joint venture
entities' profit/(loss) (where material)
Profit/(loss) from ordinary activities before income tax			-	-
Income tax on operating activities			-	-

9. Foreign entities

Details of origin of accounting standards used in compiling the report:

Not applicable.

10. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements were subject to a review by the auditors and the review report is attached as part of the Interim Report.

11. Attachments

Details of attachments (if any):

The Interim Report of Environmental Clean Technologies Limited for the half-year ended 31 December 2013 is attached.

12. Signed

Signed ______

Date: 25 February 2014

Ashley Moore Managing Director Melbourne

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Environmental Clean Technologies Limited ABN 28 009 120 405

Interim Report - 31 December 2013

Environmental Clean Technologies Limited Directors' report 31 December 2013

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The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Environmental Clean Technologies Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled for the half-year ended 31 December 2013.

Directors

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

Glenn Fozard - Chairman (appointed non-executive director on 15 July 2013 and Chairman on 26 November 2013) Ashley Moore

Stephen Carter

Iain McEwin

Lloyd Thomson (appointed non-execuitive director on 22 August 2013) Michael Davies (retired on 19 August 2013)

Principal activities

During the financial half-year the principal continuing activities of the consolidated entity consisted of the reduction of carbon emissions and environmental damage through investing and licensing commercially practical and environmentally cleaner technologies and processes. These include:

• Coldry process

• Matmor process

• Intellectual property

Coldry process

The Coldry process is the consolidated entity's first technology proven to be commercially viable as an economic method of dewatering brown coal to produce a black coal equivalent. Once applied, the mechanically simple Coldry process produces pellets that are stable, easily stored, can be transported and are of equal or higher energy value than black coal. Essentially, the Coldry process works through the destruction of internal porous structures, allowing the expulsion of water from lignite and sub-bituminous coals. The Coldry process delivers a ‘Gateway technology’ that enables an ideal front-end feedstock solution for numerous new technology applications.

Matmor process

Matmor is a clean, low-emission, one-step process for producing high-grade primary iron using brown coal to displace the need for coking coals as used in the incumbent blast furnace process. The Matmor process is positioned to fundamentally change primary iron making, creating a high-grade iron product from brown coal and ferrous media such as iron ore, mill scale or other iron bearing wastes or tailings. The process involves blending brown coal (lignite) with iron ore or other ferrous metal bearing media to form a paste that is dewatered using the Coldry process. The pellets are then fed into the consolidated entity's simple low cost, low emission patented Matmor retort where the remaining moisture is removed, the coal volatiles are driven off and the iron oxides are reduced to metal.

Intellectual property

The consolidated entity has an exclusive right under a participation agreement with Calleja Group enabling it to licence the Matmor technology and ultimately purchase the Coldry intellectual property. The Coldry process is covered by patents, or pending patents in all major markets with significant brown coal deposits. The sole remaining patent of interest for Coldry yet to be granted is India. This is progressing through the Indian national system.

Review of operations

The loss for the consolidated entity after providing for income tax amounted to $935,623 (31 December 2012: $1,891,705).

The reduced loss for the financial half-year was chiefly attributable to the 26.4% increase in research and development tax refund of $1.63 million received from the Australian Taxation Office on 11 October 2013, in addition to the reduced engineering and design costs. The reduced loss occurred despite a much higher spend on the Design For Tender program compared with the previous period and expenses associated with the initial development of coal exploration licence EL5119 and the costs involved in the preparation and application for the Advanced Lignite Demonstration Program ('ALDP') funding.

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Environmental Clean Technologies Limited Directors' report 31 December 2013

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Significant changes in the state of affairs

The financial half-year has been eventful and in a difficult environment the consolidated entity has progressed toward the key objective of Coldry demonstration by completing the detailed design for the Coldry demonstration plant and advancing project development opportunities and commencing Coldry equipment sourcing initiatives in India.

This is important as the Victorian Government notified the consolidated entity on 2 January 2014, that it would not receive an offer under the ALDP. Whilst disappointing, much of the effort involved in applying under the ALDP dovetailed with the consolidated entity's engineering and development programs, are underpinning the project development opportunities now under way in India.

That the consolidated entity has not received a grant under the ALDP should not be confused with a negative assessment of the Coldry technology by government. Indeed the reality is quite the opposite and the degree to which the consolidated entity advanced through such a rigorous program should be noted:

• Coldry technology was one of around 30 initial applications at the Expression of Interest ('EOI') stage;

• Coldry was assessed as suitably developed to then progress through the detailed examination phase (Request for Proposal ('RFP')); and

• The consolidated entity was further short listed, joining a select field of applicants that underwent more detailed assessment involving technical and financial sub-panels and lastly an interview with the Independent Assessment panel.

Coldry technology remains a solid technical and commercial proposition. Its application is not just for thermal coal export, but also as a pre-drying solution for a wide range of advanced processes that use, upgrade and transform high moisture coals to electrical energy, gases, transportation fuels, chemicals and other outcomes, as well as unlocking the potential within the consolidated entity's Matmor technology.

In addition to its technical and commercial advantages, the Coldry process is unique among drying solutions in that it features a zero CO2 footprint, and decreases water demand in the processes it integrates with. These features are highly valuable and improve Coldry’s overall worth to its end customers.

On 20 August 2013, the consolidated entity announced that it had concluded its nearly two-year engineering efforts, resulting in a detailed design for Coldry technology deployment. It is this highly developed engineering package that provides the consolidated entity the ability to proceed to construction in Victoria, but – now more importantly – move to develop Indian project opportunities and access lower cost equipment in India itself.

Prior to the end of the financial period, the consolidated entity began a significant activity to develop suitable Coldry plant and equipment providers, as well as construction contractors for Indian deployed Coldry facilities as part of its India strategy. An initial screening of suitable Indian firms, capable of equipment manufacture, sourcing of other items, engineering customisation, as well as construction, led to a short listing of eight firms. These firms then received a partial yet comprehensive engineering information package, allowing their responses with capital cost estimations for a fully constructed facility in India, as well as being able to offer further value-engineering concepts to lower the cost to deliver a functioning Coldry plant. These responses are expected in March 2014, which will then provide the consolidated entity several key outcomes:

• A firm set of as-built capital estimates for Indian deployment, allowing deeper engagement with the consolidated entity's Indian project deployment targets;

• Further ideas regarding improvement to Coldry capital cost; and

• Identify the lead candidates for long term plant, equipment and construction relationships which will carry the consolidated entity forward in India, as well as support deployment in other locations.

On 31 October 2013, the company issued a shareholder update on capital management advising a further round of funding had been delivered via the ‘FAST Finance’ model as an advance against expected research and development tax incentive rebates of $1.2 million expected by November 2014.

The consolidated entity entered a strategic relationship with YES BANK, India’s 4th largest private sector bank, to provide in-country corporate advisory services in support of the consolidated entity’s strategy to develop Coldry and Matmor projects and leverage the cost effective fabrication capabilities available in India’s manufacturing and engineering sectors.

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Environmental Clean Technologies Limited Directors' report 31 December 2013

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On 24 December 2013, the consolidated entity announced the signing of a non-binding Term Sheet with The Lind Partners LLC, Manager of The Australian Special Opportunity Fund, LP and Australian Investment house Peloton Capital that covers the following:

• The proposed full underwriting of the planned new issue of listed options, as approved by shareholders at the company’s annual general meeting on 29 November 2013; and

• A $20 million line of trade finance, for the specific use of supporting the consolidated entity’s planned Coldry Commercialscale Demonstration Plant ('CDP') projects.

The consolidated entity has continued to progress fundamental research and development of the Matmor technology with the testing of numerous lignites and iron bearing materials from both domestic and overseas sources in addition to expanding testing to ores containing Nickel, Chrome, Manganese, and Titanium.

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

Auditor's independence declaration

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

This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

On behalf of the directors

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---

Ashley Moore Managing Director

25 February 2014 Melbourne

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Tel: +61 3 9603 1700 L evel 14, 140 W illiam St Fax: +61 3 9602 3870 M elbourne VIC 3 000 www.bdo.com.au G PO Box 5099 M elbourne VIC 3001 A ustralia

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DECLARATION OF INDEPENDENCE BY ALEX SWANSSON TO THE DIRECTORS OF ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED

• As lead a uditor for the review o f Environme n tal Clean Technologies Limited for the half-ye a r ended 31 Dece m ber 2013, I declare th a t to the be s t of my kno w ledge and b elief, ther e have been: • no c ontraventions of the auditor indep e ndence req u irements o f the Corpor a tions Act 2 0 01 in rel a tion to the r eview; and

• • no c ontraventions of any a p plicable co d e of professional condu c t in relatio n to the review.

This de c laration is i n respect of Environmen t al Clean Technologies L imited and t he entities it controll e d during th e period.

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Alex Sw a nsson

Partner

BDO East Coast Partnership Melbour n e, 25 Febr u ary 2014

BDO Ea s t Coast Partnership ABN 83 236 985 72 6 is a member of a n a tional association o f independent entities which are all memmbers of BDO (Aust r alia) Ltd ABN 77 0 50 110 275, an Aus t ralian company lim i ted by guarantee. B DO East Coast Partnership and BDO (Au s tralia) Ltd are membbers of BDO Interna t ional Ltd, a UK company limited b y guarantee, and f o rm part of the inte r national BDO network of independent m ember firms. Liabiliity limited by a scheme approv e d under Professional Standards Legislation (other than for t h e acts or omissions of financial service s licensees) in each SState or Territory other than Tasman i a.

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Environmental Clean Technologies Limited Financial report 31 December 2013

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Contents

Contents
Statement of profit or loss and other comprehensive income	6
Statement of financial position	7
Statement of changes in equity	8
Statement of cash flows	9
Notes to the financial statements	10
Directors' declaration	16
Independent auditor's review report to the members of Environmental Clean Technologies Limited	17

General information

The financial report covers Environmental Clean Technologies Limited as a consolidated entity consisting of Environmental Clean Technologies Limited and the entities it controlled. The financial report is presented in Australian dollars, which is Environmental Clean Technologies Limited's functional and presentation currency.

The financial report consists of the financial statements, notes to the financial statements and the directors' declaration.

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:

Suite 712, 530 Little Collins Street Melbourne VIC 3000

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 report.

The financial report was authorised for issue, in accordance with a resolution of directors, on 25 February 2014. The directors have the power to amend and reissue the financial report.

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Environmental Clean Technologies Limited Statement of profit or loss and other comprehensive income For the half-year ended 31 December 2013

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Note Revenue 4 Expenses Corporate costs Legal costs Employee benefits expense Sales and marketing Depreciation and amortisation expense 5 Engineering and design costs Occupancy expense Travel and accommodation Other expenses Finance costs 5 Loss before income tax expense Income tax expense Loss after income tax expense for the half-year attributable to the owners of Environmental Clean Technologies Limited Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year attributable to the owners of Environmental Clean Technologies Limited Basic earnings per share 12 Diluted earnings per share 12	Consolidated 31/12//2013 31/12/2012 $ $ 1,641,495 1,306,913 (202,649) (213,158) (78,642) (59,723) (613,113) (750,229) (104,458) (179,664) (260,026) (269,956) (400,314) (1,229,156) (90,214) (89,189) (26,322) (72,866) (49,437) (50,000) (751,943) (284,677)	Consolidated 31/12//2013 31/12/2012 $ $ 1,641,495 1,306,913 (202,649) (213,158) (78,642) (59,723) (613,113) (750,229) (104,458) (179,664) (260,026) (269,956) (400,314) (1,229,156) (90,214) (89,189) (26,322) (72,866) (49,437) (50,000) (751,943) (284,677)
	(935,623) -	(1,891,705) -
	(935,623) -	(1,891,705) -
	(935,623)	(1,891,705)
	Cents (0.05) (0.05)	Cents (0.12) (0.12)

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

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Environmental Clean Technologies Limited Statement of financial position As at 31 December 2013

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Note Assets Current assets Cash and cash equivalents 6 Trade and other receivables Other Total current assets Non-current assets Investments accounted for using the equity method Property, plant and equipment Intangibles Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings 7 Employee benefits Total current liabilities Non-current liabilities Employee benefits Other financial liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital 8 Accumulated losses Total equity	Consolidated 31/12/2013 30/06/2013 $ $ 989,084 627,115 55,546 150,227 84,649 99,234	Consolidated 31/12/2013 30/06/2013 $ $ 989,084 627,115 55,546 150,227 84,649 99,234
	1,129,279	876,576
	2 99,490 7,440,000	2 120,328 7,680,000
	7,539,492	7,800,330
	8,668,771	8,676,906
	228,779 1,946,111 89,986	1,044,425 2,754,612 62,602
	2,264,876	3,861,639
	20,769 417,058	14,730 417,058
	437,827	431,788
	2,702,703	4,293,427
	5,966,068	4,383,479
	54,595,033 (48,628,965)	52,076,821 (47,693,342)
	5,966,068	4,383,479

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

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Environmental Clean Technologies Limited Statement of changes in equity For the half-year ended 31 December 2013

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Consolidated Balance at 1 July 2012 Loss after income tax expense for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Balance at 31 December 2012 Consolidated Balance at 1 July 2013 Loss after income tax expense for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 8) Balance at 31 December 2013	Issued capital $ 49,518,412 - -	Accumulated losses $ (42,249,157) (1,891,705) -	Total equity $ 7,269,255 (1,891,705) -
	- 606,500	(1,891,705) -	(1,891,705) 606,500
	50,124,912	(44,140,862)	5,984,050
	Issued capital $ 52,076,821 - -	Accumulated losses $ (47,693,342) (935,623) -	Total equity $ 4,383,479 (935,623) -
	- 2,518,212	(935,623) -	(935,623) 2,518,212
	54,595,033	(48,628,965)	5,966,068

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

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Environmental Clean Technologies Limited Statement of cash flows For the half-year ended 31 December 2013

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Environmental Clean Technologies Limited Statement of cash flows For the half-year ended 31 December 2013
Cash flows from operating activities Research and development offset Payments to suppliers and employees Interest received Interest and other finance costs paid Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Net cash from/(used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial half-year Cash and cash equivalents at the end of the financial half-year	Consolidated 31/12//2013 31/12/2012 $ $ 1,727,708 1,292,083 (2,308,349) (1,836,590) 8,468 14,830 (141,969) -
	(714,142)	(529,677)
	- 375	(1,636) -
	375	(1,636)
	1,299,000 (223,264)	1,300,000 -
	1,075,736	1,300,000
	361,969 627,115	768,687 285,872
	989,084	1,054,559

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

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2013

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Note 1. Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2013 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2013 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the policies stated below.

New, revised or amending Accounting Standards and Interpretations adopted

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

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

Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity

The following Accounting Standards and Interpretations are most relevant to the consolidated entity:

AASB 10 Consolidated Financial Statements

The consolidated entity has applied AASB 10 from 1 July 2013, which has a new definition of 'control'. Control exists when the reporting entity is exposed, or has the rights, to variable returns (e.g. dividends, remuneration, returns that are not available to other interest holders including losses) from its involvement with another entity and has the ability to affect those returns through its 'power' over that other entity. A reporting entity has power when it has rights (e.g. voting rights, potential voting rights, rights to appoint key management, decision making rights, kick out rights) that give it the current ability to direct the activities that significantly affect the investee's returns (e.g. operating policies, capital decisions, appointment of key management). The consolidated entity not only has to consider its holdings and rights but also the holdings and rights of other shareholders in order to determine whether it has the necessary power for consolidation purposes.

AASB 11 Joint Arrangements

The consolidated entity has applied AASB 11 from 1 July 2013. The standard defines which entities qualify as joint arrangements and removes the option to account for joint ventures using proportional consolidation. Joint ventures, where the parties to the agreement have the rights to the net assets are accounted for using the equity method. Joint operations, where the parties to the agreements have the rights to the assets and obligations for the liabilities, will account for the assets, liabilities, revenues and expenses in accordance with the standards applicable to the particular asset, liability, revenue or expense

AASB 12 Disclosure of Interests in Other Entities

The consolidated entity has applied AASB 12 from 1 July 2013. The standard contains the entire disclosure requirement associated with interests in other entities: subsidiaries, joint arrangements (joint operations or joint ventures), associates and unconsolidated structured entities. It has significantly enhanced the disclosure requirements, when compared to the standards that have been replaced.

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

The consolidated entity has applied AASB 13 and its consequential amendments from 1 July 2013. The standard does not prescribe when to use fair value. Instead it provides a single robust measurement framework, with clear measurement objectives, for measuring fair value using the 'exit price' and it provides guidance on measuring fair value when a market becomes less active. The 'highest and best use' approach would be used to measure assets whereas liabilities would be based on transfer value.

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2013

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Note 1. Significant accounting policies (continued)

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

The consolidated entity has applied AASB 119 and its consequential amendments from 1 July 2013. The standard eliminates the corridor approach for the deferral of gains and losses; streamlines the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhances the disclosure requirements for defined benefit plans. The standard also changed the definition of short-term employee benefits, from 'due to' to 'expected to' be settled within 12 months. Annual leave that is not expected to be wholly settled within 12 months is now discounted allowing for expected salary levels in the future period when the leave is expected to be taken.

AASB 127 Separate Financial Statements (Revised), AASB 128 Investments in Associates and Joint Ventures (Reissued) and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standard

The consolidated entity has applied AASB 127, AASB 128 and AASB 2011-7 from 1 July 2013. AASB 127 and AASB 128 have been modified to remove specific guidance that is now contained in AASB 10, AASB 11 and AASB 12 and AASB 2011-7 makes numerous consequential changes to a range of Australian Accounting Standards and Interpretations. AASB 128 has also been amended to include the application of the equity method to investments in joint ventures.

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

The consolidated entity has applied AASB 1012-2 from 1 July 2013, which enhanced the disclosure requirements of AASB 7 'Financial Instruments: Disclosures' (and consequential amendments to AASB 132 'Financial Instruments: Presentation') to provide information about netting arrangements, including rights of set-off related to an entity's financial instruments and the effects of such rights on its statement of financial position.

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle The consolidated entity has applied AASB 2012-5 from 1 July 2013. The amendments affect five Australian Accounting Standards as follows: Confirmation that repeat application of AASB 1 (IFRS 1) 'First-time Adoption of Australian Accounting Standards' is permitted; Clarification of borrowing cost exemption in AASB 1; Clarification of the comparative information requirements when an entity provides an optional third column or is required to present a third statement of financial position in accordance with AASB 101 'Presentation of Financial Statements'; Clarification that servicing of equipment is covered by AASB 116 'Property, Plant and Equipment', if such equipment is used for more than one period; clarification that the tax effect of distributions to holders of equity instruments and equity transaction costs in AASB 132 'Financial Instruments: Presentation' should be accounted for in accordance with AASB 112 'Income Taxes'; and clarification of the financial reporting requirements in AASB 134 Interim Financial Reporting' and the disclosure requirements of segment assets and liabilities.

AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and Other Amendments The consolidated entity has applied AASB 2012-10 amendments from 1 July 2013, which amends AASB 10 and related standards for the transition guidance relevant to the initial application of those standards. The amendments clarify the circumstances in which adjustments to an entity's previous accounting for its involvement with other entities are required and the timing of such adjustments.

Going concern

For the financial half-year ended 31 December 2013, the consolidated entity had an operating net loss of $935,623, net cash outflows from operating activities of $714,142, and net current liabilities at the reporting date of $1,135,597. Furthermore the consolidated entity does not have a source of revenue and is reliant on equity capital or loans from third parties to meet its operating costs. These conditions indicate a material uncertainty that may cast significant doubt about the consolidated entity's ability to continue as a going concern.

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

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2013

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Note 1. Significant accounting policies (continued)

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

• The consolidated entity is planning to convene a general meeting of shareholders in April 2014 to seek approval of placements and other issues of securities that had not been already approved by shareholders. At the same meeting shareholder approval will be sought for the consolidated entity to issue a new series of Options and/or Equities. The Options series is similar to that approved in the AGM in November 2013, though with adjustments to pricing. If shareholders approve the resolutions put to the proposed meeting planned for in April 2014, the directors, on behalf of the consolidated entity, will have authority to raise substantial funds by way of placements to meet its business objectives;

• The consolidated entity retains access to residual amounts within the Arup Strategic Deliverable Bond to the amount of $350,000, subject to the continued mutual agreement of the Bond broker and the consolidated entity;

• The consolidated entity has conditional offers of trade financing, subject to certain conditions, to support Commercial Demonstration Plant projects. Formal execution of these would require shareholder approval; and

• The consolidated entity continues to receive assurances and written guidance from Monash Capital Group Pty Ltd that they are making progress on their capital raising with respect to the planned equity placement.

Based on the above and cash flow forecasts prepared, the directors are of the opinion 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 assets amounts or to the amounts and classification of liabilities that might be necessarily incurred should the consolidated entity not continue as a going concern.

Note 2. 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.

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.

At regular intervals, the CODM is provided management information at a consolidated level for the entity’s cash position, the carrying values of intangible assets and a cash forecast for the next twelve months of operation. On this basis, no segment information is included in these financial statements.

Note 4. Revenue

Interest Research and development tax refund Other revenue Revenue	Consolidated 31/12//2013 31/12/2012 $ $ 8,468 10,991 1,632,606 1,292,083 421 3,839	Consolidated 31/12//2013 31/12/2012 $ $ 8,468 10,991 1,632,606 1,292,083 421 3,839
	1,641,495	1,306,913

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2013

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Note 5. Expenses

Loss before income tax includes the following specific expenses: Depreciation Plant and equipment Fixtures and fittings Office equipment Total depreciation Amortisation Intellectual property Total depreciation and amortisation Finance costs Interest and finance charges paid/payable Capital raising costs ARUP Bond finance costs Finance costs expensed Note 6. Current assets - cash and cash equivalents Cash at bank Note 7. Current liabilities - borrowings Fast Finance Loan ARUP Bond Note 8. Equity - issued capital 31/12/2013 Shares Ordinary shares - fully paid 2,112,551,197	Consolidated 31/12//2013 31/12/2012 $ $ 17,922 29,956 404 - 1,700 - 20,026 29,956 240,000 240,000 260,026 269,956 123,560 10,333 128,727 274,344 499,656 - 751,943 284,677 Consolidated 31/12/2013 30/06/2013 $ $ 989,084 627,115 Consolidated 31/12/2013 30/06/2013 $ $ 1,475,000 1,587,945 471,111 1,166,667 1,946,111 2,754,612 Consolidated 30/06/2013 31/12/2013 30/06/2013 Shares $ $ 1,824,318,131 54,595,033 52,076,821	Consolidated 31/12//2013 31/12/2012 $ $ 17,922 29,956 404 - 1,700 -	Consolidated 31/12//2013 31/12/2012 $ $ 17,922 29,956 404 - 1,700 -
		20,026	29,956
		240,000	240,000
		260,026	269,956
		123,560 128,727 499,656	10,333 274,344 -
		751,943	284,677
		Consolidated 31/12/2013 30/06/2013 $ $ 989,084 627,115
		Consolidated 31/12/2013 30/06/2013 $ $ 1,475,000 1,587,945 471,111 1,166,667
		1,946,111	2,754,612
			30/06/2013 $ 52,076,821

Note 6. Current assets - cash and cash equivalents

Note 7. Current liabilities - borrowings

Note 8. Equity - issued capital

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2013

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Note 8. Equity - issued capital (continued)

Movements in ordinary share capital

Details Date Balance 1 July 2013 Issuance of shares on bond conversion 11 July 2013 Issuance of shares on bond conversion 17 July 2013 Issuance of shares on acquisition of exploration sub- license 17 July 2013 Issuance of shares on bond conversion 22 July 2013 Issuance of shares on bond conversion 16 August 2013 Issuance of shares on bond conversion 20 August 2013 Issuance of shares on bond conversion 21 August 2013 Issuance of shares on bond conversion 21 August 2013 Issuance of shares on bond conversion 12 September 2013 Issuance of shares on bond conversion 28 October 2013 Balance 31 December 2013	No of shares Issue price 1,824,318,131 13,888,889 $0.007 21,681,186 $0.007 3,000,000 $0.009 21,681,186 $0.007 24,554,967 $0.006 47,470,000 $0.006 40,191,266 $0.006 11,018,001 $0.007 62,500,000 $0.007 42,247,571 $0.000 2,112,551,197	$ 52,076,821 111,111 173,449 24,000 195,131 171,885 427,230 321,530 88,648 625,000 380,228
		54,595,033

Note 9. Equity - dividends

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

Note 10. Contingent liabilities

As previously reported, the company's subsidiary Asia Pacific Coal and Steel Pty Ltd ('APCS') has entered into an agreement, and subsequent deed of variation, with Maddingley Associates ('Maddingley'). Should the agreement be terminated by any reason other than breach or default on the part of Maddingley, then APCS will grant to Maddingley an option to buy the following for $1:

• The benefits of all contracts, licenses and sub-licenses entered into in relation to the Licensed Technology;

• All right, title and interest of APCS relating to the Matmor Licensed Technology;

• All right, title and interest of APCS in any improvements at JBD Industrial Park including any modifications or

• upgrades to the Coldry Pilot Plant; and

• All the leasehold or other interest of APCS to JBD Industrial Park or any part thereof.

As part of the fulfilment of the agreement is dependent on the completion of future events noted above there is a potential loss to the consolidated entity if the consolidated entity fails to meet the obligations and Maddingley exercise the option to purchase the Coldry Pilot Plant upgrades for $1. At 31 December 2013 the upgrades had a net book value of $92,651 (30 June 2013: $110,574).

Note 11. Events after the reporting period

On 3 January 2014, the consolidated entity advised it had not attracted a grant under the Advanced Lignite Demonstration Program.

On 17 January 2014, the consolidated entity advised the postponement of the new options series pending review of pricing and structure by the Board.

No other matter or circumstance has arisen since 31 December 2013 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.

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2013

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Note 12. Earnings per share

Loss after income tax attributable to the owners of Environmental Clean Technologies Limited Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share	Consolidated 31/12//2013 31/12/2012 $ $ (935,623) (1,891,705)	Consolidated 31/12//2013 31/12/2012 $ $ (935,623) (1,891,705)
	Number 2,022,903,537	Number 1,606,625,325
	2,022,903,537	1,606,625,325
	Cents (0.05) (0.05)	Cents (0.12) (0.12)

At 31 December 2013 there were 20,000,000 unlisted ordinary options and 871,885,303 quoted options ('ESIO') over ordinary shares. These options were considered anti-dilutive and excluded from the calculation above.

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Environmental Clean Technologies Limited Directors' declaration 31 December 2013

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In the directors' opinion:

• the attached financial statements and notes thereto comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes thereto give a true and fair view of the consolidated entity's financial position as at 31 December 2013 and of its performance for the financial half-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.

Signed in accordance with a resolution of directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

On behalf of the directors

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______
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______ Ashley Moore Managing Director

25 February 2014 Melbourne

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