ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Interim / Quarterly Report 2016

Feb 25, 2016

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Interim Report to 31 December 2015

Friday, 26 February 2016: Environmental Clean Technologies Limited (ASX: ESI) (ECT or Company) is pleased to provide the following half-year report to shareholders.

Key Points

• Continued strong cost management

• Strong post-report period financial position

Managing Director, Ashley Moore stated “The Interim Report highlights the continued strong attention to financial management with cash operating cost 17% lower than the previous corresponding period. The subsequent receipt of the R&D Tax Incentive rebate of ~$1.1M and satisfaction of the primary Fast Finance debt facility of ~$1.5M via conversion to equity sees the Company enter the second half of the financial year in a strong position, supporting our pursuit of development objectives in India and Australia.”

For further information, contact:

Ashley Moore – Managing Director info@ectltd.com.au

About ECT

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

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

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

About Coldry

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

About MATMOR

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

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

Suite 502, Level P5, 9 Yarra Street, South Yarra, VIC 3141 Australia | Phone +613 9939 4595 | www.ectltd.com.au | ABN 28 009 120 405 Listed on the Australian Stock Exchange (ASX:ESI)

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 2015 Previous period: For the half-year ended 31 December 2014

2. Results for announcement to the market

			$
Revenues from ordinary activities	up	101.4% to	15,546
Loss from ordinary activities after tax attributable to the owners of
Environmental Clean Technologies Limited	up	21.1% to	(1,893,960)
Loss for the half-year attributable to the owners of Environmental Clean
Technologies Limited	up	21.1% to	(1,893,960)

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 $1,893,960 (31 December 2014: $1,563,917).

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

3. Net tangible assets

Reporting Previous period period Cents Cents Net tangible assets per ordinary security (0.01) 0.02 4. Control gained over entities Name of entities (or group of entities) Not Applicable Date control gained $ Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities before income tax - during the period (where material) Profit/(loss) from ordinary activities before income tax of the controlled entity (or group of entities) for the - whole of the previous period (where material)

4. Control gained over entities

5. Loss of control over entities

Name of entities (or group of entities) Not Applicable

Date control lost

Environmental Clean Technologies Limited Appendix 4D Half-year report

$

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Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities before income tax - during the period (where material) Profit/(loss) from ordinary activities before income tax of the controlled entity (or group of entities) whilst - controlled during the whole of the previous period (where material)

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.

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

	Reporting	entity's	Contribution to profit/(loss)	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%	-	-
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			-	-

Associates and joint ventures of the consolidated entity are not material.

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.

Environmental Clean Technologies Limited Appendix 4D Half-year report

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11. Attachments

Details of attachments (if any):

The Interim Report of Environmental Clean Technologies Limited for the half-year ended 31 December 2015 is attached.

12. Signed

Signed ______ Ashley Moore Managing Director Melbourne

Date: 26 February 2016

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Environmental Clean Technologies Limited ABN 28 009 120 405

Interim Report - 31 December 2015

Environmental Clean Technologies Limited Directors' report 31 December 2015

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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 at the end of, or during, the half-year ended 31 December 2015.

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 Ashley Moore - Managing Director Barry Richards David Smith

Principal activities

During the financial period the principal continuing activities of the consolidated entity consisted of investment, research, development and commercialisation of environmentally cleaner technologies and processes capable of reducing carbon emissions and environmental damage, in the energy and resource sectors. These include:

• development of a large-scale demonstration project for the Coldry Process;

• advancement of the Matmor Process toward pilot scale; and

• managing the development and extracting value from Intellectual Property.

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 demonstrationscale allowing techno-economic 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 electricity production, Coldry pellets have a significantly lower CO2 footprint than the low-rank coal from which they are made, providing a compelling 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 our Matmor 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.

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 CO2 reductions.

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Environmental Clean Technologies Limited Directors' report 31 December 2015

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Matmor process

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

The Matmor 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.

Matmor 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 ECT'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.

The Matmor process operates below 1000 degrees Celcius, compared to a blast furnace which operates at around 1500 degrees Celcius. 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.

Matmor 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.

Intellectual property

The Group owns both the Coldry and Matmor intellectual property. The Coldry process is covered by patents, or pending patents in all major markets with significant brown coal deposits.

Matmor is covered by two Australian patents, and due to its intrinsic reliance on Coldry for feedstock preparation, is afforded an additional degree of protection via Coldry patents. In markets where neither Coldry nor Matmor patents exist, the company will employ other IP protection strategies.

Dividends

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

Review of operations

The loss for the consolidated entity after providing for income tax amounted to $1,893,960 (31 December 2014: $1,563,917).

Cash operating expenses (Total expenses less non-cash finance costs, movement in earn-out provision and depreciation and amortisation expense) was lower at $1,047,408 (2014: $1,259,455), a reduction of $212,047 or 17%. Total expenses increased, driven by the non-cash item of depreciation but which was partially offset by the reduction in the earn-out provision. While these non-cash items increase the total loss for the period, the depreciation contributes to claimable research and development expenses which provides financial benefit to the company.

Legal expense was reduced for the period compared to the comparative period, mainly due to the non-repeating nature of the Matmor acquisition which occurred in December 2014. Increases in travel expense were offset by reductions in other expense areas.

Significant changes in the state of affairs

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

Matters subsequent to the end of the financial half-year

On 19 January 2016, the company secured a binding agreement to proceed with project development activities for its Coldry and Matmor technologies with India’s national lignite authority, Neyveli Lignite Corporation and India’s largest iron ore miner, NMDC.

On 20 January 2016, 75,253,967 ordinary shares were issued raising $1,503,971. This was a result of the exercise of 166,667 ESIOA options at $0.009 each, 25,000 ESIOB options at $0.015 each, and the issue of 75,062,300 ordinary shares at $0.02 in satisfaction of the primary Fast Finance debt facility which had a carrying value of $1,501,246 at 31 December 2015, leaving $300,000 which expires on 27 April 2016.

During January 2016, the company received a R&D Tax Incentive refund of $1,114,594 relating to the 2015 financial year.

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Environmental Clean Technologies Limited Directors' report 31 December 2015

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On 2 February 2016, the company finalised a loan facility agreement with Innovation Structured Finance Co., LLC, a specialty finance company established by Brevet Capital, a New York City based investment manager. The Brevet facility is a senior secured loan, established on commercial terms, and provides short-term flexibility to draw down against the company’s current accrued R&D Tax Incentive refund for the 2016 financial year, now estimated to be more than $1.2 million.

No other matter or circumstance has arisen since 31 December 2015 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.

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

______Ashley Moore Managing Director

26 February 2016 Melbourne

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Tel: +61 3 9603 1700 Level 14, 140 William St Fax: +61 3 9602 3870 Melbourne VIC 3000 www.bdo.com.au GPO Box 5099 Melbourne VIC 3001 Australia

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

As lead auditor for the review of Environmental Clean Technologies Limited for the half-year ended 31 December 2015, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

2. No contraventions of any applicable code of professional conduct in relation to the review.

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

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Alex Swansson Partner

BDO East Coast Partnership

Melbourne, 26 February 2016

BDO East Coast Partnership ABN 83 236 985 726 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 East Coast Partnership 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, other than for the acts or omissions of financial services licensees.

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Environmental Clean Technologies Limited Contents 31 December 2015 Contents

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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	18
Independent auditor's review report to the members of Environmental Clean Technologies Limited	19

General information

The financial statements cover Environmental Clean Technologies Limited as a consolidated entity consisting of Environmental Clean Technologies Limited and the entities it controlled at the end of, or during, the half-year. The financial statements are presented in Australian dollars, which is Environmental Clean Technologies Limited'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:

Suite 502, Level P5, 9 Yarra Street South Yarra, Vic 3141

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 26 February 2016. The directors have the power to amend and reissue the financial statements.

5

Environmental Clean Technologies Limited Statement of profit or loss and other comprehensive income For the half-year ended 31 December 2015

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Note Revenue 4 Other income 5 Expenses Corporate costs Legal costs Employee benefits expense Sales and marketing Depreciation and amortisation expense 6 Engineering and design costs Occupancy expense Travel and accommodation Movement in earn-out provision 12 Finance costs 6 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 19 Diluted earnings per share 19	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 15,546 7,720 571,819 564,866 (435,196) (458,628) - (90,913) (358,058) (388,545) (65,310) (93,213) (1,521,502) (375,476) (57,224) (132,045) (72,575) (72,156) (57,135) (23,965) 486,546 - (400,871) (501,562)	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 15,546 7,720 571,819 564,866 (435,196) (458,628) - (90,913) (358,058) (388,545) (65,310) (93,213) (1,521,502) (375,476) (57,224) (132,045) (72,575) (72,156) (57,135) (23,965) 486,546 - (400,871) (501,562)
	(1,893,960) -	(1,563,917) -
	(1,893,960) -	(1,563,917) -
	(1,893,960)	(1,563,917)
	Cents (0.07) (0.07)	Cents (0.07) (0.07)

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

6

Environmental Clean Technologies Limited Statement of financial position As at 31 December 2015

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Note Assets Current assets Cash and cash equivalents Trade and other receivables 7 Other Total current assets Non-current assets Investments accounted for using the equity method Property, plant and equipment 8 Intangibles 9 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings 10 Provisions 11 Total current liabilities Non-current liabilities Provisions 12 Total non-current liabilities Total liabilities Net assets Equity Issued capital 13 Reserves 14 Accumulated losses Total equity	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 254,777 940,676 1,755,416 1,169,273 16,431 20,359	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 254,777 940,676 1,755,416 1,169,273 16,431 20,359
	2,026,624	2,130,308
	2 2,427,256 6,480,000	2 3,702,887 6,720,000
	8,907,258	10,422,889
	10,933,882	12,553,197
	428,161 1,768,878 2,020,356	232,530 1,644,656 2,625,401
	4,217,395	4,502,587
	385,775	869,444
	385,775	869,444
	4,603,170	5,372,031
	6,330,712	7,181,166
	58,831,801 3,350,502 (55,851,591)	57,051,403 4,087,394 (53,957,631)
	6,330,712	7,181,166

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

7

Environmental Clean Technologies Limited Statement of changes in equity For the half-year ended 31 December 2015

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Consolidated Balance at 1 July 2014 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 Issued options Balance at 31 December 2014 Consolidated Balance at 1 July 2015 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 13) Issued Options (note 14) Exercised options net of adjustments (note 14) Balance at 31 December 2015	Issued capital $ 54,837,275 - -	Reserves $ - - -	Accumulated losses $ (50,241,455) (1,563,917) -	Total equity $ 4,595,820 (1,563,917) -
	- 1,114,130 -	- - 4,028,700	(1,563,917) - -	(1,563,917) 1,114,130 4,028,700
	55,951,405	4,028,700	(51,805,372)	8,174,733
	Issued capital $ 57,051,403 - -	Reserves $ 4,087,394 - -	Accumulated losses $ (53,957,631) (1,893,960) -	Total equity $ 7,181,166 (1,893,960) -
	- 1,780,398 - -	- - 20,000 (756,892)	(1,893,960) - - -	(1,893,960) 1,780,398 20,000 (756,892)
	58,831,801	3,350,502	(55,851,591)	6,330,712

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

8

Environmental Clean Technologies Limited Statement of cash flows For the half-year ended 31 December 2015

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Note Cash flows from operating activities Receipts from customers (inclusive of GST) 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 disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares 13 Proceeds from issue of options Proceeds from borrowings Repayment of borrowings Net cash from financing activities Net increase/(decrease) 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 Dec 2015 31 Dec 2014 $ $ 7,335 - - 564,866 (944,080) (1,467,478) 4,329 6,421 (1,166) -	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 7,335 - - 564,866 (944,080) (1,467,478) 4,329 6,421 (1,166) -
	(933,582)	(896,191)
	(7,301) -	(6,901) 400
	(7,301)	(6,501)
	577,736 - - (322,752)	- 1,122,724 139,697 (87,947)
	254,984	1,174,474
	(685,899) 940,676	271,782 215,120
	254,777	486,902

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 2015

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Note 1. Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2015 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 2015 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, unless otherwise stated.

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. The adoption of these Accounting Standards and Interpretations did not have a significant impact on the financial performance or position of the consolidated entity.

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

Going concern

For the financial half-year ended 31 December 2015, the consolidated entity had an operating net loss of $1,893,960, net cash outflows from operating activities of $933,582, and net current liabilities at the reporting date of $2,190,771. The consolidated entity currently does not have a source of revenue and is reliant on 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 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:

• drawdowns against the newly established loan facility agreement with Brevet Capital of New York, secured over the company's entitlements to available future R&D Tax Incentive receipts.

• facilitated exercise of listed options via mandated arrangements with Platinum Road Pty Ltd; and

• issuance of equity via ECT securities, or debt funding, to support project funding needs in India.

Since balance date, the company also received an R&D Tax Incentive refund of $1,114,594 relating to the 2015 financial year and converted $1,501,246 of the primary Fast Finance debt into issued shares.

Based on the above and cash flow forecasts prepared, the directors are of the opinion that the company 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.

The financial statements indicate a material uncertainty that may cast significant doubt about the consolidated entity's ability to continue as a going concern. 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.

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2015

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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 Other revenue Revenue Note 5. Other income Research and development tax incentive Note 6. 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 Unwinding of the discount on provisions ARUP Bond finance costs Finance costs expensed	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 8,196 7,341 7,350 379	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 8,196 7,341 7,350 379
	15,546	7,720
	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 571,819 564,866
	Consolidated 31 Dec 2015 31 Dec 2014 $ $ 1,280,163 134,586 489 161 850 893
	1,281,502	135,640
	240,000	240,000
	1,521,502	375,640
	1,910 398,961 -	- - 501,562
	400,871	501,562

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2015

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Note 7. Current assets - trade and other receivables

Other receivables Research and development tax incentive receivable Loan to G. Fozard	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 44,003 29,911 1,686,413 1,114,362	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 44,003 29,911 1,686,413 1,114,362
	1,730,416	1,144,273
	25,000	25,000
	1,755,416	1,169,273

The research and development tax incentive receivable as at 30 June 2015 was subsequently received in January 2016.

Note 8. 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 Note 9. Non-current assets - intangibles Intellectual property - at cost Less: Accumulated amortisation	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 5,712,837 5,712,837 (3,296,300) (2,016,137)	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 5,712,837 5,712,837 (3,296,300) (2,016,137)
	2,416,537	3,696,700
	5,789 (2,586)	9,619 (4,679)
	3,203	4,940
	53,688 (46,172)	50,989 (49,742)
	7,516	1,247
	2,427,256	3,702,887
	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 9,600,000 9,600,000 (3,120,000) (2,880,000)
	6,480,000	6,720,000

Note 9. Non-current assets - intangibles

Reconciliations

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

Consolidated Balance at 1 July 2015 Amortisation expense Balance at 31 December 2015	Intellectual property $ 6,720,000 (240,000)	Total $ 6,720,000 (240,000)
	6,480,000	6,480,000

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2015

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Note 9. Non-current assets - intangibles (continued)

The intellectual property represents the patented technology related to Coldry acquired by the consolidated entity in 2009.

Note 10. Current liabilities - borrowings

FAST Finance Loan	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 1,768,878 1,644,656

Fast Finance Loan

The Fast Finance loans were renewed during the period. The primary facility totalling $1,501,246 was satisfied through conversion to equity on 16 January 2016 leaving $300,000 which expires on 27 April 2016.

The balance is repayable in cash or equity, at the lenders option, with an interest rate of 15% p.a. and an equity conversion price of 2.0¢. The loan is secured by first ranking charge and irrevocable pledge over all amounts of R&D tax rebate received from the Australian Tax Office.

Note 11. Current liabilities - provisions

Annual leave Deferred consideration - Matmor	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 57,208 62,846 1,963,148 2,562,555	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 57,208 62,846 1,963,148 2,562,555
	2,020,356	2,625,401

Deferred Consideration Liability - Matmor Assets

As part consideration for the acquisition of the Matmor asset, deferred consideration of $3.5m cash was incurred. The timing of paying consideration up to the cash amount of $3.5m to Matmor Steel is dependent upon if, and when, ESIOA and ESIOB series options ('ESI options') of the company are exercised and meeting various milestones. 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 ECT from exercise of ESI Options up to the cash amount of $1m

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

(c) $500,000 on signing of a binding contract for construction of Matmor Pilot Plant

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

(e) $1,000,000 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

In measuring the present value of the liability, management have estimated when options will likely be exercised and when milestones will likely be achieved. A discount rate of 41.5% has been applied to derive a present value.

Perpetual Royalty Liability

In addition to the Matmor Asset Liability recognised, the company has incurred a future obligation to remit a perpetual royalty to Matmor Steel, the originator of the Matmor technology, at an amount calculated at 3% of Licensing Income received by the company after allowing for Deductions. Given the uncertainties and risks associated with developing new technologies and the current stage of development of the technology, the liability value is presently immaterial and has not been recognised.

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2015

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Note 11. Current liabilities - provisions (continued)

Movements in provisions

Movements in each class of provision during the current financial half-year, other than employee benefits, are set out below:

Consolidated - 31 Dec 2015 Carrying amount at the start of the half-year Paid out Unwinding of discount Carrying amount at the end of the half-year	Deferred consideration - Matmor $ 2,562,556 (998,368) 398,960
	1,963,148

Note 12. Non-current liabilities - provisions

Long service leave Earn-out provision	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 37,277 34,400 348,498 835,044	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 37,277 34,400 348,498 835,044
	385,775	869,444

Earn-out provision

The earn-out provision represents deferred consideration related to the acquisition of the Coldry intellectual property from the Maddingley Group. The consideration payable is calculated based on 50 cents per projected processed tonne of coal feedstock between 2017 and 2023 and is discounted at a rate of 41.5%. The consideration, estimated as payable through to 2023, is capped at $3m.

The reduction in the balance occurring since 30 June 2015 is a result of a change in estimates related to the timing of production tonnage and duration of the projected production period before it is anticipated that the $3m cap is attained.

Movements in provisions

Movements in each class of provision during the current financial half-year, other than employee benefits, are set out below:

Consolidated - 31 Dec 2015 Carrying amount at the start of the half-year Reduction for revision of estimates Carrying amount at the end of the half-year Note 13. Equity - issued capital Ordinary shares - fully paid	31 Dec 2015 Shares 2,618,611,613	Consolidated 30 Jun 2015 31 Dec 2015 Shares $ 2,519,526,361 58,831,801	Earn-out provision $ 835,044 (486,546)
			348,498
			30 Jun 2015 $ 57,051,403

Note 13. Equity - issued capital

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2015

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Note 13. Equity - issued capital (continued)

Movements in ordinary share capital

Details Date Balance 1 July 2015 Exercise of ESIOA options 22 September 2015 Exercise of ESIOB options 22 September 2015 Exercise of ESIOA options 7 October 2015 Exercise of ESIOB options 7 October 2015 Transfer from options reserve Balance 31 December 2015	No of shares Issue price 2,519,526,361 27,877,778 $0.009 35,050,379 $0.015 36,000,000 $0.009 157,095 $0.015 - $0.000 2,618,611,613	$ 57,051,403 250,900 525,000 324,000 2,356 678,142
		58,831,801

Ordinary shares

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.

Note 14. Equity - reserves

Share-based payments reserve Options reserve	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 22,087 22,087 3,328,415 4,065,307	Consolidated 31 Dec 2015 30 Jun 2015 $ $ 22,087 22,087 3,328,415 4,065,307
	3,350,502	4,087,394

Options reserve

The options reserve is used to recognise the value of options issued.

Movements in reserves

Movements in each class of reserve during the current financial half-year are set out below:

Consolidated Balance at 1 July 2015 Exercise of options Placement Reversal Balance at 31 December 2015	Share Based Payments $ 22,087 - - -	ESIOA* Options $ 1,286,140 (63,878) - -	ESIOB** Options $ 2,779,167 (614,264) 20,000 (78,750)	Total $ 4,087,394 (678,142) 20,000 (78,750)
	22,087	1,222,262	2,106,153	3,350,502

• ESIOA options have an exercise price of 0.9 cents and expire on 31 July 2017.

• ** ESIOB options have an exercise price of 1.5 cents and expire on 31 July 2017.

Note 15. Equity - dividends

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

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Environmental Clean Technologies Limited Notes to the financial statements 31 December 2015

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Note 16. Fair value measurement

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.

Note 17. Related party transactions

Transactions with related parties

During the period, the company had the following loan to a director or director related entity for the purpose of funding purchases of ESIOA options pursuant to the Prospectus dated 30 June 2014. Each option was issued at 0.1 cents and is exercisable on or before 30 July 2017. Options remain in escrow to the extent that there is any principal or interest remaining unpaid on each loan. Interest is payable on the outstanding balance at the rate of 6% p.a. calculated daily. Loans are for 12 months with interest to be paid in arrears and in quarterly instalments.

• Glenn Fozard was advanced $50,000 for the acquisition of 50 million options. Interest incurred during the period was $1,085. The total principal repaid as at period-end remained at $25,000. Interest repaid during the period was $1,085. The loan balance at 31 December 2015 is $25,000. The loan was due for repayment on 5 August 2015. Per the terms of the Loan Agreement, additional interest of 3% p.a. over the base interest of 6% p.a. is applicable until the loan is satisfied.

Receivable from and payable to related parties

There were no trade receivables from or trade payables to related parties at the current and previous reporting date.

Loans to/from related parties

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

	Consolidated	Consolidated
	31 Dec 2015	30 Jun 2015
	$	$
Current receivables:
Loans to directors	25,000	25,000

Note 18. Events after the reporting period

On 19 January 2016, the company secured a binding agreement to proceed with project development activities for its Coldry and Matmor technologies with India’s national lignite authority, Neyveli Lignite Corporation and India’s largest iron ore miner, NMDC.

On 20 January 2016, 75,253,967 ordinary shares were issued raising $1,503,971. This was a result of the exercise of 166,667 ESIOA options at $0.009 each, 25,000 ESIOB options at $0.015 each, and the issue of 75,062,300 ordinary shares at $0.02 in satisfaction of the primary Fast Finance debt facility which had a carrying value of $1,501,246 at 31 December 2015, leaving $300,000 which expires on 27 April 2016.

During January 2016, the company received a R&D Tax Incentive refund of $1,114,594 relating to the 2015 financial year.

On 2 February 2016, the company finalised a loan facility agreement with Innovation Structured Finance Co., LLC, a specialty finance company established by Brevet Capital, a New York City based investment manager. The Brevet facility is a senior secured loan, established on commercial terms, and provides short-term flexibility to draw down against the company’s current accrued R&D Tax Incentive refund for the 2016 financial year, now estimated to be more than $1.2 million.

No other matter or circumstance has arisen since 31 December 2015 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 2015

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Note 19. 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 Dec 2015 31 Dec 2014 $ $ (1,893,960) (1,563,917)	Consolidated 31 Dec 2015 31 Dec 2014 $ $ (1,893,960) (1,563,917)
	Number 2,570,707,611	Number 2,355,950,690
	2,570,707,611	2,355,950,690
	Cents (0.07) (0.07)	Cents (0.07) (0.07)

At 31 December 2015 there were 1,222,294,586 ESIOA series options and 861,060,942 ESIOB series options on issue 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 2015

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In the directors' opinion:

• the attached financial statements and notes 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 give a true and fair view of the consolidated entity's financial position as at 31 December 2015 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

______Ashley Moore Managing Director

26 February 2016 Melbourne

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