MCS SERVICES LIMITED — Interim / Quarterly Report 2016

Feb 29, 2016

29 February 2016

Australian Securities Exchange Level 40, Central Park 152-154 St George’s Terrace Perth WA 6000

ASX ANNOUNCEMENT

HALF YEAR FINANCIAL REPORT & APPENDIX 4D

MCS Services Limited ( MCS Services or the Company ) ( ASX: MSG ) is pleased to present its audited half-year report ( Report ) for the six (6) months ending 31 December 2015 ( Period ) and Appendix 4D. MCS has taken an economic interest in MCS Security Pty Limited and John Boardman Pty Limited (trading as Intiga Security) ( Security Businesses ) since 1 November 2015.

Highlights from the Period, as detailed in the Report, are as follows:

• Results of the Security Businesses have been captured since 1 November 2015 (i.e. 2 months);

• Current Assets were $1,382,891 at 31 December 2014 and $4,847,354 at 31 December 2015;

• Net Assets were $1,305,183 at 31 December 2014 and $2,997,735 at 31 December 2015;

• Audited Total Revenues of $3,088,650 were solely attributable to the Security Businesses;

• Total Expenses for the Period of $5,353,296 of which $4,403,319 were impairments; and

• Audited Gross Profit for the Period was $747,125.

Yours faithfully

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The Hon RC (Bob) Kucera APM JP Non-Executive Chairman MCS Services Limited

MCS Services Limited Appendix 4D Half-Year Report

1. Company details

Name of entity: MCS SERVICES LIMITED ABN: 66 119 641 986 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 the ordinary activities	up	100% to	$3,088,651
Loss from ordinary activities after tax attributable to the owners	up	122% to	$4,626,292
of MCS Services Limited
Loss for the half-year attributable to the owners of	up	122% to	$4,626,292
MCS Services Limited

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 $4,626,292 (31 December 2014: loss of $2,080,517). The net loss includes the write off of goodwill of $4,403,319 and the amortisation of contracts acquired of $129,606.

3. Net tangible assets

	Reporting	Previous
	period	Period
	Cents	Cents
Net tangible assets per ordinary security	1.487	2.347

4. Gain or Loss of control over entities

Name of entities (or group of entities) MCS Security Group Pty Ltd and John Boardman Pty Ltd Date control gained Transaction completed on 18 December 2015 however the Company took over control effective 1 November 2015

Contribution of such entities to the reporting entity’s profit/ (loss) from ordinary activities before income tax during the period (where material)

$122,980

Profit/ (loss) from ordinary activities before income tax of the controlled entity N/A (Or group of entities) whilst controlled during the whole of the previous period (where material)

5. 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.

6. Dividend reinvestment plans

Not applicable.

7. Details of associates and joint venture entities

Not applicable.

8. Foreign entities

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

Not applicable.

9. 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 Half-Year Report.

10. Attachments

Details of attachments (if any)

The Half Year Report of MCS Services Limited for the half –year ended 31 December 2015 is attached.

Signed

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The Hon RC (BOB) KUCERA APM JP Non-Executive Chairman 29 February 2016

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ABN: 66 119 641 986

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

CONTENTS

Description	Page
Directors’ Report	2
Auditor’s Independence Declaration	5
Consolidated Statement of Financial Position	6
Consolidated Statement of Profit or Loss and Other Comprehensive Income	7
Consolidated Statement of Changes in Equity	8
Consolidated Statement of Cash Flows	9
Condensed Notes to Financial Statements	10
Directors’ declaration	19
Independent auditor’s review report	20

DIRECTORS’ REPORT

Your directors present their report, together with the financial report on MCS Services Limited (previously named Red Gum Resources Limited) ( Company ) for the half-year ended 31 December 2015.

Corporate and Operational Overview

During the Reporting Period (1 July 2015 to 31 December 2015) the Company’s activities were focused on the acquisition of MCS Security Group Pty Ltd and John Boardman Pty Ltd (collectively the Transaction ). Shareholders approved the Transaction at a General Meeting held on 28 October 2015 and the Transaction completed on 18 December 2015. The operations of MCS Security Group Pty Ltd and John Boardman Pty Ltd were taken over by the Company effective 1 November 2015 following approval by shareholders on 28 October 2015.

Consistent with previous stated intentions, operationally the Company’s mining related field activities remained on hold during the Reporting Period. There was no non-essential expenditure related to activities in Peru and Chile and no new material expenditure commitments incurred in relation to the Company’s mining interests.

Review of Operations

Corporate

A summary of the most significant transactions is set out below:

• On 3 August 2015, the Company announced it had entered into a binding terms sheet with MCS Security Group Pty Ltd ( MCS Security ) and John Boardman Pty Ltd ( Intiga Security ) (collectively the Transaction ). The businesses specialise in asset security at major commercial property sites and retail shopping centres, sport stadiums, construction sites, and other ancillary sectors such as events.

Under the terms of the Transaction, MCS Security was acquired for a consideration of $3,780,000 cash and 30,000,000 fully paid ordinary shares in the Company and Intiga Security was acquired for a consideration of 18,000,000 fully paid ordinary shares in the Company with an additional 6,000,000 fully paid ordinary shares in the Company to be issued on the Company achieving a net profit after tax of $1.92 million for the financial year ending 30 June 2016.

On 28 October 2015, the Company held a General Meeting to approve the Transaction. On 10 November 2015, the Company announced that the capital raising had been heavily oversubscribed and that it had completed the $4.5 million capital raising.

On 18 December 2015, the Company announced that it had completed the acquisitions of MCS Security and Intiga Security.

• On 12 October 2015, the Company announced its intention to target a dividend payout ratio of 80% of audited net profit after tax at the discretion of the Board.

Operational Highlights

The Company specialises in asset security at retail shopping centres, government offices and facilities, major commercial property sites, sports stadiums, construction sites and other ancillary sites and major events throughout the Perth metropolitan area and regional country areas of Western Australia. The Company also provides mobile patrols and response vehicle services as well as electronic security services including the design, supply, installation and commissioning of security alarms, CCTV, biometric and access control systems to commercial, industrial and domestic sectors.

Following the acquisition of MCS Security and Intiga Security, the Company has focused on meeting existing client demands which seasonally increase as a result of extended Christmas trading hours and outdoor summer events. Following acquisition, the Company has focused on expanding into regional Western

DIRECTORS’ REPORT

Australia in the government facilities and health care sectors. As announced on 14 January 2016, the Company has been awarded, by the Department of Health (Western Australia), the security contract to the Hedland Health Campus. The Company has also now commenced work for the Town of Port Hedland Council providing asset security services for events in the Pilbara region.

During the period, the Company has established a new division in loss prevention management which provides crime prevention strategies, retail theft protection, covert officers and tracking services to clients in the Perth Metropolitan area.

Directors

The names of Directors who held office during or since the end of the half-year are set out below. Directors were in office for this entire period unless otherwise stated.

• The Hon RC (Bob) Kucera APM JP – Non Executive Chairman (appointed 20 January 2016)

• Mr Josh Puckridge – Non Executive Director

• Ms Melissa Chapman – Non Executive Director (appointed 18 December 2015)

• Mr Edwin Bulseco – Non Executive Director (retired 18 December 2015)

• Mr Thomas Pickett – Non Executive Director (retired 20 January 2016)

Company Secretary

The names of the Company Secretary who held office during or since the end of the half-year are set out below. The Company Secretary was in office for this entire period unless otherwise stated.

• Ms Melissa Chapman (appointed 2 February 2016)

• Mr Malcolm Lucas-Smith (retired 2 February 2016)

Operating Results

The net loss attributable to members of the Company for the half-year ended 31 December 2015 was $4,626,292 (2014: $2,080,517 loss). The net loss includes the write off of goodwill of $4,403,319 and the amortisation of contracts acquired of $129,606.

Capital

During the half-year 146,000,000 ordinary securities were issued at $0.05 each. The Company had the following securities on issue at the date of this report:

Ordinary Shares¹ Quoted options RGXO Ex $4.40 exp 1/03/2016 Quoted options RGXOA Ex $0.44 exp 15/11/2017 Unquoted options RGXAK Ex$6.60 exp 30/04/2016	Number
	201,610,212
	1,391,730 4,000,047 113,637
	5,505,414

¹ At 31 December 2015 ordinary shares held in escrow amounted to 38,400,000 which are restricted from trade until 29 December 2016.

DIRECTORS’ REPORT

Events Subsequent to Balance Date

On 14 January 2016, the Company announced that it had been awarded new contracts in the government services, healthcare sector, commercial property and sporting and events sector. It also announced that it has expanded into the retail security sector.

On 20 January 2016, the Company announced the appointment of the Hon RC (Bob) Kucera APM JP as the Company’s Non-Executive Chairman.

On 2 February 2016, the Company announced the change in registered office and the appointment of Ms Melissa Chapman as Company Secretary.

Signed in accordance with a resolution of the directors.

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The Hon RC (Bob) Kucera APM JP Non-Executive Chairman

Dated this 29 day of February 2016

Stantons International Audit and Consulting Pty Ltd trading as

PO Box 1908 West Perth WA 6872 Australia

Chartered Accountants and Consultants

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Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204

ABN: 84 144 581 519 www.stantons.com.au

29 February 2016

Board of Directors MCS Services Limited 3/108 Winton Road JOONDALUP WA 6027

Dear Sirs

RE: MCS SERVICES LIMITED

In accordance with section 307C of the Corporations Act 2001 , I am pleased to provide the following declaration of independence to the directors of MCS Services Limited.

As Audit Director for the review of the financial statements of MCS Services Limited for the half year ended 31 December 2015, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

Yours faithfully

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

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Martin Michalik Director

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Liability limited by a scheme approved under Professional Standards Legislation

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015

Note Assets Current Assets Cash and cash equivalents Trade and other receivables 4 Inventory Total Current Assets Non-Current Assets Plant and equipment 5 Restricted cash and bonds Deferred tax asset Intangible assets 12 Exploration and evaluation expenditure 6 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Deferred consideration 13 Provisions Financial liabilities 14 Income tax Total Current Liabilities Non-Current Liabilities Financial liabilities 14 Deferred tax liability Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued Capital 7 Foreign Currency Translation Reserve Share Option Reserve 7 Accumulated Losses Total Equity	31 December 2015 30 June 2015 $ $ 2,121,703 1,216,564 2,685,665 166,327 39,986 -
	4,847,354 1,382,891
	566,797 - 2,200 - 281,116 - 1,814,477 - - -
	2,664,590 -
	7,511,944 1,382,891
	3,046,130 77,708 300,000 - 367,609 - 146,651 - 29,689 -
	3,890,079 77,708
	79,787 - 544,343 -
	624,130 -
	4,514,209 77,708
	2,997,735 1,305,183
	17,944,000 11,621,646 16,869 20,379 201,743 201,743 (15,164,877) (10,538,585)
	2,997,735 1,305,183

This statement should be read in conjunction with the Notes to the Financial Statements

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2015

Note Revenue Uniformed guards Mobile patrols Alarm and CCTV Monitoring Total Revenue Cost of Goods Sold Uniformed guards Mobile patrols Alarm and CCTV Monitoring Other expenses Total Cost of Goods Sold Gross Profit Other income Exploration expenditure impaired expense Exploration expenses written off 6 Employee expenses and benefits Professional fees Travel and entertainment Directors fees and remuneration Compliance and regulatory fees Administration Insurance Finance expenses Motor vehicle expenses Occupancy Depreciation and amortisation Impairment of goodwill Other expenses Transaction costs Total Expenses Loss before tax Income tax (expense)/benefit Loss for the period attributable to members Other Comprehensive income Items that will be reclassified subsequently to profit or loss Exchange gain/(loss) arising on the translating foreign operations Items that will not be reclassified subsequently to profit or loss Total comprehensive loss for the period Earnings per share Basic and diluted loss per share from continuing operations 10	31 December 2015 31 December 2014 $ $ 2,986,087 - 49,438 - 44,699 - 8,426 -
	3,088,650 - (2,247,319) - (34,876) - (20,928) - (2,901) - (25,501) -
	(2,331,525) -
	757,125 -
	33,361 14,793 - (510,771) (10,228) (25,643) (326,407) - (117,600) (86,713) (11,177) - (91,078) (164,324) (26,938) - (50,711) - (140,797) - (6,253) - (11,397) - (23,625) (109,988) (166,535) (584) (4,403,319) - (592) (61,900) - (1,135,387)
	(5,353,296) (2,080,517)
	(4,596,171) (2,080,517) (30,121) -
	(4,626,292) (2,080,517) (3,510) (1,629) - -
	(4,629,802) (2,082,146)
	Cents Cents (6.93) (11.00)

This statement should be read in conjunction with the Notes to the Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2015

Note Ordinary Shares Foreign Currency translation Reserve Share Option Reserve Accumulated Losses Total $ $ $ $ $ Balance 30 June 2015 11,621,646 20,379 201,743 (10,538,585) 1,305,183 Loss for the period - - - (4,626,292) (4,626,292) Foreign currency translation reserve - (3,510) - - (3,510) Total comprehensive income / (loss) - (3,510) - (4,626,292) (4,629,802) Issue of share capital - Prospectus 4,500,000 - - - 4,500,000 Issue of share capital – MCS Consideration 1,500,000 - - - 1,500,000 Issue of share capital – Intiga Consideration 900,000 - - - 900,000 Issue of share capital – Facilitator Shares 400,000 - - - 400,000 Share issue costs (977,646) - - - (977,646) Balance 31 December 2015 17,944,000 16,869 201,743 (15,164,877) 2,997,735 Balance 30 June 2014 10,449,282 31,159 201,743 (8,078,733) 2,603,451 Loss for the period - - - (2,080,517) (2,080,517) Other comprehensive income - (1,629) - - (1,629) Total comprehensive income / (loss) - (1,629) - (2,080,517) (2,082,146) Balance 31 December 2014 10,449,282 29,530 201,743 (10,159,250) 521,305	Note Ordinary Shares Foreign Currency translation Reserve Share Option Reserve Accumulated Losses Total $ $ $ $ $ Balance 30 June 2015 11,621,646 20,379 201,743 (10,538,585) 1,305,183 Loss for the period - - - (4,626,292) (4,626,292) Foreign currency translation reserve - (3,510) - - (3,510) Total comprehensive income / (loss) - (3,510) - (4,626,292) (4,629,802) Issue of share capital - Prospectus 4,500,000 - - - 4,500,000 Issue of share capital – MCS Consideration 1,500,000 - - - 1,500,000 Issue of share capital – Intiga Consideration 900,000 - - - 900,000 Issue of share capital – Facilitator Shares 400,000 - - - 400,000 Share issue costs (977,646) - - - (977,646) Balance 31 December 2015 17,944,000 16,869 201,743 (15,164,877) 2,997,735 Balance 30 June 2014 10,449,282 31,159 201,743 (8,078,733) 2,603,451 Loss for the period - - - (2,080,517) (2,080,517) Other comprehensive income - (1,629) - - (1,629) Total comprehensive income / (loss) - (1,629) - (2,080,517) (2,082,146) Balance 31 December 2014 10,449,282 29,530 201,743 (10,159,250) 521,305	Note Ordinary Shares Foreign Currency translation Reserve Share Option Reserve Accumulated Losses Total $ $ $ $ $ Balance 30 June 2015 11,621,646 20,379 201,743 (10,538,585) 1,305,183 Loss for the period - - - (4,626,292) (4,626,292) Foreign currency translation reserve - (3,510) - - (3,510) Total comprehensive income / (loss) - (3,510) - (4,626,292) (4,629,802) Issue of share capital - Prospectus 4,500,000 - - - 4,500,000 Issue of share capital – MCS Consideration 1,500,000 - - - 1,500,000 Issue of share capital – Intiga Consideration 900,000 - - - 900,000 Issue of share capital – Facilitator Shares 400,000 - - - 400,000 Share issue costs (977,646) - - - (977,646) Balance 31 December 2015 17,944,000 16,869 201,743 (15,164,877) 2,997,735 Balance 30 June 2014 10,449,282 31,159 201,743 (8,078,733) 2,603,451 Loss for the period - - - (2,080,517) (2,080,517) Other comprehensive income - (1,629) - - (1,629) Total comprehensive income / (loss) - (1,629) - (2,080,517) (2,082,146) Balance 31 December 2014 10,449,282 29,530 201,743 (10,159,250) 521,305
	- (3,510) - (4,626,292) 4,500,000 - - - 1,500,000 - - - 900,000 - - - 400,000 - - - (977,646) - - -	(4,629,802) 4,500,000 1,500,000 900,000 400,000 (977,646)
	17,944,000 16,869 201,743 (15,164,877) 10,449,282 31,159 201,743 (8,078,733) - - - (2,080,517) - (1,629) - -	2,997,735 2,603,451 (2,080,517) (1,629)
	- (1,629) - (2,080,517)	(2,082,146)
	10,449,282 29,530 201,743 (10,159,250)	521,305

This statement should be read in conjunction with the Notes to the Financial Statements

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2015

Cash flows from operating activities Receipts from customers Payments to employees, suppliers and directors Refund in respect of transaction costs Payments in respect of transaction costs Income tax paid Net Cash (used in)/provided by operating activities Cash flows from investing activities Interest received Payments for exploration expenditure Payment for finance leases Cash balances at acquisition of subsidiaries 14 Payment for acquisition of subsidiaries Net Cash (used in)/provided by investing activities Cash flows from financing activities Proceeds from the issue of share capital Payments for share issue costs Net Cash provided by/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Foreign exchange difference Cash and cash equivalents at the end of the financial period*	31 December 2015 31 December 2014 $ $ 2,920,827 - (3,184,305) (460,792) 125,000 - (12,626) (1,068,405) (30,000) -
	(181,104) (1,529,197)
	9,265 14,793 (10,228) (27,029) (17,747) - 668,633 - (3,780,000) -
	(3,130,077) (12,236)
	4,500,000 - (283,484) -
	4,216,516 -
	905,335 (1,541,433) 1,216,564 2,074,889 (196) -
	2,121,703 533,456

• Amount represents cash at date of acquisition in Intiga Security and MCS Security. The amount was not acquired and part of The Transaction and will be repaid to the vendors of Intiga Security and MCS Security.

This statement should be read in conjunction with the Notes to the Financial Statements

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

MCS Services Limited and its subsidiaries’ ( Group or Consolidated Entity ) principal activity during the Reporting Period transitioned from global mineral exploration to security.

1. General Information and Basis of Preparation

These condensed interim consolidated financial statements ( the interim financial statements ) of the Group are for the six months ended 31 December 2015 and are presented in Australian dollars ( $ ), which is the functional currency of the parent company. These general purpose interim financial statements have been prepared in accordance with requirements of the Corporations Act 2001 and Australian Accounting Standards Board ( AASB ) 134: Interim Financial Reporting. They do not include all of the information required in the annual financial statements in accordance with International Financial Reporting Standards ( IFRS ), and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2015 and any public announcements made by the Group during the half-year in accordance with continuous disclosure requirements under the Australian Stock Exchange ( ASX ) Listing Rules and Corporations Act 2001.

The interim financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

The interim financial report covers MCS Services Limited ( Company ) and its 100% subsidiaries MCS Security Group Pty Ltd, John Boardman Pty Ltd, Red Gum Resources (Peru) Pty Ltd and Central Peru Resources SAC ( Group ).

MCS Services Limited is a public company, incorporated and domiciled in Australia. The registered office is 3/108 Winton Road, Joondalup, WA, 6027.

The Company was incorporated on 11 May 2006.

The interim financial statements for the half-year ended 31 December 2015 (including the comparatives) were approved by the board of directors on 29 February 2016.

2. Significant Accounting Policies

Except as noted below, the accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

New and amended accounting standards and interpretations

The Company has adopted all Australian Accounting Standards and Interpretations effective from 1 July 2015, including:

Reference	Title	Summary
AASB 2015-3	Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031_Materiality_	The Standard completes the AASB’s project to remove Australian guidance on materiality from Australian Accounting Standards.

The adoption of new and amended standards and interpretations had no impact on the financial position or performance of the Company.

The Company has not elected to early adopt any new accounting standards and interpretations.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

3. Estimates

When preparing the interim financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

The judgements, estimates and assumptions applied in the interim financial statements, including the key sources of estimation uncertainty were the same as those applied in the Group's last annual financial statements for the year ended 30 June 2015 except as noted in notes 13 and 14.

4. Trade and Other Receivables

Trade debtors Prepayments Goods and services tax receivable Other receivables	31 December 2015 $ 30 June 2015 $ 2,244,357 - 422,789 - - 20,716 18,519 145,611
	2,685,665 166,327

5. Plant and Equipment

31 December 2015 Carrying amount Balance at 1 July 2015 Additions Transfers and other movements(1) Disposals Balance at 31 December 2015 Depreciation Balance at 1 July 2015 Disposals Transfers and other movements(1) Depreciation Balance at 31 December 2015 Carrying amount at 31 December 2015 30 June 2015 Carrying amount Balance at 1 July 2014 Balance at 30 June 2015 Depreciation Balance at 1 July 2014 Depreciation Balance at 30 June 2015 Carrying amount at 30 June 2015	Furniture & Equipment $ Motor Vehicles $ Software $ Total $ 14,601 - - 14,601 - - - - 398,766 409,479 42,103 850,348 - - - -
	413,367 409,479 42,103 864,949
	(14,601) - - (14,601) - - - - (117,371) (104,160) (25,091) (246,622) (14,148) (20,776) (2,005) (36,929)
	(146,120) (124,936) (27,096) (298,152)
	267,247 284,543 15,007 566,797
	14,601 - - 14,601
	14,601 - - 14,601
	(14,017) - - (14,017) (584) - - (584)
	(14,601) - - (14,601)
	- - - -

(1) Acquired on the acquisition of MCS Security and Intiga Security.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

6. Exploration and Evaluation Expenditure

During the period ended 31 December 2015 $10,228 (31 December 2014: $25,643) of project costs were expensed in the Statement of Profit or Loss and Other Comprehensive Income rather than capitalised.

The following mineral projects are currently held by the Company:

Project description	Project code	Location		Area (approx)	Interest held
Cerro Huancash Chongos A Chongos B Chongos C LaNegra	n/a n/a n/a n/a n/a	Peru Peru Peru Peru Chile		5.76 km2 10 km2 9 km2 9 km2 20km2	100% 100% 100% 100% 100%
7. Issued Capital 201,610,212 (30 June 2015: 55,610,212) ordinary shares Ordinary shares At the beginning of reporting period Shares issued during the current period Shares issued 18 December 2015(1) Shares issued 18 December 2015(2) Shares issued 18 December 2015(3) Shares issued 18 December 2015(4) Shares issued during the prior year Shares issued 8 April 2015(5) Shares issued 11 May 2015(6) Shares issued 21 May 2015(7) Total shares issued during the period Less: Share issue costs At the end of reporting period			31 December 2015 $ 17,944,000		30 June 2015 $ 11,621,646
			11,621,646 4,500,000 1,500,000 900,000 400,000 - - -		10,449,282 - - - - 98,000 696,524 490,000
			7,300,000		1,284,524
			(977,646)		(112,160)
			17,944,000		11,621,646

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

7. Issued Capital (continued)

Ordinary shares At the beginning of reporting period - Shares consolidated on the basis of 1:44 Shares issued during the period - Shares issued 18 December 2015(1) - Shares issued 18 December 2015(2) - Shares issued 18 December 2015(3) - Shares issued 18 December 2015(4) Shares issued during the prior year: - Shares issued 8 April 2015(5) - Shares issued 11 May 2015(6) - Shares issued 21 May 2015(7) At the end of reporting period

Half Year Ended 31 December 2015 No. Year Ended 30 June 2015 No. 55,610,212 832,000,000 - (813,090,494) 90,000,000 - 30,000,000 - 18,000,000 - 8,000,000 - - 2,800,000 - 19,900,699 - 14,000,007

201,610,212 55,610,212

At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

On 18 December 2014 the shareholders approved the consolidation of securities on the basis of 1 share for every 44 shares held. The consolidation was completed on 29 December 2014.

Share issue notes:

• (1) On 18 December 2015, 90,000,000 ordinary shares were issued at $0.05 per share

• (2) On 18 December 2015, 30,000,000 ordinary shares were issued at $0.05 per share to the vendors of MCS Security Group Pty Ltd as part of the security acquisition

• (3) On 18 December 2015, 18,000,000 ordinary shares were issued at $0.05 per share to the vendor of John Boardman Pty Ltd as part of the security acquisition

• (4) On 18 December 2015, 8,000,000 ordinary shares were issued at $0.05 per share to the facilitators of the security acquisition

• (5) On 8 April 2015, 2,800,000 ordinary shares were issued at $0.035 per share.

• (6) On 11 May 2015, 19,900,699 ordinary shares were issued at $0.035 per share as part of the NonRenounceable Rights Issue.

• (7) On 21 May 2015, 14,000,007 ordinary shares were issued at $0.035 per share upon conversion of $490,000 convertible note.

• a. Share Option Reserve

Equity based remuneration At the beginning of the period Options issued during the period At the end of the period	31 December 2015 $ 30 June 2015 $ 201,743 201,743 - -
	201,743 201,743

The share option reserve records items recognised on the valuation of share options over the vesting period.

No Options were issued during the half year ended 31 December 2015 or during the half year ended 31 December 2014.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

8. Segmental Information

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on operating sector. The Group's reportable segments under AASB 8 are therefore as follows.

• Security

• Mineral Exploration

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment.

31 December 2015 REVENUE Total revenue RESULT Segment result Finance costs Loss before income tax Income tax expense Loss after income tax OTHER Depreciation and amortisation of segment assets ASSETS Segment assets LIABILITIES Segment liabilities 31 December 2014 REVENUE Total revenue -external interest received RESULT Segment result Finance costs Loss before income tax Income tax expense Loss after income tax OTHER Depreciation and amortisation of segment assets ASSETS Segment assets LIABILITIES Segment liabilities 30 June 2015 ASSETS Segment assets LIABILITIES Segment liabilities	Security Services $ Mineral Exploration $ Total $ 3,088,650 - 3,088,650
	(4,585,943) (10,228) (4,596,171)
	(6,253) - (6,253)
	(4,585,943) (10,228) (4,596,171) (30,121) - (30,121)
	(4,616,064) (10,228) (4,626,292)
	(166,535) - (166,535)
	7,511,944 - 7,511,944
	(4,514,209) - (4,514,209)
	Security Services $ Mineral Exploration $ Total $ - 14,793 14,793
	- (2,080,517) (2,080,517)
	- - -
	- (2,080,517) (2,080,517) - - -
	- (2,080,517) (2,080,517)
	- (584) (584)
	- 880,273 880,273
	- (358,968) (358,968)
	- 1,382,891 1,382,891
	- (77,708) (77,708)

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

8. Segment Information (continued)

Accounting Policies

Segment revenues and expenses are those directly attributable to the segments. Segment assets include all assets used by a segment and consist principally of cash, receivables, intangible assets, exploration and evaluation expenditure and plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions and borrowings. Segment assets and liabilities do not include deferred income taxes.

Intersegment Transfers

Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment transactions are the same as those charged for similar goods to parties outside of the Company at an arm’s length. These transfers are eliminated on consolidation. At 31 December 2015 and 30 June 2015 there were no such intersegment transfers.

9. Related Party Transactions

There were no significant changes to the nature of related party relationships and transactions from those disclosed in 30 June 2015 annual report except as noted below.

On 1 October 2014 MCS Security Group Pty Ltd entered into a lease agreement with The Simmons Superannuation Fund, a related party to CEO Mr Paul Simmons, for the lease of 3/108 Winton Road, Joondalup, WA, 6027. The term of the lease is 1 October 2014 to 30 September 2019. The lease is based on an area of 231m² at a rent of $49,123 (excluding GST) per annum, subject to an annual CPI increase, with variable outgoings charged separately at market rates.

10. Earnings Per Share

Both the basic and diluted earnings per share have been calculated using the loss attributable to shareholders of MCS Services Limited as the numerator.

The weighted average number of shares for the purposes of calculating the basic and diluted earnings per share:

Weighted average number of shares: basic and dilutive The Options are not dilutive as at 31 December 2015.	31 December 2015 No. 31 December 2014 No. 66,718,908 18,909,506

11. Events Subsequent to Balance Date

On 14 January 2016, the Company announced that it had been awarded new contracts in the government services, healthcare sector, commercial property and sporting and events sector. It also announced that it has expanded into the retail security sector.

On 20 January 2016, the Company announced the appointment of the Hon RC (Bob) Kucera APM JP as the Company’s Non-Executive Chairman.

On 2 February 2016, the Company announced the change in registered office and the appointment of Ms Melissa Chapman as Company Secretary.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

12. Intangible Assets

Cost At the beginning of the period Acquisitions through business combinations – Contracts on acquisition of MCS Security and Intiga Security At the end of the period Amortisation At the beginning of the period Amortisation in the period At the end of the period Carrying value at end of the period	31 December 2015 $ 30 June 2015 $ - - 1,944,083 -
	1,944,083 -
	- - (129,606) -
	(129,606) -
	1,814,477 -

Key assumptions used in the discounted cash flow calculations

The fair value of the contracts at acquisition date has been calculated using the discounted cash-flow model based the following assumptions:

i. Life of contracts

• Using the remaining life of each contract at acquisition date and the net cash flows from each contract.

ii. Cash flows from contracts

Cash revenues are based on the contract values for each contract. The values assigned to the operating costs on each contract represent management’s assessment of estimated costs to deliver on the contracts based on internal sources (historical data).

iii. Discount rates

The discount rates used is based on the estimated weighted average cost of raising funds by the Company.

Amortisation of the contracts is based on the estimated average remaining life of the contracts at acquisition date. Per management, the average estimated life of the contracts, excluding any renewals or extensions, is 2.5 years.

As the business combination was only completed during the period, management are of the view that there is no indication of impairment at the reporting date.

13. Contingent Consideration

	31	December	30	June
		2015		2015
		$		$
Contingent consideration		300,000		-

The fair value of contingent consideration arose from the acquisition of Intiga Security. It has been calculated based on the expected issue of 6,000,000 ordinary shares to the vendors of Intiga Security and the associated probability of the Company achieving a consolidated net profit after tax of $1,920,000 in the year ended 30 June 2016 as per Share Purchase Agreement.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

13. Contingent Consideration (continued)

At the acquisition date, the Board estimated that it was probable that the consolidated entity would achieve the net profit after tax of $1,920,000 and therefore, a full accrual has been made for the 6,000,000 shares expected to be issued.

As the shares are expected to be issued with 12 months, the fair value of the contingent consideration has not been discounted.

14. Business Combinations

On 31 October 2015, the Group completed the acquisition of 100% of the issued share capital and voting rights of MCS Security Group Pty Ltd ( MCS Security ) and John Boardman Pty Ltd ( Intiga Security ). MCS Security and Intiga Security specialises in asset security at retail shopping centres, government offices and facilities, major commercial property sites, sports stadiums, construction sites and other ancillary sites and major events throughout the Perth metropolitan area and regional country areas of Western Australia. The objective of the acquisition includes exposure to future potential cash flows from two established and profitability businesses.

Details of the business combination are as follows:

Note Consideration MCS Security Intiga Security(1) (i) Assets Acquired Cash acquired Trade and other receivables Inventory Plant and equipment Deferred tax asset Intangible asset Less trade and other payables Less deferred tax liability Net assets acquired (ii) Goodwill (i) less (ii)	$ 5,280,000 1,200,000
	6,480,000 - 1,100 51,344 603,726 259,653 1,944,083
	2,859,906 (200,000) (583,225)
	2,076,681
	4,403,319

(1) Includes contingent consideration of $300,000

Identifiable net assets

The fair values of the identifiable intangible assets have been determined at 31 October 2015. The fair value of the trade and other receivables acquired as part of the business combination amounted to $1,100. The value of intangible assets amounted to $1,944,083 as outlined in note 12.

Goodwill

The goodwill that arose on the combination can be attributed to the synergies expected to be derived from the combination and the value of the workforce of Intiga Security and MCS Security which cannot be recognised as an intangible asset. At the reporting date, the Board have determined that the goodwill is not recoverable and therefore have written it off to the consolidated statement of profit or loss and other comprehensive income for the half year ended 31 December 2015. The goodwill that arose from this business combination is not expected to be deductible for tax purposes.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

14. Business Combinations (continued)

Reconciliation accounts

At completion, the Company was required to transfer the MCS Security retained cash and Intiga Security retained cash to the vendors of MCS Security and Intiga Security. As at the date of this report, the reconciliation accounts are still being finalised; therefore a portion of the assets and liabilities reported in these financial statements are to be repaid the accounts of the vendors of MCS Security and Intiga Security.

MCS Security and Intiga Security’s contribution to the Group’s results The acquired entities contributed $3,088,650 to the Group’s revenues from the date that MCS Services assumed control being 1 November 2015 to 31 December 2015. The acquired entities contributed $122,980 to the Group’s net profit after tax for the same period however excluding non-cash items net profit after tax for the two month period amounted to $211,742.

Had the acquisition occurred on 1 July 2015, the Group’s revenue for the period to 31 December 2015 would have been $8,355,588 and the Group’s result for the period would have been a loss of $4,540,422.

DIRECTORS’ DECLARATION

The directors of the Company declare that:

1. In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

2. The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:

3. a) Giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

4. b) Complying with Accounting Standards AASB 134 Interim Financial Reporting.

This declaration is made in accordance with a resolution of the directors made pursuant to s303(5) of the Corporation Act 2001.

On behalf of the Directors

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The Hon RC (Bob) Kucera APM JP Non-Executive Chairman

Dated this 29 day of February 2016

Stantons International Audit and Consulting Pty Ltd trading as

PO Box 1908 West Perth WA 6872 Australia

Chartered Accountants and Consultants

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Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204

ABN: 84 144 581 519 www.stantons.com.au

INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF MCS SERVICES LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of MCS Services Limited, which comprises the consolidated statement of financial position as at 31 December 2015, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the half-year ended on that date, condensed notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration for MCS Services Limited (“the consolidated entity”). The consolidated entity comprises both MCS Services Limited (“the Company”) and the entities it controlled during the half year.

Directors’ Responsibility for the Half-Year Financial Report

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

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of MCS Services Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Whilst we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our review was not designed to provide assurance on internal controls.

Our review did not involve an analysis of the prudence of business decisions made by the directors or management.

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Liability limited by a scheme approved under Professional Standards Legislation

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , has been provided to the directors of MCS Services Limited on 29 February 2016.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of MCS Services Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

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Martin Michalik Director

West Perth, Western Australia 29 February 2016