MYECO GROUP LTD — Interim / Quarterly Report 2016

Oct 29, 2015

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TO: COMPANY ANNOUNCEMENTS OFFICE ASX LIMITED

DATE: 30 October 2015

September 2015 Quarterly Report

The Board of SECOS Group Limited (ASX: SES) presents its Quarterly Activities Report and Appendix 4C Quarterly Cash Flow Statement for the consolidated entity consisting of SECOS Group Limited (“SECOS” or “the Company”) and the entities it controlled (“the Group”) for the quarter ended 30 September 2015.

Overview

SECOS Group was formed through the merger of Cardia Bioplastics and Stellar Films Group in April 2015 to become a leader in sustainable packaging with core market segments being “Films & Packaging” and “Waste Management Solutions”.

During the September 2015 quarter SECOS progressed with delivering key synergies identified for the merged entity and implementing its business growth strategy in its core market segments. In addition to achieving sales of $5.49 million and growing the business by 13.20% compared to the June 2015 quarter, SECOS secured additional sales contracts and orders that will underpin the growth of its sustainable packaging business.

SECOS has developed a leading supply position of high quality cast films to the personal care and hygiene industry, in particular, the high growth Asian market region. This position will be further strengthened with the introduction of sustainable Cardia Biohybrid™hygiene film now manufactured in Stellar Films Australian operations and tailored to global hygiene customer requirements.

Since the merger, SECOS has also secured a leading market position in the supply of organic waste management systems to the Australian Council sector. Cardia kitchen tidy bins and Cardia Compostable bags are the industry benchmark for the delivery of an efficient kitchen organics waste diversion programme. Already 100,000 households representing 5% of households in the State of Victoria are using Cardia Compostable kitchen tidy bins and bags with further growth expected in Victoria, Australia and internationally.

As part of the merger implementation, the SECOS Board of Directors conducted a strategic review of the business, its operations and investment holdings. The key outcomes of this review has assisted SECOS in prioritising its resources and investments to achieve the overall objective of delivering the significant growth opportunities in its chosen markets, in line with its sustainable packaging strategy.

Cash: Consolidated cash position as at 30 September 2015 was $0.6 million.

Net Operating Cash Outflows: Net Operating Cash Outflow (“NOCF”) for the September quarter was $1.43 million. Most of the cash out flow was attributed to fund increased sales orders during the period.

The Company’s cash position post 30 September 2015 has been considerably enhanced with:

• The injection of $0.488 million from the proceeds of the sale of the Company’s investment in Bioglobal Limited (in line with the Company’s strategic objective of divestment of non-core assets).

• The refinancing of Stellar Films Group’s existing overdraft $0.337million and market rate facilities $0.43 million totalling $0.767 million into a single market rate facility with improved terms comprising interest only payments for year 1 and then amortising over the next 3 years.

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Further, the group has secured an approval of a debt funding facility comprising a debtor financing facility with an available limit of $2.05 million to be utilised in funding increasing sales orders for Stellar Films Group and Cardia Bioplastics’ domestic and export customers. The facility is with Bibby Financial Services and is subject to Bibby Financial Services obtaining a Deed of Priority over the group’s debtors from Stellar’s incumbent banker National Australia Bank. The facility will enable the group to reduce its working capital cycle and consequently improve its future cash positions.

Sales: Sales for the September 2015 quarter were $5.49 million, up 13.20% on the June 2015 quarter ($ 4.85 million on full consolidation basis) Funds from the Rights Issue completed late June 2015 were deployed into working capital to grow sales across the Group. This assisted the Group in achieving stronger sales in September quarter 2015 (versus June quarter 2015). A review of the key sales activities and achievements by market segment for the September 2015 quarter is as follows:

Films & Packaging

SECOS is well positioned to benefit from the trend towards sustainable packaging, offering customers a broad range of high quality Stellar cast films with the choice of sustainable Cardia Biohybrid™or compostable resin technology for their packaging or plastic product solutions. SECOS sales performance’ highlights in the Films & Packaging market segment included:

• Stellar Films Australia secured sales worth approximately $400,000 per month representing annualised sales revenue of $4,800,000 per annum since the reopening of its Australian plant in April 2015. During the September 2015 quarter Stellar resumed supply of hygiene films to various customers in the USA.Stellar sales to its leading Japanese customer continued to grow during the quarter. With the plant currently running at approximately 30% capacity, the potential growth opportunity is significant. Sales projects are underway to grow the business by capitalising on the increasing demand for Stellar’s high quality films.

• Stellar Films Malaysia’s sales trended in line with budget with strong customer demand expected to continue both from existing and new customers.

• Following on from its successful market launch of its new PakNatural[®] Biodegradable Cushion Bags, Sealed Air, the leading global protective packaging manufacturer, purchased its first container quantities of Cardia Compostable film to meet increasing customer demand.

Waste Management Solutions

SECOS is developing the sustainable waste management products market with a particular emphasis on organic waste recycling through its Cardia Bioplastics business. SECOS sales performance’ highlights in the Waste Management Solutions market segment included:

• Cardia Bioplastics’ market position has been further strengthened with continuing growth in the supply of organic waste management systems to the Australian Council sector. During the September quarter, Cardia Bioplastics secured additional ongoing contracts and now supplies ten Australian Councils with kitchen tidy bins and Compostable bags for their respective large scale organic waste diversion and recycling programmes.

• Cardia Bioplastics has also commenced supply of Biohybrid™dog waste bags to a leading global retailer.

Manufacturing and Technology

SECOS has developed proprietary manufacturing processes for its bioplastic resin, high quality cast films and finished products derived from renewable resources. SECOS Group manufacturing plants are located in Melbourne, Australia, Kuala Lumpur, Malaysia and Nanjing, China. SECOS’ annual production capacity is 7,200 tonnes of bioplastics resins and 15,000 tonnes of cast film and 2,000 tonnes of blown film and finished products with cost effective capacity expansion options. SECOS manufacturing and technology highlights included:

• Increasing production outputs and efficiencies of all three SECOS Group manufacturing plants to meet growing demand during the September quarter.

• SECOS’ Global Application Development Centre and Australian warehousing facilities were consolidated at Stellar Films Melbourne manufacturing plant site.

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• SECOS successfully scaled up production of its Biohybrid™films tailored for the global personal care and hygiene product markets at its Stellar Films Australian plant. Following initial tests and engagement with major personal care and hygiene product manufacturers, SECOS received product requests and specifications from ten potential customers. It has now provided these manufacturers with their tailored Biohybrid™hygiene sample films for in-house validation and product performance testing.SECOS anticipates first orders from these customers following successful product validation.

• The European Patent Office granted a cornerstone patent for Cardia Compostable resin and process technology. Cardia Bioplastics has now expanded its patent portfolio to twenty-eight registered patents protecting its bioplastics technologies with thirty-nine more patents pending registration. Cardia will continue to capitalise on its strong intellectual property position (a key requirement for commercial success).

Launch of Cardia Bioproducts e-commerce website

During the quarter, Cardia Bioproducts e-commerce website (www.cardiabioproducts.com) was launched by SECOS’ subsidiary Cardia Bioplastics. The Cardia Bioproducts website sells bags ranging from produce bags, kitchen tidy bags, various sizes of household waste bags, shopping bags, garden bags, nappy bags to dog waste bags. The new website also sells a selection of Cardia’s innovative Biohybrid™products.

Corporate Matters

Investment Portfolio Review : As result of its strategy review, the SECOS Board re-affirmed its business strategy of focussing on core business assets and investments and rationalise its investment portfolio to dispose of its non-core assets and in this direction:

• On 6 October 2015, SECOS sold its investment in Bioglobal (ACN 091 488 505) ( Bioglobal ) for consideration of $488,280 .SECOS held 18.78 million ordinary shares in Bioglobal representing 2.97% equity interest in that company. Bioglobal Limited is a developer and manufacturer of integrated insect management products and services. The sale of the Bioglobal investment resulted in cash becoming available to fund working capital for SECOS’ sales growth. The sale of the investment resulted in a loss of $75,120 on the carrying book value of this investment, and a profit of $244,140 on the investment’s cost base.

• SECOS is currently in discussions with suitable silicone release industry partners in relation to the sale of its interest in Akronn Industries Sdn Bhd ( Akronn ). Potential industry partners have expressed a strong interest in either injecting further capital into Akronn with the objective of taking a controlling interest or effecting an outright purchase of the Akronn business. The SECOS Board had already recognised an impairment of SECOS’ loan advances to Akronn of $345,710 in SECOS’ 30 June 2015 accounts. The carrying value of SECOS’ investment in Akronn as at 30 June 2015 was NIL.SECOS through its wholly owned malaysian subsidiary holds 50.8% equity interest in Joint Venture- Akronn. Akkronn is a developer and manufacturer of siliconized release liners targeted at the hygiene, packaging and renewable energy markets.

Director Resignation: On 24 August 2015, Mr Gideon Meltzer resigned as a Director of the Company.

Appendix 4C follows.

Richard Tegoni Chairman

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Please direct any enquires to Richard Tegoni Chairman M: +61 411 110 901 E: r.tegoni@secosgroup.com

About SECOS Group

SECOS Group Limited (ASX CODE: SES) is a leader in sustainable packaging and was formed through the merger of Cardia Bioplastics and Stellar Films Group in April 2015. It develops, manufactures and markets its proprietary high quality cast films and patented renewable resource-based materials and finished products derived from its proprietary Cardia technology for the global packaging and plastic products industries. The company holds a strong patent portfolio and its growth is fuelled by the global trend towards sustainable packaging. The company Headquarters and Global Application Development Centre is in Melbourne, Australia. Cardia Bioplastics’ Product Development Centre and manufacturing plant for resins and finished products is in Nanjing, China. Stellar Films’ manufacturing plants for high quality cast films are located in Melbourne, Australia and Kuala Lumpur, Malaysia. Its Akronn joint venture production plant for silicone coated products is in Kuala Lumpur, Malaysia. Further sales offices are in Australia, Malaysia, China, USA, Brazil and a network of leading distributors across the Americas, Asia and Europe.

Visit www.cardiabioplastics.com and www.stellarfilmsgroup.com

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Appendix 4C

Quarterly report for entities admitted on the basis of commitments

Introduced 31/3/2000. Amended 30/9/2001

Name of entity

SECOS Group Limited

ABN 89 064 755 237	Quarter ended (“current quarter”)
89 064 755 237	30 September 2015

Consolidated statement of cash flows

Consolidated statement of cash flows
Cash flows related to operating activities 1.1 Receipts from customers 1.2 Payments for (a) staff costs (b) advertising and marketing (c) research and development (d) leased assets (e) other working capital 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net operating cash flows	Current quarter $A’000	Year to date (3 months) $A’000
	4,211 (901) (29) (113) (140) (4,420) - 6 (42) - 3	4,211 (901) (29) (113) (140) (4,420) - 6 (42) - 3
	(1,425)	(1,425)
1.8 Net operating cash flows (carried forward)	(1,425)	(1,425)
Cash flows related to investing activities 1.9 Payment for acquisition of: (a)businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.10 Proceeds from disposal of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Other investing activities Net investing cash flows 1.14 Total operating and investing cash flows	- - - (62) - - - - - - (228) - -	- - - (62) - - - - - - (228) - -
	(290)	(290)
	(1,715)	(1,715)
Cash flows related to financing activities 1.15 Proceeds from issues of shares, options, etc. 1.16 Proceeds from sale of forfeited shares	- -	- -

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1.17 Proceeds from borrowings 1.18 Repayment of borrowings 1.19 Dividends paid 1.20 Other (provide details if material) Net financing cash flows	139 (228) - 209	139 (228) - 209
	120	120
Net increase (decrease) in cash held 1.21 Cash at beginning of quarter/year to date 1.22 Exchange rate adjustments to item 1.21 1.23 Cash at end ofquarter	(1,595) 2,173 29	(1,595) 2,173 29
	607	607

Payments to directors of the entity and associates of the directors

Payments to related entities of the entity and associates of the related entities

1.24 1.25		Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.11	Current quarter $A'000
			$187
			-
1.26		Explanation necessaryfor an understandingof the transactions
		Item 1.24 Stephen Walters was paid a salary of $53,529 inclusive of superannuation for the quarter. Trever Haines was paid a salary of $47,698 inclusive of superannuation for the quarter. Dr. F Glatz was paid a salary of $54,080 inclusive of superannuation for the quarter Directors’ fees totalling $31,667 (Ex GST) were paid during the quarter as detailed below:  COB Pty Ltd (a company controlled by Mr. Richard Tegoni)- $25,000 (Ex GST)  GM Legal & Corporate Advisory (a company controlled by Mr. Gideon Meltzer-$6,667 (Ex GST)

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

N/A

• 2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest

n/a

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Financing facilities available

Add notes as necessary for an understanding of the position. (See AASB 1026 paragraph 12.2).

	3. 1 Loan facilities 3. 2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
		A$2,886	A$2,779
		n/a	n/a

Loan Facilities include Overdraft, Term Loans and Trade Finance Facilities in relation to SECOS’ subsidiaries-Stellar Films Australia and Stellar Films Malaysia.

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
4.1 Cash on hand and at bank 4.2 Deposits at call 4.3 Bank overdraft 4.4 Term Deposits 4.5 Deposits against Letter of Credits 4.6 Funds in Transit	803	2,627
	-	-
	(496)	(454)
	300	-
	-	-
	-	-
Total: cash at end of quarter(item 1.23)	607	2,173

Acquisitions and disposals of business entities

5.1 Name of entity 5.2 Place of incorporation or registration 5.3 Consideration for acquisition or disposal 5.4 Total net assets 5.5 Nature of business	Acquisitions (Item 1.9(a))	Disposals (Item 1.10(a))
	-	-
	-	-
	-	-
	-	-
	-	-

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Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act (except to the extent that information is not required because of note 2) or other standards acceptable to ASX.

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here: ...................................................... Date : 30 October 2015. (Company Secretary) Print name: Rekha Bhambhani

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2. The definitions in, and provisions of, AASB 1026: Statement of Cash Flows apply to this report except for the paragraphs of the Standard set out below.

3. 6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss

4. 9.2 - itemised disclosure relating to acquisitions

5. 9.4 - itemised disclosure relating to disposals  12.1(a) - policy for classification of cash items  12.3 - disclosure of restrictions on use of cash  13.1 - comparative information

6. Accounting Standards. ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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