MYECO GROUP LTD — Interim / Quarterly Report 2016

Oct 30, 2016

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TO: COMPANY ANNOUNCEMENTS OFFICE ASX LIMITED

DATE: 31 October 2016

September 2016 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 (“SECOS Group”) for the quarter ended 30 September 2016.

Overview

Consolidated cash position as at 30 September 2016 was $1.3 million. Net operating cash outflow for September quarter was -$0.9 million, an improvement from -$1.4 million reported same time last year.

Operating cash outflow has improved due to the better mix of higher margin customers and the reduction in operating expenses.

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5,000
4,000
3,000
2,000
1,000
-
SEP15 SEP16
-1,000
-2,000
Receipts from customers Net operating cash flows
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Operational Highlights of the September 2016 Quarter

SECOS continues to implement its business strategy to become a leader in sustainable packaging with core market segments being “Films and Packaging” and “Waste Management Solutions”.

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Films and Packaging

Some of the major highlights in the Films and Packaging market segment include:

• Storopack USA validated initial trial material for their compostable cushion bag applications and have now placed volume development orders.

• New business has been secured from a second pet sheet manufacturer in Japan which will see production output increase by >40% at the Australian plant.

• New business has been secured from a major hygiene manufacturer that has facilities in Thailand and Indonesia. Volume development trials commenced in September with the placement of an initial container order of film supplied from the Malaysian plant.

• New business has been secured from a global silicone coating business that has a facility in Thailand and will source film from the Malaysian plant.

• A global chemical company has approved Cardia Biohybrid[tm] resin for use in its range of adhesive bottles. A global roll out of this product is imminent.

• The breathable film business case is moving forward with evaluation of a unique and newly developed film progressing well. All of the project “mile stone” events have been passed and real time trials will commence imminently.

Waste Management Solutions

Sales performance highlights in the Waste Management Solutions market segment include:

• Sales increased in dog bags following the Nanjing plant increase in manufacturing capacity of dog bags by 58%.

• A major USA and Canada based Pet Shop chain developed a co-branded (Cardia) range of products and placed a significant initial order.

• An initial order for supply of dog bags in to Italy was received. If successful, this could lead to regular business.

• SECOS continued to supply organic waste management systems to the Australian local government sector during the September quarter and worked with preferred supplier partners and distributors to secure the growing trend in adopting waste diversion programs to reduce landfill usage.

• A project to develop a high-speed composting range of bags came to a successful conclusion during September. Compliance management requirements will be completed by the end of the year.

• The North American based distributor appointed a new sales representative, with extensive industry experience to focus on the waste diversion markets.

• A new Sales Representative was appointed to work on the Waste Management sector in South Australia and Western Australia.

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 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 1,500 tonnes of blown film and finished products.

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Funds raised from the June Share Purchase Plan were applied to a capacity expansion at the Nanjing plant, increasing the blown film capacity by 400 tonnes and dog bag making capacity by 120 million dog waste bags.

Corporate Matters

Mr Donald F. Haller Jr has been appointed as a Non-executive Director of the Company on 1 September 2016. Don Haller is a major shareholder of a key distributor of SECOS products in the USA, and the appointment will strengthen the strategic relationship with SECOS and will support continued growth in the US market.

During the Quarter SECOS completed placement of 12,992,535 ordinary shares to raise $1,074,438 as additional working capital. The shares under the Placement were issued pursuant to the Company’s 15% and 10% placement capacities.

On 6 October 2016, the Company issued 271,973 fully paid ordinary shares under the Loan Share Plan to two of its directors- M/s Tegoni and Haines, in lieu of the part payment of their respective remuneration for the quarter ending 30 September 2016. The issue of these shares to Directors was approved by shareholders at the Annual General Meeting held on 17 November 2015 (Resolutions 6 & 9). The shares were issued at an issue price of $0.088/share, which was determined based on the volume weighted average sale price of SECOS shares during September 2016 Quarter.

Outlook

The Company is pleased to report that the anticipated sales orders underpinning the business case for the capacity expansion of the Nanjing plant are materialising and that SECOS is currently receiving unprecedented levels of interest in its biohybrid films, which the Company believes is a good lead indicator for future sales.

Appendix 4C follows.

Richard Tegoni

Chairman

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

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 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. SECOS has a Product Development Centre and manufacturing plant for resins and finished products in Nanjing, China, and manufacturing plants for high quality

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cast films in Melbourne, Australia and Kuala Lumpur, Malaysia. SECOS has sales offices in Australia, Malaysia, China, USA and a network of leading distributors across the Americas, Asia and Europe.

Visit www.secosgroup.com.au

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Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

Name of entity

Name of entity
SECOS GROUP LIMITED
ABN 89 064 755 237	Quarter ended (“current quarter”)
	30 September 2016
Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	4,290 (86) (3,783) (10) (67) (1,085) (344) - 3 (59) - 199 -	4,290 (86) (3,783) (10) (67) (1,085) (344) - 3 (59) - 199 -
	(942)	(942)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10) (c) investments (d) intellectual property (e) other non-current assets	(151) - - - -	(151) - - - -

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Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
2.2 Proceeds from disposal of: (a) property, plant and equipment (b) businesses (see item 10) (c) investments (d) intellectual property (e) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities	15 - - - - - - -	15 - - - - - - -
	(136)	(136)
3. Cash flows from financing activities 3.1 Proceeds from issues of shares 3.2 Proceeds from issue of convertible notes 3.3 Proceeds from exercise of share options 3.4 Transaction costs related to issues of shares, convertible notes or options 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities	1,074 - - - 517 (378) - - -	1,074 - - - 517 (378) - - -
	1,213	1,213
4. Net increase / (decrease) in cash and cash equivalents for the period 4.1 Cash and cash equivalents at beginning of quarter/year to date 4.2 Net cash from / (used in) operating activities (item 1.9 above) 4.3 Net cash from / (used in) investing activities (item 2.6 above)	1,212 (942) (136)	1,212 (942) (136)

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Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
4.4 Net cash from / (used in) financing activities (item 3.10 above) 4.5 Effect of movement in exchange rates on cash held 4.6 Cash and cash equivalents at end of quarter	1,213 4	1,213 4
	1,351	1,351
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts	Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) Funds in Transit Deposits against Bank Guarantee Issued 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)	1,454 - (158) - 55	1,069 - (133) 221 55
	1,351	1,212

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6.	Payments to directors of the entity and their associates	Current quarter
		$A'000
6.1	Aggregate amount of payments to these parties included in
	item 1.2	190
6.2	Aggregate amount of cash flow from loans to these parties
	included in item 2.3	-
6.3	Include below any explanation necessary to understand the transactions included in
	items 6.1 and 6.2

Item 1.2

Stephen Walters was paid a salary of $53,529 inclusive of superannuation for the quarter. Trevor Haines was paid a salary of $30,545 in cash inclusive of superannuation for the quarter.

Dr. Frank Glatz was paid a salary of $18,117 inclusive of superannuation and termination payments of $75,630 up to the date of his departure.

Directors’ fees totalling $12,500 (Ex GST) were paid in cash during the quarter as detailed below:

• COB Pty Ltd (a company controlled by Mr. Richard Tegoni)- $12,500 (Ex GST)

On 6 October 2016, the Company issued 271,973 fully paid ordinary shares under Loan Share Plan to two of its directors- M/s Tegoni and Haines, in lieu of the part payment of their respective remuneration for the quarter ending 30 September 2016.

Mr. Tegoni had agreed to accept 50% of his September Quarter remuneration ($12,500) to be paid in Shares and Mr. Haines had agreed to accept 30% of his September Quarter remuneration ($11,527) to be paid in Shares.

The issue of these shares to Directors was approved by shareholders at the Annual General Meeting held on 17 November 2015 (Resolutions 6 & 9). The shares were issued at an issue price of $0.088/share. The share issue price had been determined based on volume weighted average sale price of SECOS shares for September 2016 Quarter.

7.	Payments to related entities of the entity and their	Current quarter
	associates	$A'000
7.1	Aggregate amount of payments to these parties included in	-
	item 1.2
7.2	Aggregate amount of cash flow from loans to these parties	-
	included in item 2.3
7.3	Include below any explanation necessary to understand the transactions included in
	items 7.1 and 7.2
N/A

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8. Financing facilities available Add notes as necessary for an understanding of the position Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000 8.1 Loan facilities 1,502 1,427 8.2 Credit standby arrangements - - 8.3 Other (please specify) 3,128 1,591 8.4 Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
	1,502	1,427
	-	-
	3,128	1,591

	Sr No	Description of the Facility	Lender	Interest Rate	Secured/ Unsecured	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
	8.1	Loan Facilities include
	1	Term Loan	CIMB Bank Berhad, Malaysia	8.85%	Secured	660	660
	2	Market Rate Facility	National Australia Bank	8.36%	Secured	767	767
	3	Payroll Assistance	National AustraliaBank	8.36%	Secured	75	-
						1,502	1,427
	8.3	Other Facilities include
	1.	Bank Overdraft	CIMB Bank Berhad, Malaysia	7.75%	Secured	158	158
	2.	Multi Option Line Facility	-Do-	1.83%	Secured	920	859
	3.	Debtor Finance Facility	Scottish Pacific Group Limited	9.50%	Secured	2,050	574
						3,128	1,591
		Total				4,630	3,018

9. Estimated cash outflows for next quarter	$A’000
9.1 Research and development 9.2 Product manufacturing and operating costs 9.3 Advertising and marketing 9.4 Leased assets 9.5 Staff costs 9.6 Administration and corporate costs 9.7 Other (provide details if material) 9.8 Total estimated cash outflows	90 3,800 25 157 1,050 350 -
	5,472

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10. Acquisitions and disposals of business entities (items 2.1(b) and 2.2(b) above)	Acquisitions	Disposals
10.1 Name of entity	-	-
10.2 Place of incorporation or registration	-	-
10.3 Consideration for acquisition or disposal	-	-
10.4 Total net assets	-	-
10.5 Nature of business	-	-

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

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

Sign here: ............................................................ (Director/Company secretary)

Date: 31 October 2016

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 that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

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