MYECO GROUP LTD — Interim / Quarterly Report 2016

Apr 27, 2016

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TO: COMPANY ANNOUNCEMENTS OFFICE ASX LIMITED

DATE: 28 April 2016

March 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 31 March 2016.

Overview

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

The Group’s March 2016 quarter cash receipts from customers increased by $1.73 million (+41.1%) since the September 2015 quarter. Quarterly receipts from customers for the last three consecutive quarters are as follows:

September 2015 Quarter: $4.21 million December 2015 Quarter: $5.23 million March 2016 Quarter: $5.94 million

Further to the improvement in cash receipts from customers the Group has experienced an improvement in its March 2016 quarter net outflow of cash from operating activities by $0.92 million since the September 2015 quarter. The improvement was supported by the increased net cash receipts from customers over the last nine months. The quarterly net outflow of cash from operating activities for the last three consecutive quarters is as follows:

September 2015 Quarter: ($1.43 million) December 2015 Quarter: ($1.56 million) March 2016 Quarter: ($0.51 million)

SECOS continues to improve its trading profile despite delays in the delivery of several orders over the Christmas period and the delay in the establishment of an approved debtor financing facility which impacted the group’s production efficiencies during the period. SECOS now has an approved $2.05 million facility which has been partially drawn down to support sales orders. The Company has also raised $1.976 million in new equity capital from a $0.88 million placement in the March 2016 quarter and a further $1.096 million capital raising from a Share Purchase Plan in April 2016.

Highlights of the March 2016 Quarter

• Consolidated cash position was $0.91 million as at 31 March 2016 (excludes $1.096 million raised from Share Purchase Plan completed in April 2016)

• Capital raised during the quarter - $0.88 million through a Share Placement

• Successful completion of further $1.096 Million capital raising through a Share Purchase Plan

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• Net Operating Cash (Out) Flow for the March 2016 quarter reduced to $0.51 million compared to $1.56 million for the December 2015 quarter.

• Sales Revenues for the March 2016 quarter were $5.05 million, a decrease of 6.72% compared to sales revenues for the December 2015 quarter ($5.41 million). This was due to customers in the key Asia Pacific region slowing down their purchases over the Chinese New Year period and was in line with the Company’s seasonal trading profile.

Net Operating Cash Outflows : Net Operating Cash Outflow for the March quarter was $0.51 million. The Group’s collections from sales (Item 1.1 of Appendix-4C] were largely as per the negotiated payment terms. Delayed payment of $0.20 million from a USA based customer that was carried forward from the last quarter was collected during the March quarter. Cash outflows on other working capital (Item 1.2(e) of Appendix-4C0 were commensurate with sales, manufacturing and trading activities during the quarter except for approximately $0.30 million creditor payments were deferred to the next quarter.

Sales

Sales for the March 2016 quarter were $5.05 million compared to the December 2015 quarter ($5.41 million), the following key sales activities by market segment were achieved during the March 2016 quarter:

Films & Packaging

SECOS continues to gain significant traction in developing sustainable packaging solutions with a broad range of high quality cast films and the choice of sustainable Biohybrid™or compostable resin technology for its packaging or plastic products.

SECOS sales performance highlights in the Films & Packaging market segment included:

• The Group’s sales from its Malaysian business continue to grow with strong customer demand from both existing and new customers in the Asia Pacific region.

• Two new major Japanese hygiene film customers have commenced placing orders for film products during the quarter.

• Commercialisation of Biohybrid™Bag-in-Bag Water Packaging gaining traction with customers in the UK, Australia and Canada placing repeat orders.

• Customer validation trials of Biohybrid[™] hygiene films progressing with major customers in the US, Mexico, Australia and Asia.

• In line with customers’ growing demand for breathable films, SECOS has commenced a business case evaluation of expansion into production of breathable films.

Waste Management Solutions

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

• Monthly orders of Biohybrid™and Compostable dog waste bags to major US and European Retailers have increased to over $100,000 per month, a 60% increase on sales in the last 12 months.

• SECOS continued to strengthen its market position in the supply of organic waste management systems to the Australian Council sector. During the March quarter it secured additional ongoing contracts to now supply 19 Australian Councils kitchen tidy bins and Compostable bags for their large scale organic waste diversion and recycling programmes.

• SECOS increased its sales of Compostable waste management bags to retailers, distributors and Councils of the North West of the United States during the March 2016 Quarter. Increasing sales are expected from these businesses as the States of California, Oregon and Washington drive the implementation of organic waste diversion programmes as part of their waste reduction initiatives.

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• Environmental Resources and SECOS executed a supply contract with initial orders for market launch delivered. SECOS has extended its market reach and added a strong distribution channel in particular to the Australian leisure and recreational market.

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 2,000 tonnes of blown film and finished products with cost effective capacity expansion options.

The United States Patent and Trademark Office granted a cornerstone patent for SECOS Biohybrid™resin in foam applications. SECOS expanded its patent portfolio to twenty patents granted with fourty one more pending registration. Intellectual Property underpins commercially successful Compostable and Biohybrid™product ranges. SECOS capitalises on growth of bioplastics with leading brand owners where strong intellectual property position is a key requirement

Corporate Matters

• On 9 March 2016, the Company announced a Share Purchase Plan (SPP) to provide eligible shareholders the opportunity to acquire up to A$15,000 worth of SECOS shares at A$0.082 per share. The SPP closed on 30 March 2016 at a higher level than anticipated. The SPP raised A$1,095,920, which exceeded the original target of A$1,000,000.

The Board of SECOS was delighted by the level of support of smaller shareholders which was a driving force behind the successful take-up of the SPP. On 4 April 2016, a total of 13,364,953 new ordinary shares were issued as a result of the SPP. Funds raised via the SPP will appear in the Group’s June 2016 Quarter cash flow.

• On 30 March 2016, the Company also successfully raised $879,427 via a placement to professional and sophisticated investors. The Share Placement was made at the same price of A$0.082 per share that was offered to existing shareholders under the SPP. A total of 10,724,721 new ordinary shares were issued as a result of the share placement. New Shares were issued under the Company’s 15% placement capacity pursuant to Listing Rule 7.1.

The amount raised included an investment of $541,200 from a US-based strategic investor who is a major shareholder in a key SECOS distributor in the USA. The Board is extremely pleased to have attracted a strategic investor with key relationships in the USA which provides the group with a significant opportunity to increase its position in the lucrative USA sustainable products market including the waste management segment.

The SECOS distributor, located on the US West Coast, is heavily focused on the sustainable products market having already achieved success with several councils throughout California. The combined focus of the key investor and our distributor provides an excellent platform for SECOS to expand in that market.

The strategic investor was keen to invest directly in SECOS, and in conjunction with the distributor to achieve rapid expansion in the fast growing US waste management market. SECOS looks forward to working closely with its distributor to grow its presence in the American market which represents a very significant opportunity for the Group.

The funds raised from the Share Placement and the Share Purchase Plan will provide SECOS with sufficient funding to meet its current operational plans.

• On 4 April 2016, the Company issued 255,680 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 31 March 2016.

Mr.Tegoni had agreed to accept 50% of his March 2016 Quarter remuneration ($12,500) to be paid in Shares and Mr. Haines had agreed to accept 30% of his March 2016 Quarter remuneration ($13,068) 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 are issued at an issue price of $0.10/share. The share issue price has been determined based on volume weighted average sale price of SECOS shares for March 2016 Quarter.

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• SECOS is completing contractual arrangements for the sale of its 50.8% interest in Akronn Industries Sdn Bhd (Akronn), a developer and manufacturer of silicone coated products in Malaysia. The Company’s investment in Akronn is not considered core to the future development of SECOS. SECOS has recognised an impairment of loan advances to Akronn of $345,710 in SECOS’ 30 June 2015 accounts. The carrying value of SECOS’ investment in Akronn as at 31 December 2015 was NIL.

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 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.cardiabioplastics.com, www.cardiabioproducts.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”) 31 March 2016

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 (9 months) $A’000
	5,941 (944) (29) (129) (51) (5,254) - - (43) - -	15,381 (2,785) (73) (339) (311) (15,223) - 9 (137) - (12)
	(509)	(3,490)
1.8 Net operating cash flows (carried forward)	(509)	(3,490)
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	- - - (14) - - - - - (57) 45 -	- - - (95) - - 488 - - - (343) 45 -
	(26)	95
	(535)	(3,395)
Cash flows related to financing activities 1.15 Proceeds from issues of shares, options, etc. 1.16 Proceeds from sale of forfeited shares	879 -	879 -

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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	- (205) - 375	479 (594) - 1,355
	1,049	2,119
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	514 407 (11)	(1,276) 2,173 13
	910	910

Note 1.20

Includes amounts drawn and repaid against trade finance facilities.

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
			$155
			$57
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. Trevor Haines was paid a salary of $34,630 in cash 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 $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 4 April 2016, the Company has issued255,680fully 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 31 March 2016. Mr.Tegoni had agreed to accept 50% of his March’16 Quarter remuneration ($12,500) to be paid in Shares and Mr. Haines had agreed to accept 30% of his March’16 Quarter remuneration ($13,068) 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 are issued at an issue price of $0.10/share. The share issue price has been determined based on volume weighted average sale price of SECOS shares for March’16Quarter.

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

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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

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 standbyarrangements	Amount available $A’000	Amount used $A’000
	A$2,812	A$2,598
	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.

In addition to the above, the Group has Debtor Financing Facility with limit of $2.05million available to its Australian subsidiaries- Stellar Films Australia and Cardia Bioplastics Australia. As at 31 March 2016, the group has been able to utilise up to $0.72 million of this facility.

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 Bank overdraft 4.3 Term Deposits 4.4 Deposits against Bank Guarantee	1,018	485
	(163)	(133)
	-	-
	55	55
Total: cash at end of quarter(item 1.23)	910	407

Acquisitions and disposals of business entities

5.1 Name of entity	Acquisitions (Item 1.9(a))	Disposals (Item 1.10(a))
	-	-

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5.2 Place of incorporation or registration 5.3 Consideration for acquisition or disposal 5.4 Total net assets 5.5 Nature of business	-	-
	-	-
	-	-
	-	-

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 : 28 April 2016. (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

6. 12.1(a) - policy for classification of cash items

7. 12.3 - disclosure of restrictions on use of cash  13.1 - comparative information

8. 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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