Year End Report Scandinavian Enviro Systems AB (publ) January – December 2017

Enviro only qualifier in Chinese government controlled tender process

N.B. The English text is an in-house translation of the original Swedish text. Should there be any disparities between the Swedish and the English text, the Swedish text shall prevail.

Q4 2017 

• Net revenues for the period were MSEK 0.3 (0.1) 
• Earnings after tax for the period were MSEK -8.2 (-12.7)  
• Earnings per share for the period (before dilution) was SEK -0.07 (-0.13)  
• Cash flow for the period after investments was MSEK -4.8 (-10.7) 
• Enviro has been elected only finalist in a Chinese, government controlled, tender process regarding a tyre recycling plant in Guangdong, China
• The Company has organized a bridge financing of MSEK 6 from the owners and the Board of Directors
• Bengt Andersson has resigned as board member due to change in ownership in Hans Andersson Recycling AB

January – September 2017 

• Net revenues for the period were MSEK 0.4 (0.2) 
• Earnings after tax for the period were MSEK -28.7 (-21.8) 
• Earnings per share for the period (before dilution) was SEK -0.25 (-0.47) 
• Cash flow for the period after investments was MSEK -24.3 (-19.4) 
• The company has successful completed the Basic Design in cooperation with ÅF
• New COO Olov Ershag replaces the current Technical Manager Elisabeth Gustafsson and has been recruited internally
• MoU’s (Memorandum of Understanding) have been prolonged with China and Chile
• Conclusion that the purified pyrolysis oil from the company is of such a high quality that it can be used as fuel in diesel motor driven power plants 
• Usage of environmental rubber increases at Volvo Cars 
• Positive news related to testing of Enviro’s recovered carbon black from yet another global tyre producer
• Enviro’s recovered carbon black included in fittings for water pipes at Alvenius Industrier AB

Significant events after the end of the period 

• Sales order of reclaimed carbon black from international tyre manufacturer
• The Chairman of the Board has been arrested under suspicion of unauthorized disclosure of inside information
• Cancellation of current MoU in Chile, which is planned to be replaced with an MoU with a different company 

CEO statement 

Dear fellow shareholders:

We are putting 2017 behind us with a due sense of accomplishment from what was a very intensive final half-year and a fourth quarter that included, among other things, our winning a procurement procedure in China. Related negotiations with the customer, Guangzhou Vanlead Ecotechnology, are still in progress. The parties have met face-to-face on numerous occasions in both Sweden and China to negotiate the details of this far-reaching project, and both parties remain determined to start the project. The parties have an unchanged objective of building an initial plant, where a tyre manufacturer would invest directly in advanced materials recycling technology for carbon black for use in new tyres. The process has taken longer than both parties had anticipated but, throughout the entire time, the partnership has been focused on resolving outstanding issues. At an advanced stage in the autumn, we received news of regulatory changes, which required us to return to the drawing board to assess if and how these changes would affect the project. We completed this assessment in the last quarter and, together, we have concretised an array of solutions and agreed that we have addressed the regulatory changes technologically and are ready to proceed to final negotiations. Let me underscore that this business initiative is strategically important for both parties and that, therefore, we are being very thorough in our negotiations.

Plant Sales
Based on our Basic Design, which was completed in the first half-year of 2017, we have conducted multiple in-depth discussions for projects around the world, apart from the long going project prospect in China. The documentation we are using has garnered a lot of positive feedback in our many dialogues and our view is that, vis-à-vis our competitors, our current material is, quite simply, significantly superior. We are also being contacted by more serious actors than previously. Before we sign specific business, such as MOU's or plant contracts, I have deliberately avoided communicating all the enquiries and visits we receive and processes in which we engage in order to avoid speculation and undue expectations. But interest is great. And in line with the heightened interest in our company in the fourth quarter, let me make an exception by providing a slightly broader view.

One project that we have pursued for an extended period is Chile – there we primarily have an opportunity to address the persistent issue of mining tyres. Our technology remains of great interest to stakeholder groups, such as investors, government agencies, the mining industry, and tyre importers. In the autumn, we received a contribution of approx. MSEK 1.1, for which we had applied from the Chilean Economic Development Agency (CORFO), to produce a Basic Design for a plant that would meet the Chilean requirements. In the autumn, we also met the company there with which we had an MOU and jointly decided not to renew it in its particular constellation. Instead, together, we drafted a more detailed plan where they will form a new corporate entity to drive the project ahead, and negotiations are currently being conducted by them with additional actors to co-invest in the initial phase. The objective is for a new MOU to be signed with this company in the spring of 2018 and with a clear timetable for the plant project.

After a couple of years of internal issues that has plagued tyre collection systems in South Africa, interest has now reignited and we are in discussions with an actor for one or more potential projects there.

Since this summer, we have been in a dialogue with and have had multiple visits from stakeholders in Mexico who are seeking to invest in one or more plants in northern Mexico. That region is very interesting with respect to both its tyre-related issues and its proximity to the extensive need for carbon black there.

Back in our more immediate neighbourhood, we have seen interest from Denmark and continued interest from Great Britain, Poland, and have established initial contacts with actors in Russia.

Government initiatives in Turkey increased market interest in the autumn, and we have established good contacts with stakeholders in Iran. Several Middle Eastern countries have exhibited interest in our technology. For example, we declined to take part in a procurement procedure in Oman in the late-summer because of its formal structure. The giant Indian market is also showing interest in our technology - and there are openings for replacing significantly inferior solutions.

We have been contacted by several parts of the United States and are seeing increased interest from that market. In the autumn, we exchanged information and engaged in more detailed discussions with an interesting player in Canada – they will be visiting our plant in Åsensbruk this spring.

Representatives of additional dozen different markets have been in contact with us and visited our plant in Åsensbruk, but these are still at the exploratory stage. All our visitors have been impressed by our plant and noted that it was important for them to experience that we were producing material for the market that was of a consistent and high quality.

Carbon Black
We are receiving an increasing number of positive results from the rubber producers that are evaluating our material. And work is in progress on implementing the material into several of these companies’ internal processes. We are expecting that several of our partners will be ordering material for new applications in the spring of 2018. The first order of the new year pertained to a small volume for Sri Lanka and a global actor in the rubber industry. The intended application in that case was for industrial tyres.

In early January 2018, we are celebrating two years of shipments for AnVa Polytech and Volvo Cars – a accomplishment of which we are immensely proud. As far as we know, we remain unique in our capacity to replace virgin carbon black at 100% in rubber components for premium vehicles. Since early 2016, a great deal more than 30 million components have been shipped to Volvo from AnVa Polytech using our material.

Åsensbruk Plant
In the autumn, we continued to receive a lot of positive visits at Åsensbruk from stakeholders. The plant's huge importance to our new plant sales process is affirmed repeatedly by our visitors. Moreover, in order to further broaden our product line of carbon black, both for our own sales and for future plant investors, we are continuing our efforts to carry out various kinds of materials development tests. The work on reclassifying the plant to be able to further meet demand for this type of technology is in progress. The purpose of this is, among other things, to be able to process other materials than tyres, e.g. waste from rubber production to further improve recovery rates in that industry.

Financing
The initiatives that have been communicated previously about financing are continuing and the board of directors are continuously monitoring which alternatives are more suitable for the company.

Thomas Sörensson
Chief Executive Officer

For more information, please contact:
Thomas Sörensson, CEO, +46 735-10 53 43, thomas.sorensson@envirosystems.se
Alf Blomqvist, board member Enviro, tel: +46 (0)733-149 700, alf@blomqvistunlimited.com

Scandinavian Enviro Systems AB 
Regnbågsgatan 8C 
417 55 Gothenburg
info@envirosystems.se 
www.envirosystems.se

This information is information that Scandinavian Enviro Systems AB (publ) is required to publish under the EU regulation on market abuse. The information is provided under the auspices of the contact person listed above for publication on February 6th 2018 at 08:30 CET.   

Enviro is an environmental company that offers profitable recovery of tyres and processed materials primarily to the rubber industry. The company sells turn-key environmental facilities to industrial investors and also operate their own plant for end-of-service tyres in Åsensbruk, Sweden. Enviro, headquartered in Gothenburg, was founded in 2001, has 20 employees, and is listed on the Nasdaq First North securities exchange with Mangold Fondkommission AB, tel. +46 (0)8 5030 1550, as its Certified Advisor. https://www.envirosystems.se/en/

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