MYECO GROUP LTD — Annual Report 2011

Aug 30, 2011

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ASX CODE: CNN OTCQX CODE: CDRBY

TO: COMPANY ANNOUNCEMENTS OFFICE ASX LIMITED DATE: 31[st] August 2011

PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 30[th] JUNE 2011

Attached is the Preliminary Final Report (Appendix 4E) of Cardia Bioplastics Limited and its Controlled Entities pursuant to Listing Rule 4.3B.

REKHA BHAMBHANI Company Secretary

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ACN 064 755 237

CARDIA BIOPLASTICS LIMITED

APPENDIX 4E

PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

CONTENTS
	PAGE
Results for Announcement to the Market	1
Preliminary Consolidated Statements of Comprehensive Income	2
Preliminary Consolidated Balance Sheet	4
Preliminary Consolidated Statement of Changes in Equity	5
Preliminary Consolidated Cash Flows Statements	6
Notes to the Preliminary Consolidated Financial Statements	7
Commentary on Results for the Year	18

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Revenuefrom ordinary activities	Down	25.49%	to	$1,865,826
Loss from ordinary activities after tax attributable to members	Down	41.08%	to	$3,325,211
Net Lossfor the year attributable to members	Down	40.17%	to	$3,325,211
Dividends/Distributions No interim dividend was paid during the year and it is not proposed to pay a final dividend for the year. A dividend policy will be established when the Company achieves a regular profitable operation.

Brief Explanation of the above figures

Revenue

The Revenue for the year comprised Sales of $1,649,171, a Research & Development Rebate of $169,442 and other income of $47,213.

Revenue from sales was down by 25.23% compared to the last year. The foremost reason for the decrease was the Company’s underperformance in its China market segment which contributed to 32.14% of decrease in overall sales by comparison to the previous year. The Company’s sales to all other countries increased by 23.6% over 2010,with the USA being the predominant contributor by 786% during the year.

Improved Loss Position

The Company’s loss for the year after tax of $3,325,211 improved by $2,318,632.The major reasons for the improvement in the Net loss for the year attributable to members over that reported for the corresponding year in 2010 were due to the following exceptional items:

• Bioglobal Limited ceased to be an “Associate” (as defined in AASB 128) of the Company from 1 July 2010. As

• a result, the Company discontinued to account for its 17.76% investment in Bioglobal Limited using the equity method of accounting (AASB 128) and has accounted for that investment as Available for Sale financial asset in accordance with AASB-139. Accordingly, the cost base of the investment is recorded at the carrying amount of the investment at the date that it ceased to be an “Associate”. The resultant gain of $736,883 was recorded through the Income Statement during the year.

Moreover, in the year to June 2010, the company recognised a share of Bioglobal Limited loss of $354,171.As the Company has now accounted for its investment in Bioglobal in accordance with AASB-139, recognition of equity accounted (such share of) profit or loss of Bioglobal is no longer required.

• In the 2010 year the Company recorded a provision for impairment of the Company’s Secured Loan to Aquenox Limited of $1,000,000 together with accrued interest of $198,041.No provisions relating to investments are required in the June 2011 year.

The Company’s loss from its operating activities is consistent with that of last year.

1

Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

PRELIMINARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2011

FOR THE YEAR ENDED 30 JUNE 2011
		Consolidated	Group
		2011	2010
		$	$
Continuing Operations
Sales		1,649,171	2,205,817
Cost of Sales		(1,524,526)	(2,117,905)
Gross Profit		124,645	87,912
Other Income		216,655	298,396
Administrative Expenses		(619,961)	(665,578)
Employment Benefits		(1,583,063)	(1,546,159)
Marketing & Distribution Expenses		(393,777)	(591,680)
Research & Development Expenses & Patent Costs		(1,322,833)	(958,522)
Depreciation & Amortisation		(144,483)	(198,967)
Write Off of Financial Assets		-	(1,144,050)
Amounts written Off as Bad Debts		-	(60,329)
Other Expenses		(371,991)	(460,433)
Results from operating activities		(4,094,808)	(5,239,410)
Net Finance Costs		34,601	(46,682)
Share of net profit/(loss) of Associates (net of income tax)		-	(354,171)
Gain on designation of AFS Asset	4(c)	736,883	-
Loss before income tax		(3,323,324)	(5,640,263)
Income Tax Expense		-	-
Loss from continuing operations		(3,323,324)	(5,640,263)
Gain on deconsolidation of subsidiary		-	86,361
Loss for the period after tax		(3,323,324)	(5,553,902)
Other comprehensive income
Foreign currency translation differences for foreign operations		(61,338)	(174,665)
Net change in fair value of available for sale financial assets		1,900,853	-
Dilution Gain of associate on reclassification to Available for Sale
Asset		(970,946)	-
Cummulative losses previously recognized on Equity Accounted
Associate		234,063	-
Gain on dilution of shareholdings in associate		-	334,478
Foreign currency exchange movements to Capital Reserve		(10,216)	(768)
Income tax on other comprehensive income			-
Total comprehensive income for the period		(2,230,908)	(5,394,857)
(Loss)/Profit from continuing operations attributable to:
Members of the Company		(3.325,211)	(5,643,843)
Non-Controlling Interest		1,887	3,580
Loss from continuing operations		(3,323,324)	(5,640,263)

2

Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

PRELIMINARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Loss)/Profit attributable to : Members of the Company Non-Controlling Interest Loss for the period after tax Total comprehensive income attributable to : Members of the Company Non-Controlling Interest Total comprehensive income for the period Earnings per share From continuing and discontinued operations -Basic earnings per share (cents per share) -Diluted earnings per share (cents per share) From continuing operations -Basic earnings per share (cents per share) -Diluted earnings per share (cents per share)	(3,325,211) (5,557,482) 1,887 3,580 (3,323,324) (5,553,902) (2,230,908) (5,398,437) 1,887 3,580
	(2,229,021) (5,394,857)
	(0.3843) (0.8466) (0.3843) (0.8466) (0.3843) (0.8466) (0.3843) (0.8466)

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

PRELIMINARY CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2011

AS AT 30 JUNE 2011
Notes	2011 2010
	$ $
CURRENT ASSETS
Cash and cash equivalents 3	4,154,064 1,718,012
Trade and other receivables	690,209 627,759
Inventories	1,064,645 595,696
Financial assets 4	- 80,000
TOTAL CURRENT ASSETS	5,908,918 3,021,467
NON-CURRENT ASSETS
Investments accounted for using the equity method 9	- 916,147
Financial assets 4	3,027,000 210,000
Plant and equipment	689,988 926,166
Intangible Assets	6,565,950 6,776,704
TOTAL NON-CURRENT ASSETS	10,282,938 8,829,017
TOTAL ASSETS	16,191,856 11,850,484
CURRENT LIABILITIES
Trade and other payables	893,239 717,710
Short-termprovisions	180,100 125,372
TOTAL CURRENT LIABILITIES	1,073,339 843,082
TOTAL LIABILITIES	1,073,339 843,082
NET ASSETS	15,118,517 11,007,402
EQUITY
Issued capital	40,091,115 33,749,092
Reserves	1,376,349 1,979,685
Accumulated Losses	(26,406,631) (24,777,172)
Parent interest	15,060,833 10,951,605
Non-Controlling Interest	57,684 55,797
TOTAL EQUITY	15,118,517 11,007,402

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

PRELIMINARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Issued Share Capital	Accumulated Losses	Option Issue Reserve	Foreign Currency Translation Reserve	Revaluation Reserve	Diluting Gain Reserve	Capital Reserve	Non- Controlling Interests	Total Equity
	$	$	$	$	$	$	$	$	$
Balance at1.7.2009	30,978,621	(19,219,690)	1,461,689	(273,730)	-	636,468	(3,787)	52,217	13,631,788
Loss for the Year		(5,557,482)	-	-	-	-	-	3,580	(5,553,902)
Other Comprehensive income for theyear	-	-	-	(174,665)	-	334,478	(768)	-	159,045
Total comprehensive income for theyear	-	(5,557,482)	-	(174,665)	-	334,478	(768)	3,580	(5,394,857)
Transactions with owners in their capacity as owners
Shares/Options issued duringtheperiod	2,797,720	-	-	-	-	-	-	-	2,797,720
Cost of Capital	(27,249)	-	-	-	-	-	-	-	(27,249)
Balance at30.06.2010	33,749,092	(24,777,172)	1,461,689	(448,395)	-	970,946	(4,555)	55,797	11,007,402
Balance at 1.7.2010	33,749,092	(24,777,172)	1,461,689	(448,395)	-	970,946	(4,555)	55,797	11,007,402
Loss for the Year	-	(3,325,211)	-	-	-	-	-	1,887	(3,323,324)
Other Comprehensive income for theyear	-	1,695,752	(1,461,689)	(61,338)	1,900,853	(970,946)	(10,216)	-	1,092,416
Total comprehensive income for theyear	-		(1,461,689)	(61,338)	1,900,853	(970,946)	(10,216)	1,887	8,776,494
Transactions with owners in their capacity as owners
Shares/Options issued duringtheperiod	6,809,671	-	-	-	-	-	-	-	6,809,671
Cost of Capital	(467,648)	-	-	-	-	-	-	-	(467,648)
Balance at30.06.2011	40,091,115	(26,406,631)	-	(509,733)	1,900,853	-	(14,771)	57,684	15,118,517

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

PRELIMINARY CONSOLIDATED CASH FLOW STATEMENTS

Notes 2011	Notes 2011	2010
	$	$
Cash Flows from Operating Activities
Receipts from customers (inclusive of goods and services
tax)	1,442,365	2,000,823
Payments to suppliers and employees (inclusive of goods
and services tax)	(5,485,561)	(5,791,277)
Interest	37,094	25,025
Brokerage	-	10,500
Research & Development Tax Rebate	169,442	-
Export MarketingDevelopment Rebate	65,996	91,213
Net Cash Outflow from Operating Activities 5	(3,770,664)	(3,663,716)
Cash Flows from Investing Activities
Purchase of property, plant and equipment	(22,596)	(416,346)
Sale of property, plant and equipment	5,382	-
Exploration Expenditure	-	(289,133)
Acquisition of Financial Assets	-	(210,000)
Cash on deconsolidation of subsidiary	-	(703,935)
Net Cash Outflow from Investing Activities	(17,214)	(1,619,414)
Cash Flows from Financing Activities
Loan repaid by other parties	80,000	601,352
Proceeds from issues of ordinary shares and options	6,639,671	2,612,720
Payment of share issue costs	(467,648)	(27,249)
Net Cash Inflow from Financing Activities	6,252,023	3,186,823
Net Increase/(Decrease) in Cash Held	2,464,145	(2,096,307)
Cash at the Beginning of the Financial Year	1,718,012	3,820,677
Effect of exchange rates on cash holding in foreign
currencies	(28,093)	(6,358)
Cash at the End of the Financial Year	4,154,064	1,718,012
Non-Cash Financing and Investing Activities During the year, the Company issued 8,500,000 fully paid ordinary shares (2010: 6,700,000) to the employees as per the terms of their respective employment contracts or
arrangements	170,000	185,000

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

1. Revenue from Ordinary Activities

1. Revenue from Ordinary Activities
	2011 2010
	$ $
Revenue from continuing operations
Revenue from sale of goods and services	1,649,171 2,205,817
Total	1,649,171 2,205,817
Other Income
Export Marketing Grant	- 115,996
Interest	37,094 104,843
Payables Written back	- 52,395
Brokerage Received	- 10,500
Research & Development Tax Rebate received	169,442 -
Other Miscellaneous Income	10,119 14,662
Total	216,655 298,396
Revenue from continuing operations (excluding share of Equity
accounted net losses of associates)	1,865,826 2,504,213
2. Comparison of Half –Year Results
	2011 2010
	$ $
Consolidated loss from continuing operations after tax attributable to
members reported for the first half-yearly report (1,178,198) (3,531,136)
Consolidated loss from continuing operations after tax attributable to
members for the second half-year	(2,147,013) (2,112,214)
3. Reconciliation of Cash
	2011 2010
	$ $
Cash at bank and on hand	1,067,541 1,718,012
Funds in Transit	86,523 -
Term Deposits	3,000,000 -
	4,154,064 1,718,012
4. Financial Assets
	2011 2010
	$ $
Current Financial Assets
Receivables
From related party	- 5,161,864
Provision for impairmentof receivables	- -
	5,161,864
Secured Loans
To related party	- 1,000,000
Interest Accrued thereon	- 224,050
	- 1,224,050
Total Receivables & Secured Loans with Interest Accrued	- 6,385,914

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Write Off of Receivables & Secured Loan with Accrued Interest	-	(6,305,914)
		80,000
Available for sale financial assets
Shares in listed corporation at fair value	94,126	94,126
Provision for impairment	(94,216)	(94,126)
(a)	-	-
Non Current Financial Assets
Other Investments
Unlisted Investments, at cost	210,000	210,000
Available –for sale financial assets ,at fair value (b)	2,817,000	-
Provision for investmentwrite down	-	-
	3,027,000	-

• (a) Available for sale financial assets consist of 156,877 ordinary shares in Pallane Medical Limited (formerly Dia-B Tech Investments Limited). The investment in those shares had been fully impaired as at 30 June 2009.

• (b) Available for sale financial assets consist of 18,780,000 ordinary shares in Bioglobal Limited.Bioglobal Limited ceased to be an “Associate” (as defined in AASB 128) of the Company from 1 July 2010.As a result, the Company discontinued to account for its 18.44% investment in Bioglobal Limited using the equity method of accounting (AASB 128) and has accounted for that investment as a financial asset in accordance with AASB- 139. Accordingly, the cost base of the investment is recorded at the carrying amount of the investment at the date that it ceased to be an “Associate”. The resultant gain of $736,883 was recorded through the Income Statement during the year. At 30 June 2011, the investment has been valued at fair value of 15 cents per share.

5. Reconciliation of Loss After Income Tax to Net Cash Flows from Operating Activities

	2011	2010
	$	$
Operating Loss after income tax	(3,323,324)	(5,553,902)
Depreciation & Amortisation	144,483	198,967
Write Off of Intangible Assets	191,681	-
Write Off of Financial Assets	-	1,144,050
Bad Debts	-	60,329
Issue of Shares to Employees	170,000	185,000
Loss on sale of Fixed Assets	4,764	-
Gain on reclassification of AFS Asset	(736,883)	-
Equity accounting of associates’ operating loss	-	354,171
Changes in operating assets and liabilities
(Increase)/decrease in receivables	(112,947)	237,369
(Increase)/decrease in other operating assets	(346,899)	(879,422)

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Increase/(decrease) in creditors	141,277 620,406
Increaseinprovisions and otheroperatingliabilities	97,184 (30,684)
Net cash outflow from operating activities	(3,770,664) (3,663,716)

6. Events Occurring After Reporting Date

Other than the matters discussed below, there has not arisen in the interval between the end of the financial year and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect the operations of the consolidated entity, the results of these operations or the state of affairs of the consolidated entity in subsequent years.

Establishment of Joint Venture Entity

On 11July 2011 Cardia Bioplastics Limited and RNZ Green Bio Sdn Bhd (“RNZ”) announced that the terms and conditions of a joint venture agreement to establish a bioplastics film, printing and bag manufacturing facility in Malaysia had been finalised.

Pursuant to the joint venture agreement, RNZ will contribute Malaysian Ringit (MYR) 15m (A$ 5m approximately) to maintain a 51% interest in CBMM. Cardia will not provide funding to CBMM, however Cardia will license CBMM with the right to manufacture films and bags using Cardia’s patented bioplastics resins, and assist the venture with Cardia Bioplastics management and operational expertise.Cardia and RNZ have equal Board representation on CBMM.

RNZ has contributed an initial cash subscription of MYR 500,000 (A$150,000) which has been received by CBMM with the balance being facilitated by RNZ through various Equity and Debt Funding for the sum of MYR 14,500,000 (A$ 4.85m) in which the Debt Funding will be a non recourse loan to CBMM shareholders and Directors and the guarantee will be solely provided by RNZ. The contribution of these funds by RNZ to the joint venture will be commensurate with the timing of equipment and working capital orders placed by CBMM.

The MYR 15m (A$ 5m) funding by RNZ will be applied to the setup of a finished film, bag and printing facility in one of Malaysia’s developing manufacturing hubs. These funds will finance Stages 1 & 2 of the facility and provide working capital for the joint venture. It is expected that Stage 1 will be completed by November 2011 with plant capacity of 1,500 tonnes pa. Stage 2 is expected to be completed by July 2012 and will double that capacity. The Plant will be scalable to 7,000 tonnes pa. On injecting the full MYR 15m (A$5m) RNZ will have a 51% equity interest.

Any additional funding will be contributed in accordance with each stakeholder’s equity interest.

7. Issued and Listed Securities

The Company had 1,341,824,584 fully paid ordinary shares and 223,637,482 options on issue at 30 June 2011, (2010: 741,596,587 shares and 581,992,197 options) all of which were listed.

No other securities have been issued.

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

8. NTA Backing

8. NTA Backing
	2011 2010
	$ $
Net tangible asset backing per ordinary share	$0.006 $0.006

9. Associate Entity

9. Associate Entity
Name	Ownership interest		Aggregate share of profits/(losses), where material		Carrying amount of Investments
	2011 %	2010 %	2011 $	2010 $	2011 $	2010 $
Shares in Bioglobal Ltd*	N/A	18.44	N/A	(354,171)	N/A	916,148

• Please refer Note 4(c)

10. Operating segments

Business Segments

The consolidated entity continued to operate under five business segments namely:

• Environmental Technology

• Biotechnology Medical

• Biotechnology Agricultural

• Natural Pharmaceuticals

• Mineral Exploration

Operating Segments

Cardia Bioplastics (Australia) Pty Ltd (formerly Biograde Limited) was acquired by Cardia on 6[th] March 2009.Cardia Bioplastics (Australia) Pty Ltd’s operations are in Bioplastics and is classified under “Environmental Technology” business segment of the Group.Bioplastics is the current focus of business, and the Group has identified its operating segments to accord with that business .

Operating segments are premised on the internal reports that are reviewed and used by the Board of Directors in assessing performance and determining the allocation of resources.

The Group is managed primarily on the basis of product category and service offerings as the diversification of the Group’s operations inherently have different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis.

The Company’s portfolio of investments and interests held or acquired under five division business model of the Group are classified under “Corporate Division”operating segment of the entity.

Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:

-the products sold and/or services provided by the segment; - the manufacturing process;

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

-the distribution method; and -any external regulatory requirements.

The following operating segments have been identified

(i) Manufacturing Division (ii) Distribution Division (iii) Corporate Division

Types of products and services by segment

• (i) Manufacturing Division

The manufacturing segment develops, manufactures sustainable resins derived from renewable resources for the global packaging and plastic products industries.

Manufacturing segment, that includes manufacturing unit in China, is responsible for distribution and sales of products to the Chinese market, thus leveraging their local logistics management and business relationship.

The manufacturing segment also sells products to the distribution segment.

• (ii) Distribution Division

The distribution segment includes the Group’s distributors in Australia, Americas, Europe, and Asia, led by the Company’s Business Development Managers in each of those regions. The distribution segment distributes the Company’s manufactured stock items both domestically in the respective region and internationally.

• (iii) Corporate Division

Corporate Division serves manufacturing and distribution divisions on financial, administrative and legal matters and also holds and manages portfolio of investments and interests held or acquired under five division business model of the Group.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter-segment transactions

An internally determined transfer price is set for all inter-segment sales. This price is based on what would be realised in the event the sale was made to an external party at arm’s length. All such transactions are eliminated on consolidation of the group’s financial statements.

Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates.

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Segment assets

Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.

Segment liabilities

Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Segment liabilities include trade and other payables.

Unallocated items

The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment.

• Non –recurring items of revenue or expense

• Goodwill on acquisition

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Segment Information

Segment Information
		Manufacturing	Distribution	Corporate	Total
		Division	Division
Year ended 30.06.2011		$	$	$	$
Revenue
External Sales		850,892	798,279	-	1,649,171
Inter –segment sales		856,805	-	-	856,805
Interest revenue		359	5,314	31,421	37,094
Other Income		230	170,539	8,792	179,561
Total Segment Revenue		1,708,286	974,132	40,213	2,722,631
Reconciliation of segment
revenue to group revenue
Inter-segment elimination		(856,805)	-	-	(856,805)
Total Group Revenue		851,481	974,132	40,213	1,865,826
Segment Net Loss before	Tax	(685,998)	(2,067,869)	(1,161,857)	(3,915,724)
Reconciliation of segment
result to group net	loss
before tax
-Amount not included in
segment result but reviewed by
Board
- Depreciation & amortisation		(98,668)	(42,757)	(3,058)	(144,483)
- Gain on Reclassification of
AFS Asset		-	-	736,883	736,883
Net Loss before tax from
continuing operations		(784,666)	(2,110,626)	(428,032)	(3,323,324)
Net Loss for the Period		(784,666)	(2,110,626)	(428,032)	(3,323,324)

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Segment Performance
	Manufacturing	Distribution	Corporate	Total
	Division	Division
Year ended 30.06.2010	$	$	$	$
Revenue
External Sale	1,559,992	645,825	-	2,205,817
Inter –segment sales	655,712	-	-	655,712
Interest revenue	1,115	-	103,728	104,843
Other Income	52,381	116,010	25,162	193,553
Total Segment Revenue	2,269,200	761,835	128,890	3,159,925
Reconciliation of segment
revenue to group revenue
Inter-segment elimination	(655,712)	-	-	(655,712)
Total Group Revenue	1,613,488	761,835	128,890	2,504,213
Segment Net Loss before Tax	(716,612)	(1,925,428)	(1,240,706)	(3,882,746)
Reconciliation of segment
result to group net loss before
tax
-Amount not included in segment
result but reviewed by Board
- Depreciation & amortisation	(149,249)	(46,076)	(3,642)	(198,967)
- Write down of Financial Assets	-	-	(1,144,050)	(1,144,050)
- Bad Debts	-	-	(60,329)	(60,329)
- Share of loss of associates using
Equity Accounting	-	-	(354,171)	(354,171)
Net Loss before tax from	(865,861)	(1,971,504)	(2,802,898)	(5,640,263)
continuing operations
- Gain on Deconsolidation of	-	-	86,361	86,361
subsidiary
Net Loss for the Period	(865,861)	(1,971,504)	(2,716,537)	(5,553,902)

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

			Manufacturing	Distribution	Corporate	Total
			Division	Division
As at 30.06.2011			$	$	$	$
Segment Assets			2,206,540	13,153,140	19,791,491	35,151,171
Reconciliation of	segment
assets to group assets
Inter-segment eliminations						(18,959,315)
Segment Assets	after	inter-
segment eliminations						16,191,856
Total Group Assets						16,191,856
Segment asset increases for the
period
- Capital expenditure			22,596	-	-	22,596
Included in segment assets are
- Goodwill			207,108	6,358,892	-	6,565,950
			Manufacturing	Distribution	Corporate	Total
			Division	Division
As at 30.06.2010			$	$	$	$
Segment Assets			1,791,789	12,670,475	12,867,238	27,329,502
Reconciliation of segment assets
to group assets
Inter-segment eliminations						(15,479,018)
Segment Assets after segment eliminations	inter-					11,850,484
Total Group Assets						11,850,484
Segment asset increases for the
period
- Capital expenditure			336,877	79,107	362	416,346
Included in segment assets are
- Equity accounted associates			-	-	916,148	916,148
-Goodwill			207,108	6,358,892	-	6,565,950

15

Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Segment Liabilities
	Manufacturing	Distribution	Corporate	Total
	Division	Division
As at 30.06.2011	$	$	$	$
Segment Liabilities	2,417,488	10,118,654	328,452	12,864,594
Reconciliation of	segment
liabilities to group liabilities
Inter-segment eliminations				(11,791,255)
Total Group Liabilities				1,073,339
	Manufacturing	Distribution	Corporate	Total
	Division	Division
As at 30.06.2010	$	$	$	$
Segment Liabilities	290,416	4,527,624	1,157,620	5,975,660
Reconciliation of segment
liabilities to group liabilities
Inter-segment eliminations				(4,758,717)
Total Group Liabilities				1,216,943
Revenue by geographical region			2011	2010
			$	$
Revenue attributable to external customers is disclosed below,
based on the location of the external customer
Australia			346,804	457,378
China			850,892	1,559,992
Rest of Asia			4,959	-
USA			346,127	39,048
Europe			100,389	149,399
Total Revenue			1,649,171	2,205,817

16

Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Assets by geographical region The location of segment assets by geographical location of assets is disclosed below: Australia Asia Total Assets	2011 2010 $ $ 13,985,316 10,502,024 2,206,540 1,348,461
	16,191,856 11,850,485

Major customers

The Group has a number of customers to whom it provides products. The Group has supplied a single external customer in the distribution segment who accounted for 12.93% (2010: NIL) of external revenue. The next two significant customers accounted for 9.09% (2010:9.04%) and 4.64% (2010: NIL) of external revenue respectively.

17

Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

COMMENTARY ON RESULTS FOR THE YEAR

Earnings per Share

		2011	2010
		$	$
o	Basic Earnings (Loss) Per Share	(0.0038)	(0.0085)
o	Diluted Earnings (Loss) Per Share	(0.0038)	(0.0085)

Returns to Shareholders

Not applicable.

Material Factors Affecting the Preliminary Consolidated Financial Statements

a) Revenue and Expenses

The revenue for the year was lower compared to the previous year mainly due to decrease in sales. Other than abnormal items explained elsewhere in the report, the expenses for the year have remained consistent with that of previous year.

Major items affecting the operating performance for the year were:

Employment Benefits	(1,583,063)
Marketing & Distribution Expenses	(393,777)
Research & Development Expenses & Patent Costs	(1,322,833)

b) Assets and Liabilities

The Company maintained its policy of writing off all R&D and Patent expenditure relating to the development of its business units.

As disclosed in the 2010 annual report, Bioglobal Limited ceased to be an “Associate” (as defined in AASB 128) of the Company from 1 July 2010. As a result, the Company discontinued to account for its 17.76% investment in Bioglobal Limited using the equity method of accounting (AASB 128) and has accounted for that investment as Available for Sale financial asset in accordance with AASB-139. Accordingly, the cost base of the investment is recorded at the carrying amount of the investment at the date that it ceased to be an “Associate”.The resultant gain of $736,883 was recorded through the Income Statement during the year.

Available-for-Sale Financial assets are required to be assessed for impairment at each reporting date and the impairment loss if any shall be recognised in profit or loss in accordance with the requirements of AASB 139: Financial Instruments: Recognition and Measurement. Accordingly the investment in Pallane Medical Limited remained fully impaired.

In accordance with AASB -136, Goodwill acquired on the acquisition of Biograde Limited has been allocated to Distribution segment of the business, being cash generating unit.AASB-136 also requires Goodwill to be tested annually for impairment and impairment loss to be recognised if the carrying amount of the cash generating unit exceeds the recoverable amount of the unit. No Impairment loss on Goodwill has been recognised during the year .

18

Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

COMMENTARY ON RESULTS FOR THE YEAR

c) Cash Flows

The following was received during the year:

		2011	2010
		$	$
1.	Issue of Ordinary Shares	6,639,671	2,612,720
2.	Interest Received	37,094	25,025
3.	Research & Development Tax Rebate	169,442	-
4.	Export Marketing Grant	65,996	91,213
5.	Loan repaid by other parties	80,000	601,352

d) Segment Results

There were no changes in the segment results during the period that were significant to an understanding of the business as a whole.

The Consolidated Group’s segment results by operating segments have been disclosed in Note-10 above.

e) Trends

There were no significant performance trends during the year.

Other Factors that Affected Results for the Year or which are likely to affect Results in the Future

There were no other factors which have affected the results in the year or which are likely to affect results in the future.

ACCOUNT AND AUDIT

There were no changes in accounting policies during the year and this report is based on accounts which are in the process of being audited.

Going Concern Assumption

As anticipated, the Consolidated Group’s revenue from sales has been insufficient to cover operational costs of the business and hence the company experienced operating losses during the year ended 30 June 2011. The Company’s continuing viability, its ability to continue as a going concern and to meet its debts and commitments as they fall due, are subject to the company being successful in:

 Establishing greater revenue from its current activities

• As part of the Company’s growth strategy, the Company has been extensively working on number of development projects with global brand owners and international packaging companies. Some of these projects are in commercial negotiations and others have advanced to “in-market trials” stage. Whilst no assurance can be given, the Board expects that all or some of these projects will be converted into sales revenue.

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237

COMMENTARY ON RESULTS FOR THE YEAR

• Being successful in accessing capital In June 2011 the Company has raised $4.5million in capital through a renounceable rights issue to its shareholders. As part of this capital raising, the shareholders were offered free attaching options which can finance the company’s minimum capital requirements over the period of 2 years, if exercised. In addition, the Company has the ability to issue shares of up to 15% of issued capital on a non-pro-rata basis in a 12month period without seeking shareholder approval.

• Sale of the Company’s non-core assets The Company’s major non core equity investment in Bioglobal Ltd has the potential to be sold.

The Directors are confident that the Company will be successful in the above matters and accordingly have prepared the Preliminary final report on a going concern basis. At this time the Directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is recorded in the Report.

Rekha Bhambhani Company Secretary Dated: 31[st] August 2011

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Cardia Bioplastics Ltd and its Controlled Entities ACN 064 755 237