MYECO GROUP LTD — Annual Report 2012

Aug 30, 2012

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ASX CODE: CNN OTCQX CODE: CDRBY

TO: COMPANY ANNOUNCEMENTS OFFICE ASX LIMITED DATE: 31[st] August 2012

PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 30[th] JUNE 2012

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 2012

CONTENTS
	PAGE
Results for Announcement to the Market	2
Preliminary Consolidated Statement of Comprehensive Income	4
Preliminary Consolidated Balance Sheet	6
Preliminary Consolidated Statement of Changes in Equity	7
Preliminary Consolidated Cash Flows Statement	8
Notes to the Preliminary Consolidated Financial Statements	9
Commentary on Results for the Year	19

1

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Revenuefrom ordinary activities	Up	152.39%	to	$4,709,106
Loss from ordinary activities after tax attributable to members	Up	39.61%	to	$4,642,426
Net Lossfor the year attributable to members	Up	39.61%	to	$4,642,426
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 $4,301,143, a Research & Development Rebate of $342,033 and other income of $65,930.

Revenue for the year has increased by 152.39% to $4,709,106 as compared to the revenue of $1,865,826 last year. The increase in revenue was a result of:

• improved sales performance from all the geographical market segments of the Company representing 160.81% increase in sales as compared to the sales in the corresponding year in 2011.

• an increase in R&D Tax Rebate receipt by $172,952 compared to last year.

Loss Position

The Company’s loss from its bioplastics business for the year was $3,904,406, an improvement of 4.65% or $190,402 over the corresponding year in 2011 ($4,094,808).

However, the Company has recorded a consolidated loss of $4,642,426 for the year, an increase of 39.61% as compared with a loss of $3,325,211 last year.

The main reason for the increase in the Consolidated Net Loss is attributable to the Company’s investments in Bioglobal Limited (“BGL”) where the following exceptional events and adjustments occurred:

• On 23rd December 2011, Shareholders of BGL approved an issue of shares to Good Harvest Biotech Holdings Limited of 300 million new ordinary shares at 1.3 cents cash per share to raise $3,900,000 in BGL Cardia did not participate in the issue and its investments of 18.78 million ordinary shares was diluted down to 4.63% (from current 17.78%).

As a result, the Company has written down its investments in BGL from $2,817,000 to $244,140.The resultant loss of $2,572,860 in the value of the

2

RESULTS FOR ANNOUNCEMENT TO THE MARKET

investment has been recognised through Preliminary Consolidated Statement of Changes in Equity $1,900,853 and $ 672,007 as an impairment charge in the Preliminary Consolidated Statement of Comprehensive Income .

• In the previous year, the Company recognised a gain of $736,883 resulting from the change in accounting method of recording its investments in Bioglobal Limited from equity method of accounting (AASB 128) to Available for Sale financial asset (AASB-139).The accounting method was changed due to cessation of BGL being an Associate ((as defined in AASB 128) of the Company effective 1 July 2010. No such gain is required to be recognised in the current year.

In addition to the above, as at 30 June 2012, the Company has also recognised impairment loss of $83,247 on its investments in P-Fuel Limited.

3

PRELIMINARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For The Year Ended 30 June 2012

Sales Cost of Sales Gross Profit Other Income Administrative Expenses Employment Benefits Marketing & Distribution Expenses Research & Development Expenses & Patent Costs Depreciation & Amortisation Net Finance Costs Other Expenses Results from operating activities Impairment –Financial Assets Gain on designation of Available for Sale Asset Loss before income tax Income Tax Expense Loss for the period after income tax Other comprehensive income Foreign currency translation differences of foreign operations Net change in fair value of available for sale financial assets Dilution Gain of associate on reclassification to Available for Sale Asset Cummulative losses previously recognized on Equity Accounted Associate Foreign currency exchange movements to Capital Reserve Income tax on other comprehensive income Total comprehensive income for the period (Loss)/Profit attributable to: Members of the Company Non-Controlling Interest Loss for the year after income tax	Consolidated Group 2012 2011 $ $ 4,301,143 1,649,171 (3,740,483) (1,524,526)
	560,660 124,645
	407,963 216,655 (692,657) (619,961) (1,982,644) (1,583,063) (518,803) (393,777) (1,367,967) (1,322,833) (118,842) (144,483) (109,797) 34,601 (82,319) (371,991)
	(3,904,406) (4,094,808)
	(755,254) 34,601 - 736,883
	(4,659,660) (3,323,324) - -
	(4,659,660) (3,323,324)
	13,035 (61,338) (1,900,853) 1,900,853 - (970,946) - 234,063 - (10,216) - -
	(6,547,478) (2,230,908)
	(4,642,426) (3.325,211) (17,234) 1,887
	(4,659,660) (3,323,324)

4

PRELIMINARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Total comprehensive income attributable to : Members of the Company Non-Controlling Interest Total comprehensive income for the period Earnings per share -Basic earnings per share (cents per share) -Diluted earnings per share (cents per share)	2012 2011 $ $ (6,530,244) (2,232,795) (17,234) 1,887
	(6,547,478) (2,230,908)
	(0.3306) (0.3843) (0.3306) (0.3843)

5

PRELIMINARY CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2012

AS AT 30 JUNE 2012
Notes	2012 2011
	$ $
CURRENT ASSETS
Cash and cash equivalents 3	1,362,618 4,154,064
Trade and other receivables	943,886 690,209
Inventories	1,319,426 1,064,645
TOTAL CURRENT ASSETS	3,625,930 5,908,918
NON-CURRENT ASSETS
Financial assets 4	370,893 3,027,000
Plant and equipment	686,967 689,988
Intangible Assets	6,565,950 6,565,950
TOTAL NON-CURRENT ASSETS	7,623,810 10,282,938
TOTAL ASSETS	11,249,740 16,191,856
CURRENT LIABILITIES
Trade and other payables	1,205,052 893,239
Short-termprovisions	60,026 146,748
TOTAL CURRENT LIABILITIES	1,265,078 1,039,987
NON CURRENT LIABILITIES
Long-termprovisions	35,975 33,352
TOTAL NON CURRENT LIABILITIES	35,975 33,352
TOTAL LIABILITIES	1,301,053 1,073,339
NET ASSETS	9,948,687 15,118,517
EQUITY
Issued capital	41,468,763 40,091,115
Reserves	(511,469) 1,376,349
Accumulated Losses	(31,049,057) (26,406,631)
Parent interest	9,908,237 15,060,833
Non-ControllingInterest	40,450 57,684
TOTAL EQUITY	9,948,687 15,118,517

6

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	Parent Entity Interest	Non- Controlling Interests	Total Equity
	$	$	$	$	$	$	$	$	$	$
Balance at1.7.2010	33,749,092	(24,777,172)	1,461,689	(448,395)	-	970,946	(4,555)	10,951,605	55,797	11,007,402
Loss for the Year	-	(3,325,211)	-	-	-	-	-	(3,325,211)	1,887	(3,323,324)
Other Comprehensive income for theyear	-	234,063	-	(61,338)	1,900,853	(970,946)	(10,216)	1,092,416	-	1,092,416
Total comprehensive income for theyear	-	(3,091,148)	-	(61,338)	1,900,853	(970,946)	(10,216)	(2,232,795)	1,887	(2,230,908)
Transactions with owners in their capacity as owners
Shares/Options issued duringtheperiod	6,809,671	-	-	-	-	-	-	6,809,671	-	6,809,671
Cost of Capital	(467,648)	-	-	-	-	-	-	(467,648)	-	(467,648)
Expiryof Options	-	1,461,689	(1,461,689)	-	-	-	-		-	-
Balance at30.06.2011	40,091,115	(26,406,631)	-	(509,733)	1,900,853	-	(14,771)	15,060,833	57,684	15,118,517
Balance at 1.7.2011	40,091,115	(26,406,631)	-	(509,733)	1,900,853	-	(14,771)	15,060,833	57,684	15,118,517
Loss for the Year	-	(4,642,426)	-	-	-	-	-	(4,642,426)	(17,234)	(4,659,660)
Other Comprehensive income for theyear	-	-	-	13,035	(1,900,853)	-	-	(1,887,818)	-	(1,887,818)
Total comprehensive income for theyear	-	(4,642,426)	-	13,035	(1,900,853)	-	-	(6,530,244)	(17,234)	(6,547,478)
Transactions with owners in their capacity as owners
Shares/Options issued duringtheyear	1,595,747	-	-	-	-	-	-	1,595,747	-	1,595,747
Cost of Capital	(218,099)	-	-	-	-	-	-	(218,099)	-	(218,099)
Repatriation of Capital Reserve to Foreign Currency Gains and Losses	-	-	-	(14,771)	-	-	14,771	-	-	-
Balance at30.06.2012	41,468,763	(31,049,057)	-	(511,469)	-	-	-	9,908,237	40,450	9,948,687

7

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

Notes 2012	Notes 2012	2011
	$	$
Cash Flows from Operating Activities
Receipts from customers (inclusive of goods and services
tax)	3,983,891	1,442,365
Payments to suppliers and employees (inclusive of goods
and services tax)	(8,414,464)	(5,485,561)
Interest	62,437	37,094
Research & Development Tax Rebate	342,033	169,442
Export Marketing Development Rebate	-	65,996
Net Cash Outflow from Operating Activities 5	(4,026,103)	(3,770,664)
Cash Flows from Investing Activities
Purchase of property, plant and equipment	(106,223)	(22,596)
Sale of property, plant and equipment	-	5,382
Net Cash Outflow from Investing Activities	(106,223)	(17,214)
Cash Flows from Financing Activities
Loan repaid by other parties	-	80,000
Proceeds from issues of ordinary shares and options	1,554,497	6,639,671
Payment ofshareissue costs	(218,099)	(467,648)
Net Cash Inflow from Financing Activities	1,336,398	6,252,023
Net Increase/(Decrease) in Cash Held	(2,795,928)	2,464,145
Cash at the Beginning of the Financial Year	4,154,064	1,718,012
Effect of exchange rates on cash holdings in foreign
currencies	4,482	(28,093)
Cash at the End of the Financial Year	1,362,618	4,154,064

8

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

1. Revenue from Ordinary Activities

1. Revenue from Ordinary Activities
	2012 2011
	$ $
Revenue from continuing operations
Revenue from sale of goods and services	4,301,143 1,649,171
Other Income
Interest	62,437 37,094
Research & Development Tax Rebate received	342,033 169,442
Other Income	3,493 10,119
Total	407,963 216,655
Revenue from continuing operations	4,709,106 1,865,826

2. Comparison of Half –Year Results

2. Comparison of Half –Year Results	2. Comparison of Half –Year Results
2012 2011
$ $
Consolidated loss from continuing operations after tax attributable to
members reported for the first half-yearly report (2,181,624) (1,178,198)
Consolidated loss from continuing operations after tax attributable to
members for the second half-year	(2,460,802) (2,147,013)
	(4,642,426) (3,325,211)

3. Reconciliation of Cash

Cash at bank and on hand Funds in Transit Term Deposits	2012 2011 $ $ 1,362,618 1,067,541 - 86,523 - 3,000,000 1,362,618 4,154,064

9

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

4. Financial Assets

4. Financial Assets
	2012 2011
	$ $
Current Financial Assets
Available for sale financial assets
Shares in listed corporation at fair value	94,126 94,126
Provision for impairment	(94,216) (94,216)
(a)	- -
Non Current Financial Assets
Other Investments
Unlisted Investments, at cost (b)	210,000 210,000
Less: Impairment	(83,247) -
	126,753 210,000
Available –for sale financial assets, at fair value (c)	2,817,000 2,817,000
Less :Revaluation Reserve	(1,900,853) -
Less:Impairment	(672,007) -
	244,140 2,817,000
	370,893 3,027,000

• (a) Current 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) This financial asset consist of 5,250,000 ordinary shares in P-Fuel Limited. Impairment loss of $83,247 has been recognised as at 30 June 2012.

• (c) On 23rd December 2011, Shareholders of BGL approved an issue of shares to Good Harvest Biotech Holdings Limited of 300 million new ordinary shares at 1.3 cents cash per share to raise $3,900,000 in BGL Cardia did not participate in the issue and its investments of 18.78 million ordinary shares was diluted down to 4.63% (from current 17.78%).

As a result, the Company has written down its investments in BGL from $2,817,000 to $244,140.The resultant loss of $2,572,860 in the value of the investment has been recognised through Preliminary Consolidated Statement of Changes in Equity $1,900,853 and $672,007 as an impairment charge in the Preliminary Consolidated Statement of Comprehensive Income .

10

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

5. Investments Accounted for Using the Equity method

As at 30 June 2012, Cardia had 49% equity interest in Malaysian Manufacturing Joint Venture (CBMM). Please refer Note 7 for events occurring after reporting date in relation to CBMM.

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

6. Reconciliation of Loss After Income Tax to Net Activities	Cash Flows from Operating
	2012 2011
	$ $
Operating Loss after income tax	(4,659,660) (3,323,324)
Depreciation & Amortisation	118,842 144,483
Write Off of Intangible Assets	- 191,681
Impairment -Financial Assets	755,254 -
Issue of Shares to Employees	41,250 170,000
Loss on sale of Fixed Assets	- 4,764
Gain on reclassification of Available for Sale Asset	- (736,883)
Changes in operating assets and liabilities
(Increase)/decrease in receivables	(253,677) (112,947)
(Increase)/decrease in other operating assets	(254,781) (346,899)
Increase/(decrease) in creditors	393,583 141,277
Increase/(decrease)inprovisions and payables	(166,914) 97,184
Net cash outflow from operating activities	(4,026,103) (3,770,664)

7. Events Occurring After Reporting Date

Dissolution of CBMM Joint Venture

As announced to the market on 31 July 2012, Cardia Bioplastics will be re-assigned 100% of the manufacturing rights for finished goods and the Cardia brand in Malaysia after joint venture partner, RNZ Green Bio Sdn Bhd, could not continue to fund operations.

A proposal to terminate Cardia’s Malaysian Manufacturing Joint Venture (CBMM) by mutual agreement has been agreed to. The formal settlement process is in progress; on completion of which the finished goods manufacturing rights and the Cardia brand will be reverted back to Cardia.

Cardia has no financial exposure to the Joint Venture. Accordingly, as at 30 June 2012, the Company has discontinued recognition of its investment and share of (loss)/profit in CBMM.

Other than the matters discussed above, 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.

11

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

8. Issued and Listed Securities

The Company had 1,567,057,844 fully paid ordinary shares and 221,285,714 options on issue at 30 June 2012, (2011: 1,341,824,584 shares and 223,637,482 options) all of which were listed.

No other securities have been issued.

9. NTA Backing

9. NTA Backing
	2012 2011
Net tangible asset backing per ordinary share(cents)	0.2409 0.6091

10. Operating segments

Business Activities

The consolidated entity continued to operate under a five business activities model namely:

• Environmental Technology

• Biotechnology Medical

• Biotechnology Agricultural

• Natural Pharmaceuticals

• Mineral Exploration

Cardia Bioplastics (Australia) Pty Ltd 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.

Segment Information

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

12

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

10. Operating segments (continued)

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.

13

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

10. Operating segments (continued)

Segment Performance Year ended 30.06.2012 Revenue External Sales Inter –segment sales Interest revenue Other Income Total Segment Revenue Reconciliation of segment revenue to group revenue Inter-segment elimination Total Group Revenue Segment Net Loss before Tax Reconciliation of segment result to group net loss before tax Inter-segment elimination -Amount not included in segment result but reviewed by Board - Depreciation & amortisation -Impairment- Financial Assets Net Loss before tax from continuing operations	Manufacturing Division Distribution Division Corporate Total $ $ $ $ 1,688,576 2,612,567 - 4,301,143 1,751,972 - - 1,751,972 599 17,909 43,929 62,437 - 343,426 2,100 345,526
	3,441,147 2,973,902 46,029 6,461,078 (1,751,972) - - (1,751,972)
	1,689,175 2,973,902 46,029 4,709,106
	(731,439) (2,061,454) (973,455) (3,766,348) - (19,216) - (19,216) (84,240) (33,191) (1,411) (118,842) - - (755,254) (755,254)
	(815,679) (2,113,861) (1,730,120) (4,659,660)

14

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

10. Operating segments (continued)

Segment Performance Year ended 30.06.2011 Revenue External Sales Inter –segment sales Interest revenue Other Income Total Segment Revenue Reconciliation of segment revenue to group revenue Inter-segment elimination Total Group Revenue Segment Net Loss before Tax Reconciliation of segment result to group net loss before tax Inter-segment elimination -Amount not included in segment result but reviewed by Board - Depreciation & amortisation - Gain on Reclassification of Available for sale Assets Net Loss before tax from continuing operations	Manufacturing Division Distribution Division Corporate Total $ $ $ $ 850,892 798,279 - 1,649,171 856,805 - - 856,805 359 5,314 31,421 37,094 230 170,539 8,792 179,561
	1,708,286 974,132 40,213 2,722,631 (856,804) - - (856,805)
	851,481 974,132 40,213 1,865,826
	(685,998) (2,054,999) (1,161,857) (3,902,854) - (12,870) - (12,870) (98,668) (42,757) (3,058) (144,483) - - 736,883 736,883
	(784,666) (2,110,626) (428,032) (3,323,324)

15

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

10. Operating segments (continued)

As at 30.06.2012 Segment Assets Reconciliation of segment assets to group assets Inter-segment eliminations Segment Assets after inter- segment eliminations Segment asset increases for the period - Capital expenditure Included in segment assets are - Goodwill As at 30.06.2011 Segment Assets Reconciliation of segment assets to group assets Inter-segment eliminations Segment Assets after inter- segment eliminations Segment asset increases for the period - Capital expenditure Included in segment assets are -Goodwill	Manufacturing Division Distribution Division Corporate Total $ $ $ $ 1,778,752 15,499,808 18,376,484 35,655,044 - (7,271,595) (17,133,709) (24,405,304)
	1,778,752 8,228,213 1,242,775 11,249,740
	103,549 2,674 - 106,223 - 6,565,950 - 6,565,950 Manufacturing Division Distribution Division Corporate Total $ $ $ $ 2,413,648 13,153,140 19,791,491 35,358,279 (12,870) (6,058,930) (13,094,623) (19,166,423)
	2,400,778 7,094,210 6,696,868 16,191,856
	22,596 - - 22,596 - 6,565,950 - 6,565,950

16

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

10. Operating segments (continued)

Segment Liabilities As at 30.06.2012 Segment Liabilities Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total Group Liabilities As at 30.06.2011 Segment Liabilities Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total Group Liabilities	Manufacturing Division Distribution Division Corporate Total $ $ $ $ 2,817,582 13,931,677 559,139 17,308,398 (2,668,664) (13,057,165) (281,516) (16,007,345)
	148,918 874,512 277,623 1,301,053
	Manufacturing Division Distribution Division Corporate Total $ $ $ $ 2,417,488 10,241,813 328,452 12,987,753 (1,892,630) (10,021,784) - (11,914,414)
	524,858 220,029 328,452 1,073,339

17

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

10. Operating segments (continued)

Revenue by geographical region Sales revenue attributable to external customers is disclosed below, based on the location of the external customer Australia Asia Americas Others Total Revenue Assets by geographical region The location of segment assets by geographical location of assets is disclosed below: Australia Asia Total Assets	2012 2011 $ $ 811,990 346,804 1,773,067 855,851 1,687,942 346,127 28,144 100,389
	4,301,143 1,649,171
	2012 2011 $ $ 6,923,147 9,611,184 700,663 671,754
	7,623,810 10,282,938

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 24.01% (2011: 12.93%) of external revenue. The next two significant customers accounted for 8.32% (2011:NIL) and 7.46% (2011: NIL) of external revenue respectively.

18

COMMENTARY ON RESULTS FOR THE YEAR

Earnings per Share

			2012	2011
o	Basic Earnings (Loss) Per Share	$	(0.0033)	(0.0038)
o	Diluted Earnings (Loss) Per Share	$	(0.0033)	(0.0038)
	Weighted average number of shares	No	1,404,323,961	865,279,488

Returns to Shareholders

Not applicable.

Material Factors Affecting the Preliminary Consolidated Financial Statements

a) Revenue and Expenses

Revenue for the year has increased by 152.39% as compared to the revenue of $1,865,826 last year. The primary reason for increase in revenue was improved sales performance from all the geographic market segments of the Company. Other than abnormal items explained elsewhere in the report, the expenses for the year have remained consistent with that of previous year.

b) Assets and Liabilities

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

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 Company’s financial Assets have been assessed for impairment and loss has been recognised wherever requiredRefer Note 4 to Preliminary Consolidated Financial Statements.

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.

c) Trends

Other than increase in sales revenue by 160.81% as compared to the last year, there were no other significant performance trends during the year.

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

The Company has undertaken cost restructure program during the last quarter of FY 2012 to reduce its operating costs as the Company transitions from product development to commercialisation through marketing and sales initiatives.

19

COMMENTARY ON RESULTS FOR THE YEAR

These measures are expected to reduce the cash burn to $3.0 million for FY2013. Assuming no sales or gross margin is contributed to overheads for the FY2013 then the burn translates to around $750,000 per quarter. The effect of these new cost reduction measures are expected to be visible from the first quarter of FY2013.

Other than the above measures, 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 2012. 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 and reducing costs 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.

The Company has achieved solid growth in sales for the year to 30 June 2012.

The Company implemented a cost restructure program in the last quarter of FY2012. It is expected that this program will result in additional cash savings for the Company as it develops its operations.

• Capital Raising

• The Board has a track record of raising capital and had raised $1.5million in FY2012 following $6.6million in FY2011.

The Board is currently looking at all of its capital raising options.

• Sale of the Company’s non-core assets

• The Company’s non core equity investments that have the potential to be sold, would also contribute to cash flows.

The Directors are seeking to raise capital and in line with the above matters 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 2012

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