MYECO GROUP LTD — Interim / Quarterly Report 2011

Jul 28, 2011

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TO : COMPANY ANNOUNCEMENTS OFFICE

ASX LIMITED

DATE : 29 July 2011

QUARTERLY REPORT – 30 June 2011

The Board of Cardia Bioplastics Limited (“Cardia or the Company”) presents its June 2011 Quarterly Report which consists of the Activities Report & the Quarterly Cash Flow report (Appendix 4C)

Highlights

Corporate

Cash Balance as at 30 June 2011: $4.155M Refer attached Appendix 4C.

Capital Raising

The Company completed a capital raising via a renounceable rights offer to shareholders and raised $4,472,750. Net proceeds after costs were $4,042,000. The issue was underwritten by Paterson Securities Limited.

Options Expiry

581,992,197 number of Options exercisable at 10 cents per option expired at 30[th] June 2011.

Directors held 102,151,271 options which lapsed on the expiry date.

Bioplastics Business and Operations

Sales

• Sales revenue was $530,592 for the June 2011 quarter

• Sales for the September 2011 quarter expected to increase substantially with firm orders for July 2011-($378,000) and August2011-($700,000) totalling $1,078,000 and September 2011 order book still open.

Manufacturing Capacity

As a result of the anticipated increase in customer demand over the coming quarter and year, the production capacity at the Nanjing factory for Biohybrid™ resin will be expanded to 10,000 tonnes per annum (from the current 4000 tonnes per annum) via a capital investment in two more extruders expected to be purchased in the next quarter.

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Cardia will also be able to increase its finished goods capacity by 1,500 tonnes from November 2011 as a result of the manufacturing Joint Venture established in Malaysia for finished bioplastics films and bag manufacturing. This new facility will now allow Cardia to manufacture finished films/bags both in China and Malaysia.

Strategic Partnerships

Cardia Bioplastics Limited and RNZ Green Bio Sdn Bhd finalised the terms and conditions of a joint venture agreement to establish a bioplastics film, printing and bag manufacturing facility in Malaysia whereby RNZ will make available up to AUD$5m in equity and/or non recourse loans to earn a 51% equity interest.

Development Projects/Product Launches

The company continued to work with global brand owners and packaging companies on development projects to convert conventional packaging and plastic products to bioplastics using Cardia‟s bioplastics resins.

The following International and National packaging companies and brand owners launched their new ranges of bioplastics products using Cardia Bioplastics resin technology which are to be marketed to their customer base:

• Stellar Films of Australia released a new range of personal care and medical packaging products using Cardia Bioplastics resin technology.

• Wipak Group (owned by Finland based Wihuri Group) launched globally its new range of sustainable food packaging films using Cardia Bioplastics resin technology at Interpack 2011 in Dusseldorf, Germany.

• Jokey Plastik of Germany presented their new Biohybrid™ range of buckets and containers made with Cardia Bioplastics resins at Interpack 2011.

When and if any of these projects convert to material sales contracts the market will be informed.

Other Developments

Cardia was awarded the Green Technology Excellence award by Frost & Sullivan which with Cardia‟s other global awards, again confirms Cardia as a technology innovator in the Bioplastics industry.

Details

Corporate

Cash Balance as at 30 June 2011

The consolidated cash position of the group at 30 June 2011 was $4,155,000 (March 2011 $1,008,000).

Net proceeds from the Rights Issue Offer of $4,042,000 was received during the period. Whilst receipts from customers of $558,000 (March 2011 $364,000) was $194,000 greater than prior quarter reflecting receipts from higher June 2011 month sales.

Net operating cash outflow during the quarter was $1,442,000 (March 2011 $1,295,000) being $147,000 greater than the March 2011 quarter. Payments for raw materials were broadly in line with the prior quarter, however, the Group incurred an additional $33,000 for product patents. Furthermore the outflow during the quarter also includes the 6 months prepayment of rent for the Nanjing China factory of $66,000.

Capital Raising

The company successfully completed a renounceable rights offer to shareholders during the period and raised a gross amount of $4,472,750 (net after costs $4,042,000). In accordance with the underwriting agreement with Patersons Securities Limited (“Patersons”), the shortfall of acceptances of $3,393,567 from the issue was placed with their clients.

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Options Expiry

581,992,197 number of Options exercisable at 10 cents per option expired on the 30[th] June 2011.

Directors held 102,151,271 options which lapsed on the expiry date.

Following expiry of June 2011 Options, Cardia has the following securities on issue:

Fully paid Ordinary Shares (CNN) - 1,341,824,564 Options (exercisable at 1.5 cents on or before 30 June 2012 (CNNOA) - 223,637,482

Investment Portfolio/Other Assets- Unchanged

No cash was committed to the company‟s Investment Portfolio/Other Assets during the quarter ending 30 June 2011.The only material investment included in the Cardia‟s portfolio with an equity interest exceeding 5% or worth more than 5% of that company‟s net assets is

Bioglobal Limited (18.4%)

Bioplastics Business Overview

Cardia Bioplastics Limited (“Cardia”) develops, manufactures and markets sustainable resins and finished products derived from renewable resources for the global packaging and plastic products industries. The company holds a strong provisional patent portfolio to drive its mission to be an international supplier of technically advanced sustainable resins made from renewable resources. Cardia has its Headquarters and Global Application Development Centre in Melbourne, Australia. The Product Development Centre and manufacturing plant is in Nanjing, China. Cardia offices are located in Europe, Malaysia, China and the Americas. These offices complement a network of leading distributors across Australia, the Americas, Asia and Europe. The company‟s growth is fuelled by the global trend towards sustainable packaging. Cardia gives customers the choice of using sustainable Cardia Biohybrid™ resins or Compostable resins for their packaging or plastic product applications. As a service to customers, the Cardia Bioproducts team offers design, development and production of ready to use finished goods, such as film and bag products. The company‟s materials are suitable for film, injection moulding, blow moulding, foam, extrusion and coating applications.

Bioplastics Business and Operations Update

Sales

• Sales revenue was $530,592 for the June 2011 quarter

• Sales for the September 2011 quarter expected to increase substantially with firm orders for July 2011-($378,000) and August2011-($700,000) totalling $1,078,000 and September 2011 order book still open.

Sales revenue in the June 2011 quarter was $530,592, an increase of $95,000 to the preceding March 2011 quarter but down on the same quarter in 2010 ($892,304).

During the June 2011 quarter, the month of June showed significant sales increase over the April and May sales. Sales in the month of June alone were $319,483.

This stronger uplift in June 2011 sales has been repeated in July 2011 with sales invoiced in July already totalling $378,000 and with forward firm sales orders for August 2011 at $700,000.

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Sales for the September 2011 quarter is already at $1,078,000 with sales order book for September 2011 still open representing a substantial increase for the forthcoming quarter compared to the June 2011 quarter.

Whilst sales for the year ending June 2011 was approximately $1.7m compared to $2.2m in 2010 (down 20%) the Board expects sales to improve and increase over the 2012 financial year. This is based on the current forward order book including firm sales orders and expected sales for the September 2011 quarter and the encouraging events as described below:

Manufacturing Capacity

The last month of the quarter was characterised by increased demand for Cardia products. Cardia has established an extensive international distribution network and orders emanating from these distributors significantly firmed during the month of June and continued into July 2011 and with firm forward orders already received for August 2011 as part of the forthcoming September 2011quarter.

As a result of the increased demand the company will be expanding production capacity at Cardia‟s Nanjing factory for Biohybrid™ resin from 4,000 tonnes to 10,000 tonnes per annum. The additional production capacity will allow the company to better service the emergent demand. Accordingly, and as foreshadowed in the Company‟s recent Prospectus, two resin extrusion machines with ancilliary equipments will now be ordered with production on these machines anticipated to commence in December 2011. This investment will be in the order of $770,000.

Cardia‟s marketing and development strategy engages all relevant participants within the Supply chain. As a result, Cardia is experiencing a demand „pull” for resins and finished goods by both Retailers and Fast Moving Consumer Good (FMCG) producers who are „back specifying‟ Cardia products. Separately Cardia is experiencing a marketing „push” by distributors and packaging companies who are keen to leverage the environmental and performance benefits associated with Cardia‟s novel technology.

The growth in forward orders for the first quarter of the financial year 2012 through Cardia‟s Distributors is also indirectly attributed to the Company‟s growing credibility, driven by successful product trials by FMCG companies and retailers. The escalating orders emanating directly from FMCG customers continued its solid progress, albeit from a low level, and a number of these global brand owners, retailers and packaging companies have commenced or progressed “in-market” validation trials. The Directors‟ are optimistic that growth and demand in this area will be substantial and further contribute to an already solid order book.

Strategic partnerships

Cardia Bioplastics Malaysia Manufacturing Sdn Bhd (“CBMM”)

Subsequent to the end of the period 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.

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The MYR 15m (A$ 5m) funding by RNZ will be applied to the setup of a finished film, bag and printing facility in Puncak Alam, 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.

Malaysia is recognised as one of the world‟s largest manufacturing hubs for plastics packaging and there are enormous opportunities for CBMM to manufacture bioplastics products for both the local and export market in this growing industry.

Development Projects/ Product Launches

The following market launches were conducted in the June 2011 quarter:

Stellar Films launches sustainable personal care films using Cardia Biohybrid™ technology

Melbourne-based manufacturer Stellar Films released their new range of sustainable films using Cardia Biohybrid™ patented technology for the personal care and medical products industry. The new range of films meets the highest performance standards and displays a unique satin feel. Stellar Films presented these novel films at the world's leading nonwovens trade fair, INDEX 11, in Geneva, Switzerland.

Stellar Films Managing Director, Stephen Walters, said: “The combination of performance, environmental profile and cost effectiveness made Cardia Biohybrid™ technology the solution for Stellar Films product needs. The unique texture of our Biohybrid™ hygiene and medical films gives our customers‟ products that plush, satin feel and appearance.” Stellar Films‟ product launch of personal care films made with Cardia Biohybrid™ technology is consistent with the INDEX 11 theme of market innovation and sustainability of nonwoven products.

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Stellar Films product made with Cardia Biohybrid™ technology.

The Stellar Films press release is available on Cardia‟s website.

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Wipak launches sustainable food packaging films using Cardia Biohybrid™ technology

Wipak, a leading global supplier of quality packaging films, has released their new range of sustainable food packaging films using Cardia Biohybrid™ patented technology. Wipak presented these novel films at the world's leading packaging trade fair, Interpack 2011, in Dusseldorf, Germany.

“Assuming responsibility“ – Wipak‟s motto for this year‟s exhibition says it all. “In view of rising costs for raw material and energy, affecting both retail, manufacturers and suppliers, efficient and sustainable packaging systems that are ideally adapted to the products are gaining more and more importance”, emphasizes Rafael Kraft, European Sales & Marketing Director. “Our new range of sustainable food packaging films using Cardia Biohybrid™ patented technology is an excellent example of our sustainability initiative and will be presented for the first time at Interpack 2011.” Wipak offers sustainable and efficient packaging solutions. In addition to food packaging films using Cardia Biohybrid™ technology Wipak Group presented other new developments to demonstrate how the requirements for sustainable, economical and functional packaging solutions can be met.

Rafael Kraft emphasised Wipak Group‟s strategy on responsible products and packaging. “We are excited to work with Cardia Bioplastics. Our food packaging film products made from Cardia Biohybrid™ resins meet the highest performance standards and will form an integral part of our responsible product offering,” he said.

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Wipak packaging made with Cardia Biohybrid™ technology.

The Wipak press release is available on Cardia‟s website.

Cardia Bioplastics and Jokey Plastik cooperate on sustainable packaging

Cardia Bioplastics and Jokey Plastik announced their cooperation on sustainable packaging systems for the international filling industry at the Interpack 2011. Jokey Plastik presented their new range of buckets and containers made with Cardia Biohybrid™ technology that meet highest packaging performance standards.

Jokey Plastics Sales Director, Michael Schmitz, said “The combination of packaging performance, environmental profile and cost effectiveness made Cardia Biohybrid™ technology the solution for Jokey Plastik packaging needs.”

Jokey Plastik‟s product launch of buckets and containers made with Cardia Biohybrid™ technology is consistent with the Interpack 2011 theme of sustainability of packaging. Cardia Managing Director, Dr Frank Glatz, said “Our partnership with Jokey Plastik will enable their bucket and container customers to purchase innovative packaging products with reduced dependence on finite oil resources and lower carbon footprint.”

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Jokey Plastik packaging made with Cardia Biohybrid™ technology.

The Jokey Plastik press release is available on Cardia‟s website.

Other Developments

Asia Pacific Frost & Sullivan Green Excellence in Technology Innovation Award

The global technology and growth consultancy, Frost & Sullivan, announced Cardia as the recipient of their "2011 Asia Pacific Frost & Sullivan Green Excellence in Technology Innovation Award" for Eco-Materials.

Frost & Sullivan is the pre-eminent growth, technology and innovation consultancy. The Green Excellence in Technology Innovation Award is presented to companies that have excelled in green products and technology innovation, and service achievement that promote sustainability. The award recognises ground breaking ideas and innovations that originate from a firm sense of environmental responsibility across a multitude of disciplines.

This award again confirms Cardia as a technology innovator in the Bioplastics industry after wining the Australian Chamber of Commerce "Australia-China Business Excellence Award" in 2008 , the 2009 CleanEquity Monaco Conference Award, being awarded the exclusive supply contract to the 2008 Beijing Olympic Games and Paralympic Games as well as supplying packaging products to the Shanghai World Expo.

SUMMARY

Although the Company‟s total sales for the financial year 2011 are lower compared to the last year of financial year 2010, the Directors are encouraged by a strong order book for Cardia Bioplastics‟ Biohybrid[TM] products and increasing demand for Compostable products which is expected to be reflected in increased sales for the financial year 2012 . Production capacity at Cardia‟s Nanjing operation will be expanded by December 2011 and the Directors are considering still further expansion commensurate with customer demand.

Cardia remains focused on providing a high level of customer service, reducing the company‟s raw material costs and assisting FMCG customers during those customers trial periods. Meanwhile, whilst mindful of limited financial capital, the company will continue to invest in research to produce further novel applications such as the company‟s patented novel CO2 polymer-starch blending technology, and lower cost formulation opportunities.

The Board is committed to ensure Cardia is well placed to participate in the expected growth in the global bioplastics industry.

Pat Volpe Chairman

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Appendix 4C

Quarterly report for entities admitted on the basis of commitments

Introduced 31/3/2000. Amended 30/9/2001

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----- Start of picture text -----

Name of entity
Cardia Bioplastics Ltd
ABN Quarter ended (“current quarter”)
89 064 755 237 30 June 2011
Consolidated statement of cash flows
Current quarter Year to date (12 months)
Cash flows related to operating activities $A’000 $A’000
1.1 Receipts from customers 558 1,661
1.2 Payments for (a) staff costs (397) (1,552)
(b) advertising and marketing (13) (41)
(c) research and development (243) (871)
(d) leased assets (96) (226)
(e) other working capital (698) (2,919)
1.3 Dividends received - -
1.4 Interest and other items of a similar nature 5 37
received
1.5 Interest and other costs of finance paid - -
1.6 Income taxes paid - -
1.7 Other (provide details if material) - 235
Net operating cash flows (884) (3,676)
1.8 Net operating cash flows (carried forward) (884) (3,676)
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 (3) (36)
(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 - 80
1.13 Other investing activities - -
Net investing cash flows (3) 44
1.14 Total operating and investing cash flows (887) (3,632)
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Cash flows related to financing activities 1.15 Proceeds from issues of shares, options, etc. 1.16 Proceeds from sale of forfeited shares 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	4,042 - - - - -	6,153 - - - - -
	4,042	6,153
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	3,155 1,008 (8)	2,521 1,692 (58)
	4,155	4,155

Note:

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
			172
			-
1.26		Explanation necessaryfor an understandingof the transactions
		Item 1.24 Mr P Volpe was paid a salary of $69,488 inclusive of superannuation for the quarter. Mr F Glatz was paid a salary of $72,413 inclusive of superannuation for the quarter Directors’ fees (inclusive of superannuation) totalling $28,613 were paid to Mr P Volpe - $14,988 and , Mr John Scheirs-$13,625 During the Quarter, amount of $1,600 (Ex GST) was paid to Excelpas Pty Ltd, a company controlled by Dr.John Scheirs for providing consultancy services to the Company.

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

• 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

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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 standby arrangements	Amount available $A’000	Amount used $A’000
		n/a	n/a
		n/a	n/a

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 Deposits at call 4.3 Bank overdraft 4.4 Term Deposits	1,153	1,006
	2	2
		-
	3,000	-
Total: cash at end of quarter(item 1.23)	4,155	1,008

• Includes Funds in Transit of $87K

Acquisitions and disposals of business entities

5.1 Name of entity 5.2 Place of incorporation or registration 5.3 Consideration for acquisition or disposal 5.4 Total net assets 5.5 Nature of business	Acquisitions (Item 1.9(a))	Disposals (Item 1.10(a))
	-	-
	-	-
	-	-
	-	-
	-	-

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: Sd-....................................................... Date: 29 July 2011. (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

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

1. 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.

2. 6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss

3. 9.2 - itemised disclosure relating to acquisitions  9.4 - itemised disclosure relating to disposals  12.1(a) - policy for classification of cash items  12.3 - disclosure of restrictions on use of cash  13.1 - comparative information

4. 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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