MYECO GROUP LTD - Interim / Quarterly Report 2010

ACN 064 755 237

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TO : COMPANY ANNOUNCEMENTS OFFICE ASX LIMITED

DATE : 31 January 2011

QUARTERLY REPORT – 31 December 2010

The Cardia Bioplastics Limited (“Cardia or Company”) Quarterly Report for the December Quarter 2010 consists of the Activities Report & Quarterly Cash Flow (Appendix 4C)

Activities Report for December 2010 Quarter

Summary

Bioplastics Business

Total revenues of $593,495 for the December 2010 Quarter including a recovery of $169,441 for R&D expenses. Sales revenues of $424,053 for the December 2010 Quarter were a 27% increase on the September 2010 quarter of $335,000.
Market communications for strategic partnership, distribution contracts, product launches and technical advances:
Cardia Bioplastics announces collaboration with Nestlé, the largest Fast Moving Consumer Goods company in the world, to reduce environmental impact of packaging
Cardia Bioplastics appoints Eco Ventures do Brasil as Exclusive Distributor for Brazil
Australia's Channel 7 News report on the use of Cardia Compostable bags in Fresh Food Markets
Food contact breakthrough for Cardia Biohybrid™ injection moulded products
Cardia announced development of next generation CO2S™ technology and presents world‟s first biodegradable plastic bag created from a blend of CO2 emissions and starch at BioMalaysia conference
Significant progress with project and business development with global packaging producers and consumer goods producers for their sustainable and renewable packaging solutions
Further sales to large global packaging companies and brand owners associated with “in-market” validation trials.

Corporate:

OTCQX listing for USA market on track for ADR trading in first quarter 2011.
Establishment of New Malaysian Entity “CBMM” in progress.
Fund Raisings options still under review.
Set up of 100% subsidiary - CO2Starch Pty Ltd
Change of registered office

Cash Balance: The Company‟s cash balance as at 31 December 2010 was $1,951,774.

Investment Portfolio

No funds were applied to any of the Company‟s investment holdings during the quarter.

Details

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 Applications 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.

Business Update

The three months period to 31 December 2010 has resulted in significant progress with the commercialisation of the company‟s products along with continued technical development. Further distribution and supply contracts were executed. The Cardia CO2S product was launched.

The numerous communications to the market highlight the significant momentum of Cardia‟s business development and the range of applications in which Cardia materials are being used. The key outcomes are summarized below:

Cardia Bioplastics announces collaboration with Nestlé, the largest Fast Moving Consumer Goods company in the world, to reduce environmental impact of packaging
Cardia Bioplastics appoints Eco Ventures do Brasil as Exclusive Distributor for Brazil
Australia's Channel 7 News report on the use of Cardia Compostable bags in Fresh Food Markets
Food contact accreditation for Cardia Biohybrid™ injection moulded products

Cardia announced development of next generation CO2S™ technology and presented world‟s first biodegradable plastic bag created from a blend of CO2 emissions and starch at BioMalaysia conference
Cardia set up subsidiary to commercialise novel CO2S™ technology

Sales

The company‟s total revenues for the December 2010 Quarter was $593,495. Revenues included a recovery of $169,441 for research and development expenditure. Sales revenues of $424,053 for the December 2010 Quarter were a 27% increase on the September 2010 quarter of $335,000.

Initial orders and sales associated with the supply contracts executed over the last months were received in the December 2010 quarter, however, future periods will benefit as these arrangements reach full scale commercialisation. This quarter included a significant number of lower volume sales being utilised by large European and USA customers that have progressed to up-scaling and market validation stage of their product development projects.

Market Launches

The following market launches were conducted in the December 2010 Quarter:

Cardia Bioplastics announces collaboration with Nestlé to reduce environmental impact of packaging

Cardia Bioplastics announces its collaboration with Nestlé S.A., the largest Fast Moving Consumer Goods company in the world, to reduce the environmental impact of packaging.

Cardia Bioplastics Managing Director Dr Frank Glatz said: “Collaborating with Nestlé presents an exciting opportunity to develop high performance packaging with lower environmental impact. In addition to offering a product with beneficial environmental profile and full food safety compliance, delivering superior packaging performance through the product life cycle is a key criterion for success.”

“Our proprietary multi-layer flexible film and rigid packaging developments are important offerings in meeting demanding packaging performance requirements,” he said.

Cardia is well positioned to benefit from the trend towards sustainable packaging. It offers customers the choice of using sustainable Cardia Biohybrid[TM] technology (less oil, lower carbon foot print) or compostable technology (delivering certified compostability to international standards) for their packaging or plastic product solutions. The company‟s materials are suitable for a broad range of packaging applications, including flexible film, injection moulding, blow moulding, foam, and extrusion and coating applications.

The Nestlé press release and the PlasticsToday.com interview with Anne Roulin, Nestlé's Global Head of Packaging, is available on Cardia‟s website.

Cardia Bioplastics appoints Eco Ventures do Brasil as Exclusive Distributor for Brazil

Cardia Bioplastics has appointed Brazil‟s leading sustainable packaging company as its exclusive distributor for Brazil. Eco Ventures Do Brasil will distribute Cardia‟s portfolio of Biohybrid™ and compostable resins derived from sustainable resources in Brazil.

The exclusive distribution agreement enables Eco Ventures, a subsidiary of World Eco Ventures, to offer customers the comprehensive range of Cardia Bioplastics sustainable resins to the Brazilian packaging and plastic products industries.

Eco Ventures Chief Operating Officer Joao Paulo Mignot said the Cardia Bioplastics range would provide sustainable polymer choices for customers.

“As the „green space‟ grows, we have looked for a leading bioplastics supplier with a full portfolio of sustainable options. The Cardia Bioplastics range of products allows our customers a choice,” he said.

Cardia Bioplastics and Eco Ventures do Brasil are benefiting from the trend towards sustainable packaging with products used in a broad range of packaging applications, including flexible film, injection moulding, blow moulding, foam, extrusion and coating applications. The Eco Ventures Do Brasil press release is available on Cardia‟s website.

Australia's Channel 7 News report on the use of Cardia Compostable bags in Fresh Food Markets

Australia's Channel 7 News reported on the use of Cardia Compostable bags in Fresh Food Markets. Epping Village Market is the first to adopt the bags locally, while customers already using the bags include McDonald's, Japan; Seven-Eleven, China; local councils in Brisbane and Sydney; and KFC, South Australia.

The Channel 7 News press release is available on Cardia‟s website or via You Tube at http://www.youtube.com/watch?v=esJfg2BR.

Food contact breakthrough for Cardia Biohybrid™ injection moulded products

Cardia Bioplastics received European and USA food contact certification for injection moulded products made from Cardia Biohybrid™ technology. This achievement follows the food contact approval received for multilayer flexible film products in 2009. The food contact certifications provide Cardia Bioplastics‟ with an expanded market opportunity into food packaging applications. Everyday food packaging items made from Cardia Biohybrid™ technology such as containers, closures, tubes, tubs and bottles can now be offered by Cardia‟s customers. A photo of injection moulded products made from Cardia Biohybrid™ technology is displayed below. The food contact press release is available on Cardia‟s website.

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Injection moulded and extrusion blow moulded containers made with Cardia Biohybrid™ Technology fully food contact approved

Cardia Bioplastics biodegradable bag made from CO2 emissions

Cardia Bioplastics announced development of next generation CO2S™ technology and production of the world‟s first biodegradable plastic bag created from a blend of CO2 emissions and starch.

Pollutant CO2 emissions are captured prior to being released into the atmosphere. This pollutant is then transformed into a polypropylene carbonate (PPC) polymer and blended with a renewable resource (starch), using the company‟s new technology, to produce the Cardia Bioplastics CO2S™ resin. This product is then used to produce completely biodegradable carrier bags. The CO2S™ press release is available on Cardia‟s website.

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Cardia sets up subsidiary to commercialise novel CO2S™ technology

Cardia Bioplastics announced that is has established a 100% subsidiary “CO ₂ Starch Pty Ltd”. This vehicle will be used to commercialise the company‟s patented novel CO ₂ polymer - starch blending technology. CO ₂ Starch Pty Ltd will hold all the intellectual property and patents and will serve as the platform for the development and commercialization of a family of CO ₂- based polymers.

Cardia launched the world‟s first CO2 + Starch biodegradable carrier bag (made using CO2 emissions) in October 2010 and has since received interest in the technology from several major international organizations including petrochemical companies.

The breakthrough technology allows PPC (polypropylene carbonate) to be blended with starch.

Commercialisation

Resin business: in-market validation stage

Cardia advanced several projects during the quarter. A number of Fast Moving Consumer Goods producers and global packaging manufacturers progressed towards commercialisation. Initial sales have already been achieved with the large packaging companies and brand owners currently at “in-market” validation stage. As these targeted business development activities move forward to market launch and full scale commercialisation, it is expected that they will drive Cardia‟s future business success.

In-market validation of Cardia Biohybrid™ multilayer films for food packaging applications

A leading European food producer conducted successful in-market validation of Cardia‟s new range of Biohybrid™ multilayer films for their food and cold storage packaging applications. These are the first applications of Cardia‟s new film technology that provides multilayer films for the food packaging industry with excellent mechanical and processing properties as well as high clarity, high quality printability and fully food contact approved to the demanding European and USA standards. As these films passed the very stringent performance requirements of this in-market validation process, Cardia is provided with significant new market opportunities, extending from commodity to high performance food packaging.

In-market validation of Cardia Biohybrid™ multilayer films for protective packaging applications

A leading global protective packaging company completed successful in-market validation of Cardia‟s new range of Biohybrid™ multilayer films for their protective packaging applications. These are the first applications of Cardia‟s new film technology that provides multilayer films for the protective packaging industry with excellent mechanical and processing properties as well as high clarity, and excellent sealing properties under various climatic conditions. These films passed the demanding performance requirements of this in-market validation process. These performance characteristics provide Cardia with further significant and new market opportunities, in high performance protective packaging.

Projects and Business Development

Flexible and rigid packaging developments

Cardia focuses on the large flexible and rigid packaging segments of the packaging industry. Flexible packaging applications include flexible film for food and non-food applications; shrink wrap, protective packaging films, carrier bags, waste management bags, sacks as well as other applications. Rigid packaging applications include closures, containers, lids and bottles amongst other applications.

Cardia offers high-performing packaging resins and commensurate technical support to tailor the company‟s resins to the demanding requirements of Cardia‟s global customer base. Customers can select sustainable Cardia Biohybrid[™] resins (reduce oil use, improve carbon foot print and green house gas position) or Compostable resins (certified to international standards) for their packaging solutions. In addition, the Cardia Bioproducts‟ team offers as a service to customers, the design, development and production of ready to use finished goods, such as film and bag products.

Successful production qualification of rigid packaging products

A key achievement of this quarter was the successful production qualification of Cardia Biohybrid™ rigid packaging products with a leading European rigid packaging company. During the in–house production trials, Cardia products achieved production efficiencies at parity with commodity plastic products. The Cardia products met stringent food contact requirements and the customer‟s demanding packaging performance requirements. Shelf life studies are currently being conducted.

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Injection moulded closures made with Cardia Biohybrid™ Technology, fully food contact approved

Product performance qualification of Cardia Biohybrid™ shrink wrap films

Several customers in Europe and the Americas tested Cardia Biohybrid™ shrink wrap packaging films and confirmed the product performance in their applications. Shelf life studies in typical retailer supply chains are currently being conducted. This is a key requirement before progressing to in-market validation stage.

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Heavy duty shrink wrap films made with Cardia Biohybrid™ Technology

Corporate

OTCQX listing for USA market

On 22 October 2010,Cardia announced that it is proceeding to prepare for American Depositary Receipt (“ADR”) trading in the United States on the OTCQX International. Cardia appointed Viriathus Capital LLC from New York, as the OTCQX Advisor.

To the extent that Cardia receives approval for the proposed listing it will then have dual listing on the Australian Securities Exchange and on the OTCQX in the U.S.A.

Completing of the OTCQX formalities is progressing to plan and listing is imminent. The Market will be kept informed on the listing progress.

Establishment of New Entity – Cardia Bioplastics Malaysia Manufacturing (“CBMM”) in progress

On 28[th] September 2010, Cardia announced that it has signed a Heads of Agreement with RNZ Green Bio to establish a new Malaysian entity, CBMM to manufacture finished bioplastics products.

Cardia‟s proprietary technology will be licensed to CBMM and RGB will provide the initial working capital on terms and conditions to be formalized in a shareholders‟ agreement.

Cardia is in process of finalizing a shareholders‟ agreement incorporating all the terms and conditions for the establishment and operation of the new entity. The Market will be advised when this agreement is executed.

Fund Raisings

On 22 November 2010, Cardia announced that it is in negotiation with an Asian Investment Fund to raise funds and that this potential investor is performing its due diligence process on the Company.

The Company has not received any proposal which is in line with Cardia‟s strategy of accepting funds as the listed entity for ordinary share subscriptions.

On that basis, Cardia will now continue to consider any other capital raising proposals for the Board of Directors to decide on.

Set up of 100% subsidiary - CO2Starch Pty Ltd

Cardia has established a 100% subsidiary “CO2Starch Pty Ltd” to commercialise the company‟s patented novel CO2 polymer-starch blending technology.

CO2Starch Pty Ltd will hold all the intellectual property and patents and will serve as the platform for the development and commercialisation of a family of CO2 based polymers.

Change of registered office

Cardia has changed its registered office address from Suite 5.10, Level 5,737 Burwood Road, Hawthorn, VIC 3122 to Unit 18, 35 Dunlop Road, Mulgrave, VIC 3170.The new contact details for the Company are:

Tel: +61 3 95620122 Facsimile: +61 3 95620422

Cash Balance as at 31 December 2010

The consolidated cash position for the group at 31 December 2010 was $1,951,774 (December 2009 -$979,372).

Net operating cash outflow during the quarter was $1,114,490 (December 2009- $692,000). The receipts from customers was $327,130 (December 2009- $550,000). Payments for other working capita[1] of $958,227 (December 2009- $791,000), remained high relative to sales, as the Company purchased raw materials in anticipation of future sales orders, incurred costs associated with OTCQX Listing and incurred payments associated with new patent applications and other corporate compliance costs during the quarter.

Investment Portfolio/Other Assets

No cash was committed to the company‟s Investment Portfolio/Other Assets during the quarter ending 31 December 2010.

P-Fuel Limited (5.8%)

P-Fuel Limited is an unlisted Australian public company with the rights to market and distribute technology that converts waste plastic and waste oils into diesel, mixed oils and other hydrocarbons, and for power generation.

There was no change in the company‟s investment position in P-Fuel Limited during the quarter.

Bioglobal Limited (18.4%)

Bioglobal Limited (“Bioglobal”) is a non-listed company that produces and markets biochemical products for pest control in the agricultural industry.

Cardia‟s interest of 18,780,000 shares represents 18.4% of the total issued capital.

1 Refer Appendix 4C item 1.2 (e)

On 22 November 2010, Cardia announced that it is still in negotiation with several parties for the sale of its‟ holdings in Bioglobal. An adequate unconditional sale agreement with interested third parties could not be reached. Should the right offer be made, Cardia would sell all or part its interest in Bioglobal Limited.

Other Assets

The company‟s other assets are not material to Cardia‟s Balance Sheet and not related to its day to day business.

SUMMARY

In Summary, the Board is optimistic that Cardia Bioplastics resins and portfolio of related products is gaining penetration within a discerning and conservative global customer market. Bioplastics is an area of rapid market growth. The Global plastics packaging market approximated $180B in 2009, of which $140B was flexible packaging market. The sustainable and renewable packaging market is currently estimated to be less than 1% of the plastics packaging market. In January 2011 a research report titled "Biodegradable Polymers: A Global Strategic Business Report" by Global Industry Analysts Inc. foreshadowed that the Global Biological Polymers market would reach 1,845 million pounds by 2015. Substantial growth within the sustainable and renewable packaging market will occur, and at an exponential rate.

Cardia has a strong patent portfolio, which supports its product offering, and direct representation in the Americas, Malaysia, China, Europe & UK, and Australia. As previously commented, Cardia is well positioned to benefit from the anticipated market growth, albeit the large consumer goods and retailing companies‟ stringent product testing lead-times are extensive.

PAT VOLPE Chairman

Appendix 4C

Quarterly report for entities admitted

on the basis of commitments

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

Name of entity Cardia Bioplastics Ltd ABN Quarter ended (“current quarter”) 89 064 755 237 31 December 2010

Consolidated statement of cash flows

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Current quarter Year to date (6 months)
Cash flows related to operating activities $A’000 $A’000
1.1 Receipts from customers 327 739
1.2 Payments for (a) staff costs (381) (807)
(b) advertising and marketing (4) (12)
(c) research and development (193) (372)
(d) leased assets (91) (110)
(e) other working capital (958) (1,558)
1.3 Dividends received - -
1.4 Interest and other items of a similar nature 17 24
received
1.5 Interest and other costs of finance paid - -
1.6 Income taxes paid - -
1.7 Other (provide details if material) 169 235
Net operating cash flows (1,114) (1,861)
1.8 Net operating cash flows (carried forward) (1,114) (1,861)
Cash flows related to investing activities
1.9 Payment for acquisition of:
(a)businesses (item 5) - -
(b) equity investments - -
(c) intellectual property - -
(d) physical non-
current assets
(e) other non-current
assets - (26)
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 80
1.13 Other investing activities - -
Net investing cash flows 80 54
1.14 Total operating and investing cash flows (1,034) (1,807)
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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	469 - - - - -	2,116 - - - - -
	469	2,116
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	(565) 2,545 (28)	309 1,692 (49)
	1,952	1,952

Note:

1.7

Cash Inflow of $169K represents R&D Tax Rebate received from Australian Taxation Office for the year 2008/09.

1.12

Loan repaid by other entities of $80k represents an amount received from Aquenox Limited towards full and final settlement of its all past debts owing to Cardia.

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
		178
		-
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 $70,163 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 $9,828 (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

Issue of Shares to Director-1/12/2010

2,500,000 Ordinary Shares at an issue price of $0.02 per share were issued to Mr.Chen Yi, Director of the Company in lieu of his partly outstanding salary. Issue of Shares to Mr Chen Yi was approved by the shareholders’ at the AGM held on 29[th] November 2010.

Issue of Shares to Employees-31/12/2010

6,000,000 Ordinary Shares at an issue price of $0.02 per share were issued to the employees of the Company and its subsidiaries as part of their remuneration.

2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest

n/a

Financing facilities available

Add notes as necessary for an understanding of the position. (See AASB 1026 paragraph 12.2).

	3.1 Loan facilities 3.2 Credit 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 Against L/C	1,841	2,035
	2	276
	-	-
	109	234
Total: cash at end of quarter(item 1.23)	1,952	2,545

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: 31 January 2011. (Company Secretary) Print name: Rekha Bhambhani

Notes

The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
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.
6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss
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
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.