MYECO GROUP LTD — Proxy Solicitation & Information Statement 2008

May 14, 2008

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ACN 064 755 237

TO: COMPANY ANNOUNCEMENTS OFFICE AUSTRALIAN SECURITIES EXCHANGE

DATE:

15[th] May 2008

NOTICE OF GENERAL MEETING

A Notice of a General Meeting of Shareholders of Cardia Technologies Ltd to be held on Monday 16[th] June 2008 together with the accompanying documents will be dispatched to shareholders today.

The Notice and accompanying documents are attached.

JOHN WILSON Company Secretary

CARDIA TECHNOLOGIES LTD

REGISTERED OFFICE Suite 510 Level 5 Pacific Tower 737-741 Burwood Road Hawthorn Victoria 3122 Australia Telephone +61 3 9813 3228 Facsimile +61 3 9813 2668 Email: cardia@bigpond.com

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ACN 064 755 237

NOTICE OF GENERAL MEETING

PROXY FORM

AND

EXPLANATORY MEMORANDUM

Date of Meeting 16[th] June 2008

Time of Meeting

9.30 am

Place of Meeting

Suite 5.09, Level 5 Pacific Tower 737 Burwood Road Hawthorn Victoria 3122

CARDIA TECHNOLOGIES LIMITED

ACN 064 755 237

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT A GENERAL MEETING OF SHAREHOLDERS OF CARDIA TECHNOLOGIES LIMITED (ACN 064 755 237) (“COMPANY”) WILL BE HELD AT SUITE 5.09, LEVEL 5, PACIFIC TOWER, 737 BURWOOD ROAD, HAWTHORN, 3122 IN THE STATE OF VICTORIA ON 16[th] June 2008 AT 9.30AM.

An Explanatory Memorandum containing information in relation to the business to be transacted at the meeting accompanies this Notice of General Meeting.

AGENDA

Resolution - Grant of Options to holders of Options which expired on 31 December 2007

To consider, and if thought fit, to pass the following special resolution:

“That inasmuch as the Company has previously granted options to acquire ordinary shares which options were exercisable at any time up to 5.00 pm (AEDT) on 31 December 2007 at an exercise price of $0.10 (10 cents) per option (“31 December Options”) and inasmuch as the price of shares in the capital of the Company in the period immediately prior to the date on which the 31 December Options expired was significantly less than the exercise price of the 31 December Options, IT IS HEREBY RESOLVED AS FOLLOWS:

(a) that, in accordance with the requirements of Chapter 2E of the Corporations Act 2001 and as required under Listing Rules 7.1 and 10.11 of the Listing Rules of Australian Securities Exchange Limited (“ASX”) approval be granted for the Company to grant to each person registered as the holder of a 31 December Option at the time that it expired unexercised, one (1) option ("New Option") to acquire an ordinary share in the capital of the Company for each 31 December Option held at the time of its expiry with the maximum number of options being granted being not more than 196,167,308 options on the basis that the terms and conditions of the New Options shall be as set out in note 8 of the Explanatory Memorandum attached to this Notice of Meeting which terms and conditions are hereby incorporated in and form part of this resolution with each New Option being granted at an issue price of $0.005 ([1] /2 a cent) and being exercisable at an exercise price of $0.10 (10 cents) at any time up until 30 June 2011

(b) that, pursuant to Listing Rule 10.11 of the Listing Rules of ASX, approval be granted for each of the Directors of the Company and their Associates and Related Parties of the Company to participate in the proposed issue of Options to be made pursuant to this Resolution in like manner as any other person entitled to participate therein. The persons in respect of whom such approval is sought to be obtained, and the number of options sought to be granted thereto are as set out in Note 9 of the Explanatory Memorandum attached to this Notice of Meeting which is deemed to be incorporated in and form part of this resolution."

By Order of the Board of Cardia Technologies Limited

____ John Wilson Company Secretary Dated: 12[th] May 2008

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NOTES

Voting and Instructions for Appointment of Proxy:

1. The Directors have determined that in accordance with regulation 7.11.37 of the Corporations Regulations 2001 (Cwth), the shares of Cardia that are quoted on the Australian Securities Exchange as at 10.00 pm on 14[th] June 2008, will be taken, for the purposes of the General Meeting, to be held by the persons who held them at that time. Accordingly, those persons so registered as the holders of shares at that time will be entitled to attend and, and those persons who are not disqualified from voting as required in accordance with Note 6 below, will be entitled to vote at the meeting.

2. A Member entitled to attend and vote at a Meeting is entitled to appoint not more than two proxies to attend and vote on his behalf. Where more than one proxy is appointed, such proxy must be allocated a proportion of the Member’s voting rights.

3. If the Member does not specify the proportion of votes the proxy may exercise, then each proxy will be taken to exercise one half of the votes held and subject to the proxy with fractional entitlements to votes being disregarded.

4. A proxy duly appointed need not be a Member. In the case of joint holders all must sign.

5. A form of proxy accompanies this Notice and, to be effective, the form and any document necessary to show the validity of the form of proxy must be lodged at the registered office of the Company not less than 48 hours before the time appointed for the Meeting. Any proxy lodged after that time will be treated as invalid.

6. Directors and Officers of all Corporate Members should note that unless the Corporate Member either:

7. (a) completes and lodges with the Company a valid appointment of proxy in accordance with the instructions in these notes; or

8. (b) completes and either lodges with the Company prior to the meeting a form of appointment of or certificate of appointment of a personal representative in accordance with the provisions of Section 250D of the Corporations Law or causes such personal representative to attend the meeting with such form of appointment or certificate; or

9. (c) has appointed an attorney.

and such proxy, personal representative or attorney attends the relevant meeting, then such corporate member will be unable to exercise any votes at the relevant meeting.

1. Proxies and corporate appointment of representative forms may be returned to the Company in either of the following ways:

2. (a) in person or by post to the Company Secretary, Cardia Technologies Limited at: Suite 5.09, Level 5

737 Burwood Road

  - _Hawthorn Victoria 3122_

• (b) or by facsimile to (03) 9813 2668.

• Corporate Members should comply with the execution requirements set out in these notes or otherwise comply with the provisions of Section 127 of the Act. Section 127 of the Act provides that a company may execute a document without using its common seal if the document is signed by:

• 2 directors of the company; or

• a director and a company secretary of the company; or

• for a proprietary company that has a sole director who is also the sole company secretary – that director.

For Cardia Technologies Limited to rely on the assumptions set out in Sections 129(5) and (6) of the Act, a document must appear to have been executed in accordance with Section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of Section 127(1) or (2) as applicable. In particular a person who witnesses the affixing of a common seal and who is the sole director and sole company secretary of the Corporate Member must state that next to his or her signature.

Where a person signs the proxy and does not specify that the person signing is signing as a sole director and sole company secretary then the person signing the proxy will be deemed to have warranted to the Company that the Corporate Member is a company that has dispensed with the requirement to appointed a secretary as permitted by section 204A of the Act.

1. Completion of a proxy form will not prevent individual Members from attending the meetings in person if they wish. Where a Member completes and lodges a valid proxy form and attends the meeting in person then the proxy’s authority to speak and vote for that Member is suspended while the Member is present at the meeting.

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1. Where a proxy form or form of appointment of or certificate of appointment of a personal representative is lodged and is executed under power of attorney the power of attorney must be lodged in like manner as a proxy.

2. The terms and conditions of the Options as referred to in the Resolution are as follows:

3. (a) Each option entitles the holder to subscribe for 1 ordinary share in Cardia Technologies Limited ACN 064 755 237 ("the Company") upon the payment of $0.10 (10 cents).

4. (b) The options will lapse at 5.00pm (AEST) on 30 June 2011 ("Expiry Date"). (c) The options are transferable.

5. (d) There are no participating rights or entitlements inherent in these options and holders of the options will not be entitled to participate in new issues of capital that may be offered to shareholders during the currency of the option.

6. (e) Optionholders have the right to exercise their options prior to the date of determining entitlements to any capital issues to the then existing shareholders of the Company made during the currency of the options, and will be given a period of not less than 10 Business Days notice before the record date to determine entitlements to the Issue in which to exercise the options.

7. (f) In the event of any re-organisation (including reconstruction, consolidation, subdivision, reduction or return of capital) of the issued capital of the Company, the options will be reorganised as required by the Listing Rules, but in all other respects the terms of exercise will remain unchanged.

8. (g) The options shall be exercisable at any time during the period ending on or before the Expiry Date (" Exercise Period ") by the delivery to the registered office of the Company of a notice in writing (" Notice ") stating the intention of the optionholder to exercise all or a specified number of options held by the optionholder accompanied by an Option Certificate or Holding Statement and a cheque made payable to the Company for the subscription moneys for the shares to be issued on exercise of the options the subject of the Notice. The Notice and cheque must be received by the Company during the Exercise Period. An exercise of only some options shall not affect the rights of the optionholder to the balance of the options held by the optionholder.

9. (h) The Company shall allot the resultant shares and deliver a Holding Statement of shareholdings with a holders’ identification number within 10 Business Days of exercise of the options.

10. (i) The shares allotted shall rank, from the date of allotment, equally with the existing ordinary shares of the Company in all respects.”

11. Chairman’s voting intentions:

All members appointing proxies should note that the Chairman intends to exercise proxies in his favour, and which do not direct the proxy holder how to vote, in favour of all resolutions. If you do not wish to direct your proxy how to vote please place a mark in the box.

By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him other than as proxy holder will be disregarded because of that interest.

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EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of shareholders of CARDIA TECHNOLOGIES LIMITED (“Cardia” or “the Company”) in connection with the business to be transacted at the General Meeting of shareholders of Cardia to be held at Suite 5.09, Level 5, Pacific Tower, 737 Burwood Road, Hawthorn Victoria 3122 on 16[th] June at 9.30am AEST.

It forms part of the accompanying Notice of Meeting convening the General Meeting and contains an explanation of, and information about, the matter to be considered at the meeting, namely the grant of options to holders of options which expired on 31 December 2007.

The Directors recommend shareholders read the accompanying Notice of General Meeting (“Notice”) and this Explanatory Memorandum in full before making any decision in relation to the Resolution.

The proposed grant of New Options to the holders of expiring options is not an entitlements issue to members.

The total number of New Options proposed to be granted will be up to 196,167,308 with these New Options being granted on a one for one basis: that is one New Option for each expired option. At an issue price of $0.005(0.5 of a cent) the options issue will raise approximately $ 980,837 with those New Options to be granted within 3 months from the date of passing of the resolution (if ASX approves an application for waiver to permit this) or 1 month if ASX does not grant any such waiver.

1. Eligibility to Vote

Members of the Company who held options which expired on 31 December 2007 and their associates and related parties are not entitled to vote in relation to this resolution .

The only members of Cardia entitled to vote in relation to this resolution are those members who did not hold options at the time of their expiry. (See the voting exclusion clause below.)

The underlying rationale for the restriction on voting is to ensure that members who would receive a benefit from the passing of the resolution cannot use their voting power to approve the resolution in their own interests.

If the Resolution is passed, all persons who held options at the time of their expiry on 31st December 2007 will be entitled to participate in the issue of New Options being approved, regardless of whether they are or are not now members of Cardia.

2.

Participation in Issue

Members who did not hold options at the time of their expiry on 31st December 2007 will not be entitled to participate.

Consequently, for the resolution to pass, the members who did not hold options expiring on 31 December 2007 will have to form the opinion that:

• (a) it is either in their interests; or,

• (b) it is in the interests of the Company;

that the grant of the New Options be approved.

An alternative to the current proposal would have been to make an entitlements issue of New Options to members on a one for one basis. However, at the time of the initial announcement in relation to this matter, the Directors considered that the then existing optionholders, including those who purchased options on market over the life of the option period were stakeholders in the Company as well as the Members.

Members who did not hold options which expired on 31 December 2007 may consider that the New Options issue should have been made as an entitlements issue, and, given that only those persons

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may vote on the Resolution , the passing of which is a necessary precursor to the making of the Issue, they have it within their own hands to approve the Issue being made as proposed or to prevent it being made.

If the sentiment of the members who did not hold options which expired on 31 December 2007 is strongly against the basis on which the issue is proposed then, clearly, the Resolution will fail.

If the Resolution is passed, that number of New Options as would not breach the requirements of the Listing Rules of ASX that a company not have on issue more options than shares would be granted as a free pro rata bonus issue to all members on a Record Date to be determined.

If the Resolution is passed then the issue or grant of the New Options will be required to be by way of a prospectus issue and that prospectus would also be the prospectus for the pro rata element of the issue of bonus New Options to members as referred to above. The minimum number of New Options which would be offered pro rata would be approximately 80,004,841 (adjusted down to an acceptable issue ratio). It is not possible to specify the maximum number of New Options which might otherwise be offered pro rata.

Based on the value of an option calculated by DMR in its option valuation report the value of each of these New Options would be $0.0063 (0.63 of a cent) as there is no option issue price. Consequently the aggregate value of this pro rata element of the New Options issue would be a minimum of $504,000 (approximately). All members, including related parties, would participate in this pro rata issue which, based on the above figures would be at a ratio of approximately 1 New Option (free) for every 3 shares held.

3.

Benefit to the Company

The benefits to the Company of the issue to holders of expired options proceeding are that firstly, if fully subscribed, it raises approximately $980,837 in working capital, and secondly, it puts in place a security under which the Company may raise significant additional capital in the future when, and if, the New Options are exercised.

In this context Cardia’s need for working capital must be taken into account. At present Cardia has a total of $5,435,984 at bank and has receivables of a total of $ 6,161,863 primarily representing a secured loan of $1,000,000 made to Aquenox and an unsecured loan of $ 5,161,863 also made to Aquenox.

While recovery of the S1,000,000 loan is likely in due course as it is secured by a registered mortgage debenture, the recovery of the unsecured loan is less likely as it depends on either the profitability of Aquenox or on Aquenox listing on ASX, the debt being converted to shares and those shares being saleable for sufficient net proceeds to recover the full amount of the debt.

Consequently it appears that Cardia has no immediate or pressing need for funds beyond those already held and non-participating members might consider that the benefit of the additional funds raised from the Issue is of less importance than the potential dilutionary effect of the issue and the possible effect of the options on the future market price of the shares. By this statement it is merely noted that the existence of up to 276,172,149 options exercisable at $.10 (10 cents) may tend to place a ceiling on the future share price by their existence.

Notwithstanding the above however, world stock markets remain volatile and non-participating members may consider that it is appropriate to raise funds from the market as and when possible.

This is a matter the non-participating members will collectively decide by the manner in which they vote.

4.

Potential Dilution

A potential disadvantage of the issue is the possible dilution that members will suffer if the New Options are exercised and the possible effect that the existence of the New Options at an exercise price of 10 cents may have on the future market price of shares in the Company.

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However, given the current share price of the Company, the directors do not consider that a New Option exercisable at greater than 10 cents in the time frame for exercise proposed would have any appeal to any of the Company's security holders.

5.

Value of Proposed New Options

A valuation of the New Options proposed to be granted shows that, on the Black & Scholes model the options have a value of $0.0063 less the option issue price ($0.005) resulting in an actual net value of $0.0013 per New Option offered to the holders of expired options based on the assumptions set out in the option valuation report by DMR Corporate Pty Ltd (“DMR”). Briefly those assumptions are:

• (a) a volume weighted average price (“VWAP”) of the underlying shares of $0.0244 for the 30 days prior to the date of the DMR Report.

• (b) an exercise price of $0.10 (10 cents).

• (c) the options expiring on 30 June 2011.

• (d) an interest rate equal to the current Commonwealth Treasury Bond Rate of 6.425% as being the appropriate risk free rate of return.

• (e) an historical share price volatility factor of 81.75%.

In considering how to vote on the Resolution, members eligible to vote should note the terms of grant of the New Options, the Black & Scholes valuation as detailed above and generally in the report by DMR. In considering the value of the New Options and the nature of this transaction members eligible to vote should perhaps note that the exercise price of the New Options is in excess of 3 times the current Cardia share price of 2.6 cents (as at close of trading on 9[th] May 2008).

In considering whether to approve the Resolution or not they should consider whether they would themselves pay $0.005 (1/2 a cent) for an option exercisable at 10 cents in these circumstances.

Members need to consider whether, in their opinion, the valuation of options utilizing the Black & Scholes methodology is a valid measure of the value of such an option and they should note that the valuation of an option is a direct consequence of the assumptions used in making the valuation.

DMR state in their report that the since the announcement of the proposed issue of options to the market on 17 December 2007 there has been a substantial drop in the share price although there has only been a small volume of shares traded. DMR concludes that the market has made an adjustment for the dilution factor on the issue of the proposed options.

6.

Recent Dealings in Shares and Options of the Company

In considering the terms of the Resolution members should note the recent trading history of the Company detailed above and the further information in relation to trading in the shares of the Company for the period which underlies the Black & Scholes valuation referred to above.

• (a) Recent dealings in Shares of the Company

The latest recorded sale price for the Shares, before the date of this notice was 2.7 cents. This price is above the share price used in the calculation of value of the New Options in the Black & Scholes valuation referred to above.

The highest recorded sale price for the Shares during the three months immediately preceding the date of this Notice of Meeting was 4.1 cents, being a sale recorded on 12[th] February 2008 and the the lowest recorded sale price during that period was 2 cents, being a sale recorded on 18[th] March 2008.

In the three months immediately before the date of this Notice of Meeting the number of the Shares sold on the ASX was 51,952,402. Accordingly, the average price paid during that

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period calculated by taking the total proceeds of sale and dividing by the number of shares sold was 2.5 cents per Share.

• (b) Recent dealings in Options of the Company

The latest recorded sale price for the options expiring 31 December 2007, before their expiry was 1.5 cents.

The highest recorded sale price for those options during the three months immediately preceding their expiry was 1.8 cents, being a sale recorded on 17 December, the lowest recorded sale price during that period was 0.2 cents, being a sale recorded on 15 November.

In the three months immediately before their expiry the number of those options sold on the ASX was 16,424,470. The average price paid during that period, calculated by taking the total proceeds of sale and dividing by the number of those options sold, was 1.0 cents per option.

The purpose of the Resolution is to grant to all those persons who were the holders of 31 December 2007 Options at the date of their expiry with replacement New Options.

The issue of the New Options will be by way of a prospectus issued in accordance with the provisions of the Corporations Act 2001.

7. Voting exclusion statement: Persons registered as Optionholders which expired on 31 December 2007.

Cardia will disregard any votes cast on the Resolution by any member of Cardia registered as the holder of any options which expired on 31 December 2007 and any other person who might obtain a benefit except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed and any associate of any such person within the meaning of the Act. However, Cardia will not disregard a vote if:

• (a) it is cast by any such person and any associates as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

• Terms and Conditions of the Options

The terms and conditions of the Options as referred to in the Resolution are as set out in Note 11 to the Notice of Meeting.

AUTHORITY FOR DIRECTORS AND ASSOCIATES AND OTHER RELATED PARTIES TO PARTICIPATE IN THE OPTIONS ISSUE

In accordance with Listing Rule 10.11, approval is sought by part (b) of the Resolution for directors and their associates and other related parties of the Company to participate in the Issue.

9. Details of related Parties

The persons who are related parties and who will benefit from the passing of the Resolution by being entitled to participate in the New Options Issue are as follows and their present equity holdings are set out in the table below.

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DETAILS OF RELATED PARTY INTERESTS AND BENEFITS

Related Party (registered holder)	Associate of Director	Shares Held	% Share- holding	Expired Options Held 31/12/2007	% holding of Expired Options	Options to be granted to related party	Options to be granted to related party	Options to be granted to related party
						Number Of Options	Value of Benefit	Acquisition cost of Options
Patrick John Volpe	N/A	0	0	0	0	0	0	0
Trayburn Pty Ltd	P Volpe	0	0	0	0	0	0	0
Vermar Pty Ltd	P Volpe	38,284,399	13.86	27,312,791	13.92	27,312,791	$35,507	$136,564
Robin Gerald Armstrong	N/A	0	0	0	0	0		0
William Thomas Inv P/L	R Armstrong	8,750,000	3.17	1,791,626	0.92	1,791,626	$2,329	$8,958
Peter Pena	N/A	1,855,000	0.67	0	0	0		0
Totals		48,889,399	17.70%	29,104,417	14.84%	29,104,417	$37,836	$145,522

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The table:

• (a) sets out details of the related parties who will benefit from the transaction;

• (b) identifies where a holder is an associate of a director (including directors of subsidiary entities) and in each such case sets out the name of the associated Director.

• (c) sets out the details of the actual holders of securities, their current percentage shareholding and details of the options held by them prior to expiry thereof.

• (d) the number of New Options proposed to be granted to each related party and the value thereof at the value as determined by DMR.

• (e) the amount required to be subscribed by the related parties to take up any offer to be made to them if the resolution is passed at the meeting.

As can be seen from the above table, the aggregate percentage shareholding of all of the above parties totals 17.70% of the shares on issue and the aggregate option holding of 31 December 2007 options totals 14.84% of the 31 December 2007 options.

Given that the proposed New Options Issue is one for one in relation to the options which expired on 31 December 2007, the net effect of the proposed issue on interests of related parties comprising directors,and their associates is that these related parties, in aggregate, will be entitled to a lower percentage of the proposed new Options issue if it is made on the basis set out in the Resolution than they would be if the New Options issue was made on an entitlements basis. The position of each individual related party is as set out in the table.

10.

Director’s Recommendations

Because each of Mr Armstrong and Mr Volpe are related parties and they, or their associates, will receive benefits (participation in the issue) if the Resolution is passed, neither of Messrs Volpe or Armstrong consider it appropriate for either of them to make any recommendation on the Resolution.

Mr Pena, who did not hold any expired options, is permitted under the Act to make a recommendation because he has no conflict of interest in this matter. Mr Pena considers that, in their own interests, Members should have regard to the following matters when deciding how to vote in relation to the resolution:

• (a) The Issue if fully subscribed would raise an amount of $980,837, which would increase the current cash resources of Cardia to approximately $6,419,047after the Issue. This would increase the cash asset backing per Cardia share to $0.023 and the net asset backing per share from $0.025 to $0.028 (based on management accounts as at end March 2008 adjusted for actual expenditures in April 2008.)

• (b) if the Issue is approved then, any shortfall not taken up will be available to be issued as a bonus issue to the members on a pro rata basis to their shareholdings at the Record Date chosen to determine entitlements to the bonus element of the Issue. The minimum number of New Options which would be available for grant to members on this basis would be

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80,004,841 (adjusted down to an acceptable issue ratio). It is not possible to specify the maximum number of New Options which might otherwise be offered pro rata. The value of those New Options, in which non-participating members would share according to their pro rata shareholdings, would be a minimum of $504,000 (approximately). This pro rata free issue of New Options, based on the above figures, would be at a ratio of approximately 1 New Option (free) for every 3 shares held.

• (c) a critical issue to be decided by non-participating members is whether they want to see the capital of the Company potentially diluted in the manner which the New Options Issue will permit without participating more directly in that dilution themselves.

Against the above background Mr Pena states that he does not wish to make a recommendation in relation to how members should vote on the Resolution because, in his opinion, the issues are not clear cut and free of difficulty. The issue in regard to related party benefits is perhaps less significant than the question of whether the non-participating members should vote to approve the transaction which provides benefits as noted by the Independent Expert and in which they do not participate, save to the extent that the Resolution, if passed, will result in the bonus element in the issue as discussed herein.

If the non-participating members:

• (a) consider that the benefits to them from the bonus element of the proposal (which are unable to be quantified other than as to minimum value, are not sufficiently attractive to cause them to vote in favour of the Resolution;

or,

• (b) consider that the related party benefits are unreasonable and not justified ;

then they should not support the Resolution and should vote against it.

Conversely, if the non-participating members:

• (c) consider that the benefits to them from the bonus element of the proposal (which are unable to be quantified other than as to minimum value, are sufficiently attractive to cause them to vote in favour of the Resolution;

and,

• (d) consider that the related party benefits are reasonable;

then members should support the Resolution and should vote for it.

Mr Pena recommends that non-participating members should form their own conclusions as to how they will vote based on there perceptions of the above matters after considering all of the matters set out herein.

However Mr Pena has formed his own opinion in relation to the matters and he advises that intends to vote in favour of the Resolution because his opinion is:

• (a) that the amount of the related party benefit is not excessive;

• (b) current market conditions on world stock exchanges are such that it is difficult to raise funds and may remain so for some time;

• (c) as against the current share price he considers the issue price of the New Options to be reasonable. In this context, and notwithstanding the Black & Scholes valuation of the options, he does not consider that it is likely the New Options will trade on ASX at $0.0063 (0.63 of a cent) when the share price is as little as 2.7 cents. In this context the share price used by DMR in assessing the value of the New Options was 2.96 cents and current market price of the shares is now significantly below that. This amount of this reduction in value is significantly greater than the value of the related party benefit assessed by DMR as being

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0.13 of a cent representing the difference between inherent value 0.63 cents per New Option) and its issue price (0.5 cents). Given the drop in value of the shares he considers it unlikely that the New Options price on market will reflect the valuation of 0.63 cents. However, it should also be noted that DMR stated that the market price of Cardia’s shares dropped on low turnover and, conversely, it is possible that if world markets recovered strongly it may likewise increase on limited turnover (with a corresponding increase in the perceived value of the New Options). However, with an issued capital of in excess of 276,000,000 shares any share price increase would likely be limited.

• (d) Mr Pena considers that the Black & Scholes valuation methodology is not best applied to valuation of options in companies with a small capital base and limited liquidity where a very small number of transactions, either in absolute dollar value, or in number of securities traded, can have significant effect on the perceived value of the securities in question. For this reason Mr Pena suggests that non-participating members should consider the nature of a Black & Scholes valuation when making any decision on how to vote.

11.

Independent Expert’s Conclusions on Related Party matters

The Directors have commissioned an independent expert’s reports from DMR Corporate Pty Ltd (“DMR”) dealing with related Party issues in accordance with Chapter 2E of the Act.

That Report (as well as the Option Valuation Report) is attached to and forms part of this Explanatory Memorandum. To understand the Related Party Report commented on below, Members should first read the DMR Option Valuation Report.

DMR has determined that a grant of authority for Directors and their associates and related parties to participate in the proposed options issue provides a related party benefit to those persons. These issues are detailed in the report by DMR as to related party issues which form part of this Explanatory Memorandum and DMR’s conclusions are set out below. Members should however still read that report carefully.

One of the primary assumptions is volatility. DMR have chosen a volatility factor of 81.75%. However they could have validly chosen other volatility factors as relevant. For example, the volatility factor for CNN shares based on daily or monthly share prices during from 1 January 2007 to 11 Jan 2008 was 112.1%. Had other assumptions remained the same the resultant valuation of the options would presumably have been significantly higher.

Each member must therefore make up his or her own mind as to the value of the options. This conclusion as to value is directly related to the value and quantum of the related party benefits and to the value generally being made available to optionholders to the exclusion of members.

12.

Related Party Report

In its Related Party Report, DMR states that using the option valuation variables referred to above. The figure of $0.0063 as to the value of the options and the figure of the expressed value of the related party benefit of $0.0013 (after deduction of the issue price of the options) have been rounded to the 4[th] decimal place. This rounding has not however been applied in the calculation of the aggregate values of benefits or options. DMR state:

• “. . . we have valued the options at $0.0063 each, less the issue price of $0.005, or a net value of $0.0013 per option. This places a value of $37,836 on the options proposed to be issued to the Related Parties and $217,182 on the options proposed to be issued to the other option holders.”

The reference by DMR to “ Voting Shareholders ” is a reference to those shareholders who did not hold options and who may vote on the resolution: in this Memorandum also called “non-participating members” because they will not participate in the issue of options if approved by them by voting in favour of the resolution.

In Clause 4 of its report DMR comment on and quantify the Financial Benefits Received by the Related Parties. DMR notes that:

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“In Section 3 above we determined that the Related Parties will receive financial benefits totaling $37,836 if the Voting Shareholders approve the proposed issue of options and the Related Parties interests in Cardia will decrease from 17.70% to 16.51% if the options are issued and all of the options are exercised.

The other option holders will receive financial benefits totaling $217,182 if the Voting Shareholders approve the proposed issue of options.

The Related Parties will receive the same proportional benefits as the other option holders will receive from the proposed issue of options.

The Cardia shareholders, who will not have an entitlement to the options and who are being asked to approve the proposed issue of options, will effectively give the option holders (the Related Parties and the other option holders) financial benefits of $255,018 if they approve the issue of options.”

This reference to the Cardia shareholders must be read as a reference to the non-participating shareholders. Much of the $255,018 benefit flows to shareholders as many of them also owned options but none of it flows to the non-participating shareholders.

As the transaction requires shareholder approval, the directors consider that it is appropriate that members be provided with the following information under Chapter 2E which would have been required by Section 219 of the Act.

• (a) The parties who will benefit from the passing of the Resolution are the related parties who are the directors and their associates named in the table in clause 9 above.

• (b) The only directors to have an interest in the outcome of the proposed Resolution are Mr Volpe and Mr Armstrong.

• (c) Other than the securities the subject of the resolution, Mr Volpe and Mr Armstrong have relevant interests in marketable securities as otherwise set out herein referred to elsewhere herein and, in particular, in the table in clause 9 above.

• (d) the nature of the financial benefits which may be obtained by the related parties, are that:

• (i) the related parties will obtain the advantages likewise obtained by any other holder of expired options who may seek to take up his or her entitlement if the Resolution is passed, namely, that notwithstanding any direct benefit that may be obtained on the terms of grant of the option, the optionholder may make a profit from:

  • (A) trading the options if the market price thereof at any time exceeds the cost of acquisition of the options (assuming that an adequate market exists to enable the optionholder to sell the options);

  • (B) exercising the option if and when the value of the company's ordinary shares exceed the exercise price of the option and by disposing of the resultant shares so acquired;

  • (C) exercising the options and holding the resulting shares in order to participate in long-term growth in the underlying value of the entity;

  • or any combination of the above.

No assurance can be given as to the future performance of the Company or as to future share prices. The making of any profit from the exercise of the options in the present circumstances is purely hypothetical although the benefit which is granted is the potential opportunity for that to occur.

• (ii) The related parties will receive the options which, based on the related party report by DMR, which is dependent on DMR’s Option Valuation Report, will be an aggregate amount of $37,836.Of this amount interests associated with Mr Volpe will receive options with an assessed value of $35,507 and interests associated with Mr Armstrong will receive will receive options with an assessed value of $2,329. See the table in clause 9 above where these values and other data is set out numerically.

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• (e) Cardia will disregard any votes cast on the Resolution by Mr Volpe and Mr Armstrong and any associate of Mr Volpe and Mr Armstrong or such related party. However, Cardia will not disregard a vote if:

• (i) it is cast by any such person or any of its associates as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (ii) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Members should be aware that the acquisition by any person of options does not change voting power. That voting power will only change in accordance with changes in the relevant interests in shareholdings of any member or of those of his associates.

13. Approval required because Issue is not pro rata Entitlements Issue

It should be noted that if the proposed New Options issue were made as an entitlements issue then no approvals of members would be required to be granted.

14. Application for Waiver

The Company proposes to made application for a waiver of Listing Rule 10.13.3 to permit the issue to be made at the expiration of that 3 month period rather than the expiration of the one month period referred to in that Listing Rule. The reason for the application for a waiver is that the issue of the options must be by way of a prospectus issue and the Board considers that it is appropriate to allow those entitled to make application for the issue, assuming the resolution approving same is passed, a reasonable period in which to make application. If the waiver is not granted by ASX then the period during which the offer will remain open for acceptance will be restricted to enable the issue to be made within the one month period referred to in Listing Rule 10.13.3.

15.

Other Information and Relevant Matters

Directors are not aware of any other information that would be reasonably required by members to make a decision in relation to the financial benefits contemplated by these resolutions other than as stated herein.

Members should note that the grant of the options does not increase the voting power of any optionholder or of any of the related parties or their associates. For that to happen they will have to exercise the options to which they may become entitled and make payment for them at the rate of $0.10 per share. When they exercise options and increase their respective interests in shares in the capital of Cardia they will be required to comply with the provisions of the Act.

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CARDIA TECHNOLOGIES LIMITED

ACN 064 755 237

PROXY FORM

The Company Secretary Cardia Technologies Limited Suite 510, Level 5 737 Burwood Road Hawthorn Victoria 3122

I/We (name of shareholder) …………………………………………………………………………………….....

of…………………………………………………………………………………………………………………….

(address) being a member/members of Cardia Technologies Limited Hereby Appoint:

(Name)……………………………………………………………………………………………………………… of

(Address)…………………………………………………………………………………………………………… and/or failing him (Name)…………………………………………………………………………………………………………… of

(Address)…………………………………………………………………………………………………………… or failing either of them, the Chairman of the Meeting as my/our proxy to vote for me/us and on my/our behalf at the General Meeting of the Company to be held at Ground Floor, Pacific Tower, 737 Burwood Road, Hawthorn Victoria 3122 at 9.30am AEDT on 16[th] June 2008 and at any adjournment thereof.

INSTRUCTIONS AS TO VOTING ON RESOLUTION

If no directions are given my proxy may vote as the proxy thinks fit or may abstain. Otherwise the Proxy is to vote for or against the Resolution referred to in the notice convening the General Meeting as follows:

FOR AGAINST ABSTAIN

Resolution – To grant options to persons holding options which expired on 31 December 2007.

This Proxy is appointed to represent % of my voting right, or if 2 proxies are appointed Proxy 1 represents % and Proxy 2 represents % of my total votes. My total voting right is shares. If no direction is given above or if more than one box is marked, I/we authorise my/our proxy to vote or abstain as my/our proxy thinks fit in respect of the Resolution to be considered by the meeting and any adjournment of the meeting.

Signature(s)

Date Individual or Joint Shareholder 1 Joint Shareholder 2 Joint Shareholder 3 Director/Company Secretary Director Sole Director & Sole Company Secretary

NOTES: Voting and Instructions for Appointment of Proxy:

1. In accordance with the Corporations Act 2001, the Directors have determined that the shares of Cardia that are quoted on the Australian Securities Exchange as at 10.00 pm on 14[th] June 2008, will be taken, for the purposes of the General Meeting, to be held by the persons who held them at that time. Accordingly, those persons will be entitled to attend and vote at the meeting.

2. A Member entitled to attend and vote at a Meeting is entitled to appoint not more than two proxies to attend and vote on his behalf. Where more than one proxy is appointed, such proxy must be allocated a proportion of the Member’s voting rights.

3. If the Member does not specify the proportion of votes the proxy may exercise, then each proxy will be taken to exercise one half of the votes held and subject to the proxy with fractional entitlements to votes being disregarded.

4. A proxy duly appointed need not be a Member of the Company. In the case of joint holders all must sign.

5. To be effective, this proxy, duly executed, and any document necessary to show the validity of this proxy must be lodged at the registered office of the Company not less than 48 hours before the time appointed for the Meeting. Any proxy lodged after that time will be treated as invalid.

6. Directors and Officers of all corporate shareholders should note that unless the corporate shareholder either:

7. (a) completes and lodges with the Company a valid appointment of proxy in accordance with the instructions in these notes; or

8. (b) completes and either lodges with the Company prior to the meeting a form of appointment of or certificate of appointment of a personal representative in accordance with the provisions of Section 250D of the Corporations Law or causes such personal representative to attend the meeting with such form of appointment or certificate; or

9. (c) has appointed an attorney.

and such proxy, personal representative or attorney attends the relevant meeting, then such corporate shareholder will be unable to exercise any votes at the relevant meeting.

1. This proxy form may be returned to the Company in either of the following ways:

2. (a) in person or by post to the Company Secretary, Cardia Technologies Limited at: Suite 5.09, Level 5

   • 737 Burwood Road

   • Hawthorn Victoria 3122, or

3. (b) by facsimile to (03) 9813 2668.

4. Corporate Members should comply with the execution requirements set out in these notes or otherwise comply with the provisions of Section 127 of the Act. Section 127 of the Act provides that a company may execute a document without using its common seal if the document is signed by:

5. 2 directors of the company; or

6. a director and a company secretary of the company; or

7. for a proprietary company that has a sole director who is also the sole company secretary – that director.

For Cardia Technologies Limited to rely on the assumptions set out in Sections 129(5) and (6) of the Act, a document must appear to have been executed in accordance with Section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of Section 127(1) or (2) as applicable.

In particular a person who witnesses the affixing of a common seal and who is the sole director and sole company secretary of the company must state that next to his or her signature.

1. Completion of this proxy form will not prevent individual Members from attending the meetings in person if they wish. Where a Member completes and lodges a valid proxy form and attends the meeting in person then the proxy’s authority to speak and vote for that Member is suspended while the Member is present at the meeting.

2. Where this proxy form is lodged and is executed under power of attorney the power of attorney must be lodged in like manner as a proxy.

3. Chairman’s voting intentions: All members appointing proxies should note that the Chairman intends to exercise proxies in his favour, and which do not direct the proxy holder how to vote, in favour of all resolutions.

If the Chair of the meeting is appointed as your proxy, or may be appointed by default and you do not wish to direct your proxy how to vote as your proxy in respect of a resolution, please place a mark in the box.

By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by the Chair of the meeting for that resolution other than as proxy holder will be disregarded because of that interest.

If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on the resolution and your votes will not be counted in calculating the required majority if a poll is called on the resolution.

D M R CORPORATE

DMR ____ ________

D M R Corporate Pty Ltd A.C.N. 063 564 045 470 Collins Street Melbourne Telephone (03) 9629 4277 Victoria 3000 Facsimile (03) 9629 4598 Australia Email admin@dmrcorporate.com.au

30 April 2008

The Directors Cardia Technologies Limited Suite 510 Level 5, Pacific Tower 737–741 Burwood Road Hawthorn VIC 3122

Dear Sirs

Valuation of Options

1. Introduction

• 1.1 Mr J Wilson, Company Secretary of Cardia Technologies Limited (“Cardia” or the “Company”) has requested that DMR Corporate Pty Ltd (“DMR Corporate”) value a proposed issue of 196,167,308 options that are intended to replace the old series of options that expired on 31 December 2007. This report sets out the value of the options as at 30 April 2008.

Cardia presently has on issue 276,172,149 ordinary shares and if the proposed issue of options proceeds the existing shareholders interests would be diluted by approximately 41.5% if all options were exercised.

2. Valuation Methodology

• 2.1 The most commonly used option pricing methodology is the Black-Scholes Model. This model determines the value of a call option over issued shares as a function of the following:

• a) the current share price of the underlying shares.

• b) exercise price of the option.

• c) volatility of the share price.

• d) time to maturity.

• e) interest rate.

• f) expected dividends.

DMR

3. Assumptions used

3.1 Set out below are the assumptions that we have selected in applying the Black-Scholes Model to the option valuation.

3.2 The share price of the underlying shares

The Cardia shares traded for the 30 days immediately prior to the date of this report on a volume weighted average price (“VWAP”) of $0.0244 and the 90-day VWAP was $0.0261.

The announcement of the proposed issue of options was made on 17 December 2007 and from that date the share price has steadily fallen.

We are of the opinion that the VWAP of $0.0244 per share should be used in the BlackScholes model calculations as the market appears to have factored in the dilution impact that the new issue of options will have on the shares.

3.3 The exercise price of the options

Each of the options has an exercise price of $0.10 each.

3.4 The volatility of the share price

The volatility of the share price is a measure of uncertainty about the returns provided by the shares. Generally it is possible to predict future volatility of a stock by reference to its historical volatility.

A share with a greater volatility has a greater time value component of the total option value.

We have reviewed the Australian Graduate School of Management – Centre for Research in Finance - Risk Measurement Service for the September 2007 quarter and the standard deviation for Cardia was 23.6, which represents a volatility factor of 81.75%.

We have selected a volatility factor of 81.75% for use in the Black-Scholes model.

3.5 Time to maturity

The options have an expiry date of 30 June 2011 which gives them a life of 3.17 years.

3.6 Dividends

Cardia does not have a track record of paying regular half yearly or annual dividends however it has in the past done capital distributions as developed projects have matured and been spun out from Cardia into separate entities.

As we are unable to predict when and at what value existing projects may be spun out we have assumed that no dividends will be paid during the currency of the options.

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DMR

3.7 Interest rate

We have used the current Commonwealth Treasury Bond Rate of 6.425% as being the appropriate risk free rate of return.

3.8 Issue Price

The options will be issued at a price of $0.005 per option.

4.

Valuation

4.1 Based on the assumptions set out in Section 3 above we have calculated the value of one option as $0.0063 and after deducting the option issue price we have valued the options at $0.0013.

It should be noted that the above values are prior to considering the dilutive effect of the options and any restrictions on their transferability. These are considered below.

4.3 Dilution factor

The Black-Scholes Model values options over issued shares whereas the options in question are over unissued shares.

At the date of this report Cardia had 276,172,149 ordinary shares on issue and it proposes to issue a total of 196,167,308 options and if exercised, this would result in a 41.5% dilution to the current shareholders.

Since the announcement of the proposed issue of options to the market on 17 December 2007 there has been a substantial drop in the share price although there has only been a small volume of shares traded. In our opinion the market has made an adjustment for the dilution factor on the issue of the proposed options and this has been accounted for in the above Black Scholes valuation by taking the VWAP of the Cardia shares for the 30-day period prior to the date of this report.

4.4 Discount for Non-Transferability

We understand that Cardia will request the ASX to have the 196,167,308 options listed. If this occurs then the options will be freely tradable and there is no discount for lack of marketability or non-transferability.

5. Conclusion

5.1 We have valued an option at $0.0013 and the entire proposed issue of 196,167,308 options at $255,018. This is a maximum value as it does not account for the possible payment of any dividends – refer to Section 3.6 above.

Yours faithfully

DMR Corporate Pty Ltd

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Derek Ryan

Director and Authorised Representative

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DMR CORPORATE

DMR ___ _________

DMR Corporate Pty Ltd A.C.N. 063 564 045 470 Collins Street Melbourne Telephone (03) 9629 4277 Victoria 3000 Facsimile (03) 9629 4598 Australia Email derek@dmrcorporate.com.au

30 April 2008

The Directors Cardia Technologies Limited Level 5, Pacific Tower 737–741 Burwood Road Hawthorn VIC 3122

Dear Sirs,

VALUATION OF FINANCIAL BENEFITS

1. Introduction

Mr J Wilson, Company Secretary of Cardia Technologies Limited (“Cardia” or the “Company”) has advised DMR Corporate Pty Ltd (“DMR Corporate”) that Cardia proposes to issue 196,167,308 options that are intended to replace the old series of options that expired on 31 December 2007.

Cardia presently has on issue 276,172,149 ordinary shares and if the proposed issue of options proceeds the existing shareholders interests would be diluted by approximately 41.5% if all options were exercised.

The proposed issue of options is to the holders of the 196,167,308 options that expired on 31 December 2007 and not to all shareholders on a pro rata basis. There were 565 holders of expired options and those option holders held a total of 105,567,006 shares. The number of expired options held by option holders who were not also members was 82,169,453 options held by 237 option holders. As such the proposed issue is to the benefit of only the holders of the now expired options.

Messrs Patrick Volpe (“Volpe”), and Robin Armstrong (“Armstrong”) are both directors and shareholders of Cardia and as such they are deemed to be related parties of Cardia pursuant to Section 228 of the Corporations Act 2001 (“the Act”) in respect of the proposed transaction detailed in Section 2 below – the “Related Parties”.

The proposed transaction may result in financial benefits to the Related Parties however this can only occur if the transaction that gives the financial benefits is approved by the shareholders entitled to vote on the proposed transaction or the benefit falls within the scope of an exception to the Act. For the purposes of this report we refer to the shareholders who are not entitled to receive any of the new issue of options (however they must approve the issue of the options) as the “Voting Shareholders”.

The Australian Securities and Investments Commission (“ASIC”) in a media release issued on 10 August 2004 has expressed the view that the financial benefit must be adequately valued. ASIC has gone on to state:

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DMR

“An adequate valuation requires the basis of the valuation and the principal assumptions behind the valuation to be disclosed, and in some circumstances it may be necessary to provide a valuation by an independent expert.”

Shareholders should be provided with all the information that is reasonably required in order for them to decide whether or not it is in the Company’s interests to approve the giving of the financial benefits.

The Cardia directors have requested DMR Corporate to provide shareholders with the information that they may reasonably require to approve the proposed transaction that provides the financial benefits.

2. The Proposed Transaction

Cardia proposes to issue 196,167,308 options with an expiry date of 30 June 2011 and an exercise price of $0.10 each at an issue price of $0.005 per option. The options will be issued to the holders of the 196,167,308 options that expired on 31 December 2007 on a one for one basis provided that the option holders subscribe the issue price of $0.005 per option.

The option issue will raise $980,837 if all shareholders entitled subscribe the $0.005 per option actually subscribe for the options. The option issue will not be underwritten.

3. Effect of the Proposed Transaction on the Present Cardia Shareholders

The effect of the proposed issue of options on the present Cardia shareholders is as follows:

Related Parties Other Shareholders – Note 1 Other Option Holders Sub total	Existing Shareholder Entitlements Percentage Interest Proposed Option Entitlements Fully Diluted Interests Percentage Interests 48,889,399 17.70% 29,104,417 77,993,816 16.51% 227,282,750 82.30% 227,282,750 48.12% 167,062,891 167,062,891 35.37%
	276,172,149 100.00% 196,167,308 472,339,457 100.00%

Note 1 – Shareholders who held options that expired on 31 December 2007 and their associates and related parties are note entitled to vote on the proposed issue of options.

We have valued the options using the Black Scholes option model using the following variables:

• 1) the volume weighted average share price of the underlying shares of $0.0244 for the 30 days prior to the date of this report

• 2) exercise price of the option - $0.10

• 3) volatility of the share price – 81.75%

• 4) vesting conditions - none

• 5) time to maturity – 3.17 years from 30 April 2008 to 30 June 2011

• 6) risk free rate of interest – 6.425%

• 7) expected dividend yield – nil

• 8) option issue price of $0.005 per option

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DMR

Using the above variables we have valued the options at $0.0063 each, less the exercise price of $0.005, or a net value of $0.0013 per option. This places a value of $37,836 on the options proposed to be issued to the Related Parties and $217,182 on the options proposed to be issued to the other option holders.

4. Financial Benefits Received by the Related Parties

• 4.1 In Section 3 above we determined that the Related Parties will receive financial benefits totaling $37,836 if the Voting Shareholders approve the proposed issue of options and the Related Parties interests in Cardia will decrease from 17.70% to 16.51% if the options are issued and all of the options are exercised.

The other option holders will receive financial benefits totaling $217,182 if the Voting Shareholders approve the proposed issue of options.

The Related Parties will receive the same proportional benefits as the other option holders will receive from the proposed issue of options.

The Cardia shareholders, who will not have an entitlement to the options and who are being asked to approve the proposed issue of options, will effectively give the option holders (the Related Parties and the other option holders) financial benefits of $255,018 if they approve the issue of options.

Yours faithfully

DMR Corporate Pty Ltd

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Derek Ryan Director

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Paul Lom Director

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DMR

Appendix A

This report has been prepared to meet the following regulatory requirements:

• Corporations Act 2001 – Chapter 2E

Section 208 of the Act states that a public company must obtain approval from the company’s members if it gives a financial benefit to a related party unless the benefit falls within the scope of an exception to the Act or the provisions of Section 210 or 211 of the Act.

Section 210 of the Act states that member approval is not needed to give a financial benefit on terms that:

• (a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm’s length; or

• (b) are less favourable to the related party than the terms referred to in paragraph (a) above.

Section 211 of the Act states that member approval is not needed to give a financial benefit if:

(a) the benefit is remuneration to a related party as an officer or employee;

(b) to give the remuneration would be reasonable.

Section 228 of the Act defines ‘related parties’ as:

• (a) directors of the public company;

• (b) directors (if any) of an entity that controls the public company;

• (c) if the public company is controlled by an entity that is not a body corporate – each of the persons making up the controlling entity;

• (d) spouses and de facto spouses of the persons referred to in paragraphs (a) to (c) above.

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