report card

REPORT CARD - October 2007-March 2009

Between October 2007 and February 2008, SBN’s structure, business model and business plan were refined and adjusted.

A Chief Operating Officer (Jack Kerins) and a new Director (Jim Hallam) were appointed in late Oct 2007.

In December 2007, the company’s name was changed (from Harrington Group to Sunbiomedical Pty Ltd) and a major JV with SiYi was signed off.

In January 2008, the Oraline iv FDA 510k clearance application was rejected – thereby ending the Company’s prior key focus on this project and, in February, the Melbourne office was dismantled with the bulk of financial resources being transferred to the SBL operations in USA.

The major existing market opportunity was the US forensics market for Oraline, but a large number of new projects were firmed up and/or commenced in this 6 months period – including SiYi, Bioscreens, Visualine, Oraline 8 and the Medinat agreement in Russia. As well, there was a continuing expectation that Oraline iv sales opportunities would open up in Mexico.

In the following 6 months (March to August 2008), further initiatives were added - including the CMM distribution agreement, Probeline and Latin American initiatives.

How does the report card look on these various projects – in terms of outcomes and delivery on time and budget?

The answer is pretty obvious – with the reasons for it summarised in the following paragraphs.


PROJECT 1.

USA Oraline distribution

STRATEGY

Initiated a new distribution model in the US and expanded distribution network and market coverage

PROGRESS/OUTCOMES

30 Apr Update – New distributors added in Mar Qtr

30 Jul Update – new distributors added in June

28 Oct Update – new distributors added in Sept Qtr

COMMENT ON OUTCOMES:

40% INCREASE IN SALES FROM CALENDAR 2007 TO 2008 (UP FROM $629,000 TO $878,000) BUT NOT SUFFICIENT TO COVER JK SALARY AND COSTS & ADDITIONAL SALES STAFF


PROJECT 2

STRATEGY

SiYi JV Announcement 12 Dec 07 of Cooperation Agreement with Shanghai SiYi Biotechnology (3 stage partnership leading to total world production of Oraline in China)

PROGRESS/OUTCOMES

30 Apr 2008 Update – MPS requests refinement of detection ranges – with field testing delayed to November 2008

30 Jul Update – Field trials delayed to early 2009

8 Oct Update – Quality accreditation approved by MPS; field trials still to commence early 2009;

19 Dec Update – SiYi to commence final submission in Mar 2009 with completion by Jul 2009; commencement of Ketamine device on behalf of SiYi

30 Jan 2009 Update – field trial delayed to March 2009 with reduced numbers – following QC problem; new problem of storage identified; manufacture of 'improved version' of O4 required (WHY?)

13 Mar 2009 - announcement re return from SiYi of Oraline units and uncertainty re completion of MPS field trials

COMMENT ON OUTCOMES:

UNEXPLAINED STUFF-UP OF SIYI/MPS RELATIONSHIP = MAJOR LIFE THREATENING CRISIS

(POSSIBLY DUE TO POOR MANAGEMENT OF JV – INSENSITIVITY OR LOSS OF CREDIBILITY DUE TO QC DEBACLE IN DEC 2008)


PROJECT 3:

Oraline 8 Commercialisation

STRATEGY

30 Apr Update – Oraline 8 prototypes have been developed for lab testing – based on surveys of distributors – to be launched in Sept 2008

PROGRESS/OUTCOMES

26 June Rights Issue Prospectus – launch delayed to Oct 2008

28 Oct Update – launch delayed to November 2008 (Medica);

21 Nov Medica Conference – No longer a ‘launch’ at Medica – only a ‘showcasing’

19 Dec Update – further delay to Apr 2009 with delivery of plastic housing

COMMENT ON OUTCOMES:

THREE DELAYS SO FAR. NOW 7 MONTHS LATE – with no launch – only ‘showcasing’ (Nov 2008) and ‘delivery’ (Apr 2009)


PROJECT 4:

Bioscreens split cup JV

STRATEGY

13 Feb – Announcement of JV with Bioscreens for split cup (with initial sales of $500,000 in calendar 2008);

OUTCOMES/PROGRESS

28 Feb Update – Bioscreens device to be launched in Qtr ending September 2008

30 Jul Update – launch delayed to December 2008

28 Oct Update – launch now delayed to early 2009;

19 Dec Update – delayed again to March 2009

COMMENT ON OUTCOMES:

THREE DELAYS SO FAR. NOW 7 MONTHS LATE + MISSED REVENUE OF $500,000 IN 2008


PROJECT 5: Visualine relaunch

STRATEGY

28 Feb Update – Visualine to be re-launched in Qtr ending June 2008

PROGRESS/OUTCOMES:

30 Apr Update – re-launch delayed to Qtr ending Sep 2008

28 Oct Update – launch now delayed to early 2009;

19 Dec Update – delayed again to March 2009

COMMENT ON OUTCOMES:

THREE DELAYS SO FAR. NOW 10 MONTHS LATE


PROJECT 6: Russia (Medinat)

STRATEGY

13 Feb – Announcement of distribution agreement with Medinat

PRORESS/OUTCOMES

30 Apr Update – Polish and Russian registration processes continuing

30 Jul Update – Russian registration approved – distribution to commence 2nd half of 2008

28 Oct Update – initial sales expected early 2009;

19 Dec update – initial sales expected Mar Qtr

30 Jan Update – promotion progressing

COMMENT ON OUTCOMES:

DISAPPOINTINGLY SLOW – NO ANNOUNCED SALES MORE THAN 9 MONTHS AFTER APPROVALS


PROJECT 7: Mexico (ED)

STRATEGY

29 Aug 07 announcement that “ the Company anticipates commencement of shipping of OraLine IV in September 2007”

PROGRESS/OUTCOMES

30 Apr Update – decision on roll out of NL schools program expected in next 3 months

30 Jul Update – ED has submitted application to import large quantities of O4 – with decision expected August 2008

8 Oct Update – delayed approval expected in 'near future'; 19 Dec Update – continuing uncertainty

30 Jan Update – confirmation in progress

COMMENT ON OUTCOMES:

ONGOING DELAYS. NOW 18 MONTHS LATE


PROJECT 8: CMM distribution

STRATEGY

30 Jul Update – distribution agreement with CMM ($US 80,000 in 2009)

PROGRESS/OUTCOMES

19 Dec Update – slow down in orders with employment fall

COMMENT ON OUTCOMES:

DISAPPOINTING SLOW DOWN – BUT MAGNITUDE NOT REPORTED


PROJECT 9: Probeline

STRATEGY

30 Jul Update – initial market testing

PROGRESS/OUTCOMES

28 Oct Update – first phase of trial positive – to continue; commercial launch anticipated early 2009;

19 Dec Update – some modifications to email marketing model made

COMMENT ON OUTCOMES:

NO ANNOUNCED SALES AFTER 9 MONTHS OF TRIALLING


PROJECT 10: Latin America partnerships

STRATEGY

30 Apr Update – Initial work in 4 countries to identify potential markets and partners

PRORESS/OUTCOMES

No further news

COMMENT ON OUTCOMES

DISSAPOINTING LACK OF PROGRESS


PROJECT 11: Canada

STRATEGY:

19 Dec Update – Health Canada approval process commenced

PROGRESS/OUTCOMES:

30 Jan Update – Health Canada approval to be examined in March Qtr

COMMENT ON OUTCOMES:

TOO EARLY TO GUAGE POTENTIAL