Current status CHINAMPS has conducted initial testing of OraLine...

Current status CHINA

MPS has conducted initial testing of OraLine and requested that SBL further define the detection range of the OraLine product. OraLine, similar to competitor’s rapid detection devices, provides a positive/negative indication across a narrow range of drug concentrations. In June 2008, SBL delivered the results of its approved evaluation plan to MPS for its review and confirmation.

The Company anticipates that a decision will be made by MPS by October 2008.

Should overall demand for the Company’s products increase beyond 1,000,000 units per calendar year, SBL will need to increase the production capacity of its existing plant by replacing its current membrane preparation and purchasing additional strip coating equipment. It is anticipated that the cost efficiency of the replacement equipment, along with improved product reliability, will improve the accuracy of the membrane preparation.

It is also anticipated that the manufacture of the OraLine’s test strips will continue in SBL’s United States facility and that assembly of OraLine will occur in China by SBL’s current contract manufacturer.

However, future assembly of the OraLine devices may potentially occur at a SiYi facility in China.

A decision to commence the production automation plan will be made in late 2008 or early 2009 once SBL has greater certainty in relation to the success of the China project.