everything you always wanted to know about...

China...but SBN didn't tell you.

I'm putting together a post about some interesting activities coming up in China over the next couple of months - a few critical processes that SBN has not cared to tell us about.

In the meantime, here's a recap on the China JV to give it a bit of context:


1. 4 July 2006 - SBN receives notice from MPS that it has certified Oraline iv for sale to law enforcement agencies throughout China (and that Oraline will be the only POC test for illicit drug use admissible in Chinese courts of law).

2. Nov 2006 - SBN ships first Oraline order (10,000 units) to MPS to 'undertake in-field evaluations of Oraline iv by regional police agencies'

3. Nov 2006-June 2007 - MPS undertakes in-field evaluations.

[These evaluations are obviously successful because the MPS now 'gets serious' about Oraline. It had, in effect, taken a 'punt' with 10,000 units. It organised what turned out to be a temporary 'certification' in order to carry out the trials. With the trials, it obviously liked what it saw - and now wants a 'piece of the action' - as is clear in the next 3 phases of the process].

4. June 2007 - MPS advises SBN that the device has to be reviewed and evaluated by several government agencies before it can be included in the MPS Catalogue of Standard Equipment, and further orders made. This is expected to take 9 or more months to complete.

5. June 2007 - MPS also advises SBN that they are now more interested in a 'license agreement' rather than an 'agency sale arrangement' (as clearly, they see its huge market potential and want an equity stake).

6. December 2007 - Co-operation Agreement with SiYi.

This is the key development. It brought in a new party (SiYi – a government-backed company specifically set up for the purpose of a JV with SBN) and broadened the China focus from law enforcement in China (via the MPS) to also include ‘future non-government Chinese customers’ and a ‘first right of refusal to market Oraline to other Asian customers’.

Specifically, it locked in a 25 year partnership with a government-backed company (that not only broadened Oraline’s China-related markets but also, in effect, formalised the earlier commitment that Oraline iv would, in China, be the 'only POC saliva testing device in town'). It also included firm commitments re manufacturing, profit share, board reps, OEM manufacturing benefits, minimum sales hurdles etc).

[This agreement is the MAJOR EVENT in SBN’s major opportunity. It is, in effect, the 'company maker' for SBN subject ONLY to securing Chinese Government approvals for the JV’s use of Oraline. Could such approvals be secured? This was the key question for would-be SBN investors.]

7. December 2007- April 2008 – China’s MPS conducts initial testing of Oraline iv

8. April 2008 – MPS requests SBL to ‘further define the detection ranges of the Oraline device’ and that this be provided in the form of an ‘approved evaluation plan’ by the end of June 2008.

[This request stemmed from MPS’s desire to use Oraline as the ‘determining’ evidence for convictions in court (unlike in USA etc where it is only used as an initial screen) and therefore its need to be absolutely certain about the accuracy and interpretation of what is being measured].

9. June 2008 – SBL duly provides the ‘approved evaluation plan’

10. June to Sept 2008 - The Chinese version of OraLine IV (Ai Rui Te 4-in-1 Saliva Drug Screen Device) developed

11. 29th Sept 2008 – Following further reviews, the MPS approve the device and issue Quality Standard Q SIRL 1-2008 to SBN

12. Oct 2008 - Siyi obtain approval for starting the MPS field trials in 15 cities in December 2008

13. Oct 2008 – SiYi Employs Professor Zhao Jing Zhen (a Drugs of Abuse and Toxins Analysis Specialist previously employed by the MPS) as Siyi’s Director of Quality Control Centre.

14. Nov 2008 – SiYi English version web site launched

15. Dec 2008 - Dr Peter Sun presents the benefits of the Oraline IV product at the.MPS Drugs of Abuse Analysis Conference

16. Dec 2008 – commitment to develop a ketamine saliva test (for Siyi) announced.

17. Dec 2008 – announcement that the Board “is pleased with the progress of the Siyi joint venture and the tangible results to date indicate that Siyi is making a concerted effort to realize the potential of the market for OraLine IV in China”.

18. Late December 2008 – some sort of quality control stuff-up (largely unexplained) with shipment of 20,000 O4 units for Chinese field trials

19. 30 Jan 2009 – announcement that O4 quality control problem had been solved.

20. 30 Jan 2009 – announcement that MPS field trials were being delayed from late December 2008 to late February 2009 – with a scaling down from 20,000 to 5,000 units in order to still allow completion of trials by the end of March 2009

21. 30 Jan 2009 – announcement that Siyi and SBL were working on the issue of OraLine IV storage condition (in high temperature Chinese conditions) with a solution expected in ‘the next few months’

22. 30 Jan 2009 – announcement that “final product approval is still expected by June/July 2009 provided SBL is able to resolve the storage condition issue to MPS’ satisfaction”