ridiculous position, page-2

This is a cut'n'paste running commentary from SBN releases.
It just doesn't make sense why Siyi has cut off communication with SBN when you read through this. Everything is goiing fine and we're almost home, then we get to last Fridays announcement.



Extract from Investor Update 28/10/2008


4. Update on SBL’s Sales Initiatives
a) China
Siyi has received the test report from the Ministry of Public Security (MPS) confirming that OraLine is in compliance with its quality standards. The Quality Standard Number Q/SIRL1-2008 has been issued by Shanghai Technology Quality Administration.
The Chinese version of OraLine IV has been specially tailored by SBL for Siyi and is called ‘Ai Rui Te 4-in-1 Saliva Drug Screen Device’. The major customized details are as follows:
•Modified the Claimed Sensitivity Cut-off Values (CSCV). The new CSCV are based on the
MPS lab test report (ng/mL): MET 50, COC 50, OPI 30, THC 8;
•Modified the saliva collection method in the instructions for use. The new method is cup
collection (spitting to the cup) only, instead of direct collection of saliva from the mouth using
the device itself; and
•Added a saliva collection cup to each unit of product.

Following the issuance of the MPS report, Siyi obtained approval for starting the MPS field trials of OraLine in 15 cities. The table below summarises the required steps until receipt of the final product approval, SBN’s current expected timing and anticipated sales arising from each stage:
Step Anticipated orders Expected timing
1. Commencement of MPS field trials 20,000 unit order has been received by SBL December 2008

2. Completion of MPS field trials and receipt of trial reports from cities Further 40,000 to 60,000 units for completion of trials End of March 2009

3. Application for final product approval none though some trial sales may continue during the approval period Second half of CY 2009

Under the agreement with Siyi, SBL supplies the OraLine detection strips to Siyi, and, in the early stages, also provides assistance to Siyi regarding the manufacture of the finished products through OEM contracts. SBL earns its revenue and profits from the sale of the strips as the product housings are sourced separately by Siyi.




2. Update on SBL’s Sales Initiatives 19/12/2008
a) China
As noted above, (refers to 20000 order) Siyi placed an order of USD 20,000 in October for the commencement of the field trials. Further trial orders are expected in early 2009 before the final submission for Ministry for Public Security (MPS) approval. Siyi plans to commence work on the final submission in March 2009.
In December 2008, Jack Kerins, the Chief Executive Officer, and Jim Hallam, a Non Executive Director, met with Siyi to discuss progress to date of the project. The key points are set out below:
1. The progress made during 2008:
i. Registration of OraLine for Company Quality Standards by Shanghai Technology Quality Administration Bureau;
ii. OraLine passing the lab tests of the MPS Criminological Technology Product Test Centre;
iii. Placement of the first trial order in September 2008;
iv. Employment of 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. From December 2008, SBL will pay the salary for this employee;
v. Finalisation of the marketing brochure for OraLine and the launch of Siyi’s website at www.siyi.cc.
vi. The MPS are holding the MPS Drugs of Abuse Analysis Conference in late December 2008, an internal conference of technical experts at which Siyi and SBL’s representative in China (Dr Peter Sun) will present the benefits of the Oraline IV
product.
2. The timetable for the MPS regulatory approval procedure is March to July 2009. During this period, Siyi will provide detailed product sales projections;
3. Subject to SBN Board approval and legal review, Siyi will apply for Chinese patents to protect the design, practical application and other features relating to OraLine IV. This is necessary in order to allow Siyi to provide the required documents to the Chinese government and promote the OraLine product in China but for no other purpose. SBL will retain the final property rights to the Chinese patent applications. Further, in the event that
the Cooperation Agreement between SBL and Siyi is terminated early, the patents would be
returned to SBL; and
4. The development of a ketamine saliva test has been initiated on behalf of Siyi. Ketamine is a commonly used drug of abuse in China. SBL has had the ketamine test developed, and is working on the final product adjustment. Siyi will provide a detailed regulatory and marketing
plan for ketamine test after discussions with MPS at the MPS Drugs of Abuse Analysis Conference in late December 2008. As noted above, SBL will be attending this conference
where it will present the OraLine product.

The above points were enshrined in a memorandum documenting the discussions which have been referred to on the Siyi website. The Siyi website incorrectly stated that Turnberry Funds Management Pty Ltd (of which Jim Hallam is majority shareholder and director) signed a memorandum of understanding with Siyi and SBN. Other than the provision of administration services to SBN by Turnberry and the receipt of director’s fees by Jim Hallam from SBN, Turnberry has no legal or commercial arrangements with Siyi or SBN and its subsidiaries. The Siyi website content was corrected after the matter was highlighted by two SBN shareholders.
The Board of SBN 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.




1. Product Performance Issue
Since late December 2008 SBL has been working with Siyi to improve the quality of the OraLine IV units to be used in the Ministry of Public Security (“MPS”) field trials. The quality issue has now been resolved. A new batch of products is currently being assembled by SBL’s contract manufacturer and is expected to be shipped direct to MPS sites in early February 2009. SBL will present a Quality Control report to Siyi on the new batch and all future batches.
This has clearly been disappointing for both Siyi and SBN and will result in the commencement of the MPS field trials being delayed from late December 2008 to late February 2009. Further, the field trials have been scaled down from 20,000 to 5,000 units in order to still allow completion by the end of March 2009.
Siyi and SBL are also working on the issue of OraLine IV storage condition. The current product design requires storage conditions of between 2 and 30 degrees Celsius. In China, without air conditioning the storage condition is often higher than 30 degree Celsius, which may cause product failure. Siyi and SBL are examining the feasibility of developing a version of OraLine with an extended range of storage conditions, or alternatively, requiring air conditioning in the storage room during the summer. A solution to this issue is expected to be provided in the next few months.


a) China
As identified above, the MPS field trials have been delayed and reduced in scope to allow SBL to manufacture an improved version of the OraLine IV product. This delay, coupled with the Chinese New Year holidays, has moved the commencement of the field trials back to late February 2009. However, with the reduction in the size of the trial from 20,000 units to 5,000 units, final product approval is still expected by June/July 2009 provided SBL is able to resolve the storage condition issue to MPS’ satisfaction.
Current OraLine storage specifications require a temperature of between 2 and 30 degrees Celsius. In China in the summer, without air conditioning, the storage condition is often higher than 30 degree Celsius, which may cause product failure.

..............

The Directors of Sun Biomedical Limited (ASX Code: SBN) wish to advise that there is now uncertainty as to whether the Chinese Ministry of Public Security (MPS) field trials will proceed as previously advised.
On 23 February 2009, SBN delivered the 5,000 OraLine units ordered by Siyi for the commencement of the field trials. However, these units were subsequently returned by Siyi without payment or any explanation for their return. SBN has been seeking written clarification from Siyi as to the reasons for the return of the 5,000 units, the timing regarding the commencement of the field trials, and Siyi’s commitment to fulfilling its obligations under the Cooperation Agreement. SBN is not aware of any technical reasons why the 5,000 units were returned.
SBN continues to deal in good faith with Siyi - however, Siyi has been unable to provide a satisfactory response in relation to Siyi’s intentions regarding the commencement of field trials and its ongoing commitment to the Cooperation agreement. SBN is continuing to pursue the matter with Siyi and will advise investors as soon as further information becomes available.
SBN remains fully committed to fulfilling its obligations under the Cooperation Agreement. However, the successful development of the joint venture with Siyi is reliant on Siyi’s willingness to fulfil Siyi’s obligations under the Cooperation Agreement.
In the meantime, the Board is continuing with its search for a strategic partner for the business and expects to update its investors by mid April of the proposals arising from this process.




Conclusion...there is still a relationship, but we wont know what happened until they kiss and make up.

I can't see anything else.

Cheers,

TC