DIMERIX LIMITED - Capital/Financing Update 2008

SUN BIOMEDICAL LIMITED

ABN 18 001 285 230

RIGHTS ISSUE PROSPECTUS

RENOUNCEABLE RIGHTS ISSUE TO RAISE $3,178,963 ON THE BASIS OF FOUR (4) NEW ORDINARY SHARES FOR EVERY FIVE (5) FULLY PAID ORDINARY SHARES AT $0.01 PER NEW ORDINARY SHARE TOGETHER WITH ONE (1) FREE ATTACHING OPTION FOR EVERY TWO (2) NEW ORDINARY SHARES SUBSCRIBED FOR

The Minimum Subscription of $2,000,000 is underwritten by Patersons Securities Limited

This document is important and should be read in its entirety. If you do not understand its contents or you are in doubt as to the course of action you should take, you should consult your stockbroker, accountant or other professional advisor without delay.

If you decide to take up all or part of your Entitlement, you must do so not later than 6 August 2008. If you decide not to take up all or part of your Entitlement, you are advised to consider selling the Rights you receive before close of trading on ASX on 29 July 2008 rather than do nothing. In either case it is important that you do this in accordance with the instructions in Section 7 of this Prospectus.

1. Corporate Directory

Directors

Mr. Peter King (Non-Executive Chairman) Mr. Jim Hallam (Non-Executive Director) Mr. Andrew Paice (Non-Executive Director)

Company Secretary

Mr. Alfonso Grillo

Registered Office

TressCox Lawyers Level 9, 469 La Trobe Street Melbourne, Victoria, 3000 Ph: 1 300 728 275 Fax: (03) 9473 2500 Email: [email protected] Website: www.sunbiomed.com

Share Registry

Computershare Investor Services Pty Limited GPO Box 52 Melbourne, Victoria, 8060

Ph: 1 300 728 275 (within Australia) Ph: +61 3 9946 4451 (outside Australia) Fax: (03) 9473 2500

Auditor

BDO Kendalls Audit & Assurance (NSW-VIC) Pty Ltd Level 30, 525 Collins Street, Melbourne, Victoria, 3000 Ph: (03) 8320 2222 Fax: (03) 8320 2200

Contents	Contents	Page No.
Important Notices		1
Summary of Important Dates		4
Letter	from Chairman	5
1.	Details of the Rights Issue	9
2.	Effect of the Rights Issue	17
3.	Review of Operations	19
4.	Financial Information	32
	Relevant to the Rights Issue
5.	Risk Factors	34
6.	Additional Information	39
7.	Action Required by	59
	Shareholders
Directors Authorisation		63
Glossary of Terms		64

Solicitors to the Rights Issue

TressCox Lawyers Level 9, 469 La Trobe Street Melbourne, Victoria, 3000 Ph: (03) 9602 9444 Fax: (03) 9642 0382

Underwriter

Patersons Securities Limited Level 23, Exchange Plaza 2 The Esplanade Perth, Western Australia, 6000 Ph: (08) 9263 1111 Fax: (08) 9325 5123

ASX Code

SBN

ASX Home Branch

Melbourne

Important Notices

This Prospectus is dated 26 June 2008 and is for the issue of:

(a) 317,896,310 New Ordinary Shares at a price of $0.01 per New Ordinary Share payable in full on application by way of a renounceable Rights Issue of four (4) New Ordinary Shares for every five (5) Shares held at the Record Date being 9 July 2008; together with
(b) 158,948,155 free attaching Options with an exercise price of $0.02 expiring 30 November 2010 on the basis to receive one (1) Option for every two (2) New Ordinary Shares subscribed for.

Prospectus

This Prospectus was lodged with ASIC on 26 June 2008 with the consent of all Directors. Neither ASIC nor ASX and their respective officers take any responsibility for the contents of this Prospectus. No Securities will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

Certain terms and abbreviations used in this Prospectus have defined meanings which are explained in the Glossary of Terms.

This document is important and should be read in its entirety. Your investment decision in the Rights Issue should be based upon the information contained in this Prospectus. If in doubt, you should consult your stockbroker, solicitor, accountant or other professional advisor without delay.

Tax implications

The potential tax effects relating to the Rights Issue will vary between Shareholders. Shareholders are advised to consider the possible tax consequences of being allocated Rights under the Rights Issue and of participating in the Rights Issue.

Prior to February 2007, the making of a renounceable rights issue did not raise any direct income tax consequences unless the rights were sold. However, the decision of the High Court of Australia in The Commissioner of Taxation v McNeil (McNeil’s Case ) in February 2007 found that the offer of rights to shareholders under a renounceable rights issue constitutes assessable income in the hands of the shareholder taxpayer. Accordingly, shareholders that received rights were to include the value of those rights in their assessable income in the financial year in which the rights were received, notwithstanding that they may not have attempted to deal in those rights at all.

On 8 April 2008 the Commonwealth Treasurer released a media release indicating the

Commonwealth Government’s intention to amend the law to restore the taxation treatment of rights prior to McNeil’s Case ( the Media Release ). The Commonwealth Government has subsequently released a Bill titled the Tax Laws Amendment (2008 Measures No.3) Bill 2008 ( the Bill ) which contains the proposed legislative changes to rights issues as discussed by the Commonwealth

Treasurer in the Media Release. The Bill provides that in relation to any rights issued by an issuing entity to its shareholders to acquire relevant interests in the issuing entity, an amount equal to the market value of the rights is non-assessable and non-exempt income at the time the rights are issued, provided that the original interests are held on capital account. The Bill provides that a capital gain or loss will generally arise when the rights are transferred or the shares issued upon exercise of the rights are transferred.

In the event the Bill is passed, the resulting legislation will have the effect of reversing the taxation effect of McNeil’s case so that the issue of a right by a company to its shareholders after 1 July 2001 will not be classified as assessable income on the date such right is or was granted.

As the precise taxation implications will depend upon each Shareholder’s specific circumstances, the Company recommends that Shareholders seek their own professional tax advice as to the tax consequences (including tax return reporting requirements, applicable tax laws and the effect of any proposed changes in tax laws) which arise from the Rights Issue. Shareholders should seek this advice whether or not they participate in the Rights Issue and acquire the Securities. The Company and its officers and their taxation or other advisors do not accept any liability or responsibility in respect of any statements concerning the Australian taxation consequences of the Rights Issue.

Entitlement and Acceptance Form

The enclosed Entitlement and Acceptance Form is important. Please refer to the instructions in Section 7 of this Prospectus regarding your options in relation to your Entitlement. Acceptances must be received together with payment for your subscription amount by 5.00pm (Australian Eastern Standard Time) on 6 August 2008.

Application for Shortfall Securities

Members of the public other than Eligible Shareholders may apply for Shortfall Securities by completing an Application Form. An Application Form will be included in the Prospectus that is available on the Company’s website. This form is to be used by members of the public seeking to apply for Shortfall Securities. Shortfall Securities will be allotted between Eligible Shareholders, members of the public who submit a valid Application Form and sub-underwriters at the discretion of the Underwriter.

Authorised Statements

No person is authorised to give any information or make any representation in connection with the issue of Securities under this Prospectus which is not contained in this Prospectus. Any information or representation not contained in this Prospectus may not be relied upon as having been authorised by the Company in connection with this Rights Issue.

Additional Copies of the Prospectus

Additional copies of this Prospectus are available from the registered office of the Company during normal business hours or can be obtained from the Company’s website at www.sunbiomed.com/prospectus.

The Prospectus available on the Company’s website does not include an Entitlement and Acceptance Form. Eligible Shareholders wishing to take up their Entitlement to apply for Securities should complete the paper copy of the Entitlement and Acceptance Form which accompanies a paper copy of this Prospectus.

Restrictions on Distribution

The Company has decided that it will not make offers of Securities under this Prospectus to Shareholders with registered addresses outside Australia or New Zealand. This decision was made having regard to the number of Shareholders with registered addresses outside Australia or New Zealand, the number and value of Securities those Shareholders would have been offered and the cost of complying with the legal and regulatory requirements in the relevant countries outside Australia and New Zealand.

No action has been taken to register or qualify the Securities, the Rights Issue or this Prospectus or otherwise to permit a public offering of the Securities in any jurisdiction outside Australia and New Zealand.

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. The distribution of this Prospectus in jurisdictions outside Australia and New Zealand may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. It is the responsibility of Applicants who are citizens or residents of jurisdictions outside of Australia and New Zealand to ensure compliance with all laws of any of the relevant jurisdictions.

Summary of Important Dates

Date of Prospectus 26 June 2008 Lodgement of Prospectus with ASIC 26 June 2008 Notice sent informing Shareholders of the Rights Issue 2 July 2008 Shares quoted ‘ex’ rights and rights trading commences 3 July 2008 Record Date for Entitlements to New Ordinary Shares and Options 9 July 2008 Prospectus and Entitlement and Acceptance Form dispatched and 15 July 2008 announcement that dispatch complete Rights trading ends 29 July 2008 Closing date for acceptances 6 August 2008 Notify ASX of under subscriptions 11 August 2008 Dispatch of New Ordinary Share and Option transaction confirmation 14 August 2008 statements Expected date of quotation of New Ordinary Shares and Options on a normal 19 August 2008 T+3 basis

Shareholders are advised that this summary of important dates is an indicative timetable only.

The Company, in consultation with the Underwriter (and the ASX if necessary), reserves the right to extend the Closing Date by giving at least 6 Business Days notice to ASX prior to the Closing Date.

Letter from the Chairman

Dear Shareholder,

This Prospectus seeks your support for a capital raising by the Company of up to $3,178,963 (before costs) through a renounceable Rights Issue of New Ordinary Shares with free attaching Options.

Renounceable Rights Issue

It is proposed that up to:

(a) 317,896,310 New Ordinary Shares will be issued at a price of $0.01 per New Ordinary Share on the basis to acquire four (4) New Ordinary Shares for every five (5) Shares you hold at the Record Date; together with
(b) 158,948,155 free attaching Options with an exercise price of $0.02 expiring 30 November 2010 on the basis of one (1) Option for every two (2) New Ordinary Shares subscribed for.

This Offer is underwritten by Patersons Securities Limited up to the Minimum Subscription amount of $2,000,000 provided the Company raises a minimum of $500,000 from Shareholders and the public through the Rights Issue and the Public Offer.

The table below summarises the current commitments that the Company has received:

		$
A B	Commitments from sub-underwriters and current Shareholders: Minimum amount to be raised through Rights Issue from other than those persons under A: Minimum Subscription amount required by Company: Amount converted to equity by Dr Ming and Alice Sun under restructure of Promissory Note (assuming an AUD/USD exchange rate of 0.95). This amount is not included under the $2,000,000 to be raised under the Rights Issue: Total Equity Raised:	1,500,000 500,000
		2,000,000 516,000
		2,516,000

Support of Major Shareholders

The Board is pleased that the major Shareholders of the Company have demonstrated their confidence in the future of the Company and have committed the following amounts to the Rights Issue:

(a) Log Creek Pty Ltd – up to $666,667;
(b) a Director of the Company, Mr Andrew Paice has committed in writing to taking up his full Entitlement under the Rights Issue of $40,930; and

(c) Dr Ming and Alice Sun have agreed to convert the equivalent of US$490,000 into Shares to be issued in accordance with the terms of the restructure of the payment of US$980,000 under the Promissory Note.

Future Opportunities

The Board believes that the Company is well positioned to take advantage of a number of opportunities which it anticipates will materially improve its financial performance during the year ending 2009.

Since February 2008 the Board has taken the following steps to position the Company for future growth:

(a) the appointment of Jack Kerins as chief executive of Sun Biomedical Laboratories, Inc ( SBL );
(b) rationalisation of the Company’s cost structure by focusing on the Company’s operations in the United States. This has involved the resignation of senior management in Australia and a reduction in operating costs of approximately $500,000 per annum;
(c) the focus on materially improving sales of OraLine through distributors in the United States and internationally;
(d) the continued development of the Chinese joint venture with SiYi to supply OraLine to the China Ministry of Public Security;
(e) the focus on new product development including OraLine VIII and the BioScreens Cup;
(f) the restructure of the US$980,000 owing to Dr Ming and Alice Sun as summarised below; and
(g) the implementation of stronger financial controls in relation to management of working capital and project development expenditure.

Agreement with Dr Ming and Alice Sun

The Company is also pleased to advise that it has reached an agreement with Dr Ming and Alice Sun, the founders of SBL, in relation to payment of US$980,000 as final consideration for the acquisition of SBL. The Suns have agreed to:

(a) convert US$490,000 into Shares at $0.01 per Share, the same issue price as under the Rights Issue ;

(b) be issued with Options on the basis of one Option for every two Shares issued to the Suns under paragraph (a) above, the same ratio as offered under the Rights Issue. The Options will have the same terms as the Options to be issued under this Prospectus; and
(c) receive a US$490,000 payment following the Rights Issue,

as settlement for the payment of US$980,000.

The conversion under paragraph (a) is conditional upon the Company achieving the Minimum Subscription amount of $2,000,000.

Dr Sun is actively involved in both the China and OraLine VIII projects and remains committed to the success of the Company.

Use of Funds

The proceeds of this Rights Issue will be applied, inter alia, as follows:

(a) the payment of amounts owing in relation to the Company’s acquisition of SBL;
(b) the commercialisation of the Chinese joint venture with SiYi, including the capital expenditure required to increase the production capacity at the existing plant to accommodate a higher volume of sales;
(c) the development of the BioScreens Cup and the cost of attaining FDA 510(k) Clearance for point-of-care sale of the VisuaLine product;
(d) the development and marketing of OraLine VIII;
(e) developing SBL’s compliance with Good Manufacturing Practices; and
(f) working capital to support the ongoing business activities of the Company.

Applications

In the event this Rights Issue is not fully subscribed, the Directors have determined to offer Eligible Shareholders and members of the public the right to apply for Shortfall Securities arising out of any shortfall.

The Entitlement and Acceptance Form is located at the back of this Prospectus. Eligible Shareholders must complete the Entitlement and Acceptance Form in order to take up their Entitlements and to apply for Shortfall Securities. Entitlement and Acceptance Forms must be properly completed and received by the Company’s Share Registry no later than 5.00pm (Australian Eastern Standard Time) on 6 August 2008 in order for Applicants to be issued Securities and Shortfall Securities.

Members of the public may also apply for Shortfall Securities by completing the Application Form. Application Forms must also be properly completed and received by the Company’s Share Registry no later than 5.00pm (Australian Eastern Standard Time) on 6 August 2008 in order for members of the public who apply for Shortfall Securities to be issued Shortfall Securities.

Quotation

New Ordinary Shares issued under this Prospectus will rank equally with the Company’s existing Shares.

The Company has applied to ASX for quotation of the New Ordinary Shares on the Official List of the ASX. The Company will also use its best endeavours to obtain quotation of the Options on the Official List of the ASX. If approval is not granted by ASX within 3 months after the date of this Prospectus, the Company will not issue any Securities and will repay all Application monies without interest.

Enquiries

If you have any questions regarding this renounceable Rights Issue, please telephone the Company’s Share Registry, Computershare Investor Services Pty Limited, on 1 300 728 275 (within Australia) or +61 3 9946 4451 (outside Australia).

The Directors recommend this renounceable Rights Issue to you.

Yours sincerely,

==> picture [133 x 114] intentionally omitted <==

Mr. Peter King Chairman

1. Details of the Rights Issue

This Section provides an overview of the Rights Issue. Before deciding whether to subscribe for New Ordinary Shares and the free attaching Options under this Prospectus, Applicants should read this Prospectus in its entirety.

1.1. The Rights Issue

The Company currently has 397,370,388 Shares on issue.

The Company intends to make a renounceable Rights Issue of the following securities:

(a) 317,896,310 New Ordinary Shares on the basis of four (4) New Ordinary Shares for every five (5) Shares held at 7.00pm on the Record Date being 9 July 2008 at an issue price of $0.01 per New Ordinary Share; together with
(b) 158,948,155 free attaching Options with an exercise price of $0.02 expiring 30 November 2010 on the basis of one (1) Option for every two (2) New Ordinary Shares subscribed for.

The New Ordinary Shares and Options referred to above are referred to as ‘ the Securities ’ in this Prospectus.

1.2. Minimum Subscription

The underwritten Minimum Subscription is $2,000,000 (200,000,000 New Ordinary Shares and 100,000,000 Options) provided the Company raises a minimum of $500,000 from Shareholders and the public through the Rights Issue and the Public Offer. The Minimum Subscription of $500,000 to be raised from Eligible Shareholders and the public through the Rights Issue and the Public Offer is exclusive of the $707,597 that has been committed by Andrew Paice and Log Creek Pty Ltd. Please refer to Section 1.13 of this Prospectus for further information.

Provision is made for further subscriptions up to an additional $1,178,963. The Maximum Subscription is therefore $3,178,963 (317,896,310 New Ordinary Shares and 158,948,155 Options).

1.3. Entitlement to Securities

The Company has decided that it will not make offers under this Prospectus to Shareholders with registered addresses outside Australia or New Zealand. See Section 1.11 of this Prospectus for further details regarding International Shareholders.

Subject to the conditions described above, Shareholders who are on the Company’s Register at 7.00pm on the Record Date being 9 July 2008 will receive the right to acquire the following securities:

(a) four (4) New Ordinary Shares for every five (5) Shares; together with
(b) one (1) attaching free Option for every two (2) New Ordinary Shares subscribed for.

Shares acquired on the ASX on or after 4 July 2008 (or such other date set by ASX) will not receive Rights to subscribe for the Securities offered under this Prospectus.

An Entitlement and Acceptance Form setting out Shareholders’ Entitlements to the Securities accompanies the hard copy of this Prospectus distributed to Eligible Shareholders.

Eligible Shareholders who do not take up their Entitlement in full may, as a result of this Rights Issue, have their percentage shareholding in the Company diluted.

Eligible Shareholders are also invited to apply for Shortfall Securities arising out of any Existing Shareholders not taking up all or part of their Entitlement, by completing the section of the Entitlement and Acceptance Form which deals with Shortfall Securities. Section 1.12 of this Prospectus provides further information regarding Applications for Shortfall Securities.

Members of the public may subscribe for Shortfall Securities under this Prospectus by submitting a properly completed Application Form. Such Applicants should note that the Entitlements of Eligible Shareholders will be satisfied in full prior to any Shortfall Securities being allotted to members of the public in respect of such Applications. Upon the Entitlements of Eligible Shareholders being satisfied, Shortfall Securities will be allotted between Eligible Shareholders who have applied for Shortfall Securities, members of the public who submit a valid Application Form and sub-underwriters at the discretion of the Underwriter.

1.4. Entitlement

The Entitlement of each Shareholder is shown on the personalised Entitlement and Acceptance Form.

Where the number of New Ordinary Shares to which a Shareholder is entitled contains a fraction, the number will be rounded up to the nearest whole number of New Ordinary Shares.

Where the number of Options to which a Shareholder is entitled contains a fraction, the number will also be rounded up to the nearest whole number of Options.

1.5. Closing Date and Payment for Securities

The Closing Date for acceptance of Entitlement and Acceptance Forms and Application Forms is 5.00pm (Australian Eastern Standard Time) on 6 August 2008.

Cheques must be drawn in Australian currency on an Australian bank and made payable to ‘Sun Biomedical Limited – Renounceable Rights Issue’ and crossed ‘Not Negotiable’. Applicants are requested not to forward cash, postal notes or money orders by mail. Receipts for payment will not be issued.

Shareholders may also make payment via BPay. The Entitlement and Acceptance Form sets out the details of the biller code, each Shareholder’s BPay reference number and the instructions of how to pay via BPay. In the event a Shareholder elects to make payment via BPay, that Shareholder does not need to complete or return their Entitlement and Acceptance Form. Members of the public may not make payment for Shortfall Securities via BPay under the Public Offer.

1.6. Allotment of Securities

The Securities will be allotted and issued and holding statements dispatched no more than 6 Business Days after the Closing Date for receipt of Applications.

Until the allotment and issue of Securities under this Prospectus, Application monies will be held by the Company in trust in a separate bank account opened and maintained for that purpose only. Any interest earned on Application monies will be for the benefit of the Company and will be retained by the Company irrespective of whether allotment takes place.

1.7. ASX Quotation

The Company has applied to ASX for quotation of the New Ordinary Shares and the Options on the Official List of the ASX. If approval is not granted by ASX within 3 months after the date of this Prospectus, the Company will not issue any Securities and will repay all Application monies without interest.

A decision of ASX to grant Official Quotation of the Securities is not to be taken in any way as an indication of ASX’s view as to the merits of the Company or the Securities offered under this Prospectus.

1.8. Rights Trading

The Rights are renounceable. This provides Eligible Shareholders who do not wish to subscribe for some or all of the Rights an opportunity to sell those Rights.

Trading of Rights will commence on ASX on 3 July 2008 and will cease on close of trading on 29 July 2008. Rights to which Eligible Shareholders are entitled may be sold on ASX between those dates should Eligible Shareholders choose not to accept their full Entitlement.

1.9. Rights Attached to New Ordinary Shares

From allotment, the New Ordinary Shares issued pursuant to the Prospectus will rank equally in all respects with existing Shares.

A summary of the rights attaching to Shares as set out in the Company’s Constitution is described in Section 6.2 of this Prospectus.

1.10. Rights Attached to Options

A summary of the rights attaching to the Options are described in Section 6.3 of this Prospectus.

1.11. International Shareholders

The Company has determined that it is unreasonable to make offers of Securities to Shareholders with registered addresses outside Australia or New Zealand. This decision was made having regard to the number of Existing Shareholders with registered addresses outside Australia and New Zealand, the number and value of Securities those Shareholders would have been offered and the cost and time involved in complying with the legal and regulatory requirements in the relevant countries outside Australia and New Zealand.

Accordingly, this Offer will not be made to International Shareholders and no Securities will be issued to International Shareholders. This Prospectus is sent to International Shareholders for information purposes only. In order for a Shareholder to participate to accept the offer of Rights, the Shareholder must be resident in Australia or New Zealand at the Record Date.

The Directors will offer the Rights which would otherwise have been offered to International Shareholders to the Underwriter. If there is a viable market in the Rights and a premium over the expenses of the sale can be obtained, the Underwriter will sell the Rights. Any sale will be at prices and otherwise in the manner determined by the Underwriter in its sole discretion.

Neither the Company nor the Underwriter will be liable for any failure to sell the Rights or to sell the Rights at any particular price. The proceeds of the sale of International Shareholders’ Rights will be distributed to International Shareholders for whose benefit the Rights are sold in proportion to their Entitlements (after deducting costs).

If there is no viable market for the Rights, the Entitlements of International Shareholders will be allowed to lapse.

1.12. Applications for Shortfall Securities by Eligible Shareholders

The Directors have decided that all Eligible Shareholders who take up their full Entitlement will be entitled to apply for Shortfall Securities arising out of the shortfall. Eligible Shareholders wishing to apply for Shortfall Securities must complete the relevant section of the Entitlement and Acceptance Form.

All completed Entitlement and Acceptance Forms and cheques for Shortfall Securities must be received by the Company’s Share Registry by 5.00pm (Australian Eastern Standard Time) on 6 August 2008. This is the same closing date as the Closing Date for acceptance of Entitlements for the Securities. Shareholders may also make payment via BPay. In the event

a Shareholder elects to make payment via BPay, that Shareholder does not need to complete or return the acceptance attached to the Entitlement and Acceptance Form.

The Company may reject any Application for Shortfall Securities in whole or in part without interest being payable in respect of the funds advanced as payment for such Shortfall Securities.

If any shortfall remains after Eligible Shareholders have taken up their Entitlements to Securities and Shortfall Securities, the Directors reserve the right pursuant to Listing Rule 7.2 (Exception 3) to place the balance of the shortfall of the New Ordinary Shares and Options at an issue price per of not less than $0.01 within 3 months of the close of this Offer on normal commercial terms.

1.13. Position of Major Shareholders and Directors

Andrew Paice, a Director of the Company, owns 5,116,250 Shares as at the date of this Prospectus, representing approximately 1.29% of the Company’s issued capital. Mr Paice has committed in writing to take up his full Entitlement of $40,930 under this Issue and to not, during the period up to and including the date on which the Securities are allotted, dispose of any of the Shares held by him as at the date of this Prospectus. Peter King and Jim Hallam, the other Directors of the Company, do not own any Shares as at the date of this Prospectus. For the security holdings and Entitlement details of all Directors of the Company, refer to Section 6.8 of this Prospectus.

Log Creek Pty Ltd, whom at the date of this Prospectus owns 54,009,544 Shares representing approximately 14.66% of the Company’s issued capital, has committed in writing to take up to $666,667 (66,666,667 New Ordinary Shares and 34,333,334 Options) under this Issue and to not, during the period up to and including the date on which the Securities are allotted, dispose of any of the Shares held by it as at the date of this Prospectus. The Underwriter has agreed to pay Log Creek Pty Ltd a commitment fee equivalent to 3.00% of the amount it has precommitted to subscribe.

Jim Hallam is Log Creek Pty Ltd’s nominated representative on the Board of the Company.

1.14. Conversion of Debt to Equity

The Company has entered into an arrangement with Dr Ming and Alice Sun, the vendors of SBL to the Company, whereby US$980,000 outstanding to the Suns will be paid subject to conditions. Under this arrangement, five Business Days following the issue date of the Securities under the Rights Issue, the Company will:

(a) issue to the Suns (or its nominee):
(i) such number of Shares equivalent to US$490,000 at an issue price per Share of $0.01. The issue price of these Shares is to be converted from Australian Dollars into United States Dollars at the exchange rate as

published by the Reserve Bank of Australia on the Business Day immediately prior to the issue of such Shares. Assuming an exchange rate of AU$1.00 to US$0.95, this will result in the issue of 51,578,947 Shares; and

(ii) such number of Options with an exercise price of $0.02 expiring 30 November 2010 on the basis of one Option for every two Shares issued to the Suns under paragraph (a)(i) above, the same ratio as offered under the Rights Issue. Assuming the issue of 51,578,947 Shares under paragraph (a)(i), this will result in the issue of 25,789,474 Options; and
(b) pay to the Suns the amount of US$490,000.

The conversion under paragraph (a)(i) is conditional upon the Company achieving the Minimum Subscription amount of $2,000,000.

The agreement with the Suns also provides that in the event the Company:

(a) does not lodge a disclosure document or an offer document in respect of the Rights Issue with the Australian Securities and Investments Commission by 31 July 2008; or
(b) withdraws the disclosure document or the offer document in respect of the Rights Issue or otherwise cancels the Rights Issue at any time after 3 August 2008,

the US$980,000 will become due and payable in accordance with the provisions of the Promissory Note.

1.15. Minimum Subscription Underwritten

The Offer is underwritten up to the Minimum Subscription of $2,000,000 (200,000,000 New Ordinary Shares and 100,000,000 Options) by the Underwriter, Patersons Securities Limited provided the Company raises a minimum of $500,000 from Eligible Shareholders and the public through the Rights Issue and the Public Offer. The Minimum Subscription of $500,000 to be raised from Eligible Shareholders and the public through the Rights Issue and the Public Offer is exclusive of the $707,597 that has been committed by Andrew Paice and Log Creek Pty Ltd. Please refer to Section 1.13 of this Prospectus for further information.

The Underwriting Agreement entered into between the Company and the Underwriter provides that the Underwriter may terminate its obligations under the Underwriting Agreement in certain circumstances. The Underwriting Agreement is summarised in Section 6.4 of this Prospectus.

1.16. Applications for Shortfall Securities by Members of the Public

Members of the public resident in Australia and New Zealand who are not Shareholders may also apply for Shortfall Securities by submitting a properly completed Application Form and Application moneys.

All completed Application Forms for Shortfall Securities under the Public Offer and cheques for such Shortfall Securities must be received by the Company’s Share Registry by 5.00pm (Australian Eastern Standard Time) on 6 August 2008. Members of the public may not make payment for Shortfall Securities via BPay.

The Company may reject any Application for Shortfall Securities in whole or in part without interest being payable in respect of the funds advanced as payment for such Shortfall Securities.

1.17. Issue Expenses

The estimated expenses of the Rights Issue including underwriting fees, professional fees, registry services and printing and postage are approximately $330,000 under the Minimum Subscription and $350,000 under the Maximum Subscription.

1.18. Use of Funds Raised

The proceeds of this Rights Issue will be applied as follows:

Use of Funds	Minimum Subscription	Maximum Subscription
Payment to Dr Ming and Alice Sun as final consideration for the acquisition of SBL	$516,000	$516,000
Commercialisation of China joint venture, including capital expenditure required to increase the production capacity of the current plant	$140,000	$400,000
Development of BioScreens Cup and VisuaLine 510(k) Clearance	$170,000	$170,000
Development and marketing of OraLine VIII	$125,000	$125,000
FDA Good Manufacturing Practice compliance and quality control measures	$100,000	$100,000
Working capital to support operating costs of SBL and the Company	$619,000	$1,517,963
Expenses of the Rights Issue	$330,000	$350,000
Total funds raised	$2,000,000	$3,178,963

On completion of this Rights Issue, the Directors believe that the Company will have sufficient working capital to carry out its objectives as stated in this Prospectus. However, the Company may need to raise additional funds if it is not able to successfully commercialise the products developed by the Company.

1.19. Enquiries

If you have any questions regarding your Entitlement, please contact the Company’s Share Registry:

Computershare Investor Services Pty Limited GPO Box 52 Melbourne, Victoria, 8060 Ph: 1 300 728 275 (within Australia) Ph: +61 3 9946 4451 (outside Australia) Fax: +61 3 9473 2500

Alternatively, contact your stockbroker, solicitor, accountant or other professional advisor.

2. Effect of the Rights Issue

2.1. Capital Structure

The effect of the Rights Issue on the Company’s issued share capital will be as follows:

Capital	Minimum Subscription	Maximum Subscription
Shares
Shares on issue prior to the Rights Issue	397,370,388	397,370,388
Approximate number of New Ordinary Shares to be issued pursuant to this Prospectus	200,000,000	317,896,310
Approximate number of Shares to be issued to the Suns	51,578,947	51,578,947
Approximate total Shares after the Rights Issue	648,949,335	766,845,645
Options
Current Options on issue*	78,914,938	78,914,938
Approximate number of Options to be issued pursuant to this Prospectus	100,000,000	158,948,155
Approximate number of Options to be issued to the Suns	25,789,474	25,789,474
Total Options on issue	204,704,412	263,652,567

*A full list of the Options on issue as at the date of this Prospectus is set out at Section 6.7 of this Prospectus.

2.2. Market Price of Shares

The highest and lowest market sale prices of the Company’s Shares on the ASX during the 4 months immediately preceding the date of lodgement of this Prospectus with ASIC and the respective dates of those sales were as follows:

Highest: $0.048 on 22 April 2008.

Lowest: $0.013 on 11, 13 and 16 June 2008.

The latest available market sale price of the Company’s Shares on ASX prior to the date of lodgement of this Prospectus with ASIC was $0.013 on 25 June 2008.

2.3. New Ordinary Shares to Rank Pari Passu with Existing Shares

The New Ordinary Shares will rank pari passu in all respects (including dividend and bonus issues) with all existing Shares in the capital of the Company from the date of allotment and issue. The Directors are not able to determine if dividends will be paid in the future, as this

will depend on the future profitability, financial position and cash requirements of the Company.

3. Review of Operations

3.1. Corporate Structure

The Company’s core business is its investment in its United States subsidiary, Sun Biomedical Laboratories, Inc ( SBL ). SBL seeks to be the leading manufacturer of rapid diagnostic devices using oral fluids for drugs of abuse.

The Company also owns ShockRounds through its Australian subsidiary, MDM Technologies Pty Ltd.

3.2. Board of Directors and Management Team

(a) Board of Directors

PETER KING Non-Executive Chairman

Experience

Mr King is a Rhodes Scholar, barrister and former politician, being the past sitting member for Wentworth in New South Wales. Mr King has a breadth of international experience and contacts which are complimentary to the Company’s business.

Directorships held in other listed entities: Nil Directorships held in the past three years in other listed entities: Nil

JIM HALLAM Non-Executive Director

Experience

Mr Hallam is the Managing Director and founder of Turnberry Funds Management Pty Ltd ( TFM ). TFM is a specialist funds management company managing the Turnberry Private Equity Fund which invests in businesses which have an enterprise value of $10 to $50 million.

Prior to establishing TFM in 2007, Mr. Hallam spent 9 years at Hastings Funds Management as its Chief Financial Officer and Chief Operating Officer of the publicly listed Hastings Diversified Utilities Fund. Mr. Hallam also spent four years at AIDC Ltd where he originated and managed investments in the management buy-in/out and expansionary capital sector.

Directorships held in other listed entities: Nil Directorships held in the past three years in other listed entities: Nil

ANDREW PAICE Non-Executive Director

Experience

Mr Paice has extensive experience in financial management roles at a senior executive and director level, both in Australia and overseas in the medical device and pharmaceutical sector. Directorships held in other listed entities: Nil Directorships held in the past three years in other listed entities: Nil

(b) Company Secretary

ALFONSO GRILLO

Company Secretary

Experience

Mr Grillo is a partner with TressCox Lawyers and has expertise in various aspects of commercial law, including company meeting practice and corporate governance procedures, fundraising and fundraising documentation, Listing Rules and mergers and acquisitions.

Alfonso is also company secretary of two other ASX listed companies.

(c) SBL
JACK KERINS SBL - Chief Executive Officer

Experience

Mr Kerins joined SBL in October 2007 as its Chief Operating Officer. He became its Chief Executive Officer in February 2008 when the Company’s operations were restructured. Mr Kerins has a 20 year history of transitioning organisations from start up to multi million dollar enterprises. He has experience in both the private and public sectors and has managed a number of initial public offerings, acquisitions and complex technology based businesses.

DR MING SUN SBL - Director of Research and Development

Experience

Prior to commencing his employment with SBL, Dr Sun was a Project Manager and Director and Vice President of Research and Development at Abbott Labs and Becton Dickinson Immunodiagnostics Division. Dr Sun has also been involved in several other biotechnology companies. Dr Sun is personally responsible for the development of SBL’s core intellectual property and the OraLine product. He founded and managed SBL for 14 years and is now focused on the development of

the next generation of oral-fluid immunoassay devices and the transference of his knowledge and experience with saliva diagnostics to the next generation of SBL scientists.

3.3. Restructure of the Company’s Operations

In early 2008, the Company undertook a strategic review of its business model resulting in the closure of its Melbourne premises and the outsourcing of its Australian finance and administrative functions to TFM. Mr Hallam, a Non-Executive Director of the Company, is the principal of TFM. This review was undertaken by the Company to recognise the importance of allocating the majority of its cash resources to developing the SBL business based in the United States.

3.4. Overview of United States Drug Testing Market

(a) Overview

The United States Federal government regulations for alcohol and drug testing cover approximately 12.1 million employees.[1] These mandated tests, along with workplace drug testing and law enforcement, have been estimated to constitute a $1.3 billion market in the US.[2] The chart below shows the types of tests undertaken, the approximate sales of such tests and their respective market shares:

==> picture [311 x 108] intentionally omitted <==

----- Start of picture text -----

Other $8m
Hair $55m
Blood $348m
Saliva $30m Urine $858m
----- End of picture text -----

Source: BCC Research Inc, 2002

Of the US$858 million which relates to urine testing, around 60% relates to laboratory based, rather than rapid or on-site testing, which is the Company’s target market.[3]

1 Source: US Department of Transportation website (http://www.dot.gov/ost/dapc)

2 Source: BCC Inc, “The Drug Monitoring and Abuse Testing Business”, 2002, p.xviii

3

Source: BCC Inc, “The Drug Monitoring and Abuse Testing Business”, 2002, pp.68-69

Consequently, the Company estimates that the size of its contestable urine market is around US$350 million. As this market is highly competitive and very price sensitive, the Company continues to believe that its primary opportunity for growth lies in the saliva market.

The current saliva market in the United States has been estimated at around $30 million.[4] No manufacturer has emerged as a clear market leader in the saliva pointof-care ( POC ) testing market.

(b) Urine vs. Saliva

Saliva drug screening products are not a direct substitute for urine drug screening tests. Saliva and urine tests differ in the convenience of sample collection and in the detection windows for drug use. The main advantage of saliva detection is that it can detect recent drug use and provide an estimate of the level of impairment whereas urine’s main detection advantage is that it can detect use of a number of drugs that occurred weeks prior to testing. Accordingly, purchasers of saliva testing products typically prefer the ease of sample collection and the testing for current impairment.

(c) Independent Review of the United States Market

The Company appointed a United States consulting firm which specialises in the workplace testing marketplace to undertake a review of the market for rapid drug testing in the United States. The view of the consulting firm, consistent with those held by laboratories and third party administrators ( TPA ) of employee drug programs, is as follows:

lab based urine testing continues to be the predominant mode of drug testing in workplace programs;
TPAs have the greatest influence in determining which devices are used by end users;
market interest in oral fluid testing peaked in 2005 and 2006 and has subsequently fallen as a result of the United States federal government’s delay in approval of modes of testing alternative to urine testing. The recent fall in market interest in saliva testing has also been attributable to, amongst other things:
the shorter time frame of detection by saliva testing given that 70 – 80% of drug testing occurs during pre-employment screening;
the lack of legal precedent for oral testing; and

4 Source: BCC Inc, “The Drug Monitoring and Abuse Testing Business”, 2002, p.74

the inability of oral fluid devices to accurately detect THC (marijuana) at the sensitivity levels of urine testing;
oral fluid has a more favourable reputation in countries other than the United States;
oral fluid testing products have particular application in certain segments such as mining, construction, random testing, post accident and pre-commencement of work testing. Accordingly, the marketing of saliva testing products should target these segments;
the promotion of oral fluid testing devices by manufacturers and distributors to end users may be improved by emphasising the benefits of oral fluid testing over urine testing such as loss of productivity associated with workers leaving the workplace to provide samples at a collection facility;
the current lack of FDA approval of oral fluid testing is a major limitation. However, obtaining FDA approval will not guarantee an increase in sales of oral fluid testing. Issues such as price, reliability, accuracy and displacing market perception that urine is the only accepted medium of testing are also factors; and
a number of manufacturers of oral fluid testing devices have indicated that they will shortly obtain FDA approval.

3.5. OraLine’s Competitive Advantages

The Company is of the view that OraLine has a number of competitive advantages over other saliva products. These competitive advantages include, but are not limited to, the following:

OraLine tests for the parent drug as opposed to the metabolite of the drug. A drug’s metabolite is often not present in saliva and accordingly recent use of a drug may not be detected;
OraLine’s patented ‘spoon like’ saliva collection method precludes handling or further processing. Competitive products typically use swabs and other collection devices that require further processing;
OraLine’s colour coded test lines indicate the test is prepared and ready for use;
OraLine has a THC detection at 4 ng/ml, more accurate than any competitive product; and
OraLine is competitively priced.

3.6. Patents

The Company has the following patents registered in the United States:

US Patent No.	Description
6.046,058	Colour Coded Test Strip
5,962,336	Multi-Test Panels
6,372,516	Lateral Flow Test Devices
7,041,253	Sample Collection and Test Device
7,300,627	Test Sample Collection System

3.7. New Saliva Opportunities

(a) OraLine VIII

A new product, OraLine VIII is currently being developed and tested by SBL. OraLine VIII has the capacity to test for eight drugs in a single test: the four drugs currently tested by OraLine IV, marijuana, cocaine, opiates and methamphetamines, and a further four out of a possible six new drugs, amphetamines, barbiturates, benzodiazepines, ketamine, methadone and phencyclidine. Surveys of SBL distributors in the United States have been conducted to determine the additional four drugs which are to be tested by OraLine VIII. In addition, OraLine VIII also has an improved saliva collection device.

It is anticipated that customers will have the ability to choose from two combinations of the additional four drugs tested by OraLine VIII. The Company is of the view that enabling customers to choose the testing combinations will provide a significant advantage over competitors by addressing the differences in demand between countries, for example, between the United States and China. The expected launch date for OraLine VIII has been revised to October 2008.

Dr. Sun, the founder and current Director of Research and Development of SBL is supervising the OraLine VIII project.

(b) China

The Company has entered into a joint venture with SiYi, a China based company, for the assembly and sale of OraLine products for use by the China Ministry of Public Security ( MPS ) and future non-governmental Chinese customers.

(i) Stages of the agreement

Under the terms of the 25 year agreement, a three stage approach will be adopted.

Stage 1

SiYi will be responsible for the finalisation of the registration process with the relevant Chinese government authorities and securing trial order sales. SiYi will also be investing in the establishment of a manufacturing facility that will require Chinese government authorities review.

Stage 2

At the completion of the manufacturing facility, SBL will transfer the assembly of OraLine IV for the China market to SiYi and in return SBL will receive fifteen percent equity in SiYi and one seat on SiYi’s board. The illicit drug testing membranes will continue to be manufactured and controlled by SBL.

Stage 3

The final stage of the agreement ensures that SiYi will continue their investment to fully localise the production of OraLine IV. In Stage 3 SBL will continue to produce and sell the illicit drug testing chemistry to SiYi. Movement to Stage 3 is volume dependant upon SiYi manufacturing a minimum 1,000,000 units of Oraline IV per annum. In addition, SBL will supply the membrane chemistry for use in the Oraline IV manufactured by SiYi. As part of Stage 3, it is proposed that SiYi seek ISO13485 certification to enable SBL to utilise the facility for manufacturing of OraLine IV and other devices.

(ii) Current status

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.

(c) New United States Distributors

The Company is continuing to expand its United States OraLine distributor network . In February to April 2008, SBL added three additional United States distributors that are anticipated to generate an average of 60,000 units of OraLine each in calendar year 2009. In May 2008, SBL also added additional sales resources to continue the expansion of its United States distributor network.

Since May 2008, SBL has delivered products to one new United States TPA and has begun discussions with additional TPAs based in the United States. Penetration into the United States TPA market segment is expected to further diversify the OraLine revenue sources.

(d) Mexico

SBL has commenced a small test program of 2,000 OraLine units in Mexican schools with a further sale of 1,000 units anticipated to occur. SBL’s Mexican distribution partner has met with Mexican government officials and anticipates a decision regarding the roll out of the program within the next three months. SBL is of the view that should the program be approved for expansion, no new orders will be received until at least the start of the new school year in September 2008.

(e) Europe

Distribution partners in Poland and Russia have commenced registration of OraLine for initial over-the-counter ( OTC ) sales in those countries. SBL’s Polish distributor has obtained preliminary approval for OTC sales in Poland pending final approval anticipated by September 2008. In Russia, approval for OraLine sales for government, law enforcement and school testing and OTC sales by the Russian distributor are progressing ahead of the scheduled approval date in December 2008. Should approval be obtained, initial sales in Russia are projected to commence in early 2009.

SBL is currently seeking additional European distribution partners in the United Kingdom and intends to commence a marketing plan to attract other European partners for the release of OraLine VIII.

SBL is also utilising programs of the United States Department of Commerce to support the introduction of OraLine VIII at the Medica 2008 tradeshow in Germany in November 2008.

(f) Latin America

SBL has identified an opportunity to utilise the government export program of the United States Department of Commerce by measuring interest from potential partners in Latin America. Whilst SBL does not intend to divert its resources from the United States and China, SBL anticipates concentrating on four countries in Latin America to develop awareness of OraLine.

(g) Australia

Although the Australian market is relatively small in comparison with the United States’ market, the mining and metals industry has shown interest in saliva testing. SBL is currently supplying distribution partners in Australia with the OraLine product.

3.8. Urine Opportunities

(a) VisuaLine

The high cost of production and the lack of product innovation of VisuaLine has resulted in VisuaLine not being sold by any of SBL’s distributors. Current sales of VisuaLine are generally to a small number of buyers totalling approximately $10,000 per month. As a result, SBL has entered into an agreement with BioScreens, Inc to develop a new VisuaLine product.

(b) BioScreens, Inc.

The Company has entered into an agreement with BioScreens, Inc to develop a quality, lower cost urine testing cup. The BioScreens Cup is a ‘female friendly’ split specimen cup with a twist mechanism to separate the original urine specimen from the tested portion.

The Company is currently in the process of refining its existing membrane product for the new multi-drug cup design. However, the delivery timetable with BioScreens has been delayed until December 2008. Production of the BioScreens Cup has incurred delays due to the availability of cost effective mould and plastic manufacturing. The revised launch date of the BioScreens Cup is expected in early 2009.

(c) VisuaLine Relaunch

The Company has reviewed the VisuaLine production costs by utilizing SBL’s core competence of its test strip chemistry, with a lower assembly cost from Mexican

contract manufacturers. As a result, SBL has increased the capacity of VisuaLine from 10 drugs to 12 drugs per device.

3.9. ProbeLine

SBL previously developed a drug residue test for United States law enforcement, ProbeLine, but this product was given a low priority and not marketed in the United States. SBL has recently entered into discussions with a United States Internet and Continuity Program marketer to create a consumer dry residue test of ProbeLine for teenage testing in the home.

In 2005, the rate of illicit drug use in youths aged 12 to 17 in the United States was 9.9 percent[5] . ProbeLine provides the parents of these youths a discrete and non-intrusive test to begin a dialogue with their children should drug residue be found on the youth’s clothing, furniture or other personal effects.

Initial testing with Internet marketers has demonstrated strong interest in the developed ProbeLine product. As a result, SBL and its partner propose to prepare market test in the United States in mid 2008. In addition, SBL and its partner have entered into discussions with TV Info-Commercial marketers and retail distributors, generating additional interest for the potential to product test in those markets in 2008. A final determination of the market potential in the United States for ProbeLine is expected by October 2008 once testing of the current sales campaigns are completed.

3.10. FDA Approval

(a) VisuaLine

SBL has obtained independent advice that the BioScreens Cup will be adequately covered by its existing limited FDA approvals, provided the product is appropriately labelled. However, as there are currently a number of FDA approved urine tests and cups in the urine test market, to be competitive in the urine testing market, SBL will be required to upgrade its current VisuaLine FDA 510(k) Clearance from “laboratory use” to POC use.

(b) OraLine

The Company is of the view that the further studies required for FDA approval should be postponed until preliminary clinical trials have been completed for the existing four drugs of OraLine and the six new drugs in development. Accordingly, it is anticipated that the earliest date that the Company may submit a new FDA 510(k) Clearance application for OraLine would be mid to late 2009. Until this FDA 510(k) Clearance application is filed, SBL may continue to sell the OraLine product to international customers and for “forensic use only” in the United States.

5 Source: 2005 National Survey of Drug Use and Health, US Department of Health and Human Services, p.2

The cost of achieving FDA 510(k) Clearance POC for OraLine is estimated at US$500,000. The Company is continuing to evaluate the merits of pursuing this approval given the significant cost, the probability of success, the likelihood of a competitor achieving prior FDA 510(k) Clearance and the level of incremental sales that may be generated as a result of attaining such approval.

(c) Independent Review

The Company has engaged a third party consultant to review the status of SBL’s FDA current and future filings for VisuaLine and OraLine. The key findings of this review are as follows:

the proposed timeframe and budget for OraLine and VisuaLine FDA 510(k) Clearance POC submissions are achievable provided there are no validation failures or issues;
the improvements to be made to OraLine’s performance at the specified cut-off thresholds are to be resolved prior to filing a new submission; and
it is likely that the BioScreens Cup will be covered by SBL’s existing FDA 510(k) Clearance approvals provided the product is only marketed for forensic use.

(d) FDA Audit

The FDA has recently conducted its bi-annual audit of SBL’s operations. No material issues arose from the review and SBL anticipates that the warning letter issued in April 2007 will be withdrawn in late 2008.

(e) Good Manufacturing Practice Improvements

As no material issues were identified during the FDA audit, the Company has decided to progress its proposed Good Manufacturing Practice improvements through the use of internal, as opposed to external, resources.

3.11. Final Promissory Note Payment

As set out in Section 1.14 of this Prospectus, the Company has entered into an arrangement with Dr Ming and Alice Sun, as the vendors of SBL to the Company, whereby US$980,000 outstanding to the Suns will be repaid subject to conditions. The Suns have agreed to restructure this payment so that the Company:

(a) five Business Days following the issue of the Securities under the Rights Issue, issue to the Suns (or its nominee):
(i) such number of Shares in the Company equivalent to US$490,000 at an issue price per Share of $0.01, the same issue price as the issue price under

the Rights Issue. Based on an exchange rate of AU$1.00 to US$0.95, this will result in the issue of 51,578,947 Shares; and

(ii) such number of Options with an exercise price of $0.02 expiring 30 November 2010 on the basis of one Option for every two Shares issued to the Suns under (a)(i) above, the same ratio as offered under the Rights Issue. Assuming the issue of 51,578,947 Shares based on an exchange rate of AU$1.00 to US$0.95, this will result in the issue of 25,789,474 Options; and
(b) pay to the Suns the amount of US$490,000.

The conversion under paragraph (a) is conditional upon the Company achieving the Minimum Subscription amount of $2,000,000.

Dr Sun remains actively involved in both the OraLine VIII and China projects and continues to be committed to the development of the SBL business.

3.12. ShockRounds

The Company owns United States patent 7,100,514 in relation to the ShockRounds technology. In 2006, the book value of this technology was written down to zero as a result of the:

(a) uncertainty in the ‘less than lethal’ industry sector;
(b) status of the ShockRounds development and product optimisation;
(c) reliance on the expertise of its outsourced relationships and consultants for its ongoing development; and
(d) level of uncertainty relating to the commercialisation of the technology in the near term.

The Company proposes to continue to maintain the ShockRounds patent in the United States, China and Europe. The Company remains open to interested parties to fund the development of ShockRounds without any material financial commitment from the Company.

3.13. Summary

Overall, the Company has a number of opportunities to improve its financial performance in 2009. It is anticipated that growth in the Company’s sales will be driven predominantly by the success of its international initiatives, in particular the Chinese joint venture with SiYi and the launch of the BioScreens Cup. Sales to United States customers are expected to improve with the introduction of OraLine VIII and increased marketing efforts. However, the Company is aware that the impact of the general market slow down in the United States and the bias

towards urine as the preferred medium for testing may impede growth prospects in the near term.

4. Financial Information Relevant to the Rights Issue

4.1. Pro-forma Balance Sheet

The table below sets out the balance sheets of the Company. The first column sets out the pro-forma balance sheet of the Company at 31 December 2007 which has been subject to review by the Company’s auditors. The next four columns illustrate the Company’s unaudited pro-forma balance sheets as at 30 April 2008 under the minimum and maximum subscription scenarios and taking into account a number of major changes since 31 December 2007 as set out in Section 4.2 of this Prospectus.

	A	B	C	D = A + B	E = A + C
		Minimum	Maximum	Minimum	Maximum
		Subscription	Subscription	Subscription	Subscription
	Balance sheet as at	Pro-forma	Pro-forma	Pro-forma	Pro-forma
	31 December 2007	adjustments	adjustments	30 April 2008	30 April 2008 Balance
				Balance Sheet	Sheet
Current Assets
Cash Assets	1,500,051	(14,859)	1,144,104	1,485,192	2,644,155
Inventories	49,201	93,477	93,477	142,678	142,678
Receivables	122,663			122,663	122,663
Total Current Assets	1,671,915			1,750,533	2,909,496
Non-current Assets
Plant & equipment	21,504			21,504	21,504
Intangible Assets	3,052,744			3,052,744	3,052,744
Total Non-Current Assets	3,074,248			3,074,248	3,074,248
TOTAL ASSETS	4,746,163			4,824,781	5,983,744
Current Liabilities
Payables	469,894	(245,523)	(245,523)	224,371	224,371
Borrowings	-	-	-	-	-
Promissory Note	1,329,578	(1,329,578)	(1,329,578)	-	-
Total Current Liabilities	1,799,472			224,371	224,371
Non Current Liabilities
Promissory Note	-			-	-
Total Non Current Liabilities	-			-	-
TOTAL LIABILITIES	1,799,472			224,371	224,371
NET ASSETS	2,946,691			4,600,410	5,759,373
Equity
Contributed Equity	24,374,771	2,291,479	3,450,442	26,666,250	27,825,213
Reserves	158,632			158,632	158,632
Accumulated Losses	(21,586,712)	(637,760)	(637,760)	(22,224,472)	(22,224,472)
TOTAL EQUITY	2,946,691			4,600,410	5,759,373

An Australian Dollar to United States Dollar exchange rate of 0.95 has been adopted when converting United States Dollar denominated amounts into Australian Dollars.

4.2. Notes to the Pro-forma Balance Sheet

(a) The unaudited pro-forma balance sheet reflects the reduction in the Company’s cash balance during the period 1 January to 30 April 2008 as illustrated below:

		$	$
Cash	balance as at 31 December 2007		1,500,051
Add:	Net proceeds from Share purchase plan		105,690
	(January 2008)
Less:	Repayment of Promissory Note (January 2008)	(225,353)
	Employment costs (including resignation payments) 1	(490,143)
	Inventory purchases	(93,477)
	Payment of creditors	(245,523)
	Other working capital	(220,264)	(1,274,760)
	Cash balance as at 30 April 2008		330,981

Note 1: Includes payment of accrued salaries to previous Managing Director and Chief Financial Officer.

(b) The impact on cash and contributed equity of these transactions and the transactions including and following the Rights Issue are illustrated below:

Balance after transactions noted at (a) Add: Proceeds from Rights Issue Conversion of 50% of amount due under Promissory Note into Shares Less: Payment of costs associated with Rights Issue Repayment of 50% of amount due under Promissory Note Pro-forma cash balance	Minimum Subscription Maximum Subscription Cash $ Contributed Equity $ Cash $ Contributed Equity $ 330,981 24,480,461 330,981 24,480,461 2,000,000 2,000,000 3,178,963 3,178,963 515,789 515,789 (330,000) (330,000) (350,000) (350,000) (515,789) (515,789)
	1,485,192 26,666,250 2,644,155 27,825,213

5. Risk Factors

To appreciate the risk factors associated with an investment in the Company, this Prospectus should be read in its entirety.

5.1. Overview

This Section identifies the areas the Directors regard as the significant risks associated with an investment in this Offer. Applicants should be aware that an investment in the Company is speculative and involves risks which may be higher than other companies. Applicants should read the entire Prospectus and consider the Company’s continuous disclosure notices to the ASX before any decision is made to apply for Securities under this Rights Issue.

5.2. General Risks

There are risks associated with any investment in the stock market. The value of the Company’s Shares can be expected to fluctuate depending upon various factors, including general worldwide economic conditions and general stock market conditions, as well as the performance of the Company.

There are a number of risk factors, both specific to the Company and relating to the general business environment, which may impact upon the operating performance and financial position of the Company. Some of these risks can be mitigated by the use of contingency plans and safeguards. However, many are outside the control of the Company and cannot be mitigated.

5.3. Dependence on General Economic Conditions

The Company, like all business, is affected by general economic conditions including the level of interest rates, inflation and consumer spending. Any prolonged downturn in economic activity could be expected to have a negative impact on the Company. As a company having a smaller market capitalisation, the market in the Company’s securities may suffer periods of illiquidity.

Recent economic results in the United States suggesting an economic downturn may impact the Company to the extent that drug testing of employees is not mandated by the United States federal or state governments. Consequently, optional drug testing may not be pursued by employers.

5.4. Loss of Key Clients

The Company has a number of important client relationships. The loss of one or more key clients would be likely to adversely affect the operating results of the Company.

5.5. International Sales

The Company is currently seeking to market its illicit drug testing products in China and in particular, seeking an order for its products from the Chinese government. The Company has engaged consultants to assist in obtaining such orders and has prepared evaluation tests and reports for examination by the Chinese government. There is a risk that the Company may not be successful in the Chinese government’s examination or that initial approval may not result in subsequent orders.

The Company is currently seeking final approval for OTC sales in Poland. There is a risk that final approval may not be obtained and future sales in Poland may not be permitted.

The Company has supplied OraLine saliva tests to the Mexican government for use in student drug testing programs. There is a risk that these programs may not continue or that OraLine may not be part of those programs in the future.

The Company is seeking final approval for sales of OraLine in Russia. There is a risk that approval may not be obtained.

5.6. Reliance on Key Management

The responsibility of overseeing the day-to-day operations and the strategic management of the Company is substantially dependent upon its senior management, key personnel and consultants. There can be no assurance given that there will be no detrimental impact on the Company if one, or a number of, those employees or consultants cease their employment or engagement with the Company.

5.7. Development of OraLine VIII

The Company is in the business of developing and commercialising new products such as OraLine VIII. The development process is complex and both the drug formulations and the product housing can encounter problems which may result in delays in the product launch. Accordingly, current product prototypes may not prove successful at processing saliva samples. In addition, new test strips designed to carry the additional OraLine VIII drug tests may not be developed in accordance with proposed timetables or the drugs selected for OraLine VIII may not be those required by some customers.

5.8. Reliance on Distribution Partners

The Company’s ability to generate sales revenues relies, in part, upon the performance of its distribution partners. Consequently, any delays or issues encountered in its performance under these arrangements may impact the timing of delivery of the finished products.

5.9. Product Innovation

The long term success of the Company is dependent upon its ability to continue to develop and successfully commercialise its existing and new products in the invitro diagnostics market.

5.10. Technological Developments

A failure by the Company to adapt to technological developments within its industry sector could lead to a loss of opportunities and adversely impact the Company’s operating results and financial position.

5.11. Competition

There can be no assurance given in respect of the Company’s ability to continue to compete profitably in the competitive markets in which the Company operates. In particular, there is a risk that a competitor will achieve FDA 510(k) Clearance for its rapid saliva diagnostic device before the Company.

5.12. Funding

While the Company believes it will have sufficient funds after completion of the Rights Issue to meet its short term growth and capital requirements as set out in this Prospectus, there can be no assurance that the Company will not need further capital in order to achieve profitable operations or to seek to exploit opportunities of a kind which will require it to raise additional capital from equity or debt sources. There can also be no assurance that the Company will be able to raise such capital on favourable terms or at all. If the Company is unable to obtain such additional capital, it may not be able to continue operations or exploit such opportunities.

5.13. Protection of Proprietary Technology

SBL maintains key files in secure facilities in its offices. Access to SBL know-how and formulations are restricted to certain key employees that are involved in the production of unique SBL chemistry. While the Company has taken measures to protect its proprietary technology, there can be no assurance that these measures have been, or will be, sufficient.

SBL has actively pursued patent infringement issues to protect the integrity of SBL patents. SBL has recently settled a patent infringement lawsuit with Avitar Technologies, Inc. The settlement has formed the basis for on-going actions initiated by SBL in pursuing potential infringements of the SBL patents.

5.14. Product Liability

The Company’s contracts with its clients generally contain provisions drafted to limit the Company’s exposure to product liability claims. However, it is possible that the limitation of liability provisions may not be effective in certain jurisdictions. Hence, there can be no assurance that the Company will not be subject to such claims.

5.15. Foreign Currency

The Company transacts with international customers and component suppliers and therefore may be subject to foreign currency fluctuations. Such variations in exchange rate may impact the performance of either or both of Company’s revenues and margins. The Company endeavours to negotiate in United States dollars to minimise risk associated with foreign currency transactions.

5.16. Governmental Approvals and Regulations

In January 2008, the Company received formal advice from the FDA that the Company’s FDA 501(k) Clearance submission for OraLine had not met the requirements for FDA 510(k) Clearance. As a result, the marketing constraints on OraLine imposed by the FDA in April 2007 remain unchanged and the Company may only continue to market OraLine for forensic applications.

In order for the Company to be able to commercialise its products in certain jurisdictions, the Company may be required to obtain governmental approvals, such as FDA 510(k) Clearance or conformity to the European Union Invitro Diagnostics Directive 98/79/EC. There is no guarantee that the Company will be able to obtain these approvals in a timely manner or at all.

The Company is also required to comply with certain regulations, for example FDA regulations and ISO quality standards. SBL is unable to guarantee that FDA restrictions would not limit the ability of SBL to sell its products in the United States. SBL may incur further restriction on the sale of SBL products outside of the United States and the European Union may encounter more restrictive regulation.

SBL uses lead partners outside of the United States to manage compliance with those foreign jurisdictions’ government regulation. SBL believes that the use of partners in those foreign countries will reduce the risk of non-compliance with those foreign jurisdictions regulation and increase the marketability of the Company’s products in those countries.

5.17. Summary

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or its security holders. The above factors and other factors not specifically referred to above may, in the future, materially affect the financial performance of the Company and the value of the Company’s securities.

The Securities issued pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, return of capital or market value.

An investment in the Company’s securities should be regarded as speculative and neither the Company, nor any of its Directors, guarantee that any specific objective of the Company will be achieved.

Applicants should consult their professional advisors before deciding whether to respond to the Offer made by this Prospectus. Any person who responds to the Offer pursuant to this Prospectus does so in recognition of the above factors.

6. Additional Information

6.1. ASX Listing

The Company has applied to ASX for Official Quotation of the Securities on the Official List of the ASX. The Company participates in the Clearing House Electronic Sub register System, known as CHESS. On 14 August 2008, the Company will dispatch transaction confirmation statements that set out the number of Securities allocated to each successful Applicant under this Prospectus.

It is the responsibility of Applicants to determine their Entitlement prior to trading in their Securities.

Applicants who sell Securities before they receive their transaction confirmation statement do so at their own risk.

6.2. Rights Attaching to Shares

The rights attaching to ownership of Shares are detailed in the Constitution of the Company, which may be inspected during normal business hours at the registered office of the Company. The following is a summary of the material provisions of the Constitution relating to the rights attaching to Shares.

Voting

At a general meeting, every holder of Shares present in person or by proxy, attorney or representative has one vote on a show of hands and on a poll. Each Shareholder present has one vote for every fully paid Share held. On a poll, partly paid shares confer a fraction of a vote pro-rata to the amount paid up on the share.

A poll may be demanded by the chairperson of the meeting, by any 5 Shareholders entitled to vote on the resolution, by any one or more Shareholders entitled to not less than 5% of the total voting rights of all the Shareholders having the right to vote on the resolution on a poll or by a member or members present and holding Shares conferring a right to vote at the meeting, being Shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all of the Shares conferring that right.

General Meeting

Each Shareholder is entitled to receive 28 days notice of and, except in certain circumstances, to attend and vote at general meetings of the Company.

Dividend

Subject to the Corporations Act and the terms of the Shares the profits and reserves of the Company which the Directors from time to time determine to distribute by way of dividend to

Shareholders are divisible amongst the Shareholders in proportion to the amounts paid up on the Shares held by them.

Issue of Further Shares

The Directors may (subject to the restrictions on the issue of Shares imposed by the Constitution of the Company, the Listing Rules and the Corporations Act) issue Options and Shares on such terms and conditions as they see fit.

Transfer of Shares

Holders of Shares may transfer them by a proper transfer affected in accordance with the ASTC Settlement Rules and as otherwise permitted by the Corporations Act and the Listing Rules.

The Directors may refuse to register a transfer of Shares where the refusal to register the transfer is permitted under the Listing Rules and the ASTC Settlement Rules.

Winding Up

On a winding up of the Company, the liquidator may, with the approval of a special resolution, distribute among the Shareholders the whole or any part of the property of the Company and may determine how such division is to be carried out. The liquidator may also, with the approval of a special resolution, vest the whole or any part of the property in trustees on trust for Shareholders as the liquidator thinks fit.

Directors Indemnity

The Company, to the extent permitted by law, indemnifies each Director, alternate Director, or executive officer (and any person who has previously served in any such capacity) against any liability or cost incurred by the person as an officer of the Company, or a related body corporate of the Company, including but not limited to liability for costs incurred in defending proceedings in which judgment is given in favour of the person or in which the person is acquitted.

Share Buy Back

The Company may buy back Shares in itself in accordance with the provisions of the Corporations Act.

Alteration to Constitution

The Corporations Act provides that the Constitution of the Company can only be amended by a special resolution passed by at least three quarters of members present and voting at a general meeting of the Company.

6.3. Rights Attaching to Options

The following are the terms of the Options to be issued pursuant to this Prospectus (and to Dr Ming and Alice Sun under the restructure of the Promissory Note).

Interpretation

(a) ASX means ASX Limited (ACN 008 624 691);
(b) Board means the board of directors of the Company;
(c) Business Day means a day not being a Saturday, Sunday or public holiday, on which banks are generally open for business in Victoria;
(d) Corporations Act means the Corporations Act 2001 (Cth) as amended from time;
(e) Listing Rules means the official listing rules of the ASX;
(f) Official List has the meaning given to that term in the Listing Rules;
(g) Option and Options means the options to be issued to the Optionholder on the terms detailed in these Terms of Options;
(h) Quotation has the meaning given to that term in the Listing Rules;
(i) Shareholder and Shareholders means a person who owns Shares in the capital of the Company, notwithstanding that those Shares may not be fully paid; and
(j) Shares means fully paid ordinary shares in the capital of the Company.

1. Entitlement

1.1 Each Option entitles the Optionholder to subscribe for, and be allotted, one ordinary Share in the capital of the Company.
1.2 Shares issued on the exercise of Options will rank equally with all existing Shares on issue, as at the exercise date, and will be subject to the provisions of the Constitution of the Company and any escrow restrictions imposed on them by the ASX.

2. Exercise of Option

2.1 The Options are exercisable at any time from the date of issue.
2.2 The final date and time for exercise of the Options is 5pm (Australian Eastern Standard Time) on 30 November 2010. If such date falls on a day that is not a Business Day, the final date will be the next Business Day.
2.3 The exercise price of each Option is $0.02.

2.4 Each Option is exercisable by the Optionholder signing and delivering a notice of exercise of Option together with the exercise price in full for each Share to be issued upon exercise of each Option to the Company’s Share Registry.
2.5 Remittances must be made payable to ‘Sun Biomedical Limited’ and cheques should be crossed ‘Not Negotiable’.
2.6 All Options will lapse on the earlier of the:
(a) receipt by the Company of notice from the Optionholder that the Optionholder has elected to surrender the Option; and
(b) expiry of the final date and time for exercise of the Option as set out in paragraph 2.2.
2.7 In the event of liquidation of the Company, all unexercised Options will lapse.

3. Quotation

3.1 The Company intends to apply to the ASX for Official Quotation of the Options.
3.2 If the Shares of the Company are quoted on the ASX, the Company will apply to the ASX for, and will use its best endeavours to obtain, quotation of all Shares issued on the exercise of any Options within 10 Business Days (as defined in the Listing Rules) of issue. The Company gives no assurance that such quotation will be granted.

4. Participation in Securities Issues

Subject to paragraph 5 below, the holder is not entitled to participate in new issues of securities without exercising the Options.

5. Participation in a Reorganisation of Capital

5.1 In the event of any reconstruction or reorganisation (including consolidation, subdivision, reduction or return of the capital of the Company), the rights of an Optionholder will be changed in accordance with the Listing Rules of the ASX applying to a restructure or reorganisation of the capital at the time of that restructure or reorganisation, provided always that the changes to the terms of the Options do not result in any benefit being conferred on the Optionholder which is not conferred on Shareholders of the Company.
5.2 In any reorganisation as referred to in paragraph 5.1, Options will be treated in the following manner:
(a) in the event of a consolidation of the share capital of the Company, the number of Options will be consolidated in the same ratio as the ordinary

share capital of the Company and the exercise price will be amended in inverse proportion to that ratio;

(b) in the event of a subdivision of the share capital of the Company, the number of Options will be subdivided in the same ratio as the ordinary share capital of the Company and the exercise price will be amended in inverse proportion to that ratio;
(c) in the event of a return of the share capital of the Company, the number of Options will remain the same and the exercise price will be reduced by the same amount as the amount returned in relation to each ordinary share;
(d) in the event of a reduction of the share capital of the Company by a cancellation of paid up capital that is lost or not represented by available assets where no securities are cancelled the number of Options and the exercise price of each Option will remain unaltered;
(e) in the event of a pro-rata cancellation of shares in the Company, the number of Options will be reduced in the same ratio as the ordinary share capital of the Company and the exercise price of each Option will be amended in inverse proportion to that ratio; and
(f) in the event of any other reorganisation of the issued capital of the Company, the number of Options or the exercise price or both will be reorganised (as appropriate) in a manner which will not result in any benefits being conferred on the Optionholder which are not conferred on shareholders.

6. Adjustments to Options and Exercise Price

6.1 Adjustments to the number of Shares over which Options exist and/or the exercise price may be made as described in paragraph 6.2 to take account of changes to the capital structure of the Company by way of pro-rata bonus and cash issues.
6.2 The method of adjustment for the purpose of paragraph 6.1 shall be in accordance with the Listing Rules of the ASX from time to time, which, under Listing Rules 6.22.2 and 6.22.3, currently provide:
(a) Pro Rata Cash Issues

Where a pro-rata issue is made (except a bonus issue) to the holders of underlying securities, the exercise price of an Option may be reduced according to the following formula:

O’ = O – E[P-(S+D)]

N + 1

where:

O’ = the new exercise price of the Option.
O = the old exercise price of the Option.
E = the number of underlying securities into which one Option is Exercisable.
P = the average market price per security (weighted by reference to volume) of the underlying securities during the 5 trading days ending on the day before the ex rights date or ex entitlements date.
S = the subscription price for a security under the pro-rata issue. D = the dividend due but not yet paid on the existing underlying securities (except those to be issued under the pro-rata issue).
N = the number of securities with rights or entitlements that must be held to receive a right to one new security.
(b) Pro-Rata Bonus Issues

If there is a bonus issue to the holders of the underlying securities, on the exercise of any Options, the number of Shares received will include the number of bonus Shares that would have been issued if the Options had been exercised prior to the record date for bonus issues. The exercise price will not change.

7. Takeovers and Schemes of Arrangement

7.1 If during the currency of any Options and prior to their exercise a takeover offer or a takeover announcement (within the meaning of the Corporations Act) is made to holders of Shares then within 10 Business Days after the Company becomes aware of the offer, the Company must forward a notice notifying the Optionholder of the offer and from the date of such notification, the Optionholder has 60 days within which to exercise the Options notwithstanding any other terms and conditions applicable to the Options or arrangement. If the Options are not exercised within 60 days after notification of the offer, the Options may be exercised at any other time according to their terms of issue.
7.2 If an offer for shares in the Company is made to Shareholders pursuant to a scheme of arrangement which has been approved in accordance with the Corporations Act, the Optionholder will be entitled to exercise Options held by it within the period notified by the Company.

8. Transfers

The Options are freely transferable.

9. Notices

Notices may be given by the Company to the Optionholder in the manner prescribed by the Constitution of the Company for the giving of notices to Shareholders and the

relevant provisions of the Constitution of the Company will apply with all necessary modification to notices to be given to the Optionholder.

10. Rights to Accounts

The Optionholder will be sent all reports and accounts required to be laid before Shareholders in general meeting and all notices of general meeting of Shareholders, however, if the Optionholder is not a Shareholder, it will not have any right to attend or vote at these meetings.

6.4. Underwriting Agreement

The Company has entered into an Underwriting Agreement with the Underwriter under which the Underwriter will underwrite the Minimum Subscription amount of $2,000,000 in accordance with the terms and conditions of the Underwriting Agreement. The following is a summary of the key terms and conditions of the Underwriting Agreement:

Costs of the Underwriting

The Company will pay to the Underwriter:

(a) an underwriting commission equal to 5.0% of the underwritten amount (with the underwritten amount equalling $2,000,000);
(b) a corporate advisory fee of $60,000;
(c) a placement fee of 5% on any Shares which are issued within 3 months from the closing date under the Rights Issue which were not subscribed for under the Rights Issue, For the avoidance of doubt, the minimum $500,000 subscription does not include the sub-underwriting commitment of the Company sub-underwriters; and
(d) a management fee of 1% of the total funds raised by the Company pursuant to the Offer.

In addition, the Company will pay the costs and expenses reasonably incurred by the Underwriter in relation to the Offer.

Conditions Precedent

There are the following conditions precedent under the Underwriting Agreement:

(a) ( Minimum Subscription ): Shareholders and the public subscribe for a minimum of $500,000 under the Rights Issue. For the avoidance of doubt, the minimum $500,000 subscription does not include the sub-underwriting commitment of the Company sub-underwriters; and

(b) ( Discharge of Promissory Note ); The Promissory Note holder must execute all documentation and do all actions necessary to enable the full and final discharge of the Promissory Note on terms satisfactory to the Underwriter.

Termination Events

The Underwriter may without cost or liability terminate its obligations under the Underwriting Agreement at any time until the issue of Securities under the Offer in, inter alia, the following circumstances ( Event of Termination ).

(a) ( Share Price ): the Company’s Shares (ASX:SBN) trade on ASX for five or more days at a price below the Price of the Issue; or
(b) ( minimum subscription ): the aggregate amount subscribed by Shareholders and the public pursuant to the Right Issue does not exceed $500,000. For the avoidance of doubt, the minimum $500,000 subscription does not include the subunderwriting commitment of the Company sub-underwriters; or
(c) ( Promissory Note ): the Company fails to ensure that the Promissory Note holder executes all documentation and do all actions necessary to enable the full and final discharge of the Promissory Note on terms satisfactory to the Underwriter; or
(d) ( Government action ): any government agency (including ASIC) commences any public action, hearing or investigation against the Company or any of its directors in their capacity as a director of the Company or announces that it intends to take such action; or
(e) ( Indices fall ): any of the S&P All Ordinaries Index or the S&P Small Ordinaries Index is at any time after the date of the Underwriting Agreement 10% or more below its respective level as at the close of business on the Business Day prior to the date of the Underwriting Agreement; or
(f) ( Prospectus ): the Company does not lodge the Prospectus on 26 June 2008 or this Prospectus or the Offer is withdrawn by the Company; or
(g) ( Copies of Prospectus ): the Company fails to provide the Underwriter with copies of this Prospectus and such failure is not remedied within 2 Business Days; or
(h) ( No Official Quotation ): Official Quotation has not been granted by 7 August 2008 or, having been granted, is subsequently withdrawn, withheld or qualified; or
(i) ( Supplementary prospectus ):
(i) the Underwriter, having elected not to exercise its right to terminate its obligations under the Underwriting Agreement as a result of an occurrence of a significant change, forms the view on reasonable grounds that a supplementary or replacement prospectus should be lodged with ASIC for any of the reasons referred to in section 719 of the Corporations Act and the

Company fails to lodge a supplementary or replacement prospectus in such form and content and within such time as the Underwriter may reasonably require; or

(ii) the Company lodges a supplementary or replacement prospectus without the prior written agreement of the Underwriter; or
(j) (Non-compliance with disclosure requirements ): it transpires that this Prospectus does not contain all the information required by section 713 (or sections 710, 711 and 716) of the Corporations Act; or
(k) ( Misleading Prospectus ): it transpires that there is a statement in this Prospectus that is misleading or deceptive or likely to mislead or deceive, or that there is an omission from this Prospectus (having regard to the provisions of section 713 (or sections 710, 711 and 716) of the Corporations Act) or if any statement in this Prospectus becomes misleading or deceptive or likely to mislead or deceive or if the issue of this Prospectus is or becomes misleading or deceptive or likely to mislead or deceive;
(l) ( Restriction on allotment ): the Company is prevented from allotting the Securities within the time required by the Underwriting Agreement, the Corporations Act, the Listing Rules, any statute, regulation, court order, ASIC, ASX or any governmental or semi-governmental agency or authority;
(m) ( Withdrawal of consent to Prospectus ): any person (other than the Underwriter) who has previously consented to the inclusion of its, his or her name in this Prospectus or to be named in this Prospectus, withdraws that consent;
(n) ( ASIC application ): an application is made by ASIC for an order under section 1324B or any other provision of the Corporations Act in relation to this Prospectus and that application has not been dismissed or withdrawn by 7 August 2008;
(o) ( ASIC hearing ): ASIC gives notice of its intention to hold a hearing under section 739 or any other provision of the Corporations Act in relation to this Prospectus to determine if it should make a stop order in relation to this Prospectus or ASIC makes an interim or final stop order in relation to this Prospectus under section 739 or any other provision of the Corporations Act;
(p) ( Takeovers Panel ): the Takeovers Panel makes a declaration that circumstances in relation to the affairs of the Company are unacceptable circumstances under part 6.10 of the Corporations Act or an application for such a declaration is made to the Takeovers Panel;
(q) ( Hostilities ): there is an outbreak of hostilities or a material escalation of hostilities (whether or not war has been declared) after the date of the Underwriting Agreement involving one or more of Australia, New Zealand, Indonesia, Japan, Russia, the United Kingdom, the United States of America, India, Pakistan, the Peoples Republic of China, Israel or any member of the European Union or a

terrorist act is perpetrated on any of those countries or any diplomatic, military, commercial or political establishment of any of those countries anywhere in the world;

(r) ( Authorisation ): any authorisation which is material to anything referred to in this Prospectus is repealed, revoked or terminated or expires or is modified or amended in a manner unacceptable to the Underwriter;
(s) ( Indictable offence ): a director or senior manager of the Company or a subsidiary is charged with an indictable offence;
(t) ( Company sub-underwriters ): any sub-underwriter introduced by the Company does not comply with its obligations under the sub-underwriting agreement or threatens to not comply with its obligations under the sub-underwriting agreement;
(u) ( Termination Events ): any of the following events occur:
(i) ( Default ): default or breach by the Company under the Underwriting Agreement of any terms, condition, covenant or undertaking;
(i) ( Incorrect or untrue representation ): any representation, warranty or undertaking given by the Company in the Underwriting Agreement is or becomes untrue or incorrect;
(ii) ( Contravention of Constitution or Act ): a contravention by the Company or any of its subsidiaries of any provision of its Constitution, the Corporations Act, the Listing Rules or any other applicable legislation or any policy or requirement of ASIC or ASX;
(iii) ( Adverse change ): an event occurs which gives rise to a material adverse effect or any adverse change or any development including a prospective adverse change after the date of the Underwriting Agreement in the assets, liabilities, financial position, trading results, profits, forecasts, losses, prospects, business or operations of the Company or any of its subsidiaries including, without limitation, if any forecast in this Prospectus becomes incapable of being met or in the Underwriter's reasonable opinion, unlikely to be met in the projected time;
(iv) ( Error in Due Diligence Results ): it transpires that any of the due diligence results or any part of the verification material was false, misleading or deceptive or that there was an omission from them;
(v) ( Significant change ): a "new circumstance" as referred to in section 719(1) of the Corporations Act arises that is materially adverse from the point of view of an investor;

(vi) ( Public statements ): without the prior approval of the Underwriter a public statement is made by the Company in relation to the Offer, the Issue or this Prospectus;
(vii) ( Misleading information ): any information supplied at any time by the Company or any person on its behalf to the Underwriter in respect of any aspect of the Offer or the Issue or the affairs of the Company or any subsidiary is or becomes misleading or deceptive or likely to mislead or deceive;
(viii) ( Official Quotation qualified ): the Official Quotation is qualified or conditional;
(ix) ( Change in Act or policy ): there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia or any of its States or Territories any Act or prospective Act or budget or the Reserve Bank of Australia or any Commonwealth or State authority adopts or announces a proposal to adopt any new, or any major change in, existing, monetary, taxation, exchange or fiscal policy;
(x) ( Prescribed Occurrence ): a Group Company increases or reduces its share capital, enters into a buyback agreement or arrangement, grants options or convertible notes, disposes or agrees to dispose or to charge a substantial part of its business or property, resolves to be wound up or a court order is made to wind up, a liquidator or receiver is appointed or a Group Company executes a deed of company arrangement;
(xi) ( Suspension of debt payments ): the Company suspends payment of its debts generally;
(xii) ( Event of Insolvency ): an event of insolvency occurs in respect a Group Company;
(xiii) ( Judgment against a Relevant Company ): a judgment in an amount exceeding $25,000 is obtained against a Group Company and is not set aside or satisfied within 7 days;
(xiv) ( Litigation ): litigation, arbitration, administrative or industrial proceedings are after the date of the Underwriting Agreement commenced or threatened against the Group Company, other than any claims foreshadowed in this Prospectus;
(xv) ( Board and senior management composition ): there is a change in the composition of the Board or a change in the senior management of the Company before Completion without the prior written consent of the Underwriter;

(xvi) ( Change in shareholdings ): there is a material change in the major or controlling shareholdings of a Group Company or a takeover offer or scheme of arrangement pursuant to Chapter 5 or 6 of the Corporations Act is publicly announced in relation to a Group Company;
(xvii) ( Timetable ): there is a delay in any specified date in the timetable agreed between the Company and the Underwriter which is greater than 3 Business Days;
(xviii) ( Force Majeure ): a force majeure event affecting the Company's business or any obligation under the Underwriting Agreement lasting in excess of 7 days occurs;
(xix) ( Certain resolutions passed ): a Group Company passes or takes any steps to pass a resolution under section 254N, section 257A or section 260B of the Corporations Act or a resolution to amend its constitution without the prior written consent of the Underwriter;
(xx) ( Capital Structure ): a Group Company alters its capital structure in any manner not contemplated by this Prospectus;
(xxi) ( Investigation ): any person is appointed under any legislation in respect of companies to investigate the affairs of a Group Company;
(xxii) ( Market Conditions ): a suspension or material limitation in trading generally on ASX occurs or any material adverse change or disruption occurs in the existing financial markets, political or economic conditions of Australia, Japan, the United Kingdom, the United States of America or other international financial markets; or
(xxiii) ( Suspension ): the Company is removed from the Official List or the Shares become suspended from Official Quotation and that suspension is not lifted within 24 hours following such suspension.

The Underwriter may not exercise its right under paragraph (r) above unless, if in the reasonable opinion of the Underwriter reached in good faith, the occurrence of the event(s) has or is likely to have a material adverse effect or could give rise to a liability of the Underwriter under the Corporations Act or otherwise.

Indemnity

The Company will indemnify and keep indemnified each of the Underwriter and its officers, employees, agents and advisors jointly and severally and hold them harmless from and against all prosecutions, losses (including loss of profit or losses or costs incurred in preparation for or involvement in or otherwise in connection with any prosecution, investigation, enquiry or hearing by the ASIC, ASX or any governmental authority or agency), penalties, actions, suits, claims, expenses, costs (including legal costs and disbursements on

an indemnity basis), liabilities, charges, outgoings, payments, demands and proceedings (whether civil or criminal) ( Losses) suffered, incurred, paid or liable to be paid directly or indirectly arising out of or in respect of:

(a) the Offer;
(b) non-compliance with or breach of any legal requirement or the Listing Rules in relation to this Prospectus or any documents in respect of the Offer which accompany this Prospectus;
(c) any statement, misstatement, misrepresentation, non-disclosure, inaccuracy in or omission from this Prospectus or any documents in respect of the Offer which accompany this Prospectus;
(d) any advertising, publicity, announcements, statements and reports in relation to the Offer made with the agreement of the Company;
(e) any breach or failure by the Company to observe any of the terms of the Underwriting Agreement or any breach of the representations and warranties given by the Company in the Underwriting Agreement; and
(f) in respect of any payment made by the Underwriter to reimburse or provide for payment of any Losses suffered personally by the Underwriter or its officers, employees, agents and advisors in respect of the matters described in paragraphs (a) to (e) above that give rise to an indemnity or resulting from or attributable to those matters.

The indemnities do not apply:

(a) to any penalties or fines which the Underwriter must pay in respect of any contravention of the Corporations Act by the Underwriter or its officers, employees, agents and advisors not resulting from or attributable to any of the matters described above that give rise to an indemnity.
(b) to any written research or other report, advertisement, publicity or written announcement made by the Underwriter or its officers, employees, agents and advisors in relation to the Offer without the prior written approval of the Company;
(c) to any other amount in respect of which the indemnities would be illegal, void or unenforceable at law; or
(d) in respect of any Losses which result from the wilful default, misconduct, fraud, negligence or breach of contract of the person claiming the indemnity.

6.5. Amendment to Promissory Note

The Company has entered into an arrangement with Dr Ming and Alice Sun, the vendors of SBL to the Company, whereby US$980,000 outstanding to the Suns will be paid subject to

conditions. Under this arrangement, five Business Days following the issue date of the Securities under the Rights Issue, the Company will:

(a) issue to the Suns (or its nominee):
(i) such number of Shares equivalent to US$490,000 at an issue price per Share of $0.01. The issue price of these Shares is to be converted from Australian Dollars into United States Dollars at the exchange rate as published by the Reserve Bank of Australia on the Business Day immediately prior to the issue of such Shares. Assuming an exchange rate of AU$1.00 to US$0.95, this will result in the issue of 51,578,947 Shares; and
(ii) such number of Options with an exercise price of $0.02 expiring 30 November 2010 on the basis of one Option for every two Shares issued to the Suns under paragraph (a)(i) above, the same ratio as offered under the Rights Issue. Assuming the issue of 51,578,947 Shares under paragraph (a)(i), this will result in the issue of 25,789,474 Options; and
(b) pay to the Suns the amount of US$490,000.

The conversion under paragraph (a)(i) is conditional upon the Company achieving the Minimum Subscription amount of $2,000,000.

The agreement with the Suns also provides that in the event the Company:

(i) does not lodge a disclosure document or an offer document in respect of the Rights Issue with ASIC by 31 July 2008; or
(ii) withdraws the disclosure document or the offer document in respect of the Rights Issue or otherwise cancels the Rights Issue at any time after 3 August 2008,

the US$980,000 will become due and payable in accordance with the provisions of the Promissory Note.

Previously, the terms of the Promissory Note required the payment of US$980,000 on 3 July 2008.

6.6. Litigation

On or about 7 March 2008, the Company has entered into a deed of settlement in relation to the claim against Avitar Technologies, Inc ( Avitar ). Although no cash consideration was involved under the settlement, the Board believes that the outcome of this settlement was positive for the Company as, under the terms of the settlement, Avitar has acknowledged:

(a) the validity of United States patents 5,962,336, 6,046,058, 6,372,516, 7,041,253 and 7,300,627 as owned by SBL;
(b) that Avitar does not own, or claim to own, any right, title, ownership interest, or any other interest in the United States patents owned by SBL; and
(c) that SBL has licensed the use of these patents to Avitar.

6.7. Options

As at the date of this Prospectus, the Company has the following Options on issue:

Number of Options	Exercise Price	Expiry Date
500,000	10 cents	15 December 2008
8,750,000	8 cents	31 December 2008
428,675	12 cents	31 December 2008
750,000	24.89 cents	31 December 2009
500,000	25 cents	31 December 2008
40,000,000	35 cents	28 January 2009
986,263	1.3 cents	30 June 2009
1,000,000	10 cents	12 September 2009
4,000,000	4.5 cents	31 December 2010
20,000,000	10 cents	30 June 2011
2,000,000	2 cents	15 September 2011
Total Options:		78,914,938

6.8. Interests of Directors and Experts

(a) Shares

The number of Shares held by each of the Directors is set out in the table below:

Director	Number of Shares
Mr Peter King	-
Mr Jim Hallam	-
Mr Andrew Paice	5,116,250

(b) Options

The number of Options, the exercise price of those Options and the expiry date of the Options issued to Directors are detailed in the table below.

Director	Number of Options	Exercise Price	Expiry Date
Mr Peter King	750,000*	$0.2489	31 December 2009
Mr Jim Hallam	-	-	-
Mr Andrew Paice	500,000	$0.10	31 September 2009

As a consequence of the Rights Issue, the exercise price of these Options may be amended in accordance with Listing Rule 6.22.2.

(c) Interests of Directors

Except as disclosed in this Prospectus, no Director (whether individually or in consequence of a Director’s association with any company or firm or in any material contract entered into by the Company) has now, or has had, in the 2 year period ending on the date of this Prospectus, any interest in:

o the formation or promotion of the Company; or

o the Issue.

Except as disclosed in this Prospectus, no amounts of any kind (whether in cash, Shares, Options or otherwise) have been paid or agreed to be paid to any Director or to any company or firm with which a Director is associated to induce him to become, or to qualify as, a Director, or otherwise for services rendered by him or his company or firm with which the Director is associated in connection with the formation or promotion of the Company or the Issue.

(d) Director’s Emoluments

	27 June 2006 to 30 June 2006 $	1 July 2006 to 30 June 2007 $	1 July 2007 to 26 June 2008 $
Mr Peter King	$422	$26,250	$34,521
Mr Jim Hallam	$0	$0	$13,150
Mr Andrew Paice	$428	$250,000	$170,959

Of the Directors’ emoluments from 1 July 2007 to 26 June 2008, $17,500 of Mr King’s fees, all of Mr Hallam’s fees and $6,666.67 of Mr Paice’s fees are accrued and unpaid.

(e) Interests of Experts

Except as disclosed in this Prospectus, no expert, promoter or any other person named in this Prospectus as performing a function in a professional capacity in connection with the preparation or distribution of the Prospectus, nor any firm in which any of those persons is or was a partner nor any company in which any of those persons is or was associated with, has now, or has had, in the last 2 year period ending on the date of this Prospectus, any interests in:

the formation or promotion of the Company; or

o the Issue.

Except as disclosed in this Prospectus, no amounts of any kind (whether in cash, Shares, Options or otherwise) have been paid or agreed to be paid to any expert, promoter or any other person named in this Prospectus as performing a function in a professional capacity in connection with the preparation or distribution of the Prospectus, or to any firm in which any of those persons is or was a partner or to any company in which any of those persons is or was associated with, for services rendered by that person in connection with the formation or promotion of the Company or the Rights Issue.

Patersons Securities Limited has acted as Underwriter to the Offer for which it will receive fees pursuant to the Underwriting Agreement which is summarised in Section 6.4 of this Prospectus.

TressCox Lawyers have acted as solicitors to the Company in relation to this Prospectus. In respect of the work on the Prospectus the Company will pay approximately $40,000 (plus GST) for these professional services. TressCox Lawyers has provided other professional services to the Company during the last two years totalling $160,000 plus GST.

6.9. Expenses of the Offer

The total estimated costs in connection with the Offer (including advisory, legal, accounting, tax, listing and administrative fees, as well as printing, advertising and other expenses) are currently estimated to be approximately $330,000 under the Minimum Subscription and $350,000 under the Maximum Subscription.

6.10. Continuous Disclosure Obligations

The Company is a disclosing entity for the purposes of the Corporations Act and, as such, is subject to regular reporting and disclosure obligations. Copies of documents lodged at ASIC in relation to the Company may be obtained from, or inspected at, an office of ASIC. This Prospectus contains information required under special prospectus content rules for continuously quoted securities pursuant to section 713 of the Corporations Act. This section enables disclosing entities to issue a special prospectus in relation to securities in a class of securities that have been quoted by the ASX at all times in the 12 months before the issue of

the Prospectus. Apart from formal matters, a ‘continuous disclosure’ prospectus need only contain information relating to the terms and conditions of the offer, the effect of the offer on the Company and the rights attaching to the Securities.

6.11. Documents available for inspection

Copies of the following documents are available for inspection during normal office hours free of charge at the registered office of the Company, for thirteen months after the date of this Prospectus:

(a) this Prospectus;
(b) the Constitution;
(c) the consents referred to in Section 6.12 of this Prospectus; and
(d) any other document or financial statement lodged by the Company with ASIC or the ASX under the continuous disclosure reporting requirements in the period after 28 September 2007 (the date of lodgement of the financial statements and Annual Report for the year ending 30 June 2007) to the date of this Prospectus being 26 June 2008.

SUBJECT OF ANNOUNCEMENT	DATE LODGED
Appointment of Director	24 October 2007
Appointment of Sun Biomedical COO	24 October 2007
Investor Presentation	24 October 2007
Investor Update	24 October 2007
Saliva drug screening device 510(k) submission	24 October 2007
Initial Director’s Interest Notice	25 October 2007
Notice of Annual General Meeting/Proxy Form	29 October 2007
Appendix 4C - quarterly	31 October 2007
Response to Quarterly Report Query	7 November 2007
Appendix 3B	9 November 2007
Results of Annual General Meeting	30 November 2007
Cooperation Agreement with Shanghai SiYi Biotechnology	12 December 2007
Trading Halt	17 December 2007
Change of Name	17 December 2007
Placement and Share Purchase Plan	19 December 2007
Terms of Share Purchase Plan	19 December 2007
Appendix 3B	31 December 2007
Placement Disclosure Notice	31 December 2007
Update on OraLine FDA 510(k) submission	22 January 2008
Appendix 4C - quarterly	30 January 2008
Completion of Share Purchase Plan	1 February 2008
Appendix 3B	1 February 2008
Change of Director’s Interest Notice	1 February 2008
Correction to Appendix 3B	1 February 2008

SUBJECT OF ANNOUNCEMENT	DATE LODGED
New Distribution Agreements	13 February 2008
Management Change	14 February 2008
Strategic Re-alignment and Appointment of CEO	25 February 2008
Final Director’s Interest Notice	25 February 2008
Half Yearly Report and Accounts	28 February 2008
Change of Registered Address	28 February 2008
Investor Update	30 February 2008
Notice of General Meeting/Proxy Form	14 April 2008
Appendix 4C - quarterly	30 April 2008
Investor Update	30 April 2008
Chairman’s Address to Shareholders	15 May 2008
Results of Meeting	15 May 2008
Avitar litigation and ShockRounds	20 May 2008
Market Update	4 June 2008
Appendix 3B	6 June 2008
Trading Halt	17 June 2008
Trading Halt Request	17 June 2008
Suspension from Official Quotation	19 June 2008
Request for Voluntary Suspension	19 June 2008
Request for extension to voluntary suspension	24 June 2008
Appendix 3B	25 June 2008
Capital Raising	26 June 2008
Reinstatement to Official Quotation	26 June 2008

6.12. Consents

Written consents to be named in this Prospectus have been given and at the date of this Prospectus have not been withdrawn by the following parties:

(a) Patersons Securities Limited has given, and not withdrawn, its consent to be named as Underwriter to the Offer in the form and context in which it is named, but does not make any statement in this Prospectus, nor is any statement in this Prospectus based on a statement by Patersons Securities Limited.
(b) TressCox Lawyers has given, and not withdrawn, its consent to be named as solicitors to the Offer in the form and context in which it is named, but does not make any statement in this Prospectus, nor is any statement in this Prospectus based on any statement by TressCox Lawyers.
(c) Computershare Investor Services Pty Limited has given, and not withdrawn, its consent to be named as the Share Registrar of the Company. Computershare Investor Services Pty Limited does not make any statement in this Prospectus, not is any statement in this Prospectus based on any statement made by Computershare Investor Services Pty Limited.
(d) BDO Kendalls Audit & Assurance (NSW-VIC) Pty Ltd has given, and not withdrawn, its consent to be named as auditor of the Company in the form and context in which it

is named, but does not make any statement in this Prospectus, nor is any statement in this Prospectus based on any statement by BDO Kendalls Audit & Assurance (NSW-VIC) Pty Ltd.

7. Action Required by Shareholders and Applications by members of the public

7.1. What Shareholders may do

The number of Securities to which you are entitled (your Entitlement) is shown on the accompanying Entitlement and Acceptance Form.

You may:

take up your Entitlement in full;
take up your Entitlement in full and apply for Shortfall Securities;
sell all of your Rights;
take up part of your Entitlement and sell the balance of your Rights;
transfer your Entitlement by way of an off market transfer; or
do nothing and allow your Entitlement to lapse.

7.2. Taking Your Entitlement

If you wish to take up all of your Entitlement complete the accompanying Entitlement and Acceptance Form in accordance with the instructions set out in the form. Send your completed Entitlement and Acceptance Form together with your cheque in Australian currency drawn on and payable at an Australian bank for the amount shown on the form using the envelope provided to reach the Company’s Share Registry, no later than 5.00pm (Australian Eastern Standard Time) on 6 August 2008 at the address set out below:

Computershare Investor Services Pty Limited GPO Box 52

Melbourne, Victoria, 8060

Shareholders may also make payment via BPay as set out at Section 1.5 of this Prospectus. In the event a Shareholder elects to make payment via BPay, that Shareholder does not need to complete or return the acceptance attached to the Entitlement and Acceptance Form.

7.3. Taking Shortfall Securities by Eligible Shareholder

If you are an Eligible Shareholder and you wish to take up Shortfall Securities complete the Shortfall Securities section of the Entitlement and Acceptance Form in accordance with the instructions set out in the Entitlement and Acceptance Form. In order to apply for Shortfall Securities you must have first taken up your Entitlement in full. Send your completed Entitlement and Acceptance Form together with your cheque in Australian currency for the amount shown on the Entitlement and Acceptance Form using the envelope provided to reach the Company’s Share Registry, no later than 5.00pm (Australian Eastern Standard Time) on 6 August 2008.

Shareholders may also make payment via BPay. In the event a Shareholder elects to make payment via BPay, that Shareholder does not need to complete or return the acceptance attached to the Entitlement and Acceptance Form.

Persons other than Eligible Shareholders seeking to apply for Securities are referred to Section 7.8 of this Prospectus.

7.4. Selling Your Rights

If you wish to sell your Rights on the ASX complete the section marked ‘Instructions to your Stockbroker’ on the back of the Entitlement and Acceptance Form and lodge the completed Entitlement and Acceptance Form with your stockbroker as soon as possible. Allow sufficient time for your instructions to be carried out. Rights trading on ASX starts on 3 July 2008 and the sale of your Rights must be effected by close of trading on ASX on 29 July 2008 when Rights trading ends.

7.5. Taking Up Part of Your Entitlement and Selling the Balance of Your Rights

If you wish to take up part of your Entitlement and sell the balance of your Rights, complete the section on the back of the Entitlement and Acceptance Form marked ‘Instructions to your Stockbroker’ and lodge the completed Entitlement and Acceptance Form, together with your cheque, money order or bank draft for the application monies for the Securities you intend to take up, with your stockbroker as soon as possible. Allow sufficient time for your instructions to be carried out. Rights trading on ASX starts on 3 July 2008 and the sale of your Rights must be effected by close of trade on 29 July 2008 when Rights trading ends.

To take up the remaining part of your Rights, your stockbroker will need to ensure that the completed Entitlement and Acceptance Form, together with your cheque, money order or bank draft for the application monies, reaches the following address by no later than 5.00pm (Australian Eastern Standard Time) on 6 August 2008:

Computershare Investor Services Pty Limited GPO Box 52

Melbourne, Victoria, 8060

The Company will not permit payment to be made via BPay should you elect to take up only part of your Entitlement and sell the balance of your Rights

7.6. Transferring Your Entitlement To Another Person by Way of an Off Market Transfer

If you are an Eligible Shareholder and you wish to transfer all or part of your Rights to another person other than on ASX:

Complete the Entitlement and Acceptance Form in accordance with the instructions in Section 7.2 of this Prospectus;
Complete a standard renunciation form (obtainable from your stockbroker or from the Company) in favour of the transferee; and

Send or deliver the completed Entitlement and Acceptance Form, the renunciation form and the transferee’s payment for the Securities to the following address by no later than 5pm (Australian Eastern Standard Time) on 6 August 2008:

Computershare Investor Services Pty Limited GPO Box 52

Melbourne, Victoria, 8060

If the Share Registry receives both a completed renunciation form and a completed Entitlement and Acceptance Form in respect of the same Rights, the renunciation will be given effect in priority to the acceptance.

7.7. Consequences of Doing Nothing – Entitlement Not Taken Up

If you decide not to take up all or part of your Entitlement, you are advised to consider selling the Rights which you have decided not to accept rather than allow them to lapse. See Sections 7.4, 7.5 and 7.6 of this Prospectus, as appropriate.

You will receive no benefit if you do not take up your Entitlement or sell your Rights. It is therefore important that you consider taking action either to take up your Entitlement or sell your Rights in accordance with the above instructions and the instructions on the back of the Entitlement and Acceptance Form.

Please see the Important Notices Section of this Prospectus for a discussion of the potential tax effects of the Rights Issue.

7.8. Public Offer

Members of the public in Australia and New Zealand who wish to apply for Shortfall Securities may do so by completing the Application Form which accompanies this Prospectus by inserting the number of Shortfall Securities they wish to apply for and forwarding the completed Application Form together with their cheque or bank draft, for the total amount payable to the following address by no later than 5.00pm (Australian Eastern Standard Time) on 6 August 2008:

Computershare Investor Services Pty Limited GPO Box 52 Melbourne, Victoria, 8060

Members of the general public may not make payment for Shortfall Securities via BPay.

7.9. Payment

Cheques must be drawn in Australian currency on an Australian bank and made payable to ‘Sun Biomedical Limited – Renounceable Rights Issue’ and crossed ‘Not Negotiable’. Applicants are asked not to forward cash, postal notes, or money orders by mail. Receipts for payment will not be issued.

Shareholders may also make payment via BPay. The Entitlement and Acceptance Form sets out the details of the biller code, each Shareholder’s BPay reference number and the instructions of how to pay via BPay. In the event a Shareholder elects to make payment via BPay, that Shareholder does not need to complete or return the acceptance attached to the Entitlement and Acceptance Form. Members of the public may not make payment for Shortfall Securities via BPay under the Public Offer.

7.10. Enquiries

If you have any queries about your Entitlement please contact the Company’s Share Registry:

Phone: 1 300 728 275 (within Australia) Phone: +61 3 9946 4451 (outside Australia) Fax: +61 3 9473 2500

Alternatively, contact your stockbroker or other professional adviser.

7.11. Privacy

Information provided in the Entitlement and Acceptance Form or Application Form will be made available to the Company and the Share Registry. Applicants are able to gain access to such information by contacting either of those entities. The information on the Entitlement and Acceptance Form and Application Form is being collected for the purposes of determining the number of Securities which the Company should issue to Applicants and to allow the Company to act in accordance with Applicants’ instructions. Information that is provided in the Entitlement and Acceptance Form or Application Form is provided to the Underwriter, printers and mailing houses and the ASX and other regulatory authorities. If Applicants do not provide the information in the Entitlement and Acceptance Form or Application Form the Company will not be able to issue Securities or deal with Rights as per Applicants’ instructions.

Directors Authorisation

The Directors of Sun Biomedical Limited have authorised the issue of this Prospectus on behalf of Sun Biomedical Limited.

This Prospectus has been signed by a Director for and on behalf of the Directors, in accordance with Section 351 of the Corporations Act.

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Mr Jim Hallam 26 June 2008

Glossary of Terms

These definitions are provided to assist persons in understanding some of the expressions used in this Prospectus.

AIDC Ltd	AIDC Ltd (ACN 008 647 658) now known as ESIC Ltd.
Applicant	A person who submits an Entitlement and Acceptance Form or an
	Application Form.
Application	A valid application made to subscribe for a specified number of
	Securities pursuant to this Prospectus.
Application Form	The form which is attached to this Prospectus which is not
	personalised and which is to be used by persons other than Eligible
	Shareholders to apply for Shortfall Securities.
ASIC	Australian Securities and Investments Commission.
ASTC	ASX Settlement and Transfer Corporation Pty Limited (ACN 008
	504 532).
ASTC Settlement Rules	The settlement rules of ASTC.
ASX	ASX Limited (ACN 008 624 691).
Avitar	Avitar Technologies, Inc.
BDO Kendalls Audit &	BDO Kendalls Audit & Assurance (NSW-VIC) Pty Ltd (ACN 114 673
Assurance (NSW-VIC) Pty Ltd	540).
BioScreens	BioScreens, Inc.
BioScreens Cup	The quality, low cost urine testing product currently being
	developed by SBL and BioScreens.
Board	The board of Directors of the Company as set out in this
	Prospectus.
Business Day	Has the same meaning as in the ASX Listing Rules.
CHESS	ASX Clearing House Electronic Sub-register System operated by
	ASTC.
Closing Date	6 August 2008 or such other date and/or time as the Directors may
	determine.
Company	Sun Biomedical Limited (ACN 001 285 230).
Constitution	The Constitution of the Company.
Corporations Act	The_Corporations Act 2001_(Cth).
Directors	The directors of the Company at the date of this Prospectus.
Eligible Shareholders	A Shareholder having a registered address in Australia or New
	Zealand at the Record Date.

Entitlement	Eligible Shareholders’ entitlement to subscribe for the Securities as
	set out in the Entitlement and Acceptance Form.
Entitlement and Acceptance	The personalised Entitlement and Acceptance Form which is sent
Form	to Eligible Shareholders that sets out the Entitlement of
	Shareholders to subscribe for Securities pursuant to the Issue.
Existing Shareholder	A Shareholder at the Record Date.
FDA	The United States of America Food and Drug Administration.
FDA 510(k) Clearance	Clearance granted by the FDA pursuant to section 510(k) of the
	United States of America_Federal Food, Drug & Cosmetic Act_which
	clearance is required to be obtained by SBL in order for it to be
	lawfully permitted to market saliva based drug testing products in
	the United States.
GMP	Refers to the Good Manufacturing Practice Regulations
	promulgated by the United States of America Food and Drug
	Administration.
Group Company	The Company and its subsidiaries and where the context permits,
	includes Sun Biomedical Laboratories, Inc. Sun Biomedical
	Australia Pty Ltd (ACN 121 534 914) and MDM Technologies Pty
	Ltd (ACN 111 001 604).
International Shareholder	A holder of Shares having a registered address outside Australia or
	New Zealand.
Issue or Offer or Rights Issue	The offer pursuant to this Prospectus by the Company of Securities
	at an issue price of $0.01 per New Ordinary Share with free
	attaching Options.
ISO	International Organisation for Standardization.
Listing Rule	The Listing Rules of the ASX.
Maximum Subscription	$3,178,963.
MDM Technologies Pty Ltd	MDM Technologies Pty Ltd (ACN 111 001 604).
Minimum Subscription	$2,000,000.
MPS	China Ministry of Public Security.
New Ordinary Shares	The Shares to be allotted and issued pursuant to this Prospectus.
Official List	The official list of ASX.
Official Quotation	Has the meaning given to the term ‘quotation’ in the Listing Rules.
Options	An option to acquire a Share.
OraLine	A unique saliva based illicit drug test developed by SBL.
OraLine VIII	A new product currently being developed and tested by SBL.
	OraLine VIII has the capacity to test for eight drugs in a single test:
	the four drugs currently tested by OraLine IV, marijuana, cocaine,
	opiates and methamphetamines, and a further four out of a possible

	six new drugs, amphetamines, barbiturates, benzodiazepines,
	ketamine, methadone and phencyclidine.
OTC	Over the counter.
Patersons Securities Limited	Patersons Securities Limited (ACN 008 896 311).
or Underwriter
POC	Point of care.
ProbeLine	A drug residue testing product developed by SBL.
Promissory Note	The promissory note between the Company and Dr Ming and Alice
	Sun dated on or about 16 August 2006 in relation to the acquisition
	of SBL by the Company.
Prospectus	This prospectus.
Public Offer	The offer of Shortfall Securities to members of the general public
	who are resident in Australia or New Zealand and who are not
	Shareholders.
Record Date	9 July 2008.
Register	The register of Shareholders of the Company.
Rights	The renounceable rights to subscribe for four New Ordinary Shares
	for every five Shares with one free attaching Option for every two
	New Ordinary Shares applied for.
Securities	The New Ordinary Shares and Options.
Shareholders	Holders of Shares.
Shares	Ordinary fully paid shares in the capital of the Company.
Share Registry	Computershare Investor Services Pty Limited (ACN 078 279 277).
ShockRounds	The technology to develop specialised bullets and/or non lethal
	munitions that use a “piezoelectric affect” to generate a high voltage
	charge which technology registered as United States patent No.
	7,100,514.
SBL	Sun Biomedical Laboratories, Inc.
Shortfall Securities	Securities offered for Issue under this Prospectus which are not
	applied for by Eligible Shareholders as part of their Entitlement or
	applied for by the holder of a Right.
SiYi	Shanghai SiYi Biotechnology Co. Ltd.
Sun Biomedical Australia Pty	Sun Biomedical Australia Pty Ltd (ACN 121 534 914).
Ltd
TFM	Turnberry Funds Management Pty Ltd (ACN 123 370 632).
THC	Delta-9-tetrahydrocannabinol, the drug component in marijuana.
TPA	Third party administrators of employee drug testing programs.

Underwriting Agreement The Underwriting Agreement between the Company and the Underwriter, a summary of which is set out in Section 6.4 of this Prospectus. VisuaLine A urine based illicit drug test developed by SBL. $ Australian dollars unless otherwise indicated.

Registry Use Only

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==> picture [127 x 59] intentionally omitted <==

Application Form

Broker Code

Adviser Code

==> picture [530 x 561] intentionally omitted <==

----- Start of picture text -----

This Application Form is important. If you are in doubt as to how to deal with it, please contact
your stockbroker or professional adviser without delay. You should read the entire prospectus
carefully before completing this form. To meet the requirements of the Corporations Act, this
Application Form must not be distributed unless included in, or accompanied by, the prospectus.
A I/we apply for
I/we lodge full Application Money
B
.
A$
Number of Shortfall Shares in Sun Biomedical Limited at A$0.01 per Shortfall Share
or such lesser number of Shortfall Shares which may be allocated to me/us. DO NOT
include the number of free attaching Options in this application form as the number
of Options allocated to you will be determined upon the number of Shortfall Shares
issued to you.
C Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s)
Title or Company Name Given Name(s) Surname
Joint Applicant 2 or Account Designation
Joint Applicant 3 or Account Designation
D Enter your postal address - Include State and Postcode
Unit Street Number Street Name or PO Box /Other Information
City / Suburb / Town State Postcode
E Enter your contact details
Contact Name Telephone Number - Business Hours / After Hours
( )
F CHESS Participant
Holder Identification Number (HIN)
Please note that if you supply a CHESS HIN but the name and address details on your form do not
X correspond exactly with the registration details held at CHESS, your application will be deemed to be made without the CHESS HIN, and any securities issued as a result of the Renounceable Rights Issue will be held
on the Issuer Sponsored subregister.
----- End of picture text -----

Cheque details - Make your cheque or bank draft payable to ‘Sun Biomedical Limited - Renounceable Rights Issue’ and crossed ‘Not Negotiable’.

G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number	G BSB Number Account Number Drawer Amount of cheque A$ Cheque Number BSB Number Account Number Drawer Amount of cheque A$ Cheque Number
							A$

By submitting this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and the declarations/statements on the reverse of this Application form and I/we declare that all details and statements made by me/us (including the declaration on the reverse of this Application Form) are complete and accurate. I/we agree to be bound by the Constitution of the Company. See back of form for completion guidelines

S B N

How to complete this form

A Shortfall Shares Applied for F CHESS Enter the number of Shortfall Shares you wish to apply for. DO NOT Sun Biomedical Limited (the Company) will apply to the ASX to participate include the number of free attaching Options in this figure. in CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of ASX Limited. In CHESS, the company B Application Monies will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together Enter the amount of Application Monies. To calculate the amount, multiply the two Subregisters will make up the Company’s principal register of the number of Shortfall Shares by A$0.01. securities. The Company will not be issuing certificates to applicants in C Applicant Name(s) respect of Shortfall Shares allotted (and also the free attaching Options allotted). Enter the full name you wish to appear on the statement of share holding. If you are a CHESS participant (or are sponsored by a CHESS participant) (and options holding). This must be either your own name or the name and you wish to hold Shortfall Shares and Options allotted to you under this of a company. Up to 3 joint Applicants may register. You should refer to Application on the CHESS Subregister, enter your CHESS HIN. Otherwise, the table below for the correct forms of registrable title. Applications using leave this section blank and on allotment, you will be sponsored by the the wrong form of names may be rejected. Clearing House Electronic Company and allocated a Shareholder Reference Number (SRN). Subregister System (CHESS) participants should complete their name identically to that presently registered in the CHESS system. G Payment Postal Address Make your cheque or bank draft payable to ‘Sun Biomedical Limited D - Renounceable Rights Issue’ in Australian currency and cross it Not Enter your postal address for all correspondence. All communications Negotiable. Your cheque or bank draft must be drawn on an Australian to you from the Registry will be mailed to the person(s) and address as Bank. shown. For joint Applicants, only one address can be entered. Complete the cheque details in the boxes provided. The total amount must E Contact Details agree with the amount shown in box B. Enter your contact details. These are not compulsory but will assist us if Cheques will be processed on the day of receipt and as such, we need to contact you. sufficient cleared funds must be held in your account as cheques returned unpaid may not be re-presented and may result in your Application being rejected. Paperclip (do not staple) your cheque(s) to the Application Form where indicated. Cash will not be accepted. Receipt for payment will not be forwarded .

Sun Biomedical Limited (the Company) will apply to the ASX to participate in CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of ASX Limited. In CHESS, the company will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the Company’s principal register of securities. The Company will not be issuing certificates to applicants in respect of Shortfall Shares allotted (and also the free attaching Options allotted).

If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold Shortfall Shares and Options allotted to you under this Application on the CHESS Subregister, enter your CHESS HIN. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allocated a Shareholder Reference Number (SRN).

Complete the cheque details in the boxes provided. The total amount must agree with the amount shown in box B.

Before completing the Application Form the applicant(s) should read this prospectus to which this application relates. By lodging the Application Form, the applicant agrees that this application for Shortfall Shares (and free attaching Options) in Sun Biomedical Limited is upon and subject to the terms of the prospectus and the Constitution of Sun Biomedical Limited, agrees to take any number of Shortfall Shares (and free attaching Options) that may be allotted to the Applicant(s) pursuant to the prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form.

Lodgement of Application

Application Forms must be received by Computershare Investor Services Pty Limited Melbourne by no later than 5.00pm AEST on 6 August 2008. You should allow sufficient time for this to occur. Return the Application Form with cheque(s) attached to:

Computershare Investor Services Pty Limited GPO Box 52 MELBOURNE VIC 8060

Neither Computershare nor the Company accepts any responsibility if you lodge the Application Form at any other address or by any other means.

Privacy Statement

Personal information is collected on this form by Computershare Investor Services Pty Limited (“CIS”), as registrar for securities issuers (“the issuer”), for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to our related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected]

038301_00QY6E ~~x~~ personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected] If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 728 275. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold Shares and Options. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below. Type of Investor Correct Form of Registration Incorrect Form of Registration Trusts - Use trustee(s) personal name(s) - Do not use the name of the trust Individual - Use given name(s) in full, not initials Joint - Usegiven name(s)in full, not initials Company - Use companytitle, not abbreviations Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation Partnerships - Use partners personal name(s) - Do not use the name of the partnership Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc Superannuation Funds - Use the name of trustee of the fund - Do not use the name of the fund Mr John Alfred Smith Mr John Alfred Smith & Mrs Janet Marie Smith ABC Pty Ltd Ms Penny Smith Mr Michael Smith Mr John Alfred Smith Mr John Smith & Mr Michael Smith Mrs Janet Smith John Smith Pty Ltd J.A Smith ABC P/L ABC Co Penny Smith Family Trust Estate of Late John Smith Peter Smith John Smith & Son ABC Tennis Association John Smith Pty Ltd Superannuation Fund John Alfred & Janet Marie Smith S B N	038301_00QY6E ~~x~~ personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected] If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 728 275. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold Shares and Options. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below. Type of Investor Correct Form of Registration Incorrect Form of Registration Trusts - Use trustee(s) personal name(s) - Do not use the name of the trust Individual - Use given name(s) in full, not initials Joint - Usegiven name(s)in full, not initials Company - Use companytitle, not abbreviations Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation Partnerships - Use partners personal name(s) - Do not use the name of the partnership Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc Superannuation Funds - Use the name of trustee of the fund - Do not use the name of the fund Mr John Alfred Smith Mr John Alfred Smith & Mrs Janet Marie Smith ABC Pty Ltd Ms Penny Smith Mr Michael Smith Mr John Alfred Smith Mr John Smith & Mr Michael Smith Mrs Janet Smith John Smith Pty Ltd J.A Smith ABC P/L ABC Co Penny Smith Family Trust Estate of Late John Smith Peter Smith John Smith & Son ABC Tennis Association John Smith Pty Ltd Superannuation Fund John Alfred & Janet Marie Smith S B N	038301_00QY6E ~~x~~ personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected] If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 728 275. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold Shares and Options. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below. Type of Investor Correct Form of Registration Incorrect Form of Registration Trusts - Use trustee(s) personal name(s) - Do not use the name of the trust Individual - Use given name(s) in full, not initials Joint - Usegiven name(s)in full, not initials Company - Use companytitle, not abbreviations Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation Partnerships - Use partners personal name(s) - Do not use the name of the partnership Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc Superannuation Funds - Use the name of trustee of the fund - Do not use the name of the fund Mr John Alfred Smith Mr John Alfred Smith & Mrs Janet Marie Smith ABC Pty Ltd Ms Penny Smith Mr Michael Smith Mr John Alfred Smith Mr John Smith & Mr Michael Smith Mrs Janet Smith John Smith Pty Ltd J.A Smith ABC P/L ABC Co Penny Smith Family Trust Estate of Late John Smith Peter Smith John Smith & Son ABC Tennis Association John Smith Pty Ltd Superannuation Fund John Alfred & Janet Marie Smith S B N
Individual - Use given name(s) in full, not initials	Mr John Alfred Smith	J.A Smith
Joint - Usegiven name(s)in full, not initials	Mr John Alfred Smith & Mrs Janet Marie Smith	John Alfred & Janet Marie Smith
Company - Use companytitle, not abbreviations	ABC Pty Ltd	ABC P/L ABC Co
Trusts - Use trustee(s) personal name(s) - Do not use the name of the trust	Ms Penny Smith	Penny Smith Family Trust
Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased	Mr Michael Smith	Estate of Late John Smith
Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation	Mr John Alfred Smith	Peter Smith
Partnerships - Use partners personal name(s) - Do not use the name of the partnership	Mr John Smith & Mr Michael Smith	John Smith & Son
Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc	Mrs Janet Smith	ABC Tennis Association
Superannuation Funds - Use the name of trustee of the fund - Do not use the name of the fund	John Smith Pty Ltd	John Smith Pty Ltd Superannuation Fund

AI assistant

DIMERIX LIMITED — Capital/Financing Update 2008

64804_rns_2008-06-25_e4e599f1-bfd0-4431-920a-6f530d00aa50.pdf

SUN BIOMEDICAL LIMITED

RIGHTS ISSUE PROSPECTUS

1. Corporate Directory

Directors

Company Secretary

Registered Office

Share Registry

Auditor

Solicitors to the Rights Issue

Underwriter

ASX Code

Important Notices

Prospectus

Tax implications

Entitlement and Acceptance Form

Application for Shortfall Securities

Authorised Statements

Additional Copies of the Prospectus

Restrictions on Distribution

Summary of Important Dates

Letter from the Chairman

Renounceable Rights Issue

Support of Major Shareholders

Future Opportunities

Agreement with Dr Ming and Alice Sun

Use of Funds

Applications

Quotation

Enquiries

1. Details of the Rights Issue

1.1. The Rights Issue

1.2. Minimum Subscription

1.3. Entitlement to Securities

1.4. Entitlement

1.5. Closing Date and Payment for Securities

1.6. Allotment of Securities

1.7. ASX Quotation

1.8. Rights Trading

1.9. Rights Attached to New Ordinary Shares

1.10. Rights Attached to Options

1.11. International Shareholders

1.12. Applications for Shortfall Securities by Eligible Shareholders

1.13. Position of Major Shareholders and Directors

1.14. Conversion of Debt to Equity

1.15. Minimum Subscription Underwritten

1.16. Applications for Shortfall Securities by Members of the Public

1.17. Issue Expenses

1.18. Use of Funds Raised

1.19. Enquiries

2. Effect of the Rights Issue

2.1. Capital Structure

2.2. Market Price of Shares

2.3. New Ordinary Shares to Rank Pari Passu with Existing Shares

3. Review of Operations

3.1. Corporate Structure

3.2. Board of Directors and Management Team

(a) Board of Directors

PETER KING Non-Executive Chairman

Experience

JIM HALLAM Non-Executive Director

Experience

ANDREW PAICE Non-Executive Director

Experience

ALFONSO GRILLO

Company Secretary

DR MING SUN SBL - Director of Research and Development

3.3. Restructure of the Company’s Operations

3.4. Overview of United States Drug Testing Market

(a) Overview

(b) Urine vs. Saliva

(c) Independent Review of the United States Market

3.5. OraLine’s Competitive Advantages

3.6. Patents

3.7. New Saliva Opportunities

(b) China

Stage 1

Stage 2

DIMERIX LIMITED Capital/Financing Update 2008