OFFER REJECTED

Whilst we would never usually make public the terms and conditions of any negotiations without permission we feel that in this instance it is important to highlight one of the reasons that large fish suppliers need to move on and pull themselves out of the dark ages. Burying their heads in the seaweed will not make this new technology go away. Having been threatened with legal action if we reveal the company concerned, who for their own reasons would rather not repeat in public the terms they offered us, we will have to refer to them as 'X'.

Mafia would be a more apt title but we do not wish to be offensive.

Following a one month consultation period we have rejected an offer from 'X' to run a joint research project with a view to granting 'X' European rights to our sea fish production units, primarily because of the derisory support they offered and the fact that this industry in general seems to have been high-jacked by the relatively small number of companies who have far too much control over the market to the point where they can seriously damage both the industry and the fish themselves. Basically the deal was as follows: In return for further research into alternate species, namely Sea Bass and Halibut to be conducted over the next year 'X' have offered just £5k per month support, a derisory figure that would not even cover basic analysis. They also insisted on a 4 month review with an option of withdrawing their funds, ridiculous in itself as anyone with any knowledge of research and fish in particular will realise that no meaningful assessment of both viability and welfare could possibly be reached over such a short time scale.

'X' argued that the units may not be commercially viable which can only be a negotiating stance or delaying tactic rather than fact. An optimised unit can produce in excess of 90 tonnes per year with an approximate cost per tonne, to include feed and fingerling stock, of £1400. Agreed one has to add Capital expenditure, power, labour etc but even when these are factored in, the cost per tonne over the lifespan of the system is well under £3k, a figure also put forward by 'x' themselves. When higher end species are equated such as Sea Bass and possibly Halibut, (with a little more research maybe other species as well), the argument that the units may not be commercially viable is a ridiculous one. Factor in the obvious sustainability issues, fish welfare and the need to reduce our dependency on the fast dwindling ocean stocks and we can only conclude that 'X' has other objectives, we are after all a serious threat to their current business format.

Astonishingly we would also have been expected to invest £90k ourselves in a new research facility dedicated to the species that 'X' specify and give them access to the technology we have developed, much of which is not protected as yet by patents etc. It is not difficult to see why we rejected their kind offer of support despite their obvious influence and market share. We do not of course wish to condemn 'X' as we can only assume that other large companies involved in the industry would take a similar stance given that the 'X' website like many others is full of claims about their commitment to sustainability etc and we have to assume that they are sincere.

Perhaps the term sustainability relates to profit rather than fish stocks? Who knows, the fact remains that we have wasted a month and must now move on.

Since the news of our success spread across the world a few weeks ago we have a myriad of offers coming in on a daily basis from Australia and the Far East to the USA and Canada but basically they give us five options.

1) We move Diobas Ltd away from the UK and base our company where we have been offered more than ample support. Not our preferred option as we have worked hard to keep this new technology here.

2) We sell the company in its entirety. Very lucrative but fraught with potential problems in that we fear the technology will never see the light of day, there are too many companies out there that have money invested in other areas who would be severely damaged if our units became common place. As we feel a very strong moral obligation to make sure this technology is made available the option of selling out would be a very difficult pill to swallow, whatever the price offered.

3) Sell off the individual technologies most of which have far reaching implications, from our revolutionary particle fractionators to pump drives and the Ciren Neural Trigger programs. All were developed to cope with the demands of putting sea fish into a freshwater environment rather than as separate entities, but each have a whole range of potential applications. This is not ideal by any means but perhaps an option we should consider as licensing rights to use the technology as a whole within the production units could perhaps be retained.

4) We travel that well trampled path cunningly designed by politicians and civil servants to frustrate, confuse and ultimately induce a visit from the men in white coats . . . i.e. an application for Grant Funding. This seems to be a route doomed to failure unless you are a member of the right golf club, are a large company that doesn't need the money anyway or stand on one leg whilst engaging in a secret handshake. This may only apply to English funding applications however as it would appear that both Wales and Scotland are much more amenable, or so we are told.

5) This is an interesting one that has been suggested several times. We could issue sole rights to a company or individual for a particular country on a license basis. It would raise the capital we need to finance our research into other species but there is a danger that the purchaser would simply hang on to the license rights without actually building any units for the simple reason that those rights would obviously rocket in value as the technology became common place and the desire for units increased. This would be completely unacceptable as our research was never about profit alone; if it were we would never have embarked on such a revolutionary approach to aquaculture and instead would have taken a much safer path if our only objective was to retire to the Bahamas on completion of the program. It is vitally important for everyone that this technology is readily available and exploited to its maximum potential not just used for profit alone.

Either way the experience with 'X' has shown us that we need to move very cautiously and pick our partners with great care. To progress the project we need funds, it's as simple as that. Diobas has never taken any grants or third party funding, we have never had any help from any corporation, banks or governments, we do not even have an overdraft facility let alone any borrowing. Neither do we have any debts and enjoy being transparent in our negotiations, perhaps this is where the 'X' deal went wrong. We were just too honest about the support we need to go forward. In summary there appears to be more sharks on land than there are in the sea and perhaps, as we are essentially a research based company not commercially skilled negotiators, we rather naively believed the profit from our technology should be evenly shared between our partners, ourselves and of course the dwindling fish stocks themselves. Watch this space, we will keep you all informed and a very big thanks for all the emails of support and congratulations we have received. This remarkable new technology will not go away. Sooner or later it will become the norm and until then we are happy to talk to anyone who has a serious proposal, the only conditions being that all discussions are transparent, each party is honest about its objectives and that we all earn very well from the deal with the proviso that the fish themselves benefit as well. Fish welfare and profit can go hand in hand. The consumer wants it, we all have a duty of care to ensure that the fish get it, and the oceans desperately need it.

Surely that shouldn't be difficult, Diobas has the technology and we all have the power of speech.

More details on http://www.diobas.com/UPDATE.htm

Should you require any further details, please do not hesitate to contact me,

Steve Marriot Head of Research

DIOBAS LTD DIOBAS USA DIOBAS INTERNATIONAL OPERATIONS www.diobas.com

+44 (0) 1409-253123 +44 (0) 1409-211641

Personal email: steve@diobas.com