Q. The functionality, components, and concept seem relatively simplistic.

A. These three items are in fact relatively simple. However, the concept is unique in its application in the separation of dissolved and non-dissolved components of mixtures and solutions. The inventor is a recognized expert in the field of multiphase flow, which is the flow mode created with thin liquids by this process.

Q. What are the proprietary aspects of the system, pump design, configuration, application etc?

A. None of the individual items are proprietary in and of themselves. Rather, the system is a unique assemblage of standard components, with the pump operating in a unique sphere of conditions for this application, designed to create multiphase flow and resultant high efficiency energy transfer with the multiphase environment. The patent attorney of record was confident, when we interacted with him during the patent-writing process, that this system is very patentable.

Q. Will patents, copyrights and IP create and protect the barriers to entry? Will a large company be able to easily replicate this idea and then alter the concept and system under a new patent?

A. Patents provide a legal barrier to entry, especially for large companies since they are so visible and almost always adhere to legal protocols. One can never prevent any entity from truly inventing newer concepts, but patents and copyrights surely do prevent copying when defended, usually via simple contacts by the defending attorney.

The concept of describing the thermodynamic pathways linked into a commercial process framework will be developed as a grandfather filing; the idea is to provide an overarching framework around which it will be most difficult to ‘invent around’.

Q. We will need to know more about MIST and its role with the technology and overlap with Aqueous Holdings, SA; will the relationship become contentious?

A. The operating agreement with MIST will need to be drafted to account for this. The only intended overlap will be the need to design-in Paul Jepson's time and efforts into the ongoing development of the technologies associated with the process; this is both desirable and necessary in our opinion. This approach is built into the overall thinking. Our plan is to avoid contention through clear up-front definition of roles/responsibilities/commitment of various parties.

Q. How clean is the break with BioDri, Dennis Lapin and Lapin Industries; will they indemnify Aqueous Holdings, SA on the desalination application regarding the technology?

A. The break with BioDri is very clean. We do not believe that Lapin Industries would indemnify Aqueous on anything, unless of course we would be willing to provide some funding for this privilege....which we believe would open a can of worms and is unwise. BioDri owners banded together and eliminated Jepson's ownership and participation by common vote per their charter. BioDri was attempting to claim ownership of the IP, while at the same time they have valued the IP at zero on their balance sheet (no mention of the IP as a line item; we have a copy of the balance sheet) and have valued Jepson's contributions as little or nothing.

Q. Perhaps we should make a more quantitative analysis regarding the low maintenance costs and lack of filter replacements etc.

A. Fully agree. However, we have no access to this data other than published general information, and take a relative approach in this regard. It is a fact that the process by its nature separates solids from the liquid portion therefore no pre-filtration of a fine nature should be required; this is done in reverse osmosis in order to avoid membrane fouling; the membranes themselves are eliminated thus also avoiding a maintenance item of labor and replacement units (these are costly and endless).

Q. We will also require an analysis and overview of the proprietary aspects of the system by legal experts in the patent, copyright and IP areas of law.

A. Agree. Paul and Ed have discussed various rewrites of new filings citing enhanced operating conditions and system design elements and operating strategies; this can be addressed fully when we have a funded operation. A review of the original provisional application is now underway by Joseph V. Saphia who is a NYC patent attorney. The inventor and we believe that new filings describing an embodiment outside the current/original provisional application can be readily accomplished and successful.

Q. General concern over potential future litigation regarding a clean break with past relationships and alliances.

A. The break is certainly clear. The remaining question is one of outright ownership. We have an active inquiry regarding the filing abandonment issue to the prosecuting attorney, without response. Jepson's attorney (Joseph Saphia) has issued an opinion of clean break / no further encumbrance to Jepson and is very willing to discuss this case in its entirety with us at any time. Saphia believes there are two possible routes: l. Jepson recovers ownership of original filings – this is a civil case of contract dispute which may be taken to arbitration; costly possibly lengthy; possibility of recovery but no ‘slam dunk’; 2. New embodiment/new filing – this is the most logical, least costly and shortest route to intellectual property protection; Jepson has significant and substantial ideas for a newer embodiment/patent application which would grant ownership outside the BioDri ownership sphere.