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 GENERAL SEAFOOD COMPETITIVE OVERVIEW
Competitive Overview
The following is a general overview of the competitive nature of our business. Island Scallops' long-term strategy is the expansion of the live scallop and live sablefish market. ISL has developed live transportation methods for live scallops and live sablefish. In the past, ISL has produced a variety of frozen, fresh, shucked, roe-on meat, frozen half-shell and smoked scallops. However, the current demand for live-in-shell scallops surpasses the supply that ISL is capable of producing. In fact, ISL does not anticipate introducing new scallop-based products until annual production exceeds 15 million scallops.
Likewise, we believe that the demand for live sablefish will far exceed ISL's planned expansion. ISL will begin producing sablefish in corporate farms. ISL has developed one of the only hatcheries dedicated to sablefish production and capable of producing large quantities of juveniles. New sablefish farming companies will require at least one year of construction with an additional one year for testing and production. This gives the company at least a two-year advantage on any new competition and provides ISL with time to develop superior strains of sablefish to meet future competition. Currently, other researchers are attempting to produce juveniles and the company believes others will enter the market following the ISL's success.
General Industry Analysis
ISL is in the farmed seafood business. The main concentration of marine farming in British Columbia has traditionally been in the salmon sector. The salmon farming business has developed into a mature industry dominated by Norwegian farmers. Due to the world oversupply of farmed salmon, this industry has become very competitive, with pricing near the break-even level. The rest of the BC marine farming sector is in the shellfish industry, mainly in oysters and Manila clams and more recently mussels. Although this sector is rapidly expanding, it accounted for approximately US$16 million in British Columbia in 2002. Given ISL's expertise and significant research and development experience, management believes that there is little or no direct competition in the farming of scallops or farmed sablefish.
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 SCALLOPS BLACKCOD GENERAL FISHERIES  COMPETITIVE OVERVIEW |
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