Respira English Summary 1.8

Carbon Dioxide and Toxic Emissions Control System for Diesel Fuel Engines, Power and Industrial Plants OBJECTIVE The Innovatec Project : “RESPIRA” aims to create an efficient enterprise to further develop and commercialize technology that will reduce toxic emissions and carbon dioxide pollution. While significant resources have been dedicated toward pollution reduction, most efforts have focused on capturing and storing carbon dioxide (CO2) emitted by large fixed sources such as power plants and factories that generate nearly two-thirds of the world’s carbon dioxide. Innovatec technology “RESPIRA” is the first filtration system that reduces toxic pollutants and eliminates upwards of 75% of post-combustion CO2 from mobile sources, releasing clean oxygen into the atmosphere and allowing residual carbon to be recycled, refined and resold in secondary markets. This chemical-mechanical process can be installed in any mobile or stationary source emitting gases produced by the combustion of oil and its byproducts. There is no record of any invention or patent application that is capable of reducing all contaminants produced by the combustion of oil, its by-products and other fossil fuels that also eliminates CO 2, releasing pre-combustion levels of oxygen (O2) into the atmosphere.

OVERVIEW OF CURRENT SITUATION Despite legislative efforts aimed at reducing exhaust toxicity and the introduction of alternative energy sources, diesel fuel emissions remain among the most toxic and pervasive atmospheric pollutants. Diesel engines are one of the largest sources of particulate matter (PM), hydrocarbons (HC or VOC), carbon monoxide (CO), nitrous oxide (NOx), and sulfur oxide (SOx). In addition, the combustion of diesel fuel produces environmentally harmful quantities of nonlethal carbon dioxide (CO2), which contributes to global warming by preventing the escape of ultraviolet radiation from the earth’s atmosphere. Climate change has become increasingly problematic in recent decades. In 1900, the concentration of CO2 was 285 ppm; in 2000, it was 375 ppm. Increased concentrations of this gas in the atmosphere causes a change in the average temperature of the planet. Various estimates indicate that global temperatures have risen 0.8°C in the last 100 years; at this pace, the average temperature of the planet will rise 4.5°C by 2100. The environmental consequences of climate change manifest themselves in increasingly devastating droughts, floods and hurricanes as well as the inundation of low lying coastal areas due to the rise in sea level.

New Technological Solution The Respira system reduces emissions in heavy-duty diesel vehicles. The filtration process reduces contamination from the combustion of fossil fuels, petroleum and its by-products by altering the final chemical composition of the exhaust gases. Most importantly, the interaction of the chemical solution, the post-combustion gases and the filter fibers breaks the molecular bond between carbon and oxygen, capturing carbon and releasing oxygen into the atmosphere.

Filtration Process The filtration system consists of a mechanical device with three chambers containing different chemical-mechanical processes that reduce contamination caused by gases and products resulting from the combustion of fossil fuels, petroleum and its byproducts. Once exhaust gases enter the system, they mix with a chemical solution that modifies the molecular composition of the gases.. A physical reaction traps heavy particulate matter as sediment at the bottom of the chamber. The gases then enter a second chamber, where they pass through a mesh hydrocarbon filter that attracts carbon and creates water and oxygen as byproducts.

First prototype, tested at UTFSM

Second prototype, mounted in a old FIAT 673 NR truck, 1972 truck

All the system mounted in the truck

LABORATORY TEST RESULTS Laboratory results certified by the Universidad Técnica Federico Santa Maria (UTFSM), a highly respected technology and applied sciences research center in Valparaiso, Chile, indicate that the Respira filtration system reduces high levels of particulate matter, toxic fumes and greenhouse gases. It is the only known filtration system that reduces CO2 in mobile sources. Percentages in Reduction of Carbon Monoxide (CO) Revolutions Without Filter With Filter Reduction RPM ppm ppm % 1200 0.07 0.02 71.43 1400 0.12 0.02 83.33 1600 0.11 0.03 72.73 1800 0.12 0.02 83.33 2000 0.19 0.02 89.47 Percentages in Reduction of Nitrous Oxide (NOx) Revolutions Without Filter With Filter Reduction RPM ppm ppm % 1200 1288 494 61.65 1400 1412 529 62.54 1600 1373 521 62.05 1800 999 239 76.08 2000 1091 209 80.84 Percentages in Reduction of Hydrocarbons (VOC or HC) Revolutions Without Filter With Filter Reduction RPM ppm ppm % 1200 30 28 6.67 1400 38 21 44.74 1600 24 17 29.17 1800 32 13 59.38 2000 31 20 35.48

Percentages in Reduction of Carbon Dioxide (CO2) Revolutions Without Filter With Filter Reduction RPM ppm ppm % 1200 9.8 4.3 56.12 1400 10.5 4.6 56.19 1600 10.7 5.0 53.27 1800 9.1 2.6 71.43 2000 10.5 2.7 74.29 Percentages in Increase of Oxygen (O2) Revolutions Without Filter With Filter

Reduction

RPM 1200 1400 1600 1800 2000

ppm 7.0 5.8 5.6 8.0 7.5

ppm 15.7 14.9 14.2 17.3 17.5

% 124.29 156.90 153.57 116.25 133.33

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REMAINING TOXINS TRAPPED

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CLEANSED GASSES RELEASED INTO ATMOSPHERE

MARKET OPPORTUNITY The short-term goal of Innovatec is to raise funds to complete minor equipment modifications, submit the device to rigorous road testing, and demonstrate that the system reduces contamination levels more effectively than other filtration systems while also reducing CO2. Based on preliminary market research, this new alternative will cost less than competing “dry” filters that trap particulate matter and modestly reduce some toxins. The competitive advantage of the technology is carbon dioxide reduction. Innovatec intends to synchronize the mandatory government testing of the filtration system in Chile, the European Union and United States.

APPLICATIONS Once the company raises sufficient capital to complete the diesel exhaust filter, the engineering team intends to test the device using gasoline and natural gas engines. Revenue from the sale of the mobile source solutions will be used to fund research and development of fixed source filtration systems using the same chemical processes applied on a large scale. Actually big stationary pollution sources have interest to test the device in their installations, and it is necessary to built for them a pilot system to test the capability of the process in collect the gases they send to atmosphere, it exist a big job in calculations and in contacts in order to start test and pilot construction in a power generation company, but all it is stop in the start money to build the test filter The company intends to identify strategic partners such as the CO2 Capture Project, a joint venture that seeks to capture and store CO2 from fixed sources. An additional capital investment of approximately US$2-3 million will be required for the development and testing of industrial applications.

REVENUE MODEL

Sale of Filtration Device The first phase of the project intends to generate revenues from the sale of the post-combustion device to heavy-duty diesel vehicle owners with non-compliant equipment. The device will be sold as an after-market product for approximately US$7,500-US$8,200 per unit, and will allow vehicle owners in Santiago to operate safely for at least two additional years beyond the legal limit. This initial investment will be recouped through savings in taxes, fines and an extended depreciation schedule.

Trade of Carbon Credits The Kyoto Protocol, an international environmental agreement signed in 1997, actually was ratified, and it is obligation of many countries in the CO2 reduction, by improvement in the combustions systems in order to reduce their emissions or the purchase of Certified emissions reduction ( CERCs). A market for the purchase and sale of emissions credits was established in Chicago and London, allowing CO2 producers to purchase “credits” for the amount of carbon dioxide they produce from an entity that reduces CO2. The idea was to provide a financial incentive for firms to reduce CO 2 and award entities that reduce CO2.

The market has only recently become operational, but some large transactions have already been signed between large fixed sources of CO2 and forest owners. Respira aims to tap this market by demonstrating that the CO2 reduction from combustion of fuels in mobile and in stationary sources is both measurable and marketable. Fixed sources, which are responsible for nearly two-thirds of the world’s CO 2 emissions, are already regulated in several countries. The Norweigen government, for example, currently levies a CO2 tax of US$ 40/ton/year from CO2 producing companies. While the technology is being road-tested by government agencies, Innovatec will demonstrate that the technology can be adapted to fixed sources, and will contact companies with a vested interest in CO 2 reduction to provide the additional capital required to complete research and development of the industrial applications. Innovatec Ltd. intends to conduct a through investigation of the laws and functionality of the carbon credit market once initial capital requirements have been met.

Licensing of Intellectual Property: Auto Manufacturers Once the filtration system receives approval from environmental agencies, the company will enter discussions with auto manufacturers that are interested in incorporating the technology in their exhaust systems. Licensing fees from auto manufacturers will fund the equipment necessary to properly collect and refine used filter components, assuming that a third-party contractor cannot be found.

Licensing of Intellectual Property: Industrial Applications Conceptually, the technology can be used in fixed source industrial applications such as power generation and heavy mining equipment. Substantial capital investment will be dedicated to completing the research and development for the industrial solutions. The company intends to approach interested investors and strategic partners once the company has demonstrated that the technology functions in mobile sources.

Sale of Filter Components The device assembly plant could produce, package and distribute chemicals, parts and filtration components for sale to filling stations, bus terminals, and other locations frequented by heavyduty vehicle owners. After management conducts a thorough cost analysis for this facility, it will decide whether to maintain or outsource the center to a third party.

Recycling, Processing and Reselling Derivative Products from Used Filters The company will invest capital in equipment capable of collecting and processing used filter products from bus terminals and filling stations. Ideally, a revenue sharing agreement will be reached with third party vendor(s) capable of properly refining and reselling Diesel Fuel No. 6 and other hydrocarbon derivatives. These entities will be responsible for treatment and disposal of any residual waste products.

TARGET MARKETS Although initially designed to address atmospheric pollution in Santiago, Chile, and elsewhere in the developing world, the government-approved device will eventually be sold in all countries that have problems with pollution from mobile sources such as heavy-duty diesel fuel vehicles. During the past [three] years, substantial resources have been dedicated to market research, competitive analysis and key discussions with medical institutions, government agencies and public transit officials in Chile. Innovatec intends to take full advantage of these efforts and will initially focus on the public transit system in Santiago. However, the device’s CO2 reduction feature could be more attractive in developed markets with costly and restrictive CO2 reduction measures.

FINANCIAL PROJECTIONS [See Appendix 1]

COMPETITION AND ALTERNATIVE SOLUTIONS Catalytic converters, commonly found in low-sulfur fuel (i.e., gasoline-powered) vehicles, use rhodium, platinum, and high temperatures (upwards of 610ºC) to convert poisonous carbon monoxide into non-lethal carbon dioxide. Converters help solve the problem of toxic emissions but worsen the CO2 problem. Preliminary market research indicates that although attempts have been made at creating filtration systems to solve toxic and carbon dioxide pollution, no significant advances have been made in the disposal and/or storage of CO2 in mobile sources. Lower prices of “Competitive devices”, actually sold in Chile are near U$S 8.600, and they do not collect all the gases that this filter it is capable to reduce; and something very important, our device do not requires Diesel with low sulphur content; all of our competitors do not work with fuels with sulphur content.

LEGAL AND POLITICAL OBSTACLES Long-term problems like pollution are particularly troublesome in the developing world, where harmful emissions saturate dense population centers and few resources exist to address local environmental issues, let alone global warming. Environmental controls are often viewed as prohibitively expensive, reducing public support and stalling the adoption and enforcement of legislation. As a result, legislative initiatives have had limited success and often include long and costly “phase-out” periods. Politically, many efforts to curb emissions and regulate energy sources face strong opposition from interested parties, and correction measures are stalled by expensive and inefficient legal and political battles. However, the low cost of diesel fuel coupled with the high cost of transitioning to “clean” alternatives further creates a unique opportunity for a system that reduces both toxic gases and CO2. Legislation restricting greenhouse gases already exists in several countries, and lawmakers await the introduction of new solutions during the phase-in of these new laws.

Rafael Vidal F. 2008 / 11