DELUGE, INC. 

The Technology

NATURAL ENERGY ENGINE™ TECHNOLOGY

The Natural Energy Engine™ is a thermal hydraulic engine that creates power by using the physical properties of heated fluids expansion to move a piston. The engines have very low or no fuel costs, no internal fuel combustion, and produce no pollution.

Using an innovative design, and backed by $10 million in R&D since 1996, these engines provide large cost reductions, environmental advantages and other benefits over conventional methods of energy production. Extensive field testing has successfully proven the technology.

The Deluge Natural Energy Engine's core technology is an innovation in engine design. It combines advanced, yet proven, mechanical engineering and thermal dynamic technologies to produce mechanical energy.

As a hydraulic engine, it capitalizes on the same mechanical advantage embodied in such prosaic everyday applications as automobile brakes. However, instead stopping a two ton vehicle with just the pressure of a human foot on a brake pedal, this engine uses the expansion properties of fluid when heated.

The main components of the engine system are quite simple - a piston/cylinder and a heat transfer system. The cylinder contains a piston and a working fluid, and depending on the application may have a module to reposition the piston after each stroke. The heat transfer system comprises heat exchangers, a system to circulate the heat transfer fluid (typically water), and a simple circulation controller.

In a typical internal combustion engine, fuel is ignited in a cylinder resulting in expanding gases whose increasing pressure drives a piston creating usable mechanical energy. The NE Engine works on the same general principle of creating pressure on a piston in a cylinder to produce mechanical energy.

The key difference between a traditional combustion engine and the NE Engine is that the NE Engine relies on the transfer of heat to, and its subsequent removal from, a working fluid within the cylinder. As the working fluid is heated it expands, providing the pressure to drive the piston, and is subsequently cooled to complete the cycle. The expansion and contraction of the working fluid is based on the same principle seen in a traditional thermometer that causes the mercury to expand when heated and contract when cooled.

Because it operates on temperature differentials, the engine also requires a heat source and a method of removing the heat. The heat source can range from waste heat to solar to geothermal to a simple hot water heater and, where cooling water is unavailable due to high ambient temperatures, the method of heat removal can be as simple as a small evaporative cooling unit.

The NE Engine creates mechanical energy in a three step process:

1. Heated water is collected - for many applications 180°F is suitable.

2. The hot water enters a heat exchanger where the heat is transferred to a working fluid. The working fluid, typically liquefied CO2, has a very high coefficient of expansion, meaning that it expands and contracts significantly, based on its temperature, while remaining in a liquid state. As the working fluid is heated, it expands, pushing a piston in the engine's cylinder.

3. Cooling water - generally in the range of 100° lower than the input water, with varying differentials depending on the application - then enters the heat exchanger causing the working fluid to contract, readying the piston for another stroke.

The back and forth movement of the piston creates mechanical energy directly from heat energy. This motion can be harnessed to operate a motor or to perform other work. Even lower temperatures and different differentials can be utilized, all of which attest to the versatility of the engine. A formula has been developed that establishes the ratio between the volume of the heat exchanger and the volume required to displace the piston for various fluids. This formula establishes design parameters for different horsepower systems.

In typical applications, due to the natural pressure of liquid CO2, the cylinder is constructed such that the CO2 working fluid is on one side of the piston and a pneumatic spring charged with nitrogen (N2) is on the other. Heating the working fluid results in increased pressure on the working fluid side of the piston. The hydraulic pressure of the working fluid must be high enough to overcome the starting torque (static friction) of the piston. When the pressure exceeds this point, the piston moves outward, compressing the pneumatic spring. After a predetermined time period, cooling water is sent through the heat exchanger. As the temperature decreases, the volume of the working fluid shrinks. The backpressure of the pneumatic spring helps push the piston back to its starting position.

Multiple piston engines have been built and operated. In two piston applications, the two pistons can be configured so that they offset each other in a single cylinder. As one piston extends, the other retracts. Between the pistons are two working chambers that allow the engine to do work, such as compressing gas, pressurizing water, or pumping hydraulic fluid through a hydraulic motor to turn a shaft. In four piston applications, heat exchanger assemblies timed to run at staggered intervals are utilized on each of the four cylinders. Valves that direct either the heated water or the cooling water to flow through the heat exchanger are timed using the four pistons. The four cylinders work in sequence continuously applying power to turn a rotating shaft for varying applications.

Development of the revolutionary NE Engine technology began in 1984, with the first working model that ran off hot and cold water from Brian Hageman's kitchen sink in Phoenix, Arizona. Brian continued to build on this idea, developing and refining the technology. Exhibit A shows key milestones in the development of the NE Engine, and initial commercial application of the technology.



Sources of Efficiency and Economy

The fundamental design of the engine provides the basis for its efficiency and economy. First, the engine has an inherent efficiency because so little energy is dissipated in heat loss and noise generation. In an internal combustion engine, for example, much of the BTU energy in the gasoline is sent out the tailpipe as waste heat, but the NE Engine can actually recycle whatever heat is not used. In part, this is because the engine operates at low temperatures - the NE Engine uses heat differentials of approximately 100° Fahrenheit to produce usable power.

Additionally, the NE Engine is more efficient because so little energy is used for indirect motions. An internal combustion engine uses a significant fraction of its power to overcome friction and operate ancillary functions, such as valves, cooling circulation, and the like. Additionally, each cylinder in an internal combustion engine typically provides power only on every second or fourth stroke, while each stroke of the NE Engine is a power stroke.

Another efficiency advantage of the engine is in power transfer. Unlike an internal combustion engine, for example, there are no camshafts with their friction and power losses, no gearing, and no transmission. Of course, in applications where linear power must be converted to rotary power, traditional methods or even hydraulic converters can be used. Although the engine's high torque typically makes gearing and transmissions unnecessary, gearing is one option to generate even more rapid - or slower - movement than the engine's normal cycle.

The result is a highly efficient, virtually silent, direct drive engine that can easily be configured to use no traditional fuels and generate no pollution whatsoever.

In sum, the real economic advantage of the NE Engine is its lower operating cost and increased efficiency over competing gasoline, diesel or electric powered engines. Unlike conventional engines that require costly fossil fuel or electricity, the NE Engine fuel is simply low grade heat - something that can be supplied by a variety of sources including solar thermal, geothermal, ocean thermal, waste heat or small amounts of electricity or carbon-based fuels. The engine's ability to effectively utilize low grade heat results in minimal fuel costs.

The NE Engine is inherently simple with few moving parts; therefore, is easier to manufacture and to maintain than conventional engines. Deluge's technology creates an affordable alternative to the more technologically complex products currently available.



Product Features and Benefits

Unlike photovoltaics and fuel cells, technologies that are inherently complex and expensive to manufacture, the NE Engine is relatively simple, utilizing components similar to those found in traditional internal combustion engines. As a result, production units can be sold at a price that provides customers an attractive investment payback period.

Although the technology application is new to the commercial marketplace, the underlying technology is soundly established. Deluge has placed an emphasis on off-the-shelf component materials with the result that production of the engines will not require complex manufacturing equipment or facilities, or large capital investment in new plants.

In addition, the technology is a mechanical hydraulic engine of robust design. The product life, when properly maintained, is estimated to be approximately 50 years. Product warranty calculations are based on a 20-30 year life span. This allows maximization of the return on investment. Additional financial benefits include paying for capital costs of purchased equipment in a relatively short period of time and extending the profitable life of leased equipment by practicing good preventive maintenance.



Overall features and benefits of NE Engine technology include the following:

1. Proven Technology: The engine is based on recognized, proven, understandable technology of modest complexity.


2. Flexible Design: The engine is designed so that it can be fabricated using existing off-the-shelf components and machined parts from existing fabrication plants, enabling access to a diverse source of parts vendors around the world, resulting in competitive pricing.


3. Simple Maintenance: Training is of a mechanical nature, and does not require expensive high tech testing equipment, allowing for a broad range of skilled individuals who can be made field ready in a relatively short period of time.


4. Durability: The engine has a robust design for long functional life, and easy repair and maintenance.


5. Independent Power: Self-contained products can easily be configured that work well "off the grid" in remote locations.


6. Multiple Fuel Options: Multiple fuel sources include solar thermal, geothermal, ocean thermal, natural gas, propane, waste heat and others, allowing for flexibility in choosing the most cost effective and available energy and backup energy source options.


7. Low capital cost: The Company projects that engine configurations can easily be priced at some 60-85% of power systems that produce equivalent output.


8. Low operating costs: Depending on configurations, operating costs can easily range from 25-75% of power systems that produce equivalent output, and can actually be as little as 4% (a 96% reduction in costs) - which can justify replacement due to the quick payback.


9. Pollution free: The engines create no environmental waste, are inherently safe to operate, and produce no noise. They can be configured to be entirely "green" and pollution free.


10. Cost Efficiencies with Size: As engines are built in larger sizes, a dramatic decrease in cost will occur when approaching the 200 horsepower range. As with many technologies, projections beyond that range will continue to reduce the cost per horsepower.


Alternative energy and "green" technology applications are also a benefit. Since the heat input required is low compared to other engines, and the heat differential required to cycle the engine is not large, the engine is environmentally friendly. When configured in conjunction with some traditional technologies, it can actually reduce overall heat emissions. It is exceptionally well suited to "green" applications, where it can improve the work outputs from traditional "green" technologies.



Independent Analysis of the Natural Energy Engine

Verification of the NE Engine's capabilities has been documented in various forms. Third party discovery, experimental and empirical evidence, and documentation - important for acceptance by the general public, the engineering world, and financial institutions - are available.

In fact, the NE Engine and the basic engine technology have benefited from a substantial amount of third party examination and endorsement, including the implicit endorsement provided by the patent awards. Five examples of independent verification follow:


1. In 1998, an earlier version of the NE Engine was tested at Sandia National Laboratories in New Mexico. Through a facilities use agreement, the engine was connected to an engine dynamometer system at Sandia's solar research center. Data was collected by Sandia and delivered to a local Phoenix engineering company for evaluation. The engineering report provided the first documented proof that the engine produced horsepower.


2. In 2001, a Master's thesis was written by David Jacobi, a graduate engineering student under the guidance of Dr. Patrick Phelan, a professor in the Mechanical & Aerospace Engineering Department at Arizona State University. This thesis provided an in-depth analysis of the physics of the NE Engine, and described and documented the engine's operation in terms of engineering and physics equations. The thesis also provided insights for advancing the design of the engine to improve performance.


3. In 2001, testing of a water pump system, using the NE Engine, was conducted at the Indian Institute of Technology in Chennai, India. An extensive review was held at the laboratory where over 200 tests were performed and documented. The resulting study report provided valuable temperature/pressure cycle data used to determine the repeatability of cycling and sequencing of the engine timing.


4. In 2003, Deluge entered into a Cooperative Research and Development Agreement with the U.S. Department of Energy at the Rocky Mountain Oil Testing Center (RMOTC) in Wyoming. Testing of the first commercial application of a single cylinder NE Engine was performed by a pump designed and built for lifting crude oil from underground formations. Various components of the prototype were tested. The actual field testing on an existing oil well at RMOTC provided valuable development knowledge and earned Deluge the Federal Laboratories Consortium's Outstanding Technology Development Award in 2005. See Exhibit B.


5. In 2004, Deluge entered into a Cooperative Research and Development Agreement with the U.S. Department of the Interior at the Water Quality Improvement Center in Yuma, Arizona. A bench test was performed using the engine to pressurize salt water processed through a reverse osmosis membrane to produce drinking water. The successful tests were monitored by a computer logging instrument and compiled into an available report. This same process can be used to purify produced oil well water.


6. In 2006, Deluge engaged the independent engineering firm of ESG Engineering, based in Tempe, Arizona, to conduct an independent analysis of the comparative efficiency, both physical and economic, of the NE Engine in oilfield use. Their analysis indicates that NE Engine electrical costs can be less than one-twenty-fifth of the costs of traditional pumping. Depending on field conditions and pump alternatives, NE Engine operating costs range from 3.5% to 15% of typical costs. See Exhibit C.


Deluge has benefited from relationships with university professors in Arizona, some of whom have consulted on engineering matters. Professor Phelan, who has been working with the NE Engine development team for about seven years, is the primary contact at Arizona State University. While Mr. Jacobi was writing his Master's thesis on the NE Engine, ASU helped devise a computer modeling program to assist in developing larger engines. The development team is presently working with ASU on additional projects surrounding the core fundamentals of NE Engine technology that will lead to further commercial application.



Intellectual Property

As with any such fundamental innovation, patent protection is critical. Accordingly, Deluge has sought - and obtained - excellent patent protection on the NE Engine design. Patents for the engine have been issued in 39 industrialized countries around the world and are pending in three others. Details of the patent application and award status appear in Exhibit D.

The patented name of the engine is a "hydraulic engine powered by introduction and removal of heat from a working fluid". The preparation of patents was expensive and time consuming, and the decision on where to apply for patents was thoughtfully made. In the United States, two patents have been obtained, the second being an extension and elaboration of the first.

The Company fully expects that it will seek and obtain additional patents as the manufacturing process matures, as refinements are made to the application of the engine to various uses, and as modifications and extensions are made to the technology. This is considered by Company management to be a critical element in extending the competitive advantage of the engine.

To date, funding for all R&D, design, testing, and other technology projects has been accomplished through private investors who purchased common stock in Deluge, Inc.

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