Carnot EnginesThe Future of Sustainable Powertrains

Page 3Executive SummaryCarnot is developing game-changing ceramic engines with

double the efficiency and half the fuel consumption / CO2

emissions of current engines. They will revolutionise the

industry and bring the internal combustion engine into the 21st

Century. Primary target markets are Generators and long-haul

transport, for which there are no alternatives to combustion

engines. Carnot has secured £330k in grant funding and is

seeking £170k to complete phase 1 of our 3-year R&D-focused

strategy to generate IP, run a bench prototype before selling

the company to a high-volume manufacturer.

Page 1

Carnot

£170kInvestment

Sought

£1.9bn4-Year Exit Valuation

£540bnTotal Addressable

Market

ü Double efficiency

ü 30% reduced total cost of ownership

ü High margins for manufacturers

ü Operation on all fuels including biofuels and hydrogen

ü World-class team

ü Carnot is the only entity developing this technology

EIS/SEISTax Relief

£330kGrant Funding

Page 3

7 million premature

worldwide deaths in 2018 due to

air pollution

In 2016, 92% of the world’s population

lived in areas where air pollution exceeded safety limits

275 million people at

risk of flooding worldwide due to

climate change

1,576,593Death Toll

105,083Death Toll

39,536Death Toll

59,467Death Toll

1,614,620Death Toll

40,000Death Toll

The Global Problem

47,703Death Toll

68,520Death Toll

31,141Death Toll

Page 4Market Problem

30% $86bnLegislated HGV emissions

improvement in next 5 years. Same as achieved in previous

40 years

Financial penalties faced by manufacturers for non-

compliance with emission/efficiency regulations

Page 4Market Opportunity

No production-ready technologies to meet new emissions legislation

Manufactures too large to adapt to new regulations

Manufactures have very low operating margins

Manufactures looking to dynamic Startup’s for solutions

Page 4

50% Gross Margins for

Manufacturerszero-carbon operation 46% Average Fuel saving

Page 5The Carnot Solution

Conventional engine

CarnotCarnot Genset

Exhaust30%

Power 70%

Fuel Energy

Fuel Energy

Power

30%

35%Cooling

Exhaust 35%

CO2

35% BFE

70% BFE

30% reduced total cost of

ownership

Meet the team

Archie WATTS-FARMER (MEng, CEng)CO-FOUNDER, CEO

Page 6

Francis LEMPP (MSc)CO-FOUNDER, ENGINE DESIGNER

Nadiur RAHMAN (MEng)CO-FOUNDER, ENGINE DESIGNER

Innovative and Dynamic Founders

Experts in Start-up Growth and PrototypingBo GӦRANNSON

Chief AnalystWolfgang LEMPP

Managing DirectorPeter FARMERFinancial Director

Dr Richard KIRKChief IP Officer

Nik THOMPSONDirector

Dr Ed WoodChief Engineer

Page 7Funding Strategy

Carnot aims to raise >60% of capital through Grant

Funding

The OGTC TechX

£100,000Feb 2020

Energy Catalyst 7

£300,000Dec 2019

Eureka Eurostars

£300,000May 2020

Smart Grants

£300,000Jul 2020

Phase 1

RAISED£320,000

GOAL£490,000

Innovate UK£220,000 – Dec 19

TechX£100,000 – Feb 20

£58.2BILLION

Total Addressable Market

6.2%CAGR

Primary MarketsGlobally Until 2040

£58.2BILLION

Service Attainable Markets

88%Global Market share

for ICEIn 2020

4%Global Market share

for EVIn 2020

HGV Propulsion/APUs

CAGR 5.5% Predicted until 2040

Marine Propulsion/APUs

CAGR 6% Predicted until 2040

Page 6

Generator SetsCAGR 9% Predicted until 2030

Page 8Target Markets£58.2 bn

£39.4 bn

£7.8 bn

Total Addressable Market

Service Addressable MarketBackup power, long-haul transport

20% market penetration after 10 years

Page 9Competitive Landscape

Total Cost of Ownership Low Medium Very high Medium

Refuelling / Recharging Minutes Hours Minutes Minutes

Life-Cycle Emissions Low Medium Low High

Range Excellent Poor Poor Good

New Infrastructure Required None Very high Large None

Reliability/ Life/ Maintenance Good Poor Poor Good

CarnotCarnot Gensets Battery Fuel Cell Conventional ICE

Page 7Page 10Customer Value Proposition

35%Lower TCO than best in class ICE

For Generators

£180kTCO saving for Carnot Genset

43%Reduction in

fuel costsFor Generators

28%Lower TCO than best in class ICE

For HGV’s

£355kTCO saving per

HGV

48%Reduction in

Fuel costsFor HGV

Expensive

Low Cost

High RangeLow Range

CarnotCarnot Gensets

Conventional Engines

Battery Tech.

Fuel Cell

£490kInvestment

First Round

£1.9MInvestmentSecond Round

£2MInvestment

Third Round

£1.9bnExit Valuation

4 Years

Phase I

Phase II

Phase III

PCT International Patent Applications

Test all Key-risks and Sub-systems

Run a Motored Prototype

Run a Fired Prototype

Page 8

EXIT

Page 11Program Milestones

2020 2021 20232022

IP Generation

Stakeholder Review

Stakeholder Review

2020 2021 20232022Phase I

£490k

Company Headcount

Investment

7

Motored Prototype

Page 9Page 12

£1.8M

Company Headcount

Investment

16

Test key-risk sub-systems

Phase II

£1.9MInvestment

17Company Headcount

Run a Fired Prototype

Phase III

(Cash Flow)(Cash Flow) (Cash Flow)

Project Timeline

Proof-of-Concept

Test Key Risk Sub-Systems

Engineering Prototype

£1.9bnCarnot Exit Valuation

After 3 years

£1bnCruise Automation

Acquired by GM

£235MMaxwell Tech.Acquired by Tesla

OEM’sCommonly invest

in early rounds

Page 8Page 13The Exit StrategyAcquired by Large

Manufacturer

4238

27

+110%

+140%

2015 2016 2017

No.

of A

cqui

sitio

ns

Powertrain Startup Acquisitions

Rising Trend in StartupAcquisitions

£1.9bn Exit Valuation

Based on DCF analysis and market examples

2016

2017

2019

2019

Expenditure PHASE 1 PHASE 2 PHASE 3 TOTAL

R&D £312k £1.33M £1.34M £2.99M

Business Development £0 £91k £91k £181k

Capital Expenditure £135k £146k £191k £472k

Other Overheads £43k £242k £304k £589k

Cash Flow -£490k -£1.81M -£1.93M -£4.23M

Page 10Page 14Financial Forecast

8xExit Multiple

Assumed

£1.9bnExit Valuation

4 Years

£4.4 MInvestment

Total

DCF10 year Company

Valuation

Phase 1 – £490k

£312k R&D

£135k Capital Expenditure

£43k Overheads

EIS/SEISInvestors Eligible

for Tax Relief

£330k Awarded Grant Funding

Carnot EnginesTurning Theory into a Reality