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Introduction Algaewheel is a closely-held company based in Indianapolis, Indiana. Our company’s mission is to provide reliable and cost efficient algae systems that enable our customers to develop and apply algae-based technologies for clean water, clean air, and clean energy. Our vision is to integrate algae with visionary technologies in order to develop innovative systems that serve mankind in an environmentally responsible manner. For several years Algaewheel has focused the use of its algaewheel system exclusively on wastewater treatment and aquaculture. However, the algaewheel system offers enormous potential beyond wastewater and aquaculture. Our system is capable of producing substantial amounts of algae for a variety of uses, including electricity generation, biofuels production, emissions sequestration (particularly CO2 or greenhouse gas), fertilizers, and feed supplements. Furthermore, algaewheel solves two of the fundamental problems with algae – efficient production and practical harvesting. Even though many are currently developing algae-based technologies and products, nobody offers a reliable and cost efficient method of producing and harvesting algae. Algaewheel is the answer. The patented algaewheel system grows more algae, more efficiently than any other system available. Algaewheel® – How and Why It Works Algae require very basic elements to grow: CO2, nutrients, water, and sunlight. The key to algaewheel is that it maximizes algae production by creating an environment whereby the algae can efficiently uptake and process these elements. The three-dimensional shape of the algaewheel provides a much greater surface area than a two-dimensional pond or raceway. The most significant advantage of the algaewheel is the ease in which algae is harvested. Suspended algae are captured as they flow through the system. Attached algae are naturally “sheared” off the algaewheel when they reach a certain mass. This combination of processes allows automatic harvesting of the algae downstream of the algaewheels. The following is an illustration of a single algaewheel and the functions it provides:

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Air In Clean Water

Wastewater

Gas

Exc

hang

e

LIGHTAs the algaewheel turns, light "pulses" to the algaewhich increases the nutrient removal by the algae.

SURFACE AREAThe 3-D shape of the algaewheel provides a muchgreater surface area than a pond or raceway.

NUTRIENTSFoam fractionation concentrates the solids on thewater surface where it is utilized by the algae.

SYMBIOSISIn nature, bacteria convert wastes into food foralgae. Algaewheel uses this natural method byproviding an internal bio-media for bacteria to grow.

AIR/CO2The algaewheel is rotated solely by air. CO2 canbe added to the air supply to increase algaegrowth.

Out

In

Illustration of a single Algaewheel® The Wheel

The Elements

The Process

ALGAE

BACTERIA

SolarEnergyO2 CO2

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Algae in Wastewater Treatment The algaewheel system is not a substitute for a wastewater treatment plant. Rather, it replaces the typical equipment used in the biological process of a conventional plant. Because algaewheel is only one component of the system, the conventional treatment process is not turned on its head. The following diagram illustrates the wastewater process flow in an algaewheel system versus a conventional plant.

Algaewheel can be used in new construction or added to an existing plant to increase its capacity, efficiency, and environmental friendliness. The algaewheel system provides conventional biological wastewater treatment as well as advanced nutrient removal utilizing algae. The algae also serve to supply the oxygen required by the bacteria and likewise the bacteria supply the carbon dioxide required by the algae. Thus, an ecological balance is established in the algaewheel system making it very stable and resistant to the fluctuations normally experienced with wastewater treatment systems. In addition to ecological balance, another significant advantage of the algaewheel system is energy efficiency. In a conventional wastewater treatment facility the main objective of sludge management is to minimize or eliminate sludge, because ultimately, the sludge must be disposed of, (i.e. buried in a landfill, applied to farm ground, or incinerated). Unfortunately, conventional designs use phenomenal amounts of energy to reduce sludge to a minimum, and then more energy to dispose of the leftovers.1 In an algaewheel wastewater treatment facility the main objective of sludge management is to maximize algae biomass production. The algae and sludge mixture created by algaewheel is a btu-rich biomass that can be thermally processed to create steam, heat, electricity, or biofuels (see below). Depending on site conditions, the

1 The United States Environmental Protection Agency published a Fact Sheet in 2006 that discusses energy conservation in the wastewater treatment process. According to the EPA fact sheet, “energy costs can account for 30 percent of the total operation and maintenance (O&M) costs of WWTPs, and WWTPs account for approximately 3 percent of the electric load in the United States. Furthermore, as populations grow and environmental requirements become more stringent, demand for electricity at such plants is expected to grow by approximately 20 percent over the next 15 years.” See http://www.epa.gov/owm/mtb/energycon_fasht_final.pdf .

S C R E E N 1 °C L A R IF IE R

C O N V E N T IO N A LA E R A T IO N

S Y S T E M(O 2 D IT C H )

(S B R )

D IS IN F E C T IO N

L e g e n d

W A S T E W A T E R

S E W A G E 2 °C L A R IF IE R D IS C H A R G E

S C R E E N 1 °C L A R IF IE R

A L G A E W H E E LS Y S T E M D IS IN F E C T IO NS E W A G E 2 °

C L A R IF IE R D IS C H A R G E

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energy generated by the system either eliminates or significantly reduces the facility’s need to purchase energy. In fact, there is excellent potential for creating excess energy that could be sold to offset the cost of operations.2 With algaewheel, there is no leftover “sludge” that has to be disposed of which eliminates the cost of sludge disposal and the contamination of food crops with pharmaceuticals and pathogens. Lastly, the EPA has identified conventional wastewater treatment plants as major contributors to greenhouse gases. The algaewheel plant, however, is actually carbon negative because the algae use more CO2 to grow than the plant emits. The following diagram illustrates how an algaewheel plant differs from a conventional plant in regards to sludge handling and greenhouse gas emissions.

2 The United States Environmental Protection Agency, Combined Heat and Power Partnership, published a paper in 2006 titled Opportunities for and Benefits of Combined Heat and Power at Wastewater Treatment Facilities. The paper discusses the need for and the many benefits of using wastewater sludge to generate power. Interestingly, the EPA concluded that many WWTPs would significantly benefit from such processes even in a facility using traditional aeration technology. Because an algaewheel based WWTP delivers a mixture of typical sludge plus btu-rich algae the benefits of power and heat generation in an algaewheel WWTP would be far greater than in a traditional system. See http://www.epa.gov/chp/documents/wwtf_opportunities.pdf . In conjunction with the EPA’s research on Combined Heat and Power, you may also want to view the EPA’s paper titled Biomass Combined Heat and Power Catalog of Technologies, which discusses the use of various biomasses for the generation of heat and power. See http://www.epa.gov/chp/documents/biomass_chp_catalog.pdf . Coincidentally, the algaewheel based WWTP delivers a two-pronged approach to combined heat and power (i.e. sludge plus algae).

SCREEN 1°CLARIFIER

CO NVENTIO NALAERATIO N

SYSTEM(O 2 DITCH)

(SBR)

DISINFECTION

G REENHO USE G ASES

SLUDG E/BIO-SO LIDS

Legend

W ASTEW ATER

SEW AGE 2°CLARIFIER DISCHARGE

SCREEN 1°CLARIFIER

ALG AEW HEELSYSTEM DISINFECTIONSEW AGE 2°

CLARIFIER DISCHARGE

DIG ESTER LAND APPLICATION

CO 2CO2

THERM ALPRO CESS

RENEW ABLE ENERG Y

ELECTRICITYBIO-OIL

BIO -GASFERTILIZER

CO 2

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Algaewheel is currently meeting with regulatory agencies in the Midwest to discuss permitting requirements for each State. Algaewheel has received approval from the State of Indiana for discharge to soil absorption fields and anticipates submitting an NPDES (direct discharge) permit to the State of Indiana in early 2009. Algaewheel will submit to other State regulatory agencies as projects dictate. The current energy crisis and climate change concerns in the United States will help fast track this new technology because of its ability to create clean cost-effective energy and significantly reduce greenhouse gases. Algaewheel will provide design and regulatory support to any consultant or engineering firm that desires it. Algae for Electricity There are numerous ways algaewheel can be incorporated into the process of producing electricity. The algae biomass generated from the algaewheel system has a higher BTU value than most biomass feed stocks. The BTU value ranges from 8,000 – 15,000 BTU per pound depending on the waste that is being treated and the resulting algae that is produced. By comparison, pure wastewater sludge has a per pound BTU value of about 3,750, agricultural byproducts about 4,200, wood about 5,000, and coal averages about 10,500. Because of its high BTU value, algae is a powerful biomass. The algae can be thermally processed with many existing technologies including direct combustion, pyrolysis, gasification, and co-firing.3 These processes result in different end products (i.e. gases, steam, heat) which then can be converted to electricity. Combustion technologies convert biomass fuels into several forms of useful energy, including hot air, hot water, steam and electricity. A furnace is the simplest combustion technology. In a furnace, biomass fuel burns in a combustion chamber, converting biomass into heat energy. A biomass-fired boiler is a more adaptable direct combustion technology because a boiler transfers the heat of combustion into steam. Steam can be used for electricity, mechanical energy or heat. In pyrolysis biomass fuel particles are heated rapidly to temperatures in the range of 450° to 550° C (842° to 1022° F), resulting in liquid pyrolysis oil but very little gas. The oil produced in fast pyrolysis is 60 percent to 75 percent of the original fuel mass. It can be used as a synthetic fuel oil or as chemicals in making other products. Gasification converts biomass into a combustible gas called producer gas. It is a two-stage process. In the first stage heat vaporizes the volatile components of biomass in the absence of air at temperatures ranging from 450° to 600° C (842° to 1112° F). The resulting vapor consists of carbon monoxide, hydrogen, methane, volatile tars, carbon dioxide and water. The residue, about 10 percent to 25 percent of the original fuel mass, is charcoal. The final stage of gasification is called char conversion. This occurs at temperatures of 700° to 1200° C (1292° to 2192° F). The charcoal residue from the pyrolysis stage reacts with oxygen, producing carbon monoxide. Producer gas contains 70 percent to 80 percent of the energy originally present in the biomass feedstock.

3 See United States Environmental Protection Agency paper titled Biomass Combined Heat and Power Catalog of Technologies, which discusses the various technologies available for processing biomass. http://www.epa.gov/chp/documents/biomass_chp_catalog.pdf

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Producer gas can be burned directly for space heat or drying, or it can be burned in a boiler to produce steam. Medium-Btu producer gas can be converted into methanol. Co-firing biomass as a secondary fuel in a coal-burning power plant using high-sulfur coal could help reduce sulfur dioxide and nitrogen oxide emissions. Also, co-firing decreases net carbon dioxide emissions from the power plant because the algae come from a sustainable source and the algae consume carbon dioxide emissions. Algae can also be processed very efficiently in anaerobic digesters. Anaerobic digestion is a biochemical process in which bacteria digest biomass in an oxygen-free environment. Several different types of bacteria work together to break down complex organic wastes in stages, resulting in the production of digester gas. The digester gas is actually a mixture of gases, with methane and carbon dioxide making up more than 90 percent of the total. The energy content of digester gas depends on the amount of methane it contains. Typical digester gas, with a methane concentration of 65 percent, contains about 600 Btu of energy per cubic foot. The advantage of using algae is that algae can significantly enhance the digestion of other biomasses, thereby creating more fuel in less time. Algae also can significantly reduce digester nuisance gases. In addition to the advantages noted above with respect to various thermal processes, using algaewheel biomass also provides consistency, continuous supply, greater thermal value, and elimination of transportation by growing the biomass on site.4 Algae for Biofuel Algae can be utilized for production of many types of biofuels including bio-diesel, ethanol, bio-butanol, gasoline, jet fuel, and others. Unlike conventional terrestrial plants such as soybeans, corn, sugar cane, and others, algae can be produced 365 days per year, can be grown in any climate, is not restricted by soil type, and does not compete with food crops. Simple cost-effective greenhouse enclosures have proven adequate in controlling the growing climate for productive temperature ranges. In addition to the geographic versatility of algae, a 20-year study conducted by the US Department of Energy has shown that algae are capable of producing vastly more biofuel per acre than terrestrial plants.5 Current estimates by experts in the Bio-fuel industry and the Department of Energy report that algae can yield far more energy per-acre than land crops - 1,800 to 9,000 gallons of bio-fuel per acre (GPA) compared to Tallow at 970-GPA and Soybean at 98.6-GPA depending on the type of technologies

4 Various federal and state tax incentives are available for renewable energy projects. For example, Internal Revenue Code Section 45 provides income tax credits for various renewable energy projects. Based on the language of the statute it appears that an algae based system of renewable energy would qualify for renewable energy tax credit of either one or two cents per kilowatt hour. In addition, various other financial incentives are available such as grants and Clean Renewable Energy Bonds. See http://www.dsireusa.org/index.cfm?EE=0&RE=1 for more information on the various federal and state incentives available for renewable energy projects. For Congress’ most recent actions and thoughts on renewable energy, see CRS Report for Congress: Renewable Energy: Background and Issues for the 110th Congress” at http://energy.senate.gov/public/_files/RL342941.pdf . 5 See “A Look Back at the U.S. Department of Energy’s Aquatic Species Program: Biodiesel from Algae, by National

Renewable Energy Laboratory, 1998, at http://www.nrel.gov/docs/legosti/fy98/24190.pdf .

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deployed to produce the algae and type of fuel being produced. One of the primary issues identified in the Department of Energy study was the costs of production. At the time of the study this was certainly an issue because diesel fuel cost less than $2.00 per gallon. Today’s price of more than $4.00 per gallon changes the entire equation. Even so, the thought of acres of greenhouses enclosing tens of thousands of algaewheels may seem unrealistic at first glance. However, when you start breaking down the numbers the real value proposition unfolds. Based on our discussions with third parties currently working to convert algae to biodiesel, their process converts 1 ton of algae into 160 to 200 gallons of biodiesel. Depending on site conditions, the nutrient source, and CO2 supplementation the algaewheel system should produce between 1.5 and 3 tons of algae per day per acre. Averaging these inputs yields 405 gallons of biodiesel per day (147,825 gallons per year) per acre. Assuming a wholesale price of $4 per gallon, this yields gross revenue per acre of algaewheels of $591,300. The infrastructure costs for this system, assuming their respective useful lives, is less than $2.00 per gallon. The processing cost per gallon is less than $0.50 per gallon. Therefore, the total cost per gallon of algae biodiesel is estimated at $2.50. While these numbers present a solid value proposition, they don’t represent the whole picture. One must still consider the algaewheel system’s potential as a multi-functional system and potential government incentives. In regard to the former, the facility could be structured for wastewater treatment and CO2 sequestration, as well as biodiesel production with the proper site selection.6 In regard to the latter, the current social, political, and economic environments have combined to yield some very meaningful incentives from the federal government and many state governments, which can significantly offset production and facility costs.7 Algae for Emissions Sequestration Algae use CO2 to grow, and can potentially coagulate and capture other emissions. Because algae are extremely efficient at CO2 uptake, CO2 can be forced through the system to optimize sequestration and greatly enhance algae production. Studies have shown algae production can increase by as much as 600% with significant CO2 supplementation.8

6 Naturally, adding more functions to the base system would entail more infrastructure costs, but we believe those costs would be more than offset by additional revenues from the other functions. 7 Various federal and state tax incentives are available for alternative and renewable fuels. For example, Internal Revenue Code Section 40A provides excise tax credits for biodiesel. Based on the language of the statute it appears that algae based biodiesel would qualify for an excise tax credit of fifty cents or one dollar per gallon. In addition, various other financial incentives are available such as grants and loan guarantees. See http://www.eere.energy.gov/afdc/incentives_laws.html for more information on the various federal and state incentives available for alternative and renewable fuels. 8 Logothetis, K., Dakanali, S., Ioannidis, N. and Kotzabasis, K. 2004. The impact of high CO2 concentrations on the structure and function of the photosynthetic apparatus and the role of polyamines. Journal of Plant Physiology 161: 715-724. See also Andersen, T. and Andersen, F.O. 2006. Effects of CO2 concentration on growth of filamentous algae and Littorella uniflora in a Danish softwater lake. Aquatic Botany 84: 267-271.

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Any algae production process, regardless of the particular application, will reduce greenhouse gases. As such, the use of an Algaewheel system will likely allow the user to obtain tax credits and to sell or utilize carbon credits. If energy is also produced the project may be eligible for Renewable Energy Certificates (REC’s). 9 Algae can be used to capture CO2 emissions from coal plants, ethanol plants, concrete plants, and any other industry that has CO2 emissions. This is an extremely urgent and important matter for companies to consider. Even though the current regulatory environment for emissions in the United States is lax by comparison to other countries, the rules are likely to change quickly.

“The need for a domestic U.S. policy that seriously addresses climate change is increasingly apparent. A cap-and-trade system is the best approach in the short to medium term. Besides providing certainty about emissions levels, cap-and-trade offers an easy means of compensating for the inevitable unequal burdens imposed by climate policy; it is straight-forward to harmonize with other countries’ climate policies; it avoids the current political aversion in the United States to taxes; and it has a history of successful adoption in this country.”10

In order to remain profitable and competitive entire industries will eventually have to change the way they do business. The algaewheel system can be used to either reduce a company’s carbon footprint or provide offsets so that the company can expand without increasing its carbon footprint. The time to prepare is now, and Algaewheel can help. Algae for Aquaculture The algaewheel system can be used in aquaculture to filter the water, and to recycle fish waste into algae. The algae is either eaten by the fish or eaten by phytoplankton and other microorganisms, which are then eaten by the fish. The algaewheel aquaculture system runs solely on air and has no mechanical parts that inhibit or destroy phytoplankton and other microorganisms. Studies conducted by Disney World have shown that fish grown in algae based systems are healthier and more resistant to disease than systems that do not include algae processes. Disney World is currently using the algaewheel technology to further their research. In addition, the fish can

9 The potential value of carbon reduction varies by location. In the United States two programs provide potential economic value for carbon reductions. These are the Voluntary Carbon Standard and the California Climate Action Registry. See http://www.v-c-s.org/index.html . These programs provide for the sale of “carbon credits” to consumers that desire to offset their carbon footprint. While no federally sponsored incentives currently exist for carbon reductions it appears likely that such incentives will be developed in the near future. We recommend that all of our customers research local and regional incentives that may be available in their area. . 10 “A U.S. Cap-and Trade System to Address Global Climate Change” by Robert N. Stavins, The Brookings Institution, October 2007. http://www.brookings.edu/~/media/Files/rc/papers/2007/10climate_stavins/10_climate_stavins.pdf. A recent insightful report from Price Waterhouse Coopers indicates that “caps on carbon will affect all sectors of the economy”, and “The time to prepare for regulation on carbon emissions and carbon trading is now”. http://www.pwc.com/extweb/pwcpublications.nsf/docid/77D706F28B19E0958525747F006E289D/$File/carbon_whitepaper.pdf

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typically achieve a food to mass ratio of 1:1, which is also reflective of the natural eco-environment created by algaewheel. Algaewheel systems are available for large hobby installations and commercial aquariums, but they are not currently available for commercial fish production at this time. Algae for Fertilizer & Feed Supplements Algae have a high value as an organic fertilizer that has superior qualities compared to commercial fertilizers made from fossil fuels. Research by the US Department of Agriculture show that algae are also high in protein (30-40% crude protein) and have an ideal Omega 3 to Omega 6 ratio of 4:1. We are currently conducting further research in this area and hope to have more data soon. More Information on Algaewheel Systems (Quantities, Types, Lifespan) An individual algaewheel can produce an average of 0.375 pounds of algae biomass per day without CO2 supplementation. Increased algae production rates resulting from CO2 supplementation have been identified and published in many recent algae studies. Based on these published rates, CO2 supplementation can increase this rate to 0.5-2.25 pounds per day. See discussion above. Our systems are not sealed, and therefore the species of algae produced will vary. We believe that it is possible to influence the algae species in our systems, but any attempt to completely control the species grown is likely to be futile. The reason we do not seek to control algae species is simple – cost. Creating a controlled environment in which algae species selection would succeed would result in a system that would not be economically feasible. Therefore, our philosophy at this time is that we must work with what nature gives us, rather than dictate what nature gives us. Algaewheels have an indefinite lifespan and require nominal maintenance. The wheels and all components are constructed of uv protected plastic. We estimate that the minimum life span is twenty-five years, and a more likely lifespan is forty years. Other components of our system (e.g. pumps, greenhouses, clarifiers, etc.) will have variable life spans, but the bottom line is that the systems are designed to require minimal time, effort, and money to maintain. Algaewheel Product Line Algaewheel has three product lines. At the core of each of our products is the basic algaewheel system, but each product varies by purpose, and therefore design. Our three product lines include:

• Packaged Algae Production System • Customized Algae Production System • Multi-functional Algae Production System

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Packaged Algae Production System. Intended for customers who want a small-scale system to reliably produce algae. Our system will automatically harvest the algae, and can also be engineered to dry the algae to your specifications. The harvested algae is then available for use in whatever application you desire. For example, if you are researching and developing a process for making bio-diesel this system would supply you with a constant flow of algae for use in your process. Or, if you are researching and developing a process for capturing certain emissions, this system would provide you the means to deliver the emissions to the algae and supply you with a constant flow of algae for experimentation. This is a quick, simple, turnkey packaged system, and multiple systems can be placed in succession if you require greater amounts of algae. Your site must have a nutrient-rich water source available, such as pond water or wastewater, in order for the algae to thrive. Customized Algae Production System. Intended for customers who want to design and build an algae system with greater specificity than the packaged system. The system will be designed to accommodate your exact needs. For example, if you require a very specific footprint or size for your system we can customize a solution to meet your needs. These systems can be used for any singular purpose, such as carbon dioxide capture, water treatment, algae for bio-fuels, or biomass production. You should note that our systems are subject to significant economies of scale (i.e. the larger the system the lower the average price per unit). Multi-Functional Algae Production System. Intended for customers who want to design and build an algae system that will serve two or more purposes simultaneously. For example, if a municipality seeks to treat wastewater and generate electricity simultaneously within one system our engineering staff will design an algae system that fulfills both of these goals. Or, if an electric utility seeks to sequester carbon dioxide and create biomass to be used to co-generate electricity along with coal, our engineering staff will design an algae system that accomplishes both of these goals. On larger projects, we provide engineering only with respect to our algae systems, and customers should engage their own engineering firm for the remaining aspects of their project. Conclusion Algae are phenomenally useful plants, capable of filtering water, being used for bio-mass to generate electricity, creating bio-fuels, and capturing carbon dioxide. We believe that algae has the potential to remedy many of the issues we and our children will face (clean water, clean air, and clean energy). Rather than monopolizing this opportunity, Algaewheel is making its algae systems available for purchase by anybody who is serious about algae technologies. Our goal is to support the development and commercialization of these technologies with our systems. We are confident that no other system can efficiently produce and harvest as much algae as the algaewheel. Applying algaewheel technology in the wastewater treatment industry presents an undeniably attractive value proposition. The wastewater treatment plant incorporating

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algaewheel technology should pay for itself through a combination of lower construction costs and much lower operating and maintenance costs over its useful life. This saves ratepayers millions of dollars, allowing decision-makers and their engineering firms to deliver incredible value. Algaewheel technology shines in wastewater treatment scenarios because the system is truly multi-functional – i.e. the algae are cleaning the water, being used as biomass to create electricity, and capturing carbon dioxide. In addition, there may be cases where the algae by-products could be used for bio-fuels or fertilizers. Our packaged and custom systems can be used for a variety of purposes. You may have a very specific application in mind that simply requires a reliable source of algae. We can help. Or, you may be a company or university working with algae to identify the best processes for converting biomass to electricity, creating bio-diesel, creating ethanol, capturing carbon dioxide, etc. Again, we can help. Obviously, one of the keys to successfully commercializing the technologies developed will be a reliable and efficient way to produce the algae. By utilizing Algaewheel technologies in the development stage you will have a system that is ready to be scaled for much greater production when you need it.

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