Patent 6527518--Presentation

Confidential

An Innovative Pump Solution to the Longstanding and CostlyHomeowner Storm Water Back-up Problem

U.S. Patent 6,527,518 PCT 021/30284

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707 Skokie BoulevardNorthbrook, IL 60062

Introduction

A U.S. inventor has designed and patented a new high efficiency water driven sump pump to address the problem of storm water back-up during power outages.

By utilizing the virtually ever-present power available in the pressure and flow provided by the local municipal water utility, this water driven pump will assure that storm water does not back-up into below-grade building spaces during power outages of any duration.

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Introduction

This presentation will cover five topics ...

Market Overview

Sales/Distribution Channels

Unique Technology Solution

Manufacturing/Cost Advantages

New Business Opportunity

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Market Overview

Based on industry estimates, the current U.S. sump pump market is $ 150-160 million, segmented as follows:

A.C. powered $ 110-120 million, ~ 15% for new construction,85% replacement, for single family homes, apartment buildings and commercial building applications(submersible and pedestal designs)

D.C. battery back-up units $ 30-40 million, >95% retrofit and replacement, including replacement batteries.

- Provide < 1 hour to 3 hours of operation depending upon pump flow/head and battery amp-hr. capacity

Water venturi devices < $ 1 million --- poor efficiency, ~ 3-5 gpmnot adequate --- most consume more water than they eject

- Most applications need 15-25 gpm

Stand-by generators < 1% of homes - cost too high ( $1,200- 5K )

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Market Overview

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Market Overview

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Market Overview

Power outage frequency and duration are increasing.

In the U.S., twice as many outages per year vs. ten years ago for a typical homeowner

Aging power grid transmission and distribution systems, less generating reserve

Declining budgets for tree trimming and other grid maintenance programs

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Market Overview

According to insurance company estimates, annual storm water back-up damage ~ $1.5 - 2 billion --- approx. 60% reimbursed by insurance ... remainder uninsured/deductible.

Mostly due to power outages that coincide with heavy rain, lightening, and high winds, notwithstanding the significant installed base of battery back-up units installed to date

Storm water back-up insurance mandated by State Departments of insurance

A "loss" business for major homeowners' insurance companies --- must provide to sell rest of policy

Strong interest in this invention as a viable long term solutionto a problem that has existed for many decades

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Market Overview

The annual global sump pump market is an estimated $ 300 - 350 million, with both A.C. and battery back-up units, and are found in most developed countries.

In many countries of Europe and Asia, finished "below grade" construction is increasingly becoming similar to the U.S. with increasing use of sump pumps, battery back-up units, and increasing damage costs of storm water back-up during power outages.

In the U.K., "English basements" and below grade "flats"have been common for decades

In France, Germany and other countries, older constructionpractices of unfinished "cellars" shifting toward more finished below grade spaces, as in the U.S.

In Japan, mid-high rise, multi-family housing a much greater percentage of total dwelling units

- Light commercial an interesting segment, below grade inventory storage in stores and small businesses

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Market Overview

In the U.S. market, A.C. sump pumps sell at the end user level in the$ 75 - 500 range plus installation.

At the high end, units have 40-50 gpm flow rates and 10-15 ft.head performance, for multi-family buildings and large, single family houses.

D.C. battery back-up units sell in the range of $ 100 - 700 range plus single or multiple battery prices ( $ 50 - 100 each ).

High end units with multiple batteries for longer operation, electronics to monitor battery condition, alarms to signal operation, etc.

For new construction, low price A.C. units are typically specified by builders and installed by their plumbing contractors.

Often undersized vs. needed performance resulting in storm water back-up during heavy storms, even when power availability is normal

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Market Overview

Based upon the extensive market research conducted to date, solving this significant, longstanding problem will result in more finished below grade construction.

Will result in a larger addressable market for this technology vs. battery back-up systems that are only partially effective, with the very real risk of recurrent storm water back-up.

Homeowners and builders well aware of below grade flooding risks --- many decades of awareness of the pervasive problem, and in many cases first hand experiences

A serious outage and storm water back-up every 1 - 3 years on the average

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Market Overview

A " 24 - 7 - 365 - unlimited duration " storm water pump solutionwill have significant impact on construction practices and attitudes toward below grade space utilization in the entire market.

Current Market ... Future Market ... With Storm Water Back-Up Problem Solved ...

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55-60 million single family homes,est. 70% w/ municipal water

1-2 million new construction/yr.

Est. 60-65% with below grade space/ remainder "slab"

- Est. 40-45% of below grade space

finished

- Additional 40-45% unfinished, ( need to protect/storage --- and/or

potential to finish )

More below grade construction vs. slab

Shift toward higher percentage of below grade construction "finished"

- $ 50 - 75 /sq.ft. vs. $ 100-125/ sq.ft. above grade )

Potential surge in below grade "finishing" both for new construction and home improvement

Sales/Distribution Channels

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A.C. PumpManufacturers

D.C. Pump Manufacturers

Battery Manufacturers

Multifamily Apartment Building Single Family Homeowners and Light Commercial Building Owners

and Management Companies

Automotive Battery Distribution

Channels

Plumbing and Heating Distributors

Pump Distributors

Plumbing Contractors

Home Centers - DIY ( Home Depot, Sears,

Lowe's, etc. )


The key differentiating attributes of the subject new water powered design and technology are as follows:

The ability of this design to operate for unlimited duration ...

- Municipal water supplies typically two-three orders of magnitude more reliable than electric utility power

Very high efficiency vs. current/prior venturi designs

- 95 - 98% efficient, vs. 30-40% for venturi designs

Potentially very long life/maintenance free operation

No motors, no batteries, no electronics to fail

Strong potential as a truly "global product" --- no country-by-country electrical standards --- UL / VDE / CSA, etc.

Plumbing threading standards for supply line and discharge connections easily accommodated


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Principles of operation of this high efficiency, positive displacement water powered sump pump design ...

Diaphragm design with key advantages vs. pistons

More tolerant to hard water conditions for upper actuator

More tolerant to debris --- dirt, sand, bark, etc. typically found in storm water --- and will better address any raw sewage in cases where cross connections / contamination with raw sewage back-up possible

No need for precision upper or lower cylinders

Simple upper and lower diaphragm housings


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As compared to A.C. and D.C. pumps in the current market ...

Simple design, no motor, no battery --- potential for lowcost, yet high value to customers

Key component --- Self-reversing valve on upper actuator - ref. Sullivan prior art patent ... three options ...

- Source from Hydromaid $ 10-15 per valve ( cost prohibitive )

- License for $1 - 2/valve and build internally

- New valve design

Other components very straightforward


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Preliminary design for manufacturing considerations ...

Plastic diaphragm housings, center support tube and conventional plastic/rubber check valves

Lower half of upper actuator/diaphragm housing and upper half of lower pump/diaphragm housing as single piece part with center support tube

Upper half of upper diaphragm housing and lower half of lower diaphragm housing capturing diaphragms with clamping rings for assembly

Connecting rod and rod seals --- est. $ 2 - 3

Production diaphragm designs suitable for water service at relatively low pressures widely available from diaphragm vendors

Potential for approx. $ 35 - 40 total factory cost

Future Product Development ...

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A hybrid A.C. powered and water powered designwill be submitted as a new provisional patent, or asa continuation-in-part patent filing during the nextone-two months

A.C. gear motor and one-way clutch with a cam or linkage driving the connecting rod of the designs above when power available --- during power outage, water driven actuator will operate and gearmotor/one-way clutch/camor linkage will "free wheel"

Will redefine the market --- historically, a separate A.C.and D.C. market, with discrete sales/distribution channels

- A "combination design" --- A.C. when power available, water powered during outages

- Will address new construction and retrofit and "reshape" the market


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The target market detailed in this summary and the unique solution that is now patent protected in the U.S., with foreign patents pending, represents a significant new business opportunity.

$ 150 -160 million total U.S. market size, $ 300 - 350 million global market

Key target in the U.S. is $ 30 - 40 million battery back-up market, and $ 60 - 80 million worldwide

This technology will result in growing the back-up market at a faster rate than that which would otherwise occur with battery back-up units only

Significant margin/profitability potential --- as superior alternative to battery back-up units, a value driven selling price in the range of $ 150 - 250 not unrealistic

With hybrid design, total market addressable longer term

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Potential next steps ...

Prototype design and testing

Further evaluations of alternate designs and

- Internal component fabrication vs. vendor supplied

- Self-reversing valve evaluations

- Detailed cost evaluations vs. design alternatives

Identification of sources for manufacturing

Formulate market entry plan

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Patent 6527518--Presentation

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