Sara Rolfe Business Development Eltron Research & Development Inc x115 DurafluxTM. Nanofiltration Membrane

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Sara Rolfe Business Development 303-530-0263 x115 business@eltronresearch.com DurafluxTM Nanofiltration Membrane

CONTENTS Executive Summary Background Nanofiltration Overview Duraflux TM Advantage Applications Duraflux TM Products Unfair Advantages Intellectual Property Government Funding Commercialization Strategy Business Model Team Eltron R&D Inc New Venture Partners & Advisors Market Snapshot Issues, Opportunities, Trends Value Proposition Industry Participants Market Size Competitors Technology & Product Development Financial Projections Future Opportunities 2

EXECUTIVE SUMMARY Eltron Research & Development Inc, a 30 year old private lab, has invented and demonstrated a nanofiltration technology capable of operating under harsh environments and surviving periodic cleaning cycles. This technology will: i. displace other more expensive and less effective water treatment technologies, ii. displace lower performing nanofiltration membranes in the installed base and iii. expand membrane based filtration into previously unavailable applications such as produced water from hydrocarbon extraction ($50B market). The proposed path to market is to create a new venture to complete membrane optimization, to scale-up the manufacturing process and to enter the marketplace with a commercial offering. The new venture will require a management team and the resources to execute the business plan. This document is NOT a business plan but rather Eltron s perspective of the commercialization opportunity. The Duraflux TM nanofiltration membrane technology provides robust water softening and desalination filter products that will survive harsh operating conditions (high temperature, frequent system upsets, organic solvents, strong oxidizers, frequent cleaning) while providing the highest water production of any comparable filter membrane product. The intellectual property embodied in the Duraflux TM nanofiltration membrane technology is partially protected by patent coverage. Additional coverage is provided by trade secrets which are not discernable through reverse engineering. The existing market for nanofiltration is approximately $300 million and growing fast but only represents a fraction of this opportunity. The Duraflux TM nanofiltration membrane will take market share from the $3B reverse osmosis market and the $50B produced water market. Over $1 million (mostly SBIR) has been spent to date developing the technology. An additional $3 million will be required to reach market entry in 18 months. The first two years of revenue will see $5M+ in sales from smaller, distributed or mobile, water treatment systems. Once proven on the smaller scale, significantly increased revenues will come from large scale municipal or industrial installations resulting in profitability by year four. An additional $5M investment will be required to reach this point. An exit opportunity would be expected in year five. 3

BACKGROUND Nanofiltration The burst of filtration and filtration-related activity that followed the development of the phase-inversion process for the manufacture of polymeric membranes, in the early 1960s, led to the establishment of three membrane separation processes: microfiltration, ultrafiltration(uf) and reverse osmosis(ro). Each is capable of removing smaller and smaller particles or molecules. A gap was left between UF and RO. Membrane development during the 1970s and 1980s, led to a loose RO membrane process, which was given the name nanofiltration (NF). The key difference between nanofiltration and reverse osmosis is that the latter retains monovalent salts (such as sodium chloride), whereas nanofiltration allows them to pass but retains divalent salts such as sodium sulphate and multivalent ions such as calcium. This difference also enables NF membranes to operate at greatly reduced operating pressures with greatly increased flow rates as compared to Reverse Osmosis. Nanofiltration is a low to moderately high pressure (typically 50-450 psig) process in which monovalent ions will pass freely through the membrane but highly charged, multivalent salts and low molecular weight organics will be rejected to a much greater degree. Typical NF applications include water softening, desalination of dyestuffs, acid and caustic recovery and color removal. 4

The progress of much of the filtration business is being driven by demands for finer and finer cutpoints. Nanofiltration is seeing remarkable growth largely because of its unique ability to separate and fractionate ionic and relatively low molecular weight organic species. The membranes are key to the performance of nanofiltration systems. They are produced in plate and frame form, spiral wound, tubular, capillary and hollow fibre formats, from a range of materials, including cellulose derivatives and synthetic polymers, from inorganic materials, ceramics and from organic/inorganic hybrids. Recent developments of membranes for NF have greatly extended their capabilities in very high or low ph environments, and in their application to non-aqueous liquids. The plastic media are highly cross-linked, to give long-term stability and a practical lifetime in more aggressive environments. NF membranes tend to have a slightly charged surface, with a negative charge at neutral ph. This surface charge plays an important role in the transportation mechanism and separation properties of the membrane. As with any other membrane process, nanofiltration is susceptible to fouling, and so nanofiltration systems must be designed to minimize its likelihood with proper pretreatment, with the right membrane material, with adequate cross-flow velocities to scour the membrane surface clear of accumulated slime, and by use of rotating or vibrating membrane holders. Duraflux TM Advantage Duraflux TM performance advantages include high stability under elevated temperatures, oxidizers, pressure fluctuations, transition metals and organic solvents. These advantages are expected to make this nanofiltration technology 5

ideal for treating highly contaminated water, hot water processing, and separations in hydrocarbon solvent streams. Also, this technology will be uniquely applicable in distributed systems where system fluctuations and upsets are expected. The membrane will sell for a slight premium but will provide the following cost savings: dramatically reduced operating costs due to lower power (pumping) requirements smaller plant footprint due to increased flux reduced pretreatment requirements due to increased stability longer lifetime due to increased stability and tolerance to cleaning cycles Additionally, Duraflux TM membranes offer a manufacturing advantage relative to conventional spiral-wound and hollow fiber reverse osmosis (RO) and nanofiltration (NF) technology. Duraflux TM membrane are produced by a direct polymer deposition onto a solid substrate which is then loaded into its pressure housing without winding, adding flow spacers, laminating, gluing, taping, or potting steps. This conventional membrane casting process line is avoided. Duraflux TM membranes can be produced with minimal production equipment enabling a faster time to market on the small scale. Full-scale membranes could be made for field trials and small customer orders very soon after the development work has reached its critical milestones. APPLICATIONS Nanofiltration membranes are primarily used in the treatment of fresh, process and waste waters. They are currently in service for the following applications: Water softening of fresh water Pulp and paper process water Brackish water Desalination pretreatment Wastewater treatment and reclamation Grey and black water treatment Food industry applications are quite numerous. In the dairy sector, NF is used to concentrate whey, and permeates from other whey treatments, and in the recycle of clean-in-place solutions. In the processing of sugar, dextrose syrup and thin sugar juice are concentrated by NF, while ion exchange brines are demineralised. NF is used for degumming of solutions in the edible oil processing sector, for continuous cheese production, and in the production of alternative sweeteners. There are more applications in the whole chemical sector (including petrochemicals and pharmaceuticals) than in the rest of industry put together. While many of these applications are at the concept or pilot stage NF is already a valuable contributor to the totality of the chemicals industry. The production of salt from natural brines uses NF as a purification process. Most chemical processes produce quite vicious wastes, from which valuable chemicals can be recovered by processes including NF. 6

The high value of many of the products of the pharmaceutical and biotechnical sectors allows the use of NF in their purification processes. NF membranes are also used for the removal of natural organic matter from water, especially tastes, odours and colours, and in the removal of trace herbicides from large water flows. They can also be used for the removal of residual quantities of disinfectants in drinking water. As mentioned previously, Duraflux TM membranes differentiate themselves in their ability to survive harsh conditions. It is therefore anticipated that a strong value proposition will be found in the following applications: Produced Water Treatment (membrane based systems have previously been too fragile for this enormous market opportunity) Pulp and paper water reuse Mining processes Geothermal water conditioning Tar sands production, water recycle Refinery applications, water and hydrocarbon separations Textile dye removal Nuclear power plant operations (outside pressure boundary) It is important to note that nanofiltration is not restricted to the treatment of aqueous suspensions. Indeed one of the largest NF plants was installed at a petroleum refinery for the dewaxing of oils. Many organic system separation processes are highly energy intensive and by contrast, NF can be an energy saving alternative (over distillation, for example). A thorough study of the potential applications is needed. Duraflux TM PRODUCTS Membranes The Duraflux TM technology has been demonstrated on multiple supports including industry standard polymer flat sheets which can be used in spiral wound modules and solid tubular substrates as well. The initial product offering with the greatest differentiation and advantages in the market is anticipated to be the solid tubular form factor. Qualitative product specifications are as follows (more quantitative data provided in Technology & Product Development section below): 2 to 10x water flux over conventional NF Higher thermal stability than conventional NF (80 C versus 50 C) Improved stability to transition metals and oxidizers Extended shelf life (> 2 years dry) Longer service lifetime Resistant to mechanical erosion Compatible with steam cleaning or chemical solvent cleaning 7

The target product is a membrane module comprising a commercially available ceramic UF substrate with the Duraflux TM polymeric membrane coating. Known UF ceramic membranes that may be used as a Duraflux substrate include offerings by Media & Process, TAMI Industries, Corning and the following examples: Veolia/HPD CeraMem Pall Corporation Membralox Jiangsu Jiuwu Hitech Co., LTD Small Filtration Systems The Duraflux TM Membrane module will be deployable into systems that currently support the substrate UF membrane. Such an installation will require some design and control system modifications. It is anticipated that the first installations will be small, distributed, mobile systems. The following image represents a typical portable membrane filtration skid: Example of a portable membrane filtration skid. Large Systems Once mature and proven, Duraflux TM membranes will be the work horse in large scale projects such as water treatment plants. 8

Example of a water treatment plant employing NF membranes. UNFAIR ADVANTAGES Intellectual Property The process by which the Duraflux TM membrane is fabricated involves over 35 different parameters, variables and non-intuitive tricks most of which cannot be discerned by analyzing the product. This provides a very defensible intellectual property position. Eltron has applied a protection strategy involving partial patent coverage complemented by a significant collection of trade secrets. Government Funding Eltron has developed this nanofiltration technology on government funding from the Department of Defense (Army) and The Department of Energy. To date, over $1,000,000 has been spent developing this technology. Another funding opportunity available through DOE s SBIR Phase II program is currently providing an additional $750,000 for technology development which started in late 2010. COMMERCIALIZATION STRATEGY As mentioned previously, Eltron s commercialization strategy with the Duraflux TM membrane technology is to create a new venture. Eltron will retain an equity stake in the new venture and be entitled to licensing fees and royalties as negotiated with the new entity s stakeholders. Business Model It is proposed that the new venture be a product company supplying Duraflux TM membrane modules to distributors of filtration systems and project developers of large filtration facilities. The success of this model will depend upon: i) the economics of revenues passing through the distributors and ii) such partners willingness to adopt and sell Duraflux TM membranes. Membrane Sales The following companies sell membrane modules for other manufacturers and would be likely suppliers of Duraflux TM membrane modules. 9

COMMERCIAL MEMBRANE DISTRIBUTORS M.L. Ball Co.,Inc Norcross, GA Atlantic RO Products Southport, NC Global Filter Corporation Cedar Rapids, IA Pacific RO Products Pure Aqua Inc. Applied Membranes, Inc. San Diego, CA Santa Ana, CA Vista, CA America RO Systems Richmond, KY Membranes for Less Omaha, NB Small & Large Filtration System Sales As discussed above, it is probable that initial sales and a significant portion of all sales will come through small, distributed or portable filtration systems. Many companies sell small systems employing membrane modules manufactured by other suppliers. Three examples: Applied Membranes Inc. - http://www.appliedmembranes.com/mobile_water_treatment_syste ms.htm RO Consumables - http://www.roconsumables.com Anderson Water Systems Inc. (subsidiary of Degremont Technologies) sells skids with various manufacturers membranes - http://www.degremonttechnologies.com/img/pdf/nanofiltration_us_anderson.pdf Siemens sells skids with Dow s FilmTec nanofiltration membranes - http://www.water.siemens.com/sitecollectiondocuments/product_l ines/industrial_process_water/brochures/pws-m84n-ds-0308.pdf There may be a valuable opportunity for the new venture to produce and sell its own skid mounted systems in competition with these companies. This should be investigated further. While greater revenues may be realized this way, it will require significantly different skill sets and resources. In addition to membrane excellence, the new venture would need to provide: Process System Design, Systems Fabrication, Project Management, Installation Support, Document Preparation, Validation/Qualification, Risk Analysis, Operator Training, Spare Parts, Service Contracts and After-Market Service. At this time it is assumed that such competencies may be added later but will not be required business functions at start-up. MARKET Snapshot The market for membrane-based water filtration and separations is comprised of microfiltration, ultrafiltration, nanofiltration and reverse osmosis. Similar variants include membrane distillation, pervaporation and forward osmosis. These membrane technologies cover the filtration spectrum from particulate removal to seawater desalination and solvent separations. The largest market is desalination served by RO membranes which is a $3B market having a demonstrated annual growth in excess of 10% (membranes and 10

equipment). Nanofiltration is the smallest segment of the four at $300 million but growing the fastest. Issues, Opportunities, Trends Reduce Power Consumption Many new membrane products target higher water production to reduce pumping costs, capital costs and energy consumption by allowing membranes to operate at lower pressures. There are theoretical and practical limits for the minimum pressure required to drive reverse osmosis desalination determined by the osmotic pressure of the salt-containing feed water. Seawater desalination membrane technology is well on its way to approaching these limits. RO and NF membranes for purifying water containing lower salt concentrations or for separations in industrial processes have more flexibility in making improvements in selectivity and performance characteristics in niche markets. Increase Recovery and Reduce Brine Reject Stream The amount of water that can be recovered from a feed stream containing dissolved solids (salts) is determined by the solubility limit of the dissolved solid(s) being concentrated in the reject stream. The higher the water recovery the smaller the volume of brine concentrate to dispose of, which can be a significant cost for landbased filter plants where discharge to the ocean or water treatment plant is not an option. Pretreatment and antiscaling additives are used to increase the potential water recovery. Pretreatment methods can include precipitation and UF removal of lowsolubility salts. Increase Membrane Durability, Longevity Disruptions or excursions in normal filter plant operations can result in membrane damage and shortened membrane life. Failure mechanisms include chemical instability of substrate, ph instability of selective layer, oxidation by chlorine, membrane delamination, abrupt pressure changes and pressure cycling, seal failure at elevated temperatures, irreversible membrane fouling, damage from dehydration. Desalination membranes can encounter all of the above failure mechanisms, therefore there are standard practices that are followed for membrane installation commissioning and operation. If these protocols are not followed or there are uncontrolled excursions during operation membrane damage or failure can occur. Some conventional RO/NF membranes have been designed to achieve higher operating temperatures and greater ph stability, but options are relatively limited. There are several development programs under way to develop ceramic-based NF, but products are not yet on the market. Existing products (flat sheet RO) have extensive manufacturing and installation infrastructure investments behind them. A significantly different product will have 11

to present a lot of value, growth potential, can be a drop-in replacement or serve new customers/applications. High temperature membrane processing Spiral-wound membrane modules are limited in their operating temperature range due to softening and delamination or failure of tapes, glues and seals used in their construction. High pressure seawater desalination membranes operate below 30 C. Low pressure RO and NF can operate up to 55-65 C with only one product rated for up to 80 C (dairy & beverage applications). A small amount of feedback we have heard from a limited number of users indicates that these products do not perform that well at their upper temperature limits and have a shortened lifetime. Ceramic UF membranes and sintered metal filters are used for hot filtration of particles and large molecules (proteins, polymers), but desalination capabilities are not yet available on the market. Decrease filter plant pretreatment requirements RO and NF Membranes generally require extensive pretreatment of water to remove components that will damage the membranes. This includes suspended solids, cationic surfactants, chlorine and other strong oxidizers, organic solvents. Reducing the pretreatment requirements would decrease operating costs and consumables as long as membrane maintenance did not increase more than the cost savings or membrane lifetime shortened. Decrease manufacturing costs of RO/NF membranes RO and NF membrane manufacturing has historically made desalination membranes very expensive. As the technology matures large-scale manufacturing facilities and increasingly automated fabrication and assembly lines have improved the economies of scale to produce spiral-wound filter modules. Recycling or repair of damaged filters This has been a pipe dream for desalination membranes. Recycling may be possible with ceramic-supported composite membranes and represents a potential Green marketing feature. A membrane exchange program could be a unique market offering. Increase Membrane Processing in industrial applications Durability, compatibility, selectivity issues must be addressed for each application, niche markets. 12

Value Proposition The following table provides a breakdown of the Duraflux TM value proposition for three different representative applications. APPLICATION COMPARED TO ADVANTAGE BENEFIT NOTES Brackish Desalination RO Membranes Energy consumption (pumping costs) Reduces O&M cost by 23% 50% reduction in power costs provides 23% reduction in O&M costs Chlorine tolerance Reduces O&M costs by 1% Less membrane replacements Survives cleaning cycles Reduces O&M costs by 3% Less performance degradation and less membrane replacements Reduced pretreatment requirements? Not yet quantifiable. Reduced concentrate disposal costs Reduces O&M costs by 0.34% Reduced salt rejection corresponds to lower concentrate volume by Reduced capital costs Reduces CapEx by 25% Higher flow rates will require 1/3 as many membrane modules at 25% cost premium NET BENEFIT: 26% Reduced Annual Plant Cost (27% Reduction in Operating & Maintenance Costs + 25% Reduction in Capital Expenses) NF Membranes Reduced energy consumption (pumping costs) Reduces O&M cost by 7% Average power savings over other NF products is estimated to be 16% Chlorine tolerance Reduces O&M costs by 1% Less membrane replacements Survives cleaning cycles Reduces O&M costs by 3% Less performance degradation and less membrane replacements Improved tolerance to suspended solids Reduces O&M costs by 1% Less performance degradation NET BENEFIT: 7.2% Reduced Annual Plant Cost Produced Water Ion Exchange Removes more stuff See block flow diagram for Higher service temperatures reduction in process complexity Less pretreatment benefits. Economic benefit has not been quantified. RO Membranes Energy consumption (pumping costs) Reduces O&M cost by 23% 50% reduction in power costs provides 23% reduction in O&M costs Solvent tolerance (naturally ocurring organics) Reduces O&M costs by 1% Less membrane replacements Survives cleaning cycles Reduces O&M costs by 3% Less performance degradation and less membrane replacements Higher service temperatures Reduces CapEx by 5% Eliminates the cooling impoundment expense. Improved performance for interrupted operations Reduces O&M costs by 1% Less membrane replacements (interrupted operations tend to destroy membranes). Reduced concentrate disposal costs Reduces O&M costs by 0.34% Higher service temps can achieve higher water recovery rates NET BENEFIT: 19% Reduced Annual Plant Cost (28% Reduction in Operating & Maintenance Costs + 5% Reduction in Capital Expenses) Dairy and Food NF Membranes Energy consumption (pumping costs) Reduces O&M cost by 7% Average power savings over other NF products is estimated to be 16% Hot processing and/or hot water sterilization Reduces O&M costs by 1% Less membrane replacements (current products suffer from thermal instability) Survives cleaning cycles Reduces O&M costs by 4% Less performance degradation and less membrane replacements Improved performance for interrupted operations Reduces O&M costs by 1% Less membrane replacements (interrupted operations tend to destroy membranes). Chlorine tolerance Reduces O&M costs by 1% This industry is likely to flush membranes with tap water containig residual chlorine NET BENEFIT: 8.4% Reduced Annual Plant Cost (14% Reduction in Operating & Maintenance Costs) NOTE: Typical plant costs are split 40% CapEx and 60% OpEx.

Example Process Improvement Comparing the Duraflux TM membrane to non-membrane technologies will require additional analysis. As referred to in the previous table, the following block flow diagram shows an example of process improvements for the treatment of produced water. The process employing the Duraflux TM membrane is represented in the Improved Process which has two less steps than the Conventional Process. Industry Participants Membrane manufacturers with products NOT DIRECTLY competing with Duraflux (polymeric, flat sheet, spiral-wound, hollow fiber for RO & NF applications) DOW-Filmtec Koch Membrane Systems Hydranautics/Nitto Denko GE-Osmonics Toray TriSep Sepro Sparex Pall Corp. Synder Osmosis Technologies Parker Advanced Filtration

Porex Filtration There are a number of smaller startup companies producing unique membrane products for RO, NF and FO. Ceramic based NF Technologies DIRECTLY competing with Duraflux (all are in the development stage): Novasep (all ceramic NF monolith) Other small European startups (all ceramic NF monolith) Veolia/HDP/Ceramem (NF) Market Size The market size for water filtration membranes is approximately $2.5 billion and expected to more than double over the next five years. Nanofiltration membranes capture less than 10% of that market but are the fastest growing segment. The following reports are available (at a cost) for more complete market summaries. Fredonia Group Report on Membrane Separation Technologies, 2008 US demand to grow 8.2% annually through 2012. Demand for membrane materials is expected to increase 8.2 percent per year to $4.3 billion in 2012. Growth will be driven by ongoing interest in process fluids with higher purity levels in a variety of markets, as well as the introduction of increasingly strict environmental regulations concerning the quality of water and wastewater streams. These factors are leading to the rising penetration of membranes into markets such as water and wastewater treatment, and food and beverage processing, as industry requirements surpass levels that can be achieved with conventional filtration equipment alone. Additionally, a growing number of industries are using membranes to reduce water use and waste disposal expenditures, and to improve water re-use and material recovery. Value growth will be aided by the increasing use of value-added, high performance membranes, and a gradual shift toward higher value materials. Nonpolymeric membranes to outpace polymeric types. Polymeric membrane materials will continue to dominate the market as they have lower initial costs and greater product flexibility than nonpolymeric materials. However, polymerbased membranes are subject to an increasing level of competition from nonpolymer membranes because of performance limitations, including poor performance in extreme temperatures, intolerance to a number of chemicals and a tendency toward biological fouling and clogging. Demand for nonpolymeric materials, including ceramic, metal and composite types, is expected to record double-digit growth through 2012, due to their better performance in extreme temperatures and greater ph ranges, as well as generally lower maintenance costs since they are better able to withstand the high pressure backwash and/or chemicals involved in cleaning the membrane. Full Report Available at: http://www.fredoniagroup.com/brochure/23xx/2307smwe.pdf Global Markets Direct Report on Water Treatment Membranes, November 2009 Membrane Market for Water and Wastewater Treatment Forecasts and Analysis to 2015 Global Markets Direct estimates that the membrane treatment market for industrial water and wastewater is expected to grow at a Compound Annual Growth Rate (CAGR) of 13% from $2.3 billion in 2008 through 2015 to reach $5.5 billion. Increasing volume production and technological improvements have reduced capital cost of membrane systems and operating cost to the point that membrane treatment is now seen as a viable alternative in many water and wastewater applications. Declining costs are stimulating the membrane treatment growth in the industrial sector. Full Report Available At: http://www.mindbranch.com/prod-toc/global-membrane-water-r3480-14509/ 15

BBC Report on Nanofiltration, September 2007 (Report ID:NAN045A) Nanofiltration is a pressure-driven, membrane-based separation process whose characteristics fall between those of ultrafiltration and reverse osmosis. The growing interest in the utilization of nanofiltration membranes primarily stems from their unique physical properties, making them particularly well suited for specific applications, as a low-cost alternative (both in terms of unit price and operating costs) to reverse osmosis. HIGHLIGHTS The global market for nanofiltration membranes increased from $89.1 million in 2006 to an estimated $97.5 million by the end of 2007. It should reach $310.5 million by 2012, a compound annual growth rate (CAGR) of 26.1%. The water treatment sector is projected to account for 72.7% of total revenues in 2007, worth an estimated $70.9 million in 2007 and expected to reach $238.2 million by 2012, a CAGR of 27.4%. Continued growth in regulations aimed at protecting the environment will positively affect the future expansion of the nanofiltration membranes market. Full Report Available at: http://www.bccresearch.com/report/nan045a.html Frost & Sullivan Report on Nanofiltration, December 2008 Nanofiltration - An Overview of Technology Development Status and Trends Technological Developments in Membrane Materials Boost Innovation in the Nanofiltration Market Contrary to the popular opinion that membrane filtration of aqueous solutions is a thoroughly researched area with little scope for innovative technological achievements, there have been a spate of exciting changes in the relatively new nanofiltration market. Nanofiltration will encourage significant technical innovations, thereby increasing market share in the coming years. Nanofiltration of aqueous solution is primarily affected by the increasing demand for water, notes the analyst of this research. Water scarcity necessitates greater focus on domestic water processing or desalination of brackish water. Additionally, there is a high demand for industrially processable water, which promotes installation of systems for water recovery. Nanofiltration is also being increasingly deployed for the separation of organic solutions at moderate conditions and relatively low cost. Full Report Available at: http://www.researchandmarkets.com/reports/1053760 16

COMPETITORS Among the industry participants previously listed, the following companies and current market offerings are considered the most competitive. Hydranautics ESNA1-LF-4040/ESNA1-LF. Significantly reduces operating costs and provides optimum hardness rejection for softening applications, available in 4-inch and 8- inch diameter configurations. ESNA1-LF2. Designed to provide high rejection of natural organic materials and moderate rejection of total hardness, while running below 100 psi, offering energy and cost savings. TriSep TriSep offers two different nanofiltration (NF) membrane chemistries, the TS80 and the XN45. Both are based on proprietary and patented technology developed by DuPont. The unique chemistries of these membranes allow them to have lower organic fouling. Dow - FilmTec FILMTEC NF90 Elements: Removal of TOC, nitrates, pesticides, herbicides, hardness, iron, salts. FILMTEC NF270 Elements: Removal of color, TOC, medium to low calcium passage, high salt passage. FILMTEC NF200 Elements: Removal of TOC, atrazine, medium calcium passage, medium to high salt passage. FILMTEC NF Elements: Purification of non-water process streams and concentration of valuable substances. Koch Membrane Systems KMS offers its SelRO line of solvent-stable and ph-stable NF membranes as well as the SR and TFC or TFC -S NF membranes. While greater analysis of these competitive products is needed, Eltron believes the Duraflux TM performance advantages (high stability under elevated temperatures, oxidizers, pressure fluctuations, transition metals and organic solvents) provide a step change improvement over all of them. TECHNOLOGY & PRODUCT DEVELOPMENT The following table summarizes performance achieved on polymeric thin film membranes which would not have the high temperature, organic solvent and pressure cycle tolerances of the ceramic supported product. 17

Current work has been directed at reproducing this target performance on ceramic supports which would have those additional valuable characteristics proposed for the Duraflux TM product line. As of year-end 2009, Duraflux TM Membranes on ceramic supports have achieved proof of concept and have been demonstrated in a bench scale apparatus as shown below. The near term technical roadmap includes four primary steps: - Finish Chemistry - System & Process Engineering - Demonstrate Pilot Field Test - Develop Manufacturing Process 18

The following graphic depicts the remaining development path. Optimize Bench Scale Performance Validate Pilot Scale Sales ) 3 6 9 12 MONTHS 15 18 19