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Clean Power Technologies Inc. Files SEC form 10KSB, Annual Report
12 December 2007
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This annualreport contains forward-looking statements as that term is defined in section 27A of the United States Securities Act of 1933 and section 21E of the United States Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following information should be read in conjuction with our consolidated financial statements and notes thereto appearing elsewhere in the form 10KSB.
(a) Plan of Operation
We have not generated any revenues from products, services or operations since the inception of our Company. The foregoing analysis should be read jointly with the financial statements, related notes, and the cautionary statement regarding forward-looking statements, which appear elsewhere in this filing.
We are a development stage company which is presently undertaking research and development on a hybrid steam engine.
Our plan of operations is to complete the research and development on our technology over the next several months and if successful, to license the technology or form partnerships for the use of the technology with any customers we may identify.
At present we do not have sufficient funds available to execute our business plan for the development of the technology. We have to date been funded by existing working capital and by shareholder loans from one of our directors and officers. There can be no assurance that we will be able to continue to raise the funding required to continue operations.
At the end of July, 2006 Clean Power Technologies Limited ("CPTL") took possession of Unit 7(W), E-Plan Industrial Estate, Newhaven, East Sussex, U.K. The remainder of that year was largely spent in renovating the infrastructure of the 2000 square feet building, including the electrical power and lighting provision and the office facilities. An air compressor was installed to provide a fluid flow for engine testing in advance of and, later, in parallel with, a supply of steam from the saturated liquid energy accumulator, as this was developed. A
start was also made on the more direct development programme by stripping superfluous fittings from the Wankel engine compartments of the two identical Mazda RX8 vehicles earlier purchased. Using the compressed air supply the engine from one of these vehicles was motored, providing a useful early proof of the convenience with which the unit could produce power from an independent fluid source ( as with steam from the accumulator in the ultimate application). Similarly, its continuous restarting ability, independent of stopping position, because of its double cylinder-volume construction, was encouragingly demonstrated as well.
Early 2007 was committed to the design and building of a test cell within the main hall of the test facility to enclose engines and components on test at full operating conditions of pressure and temperature, with both hydrocarbon combustion and in anti-pollution mode using steam alone from the accumulator. The heavy steel construction of the test cell, which enclosed a substantial bed-plate as a foundation for components, was agreed by the insurance authorities to provide full protection from any conceivable otherwise catastrophic failure.
In May 2007 our partners Doosan - Babcock delivered the prototype energy accumulator, manufactured under contract by Poole Process Equipment Ltd to full statutory pressure vessel licensing requirements. Since then and continuously, development of the programme has been involved with installation of the facilities for the test cell and the experimental programme. These include the liquid, gas and steam supply and exhaust ducting; the comprehensive instrumentation facilities with the associated electrical and electronic connections for the sophisticated control systems required for the complete CESAR (Clean Energy Separation And Recovery) project. This comprises a main combustion engine, exhaust heat recovery components, energy accumulator and an auxiliary engine; plus the separate power absorbing dynamometers for the engines.
To augment the limited power output (170 kW) of the Wankel engines from the Mazda vehicles into the range with which the CESAR project will, initially at least, be primarily concerned, diesel engined trucks, delivery was taken in June of a Caterpillar C-15 diesel engine developing 600 kW which is now fully operational in the test cell. The main experimental programme began in September, 2007, its first phase for detailed determination of the performance of the Caterpillar engine over its full range of speed and load. This provides a data base for control system operation and detailed design of subsequent builds of the accumulator system with measurements of air and fuel rates of flow, fluid pressures, temperatures and power output all electronically logged.
The second phase of the test programme began in October 2007 in which the diesel engine exhaust is ducted through the accumulator vessel and rates of pressure and temperature rise and fall with time in the vessel are observed over a wide range of combustion engine operating conditions, with varying loads and exhaust gas temperatures, the latter tempered with closely controlled rates of atmospheric air ingression to the main engine exhaust stream. This series will yield full data on the fluid flow and heat transfer performance of the installed heat recovery components providing the data base for detailed design of CESAR systems subsequent to the prototype under test. Initial tests have provided confirmation of theoretical predictions of the rate at which pressure develops in the energy accumulator and of the predictions of heat transfer in the economiser and evaporator components which recover heat from the combustion engine exhaust into the energy storage system. Preliminary experiments have also begun on using the stored energy to drive a steam engine of conventional design which again has given encouraging early data upon the system performance.
The third and overlapping phase of this stage of the tests, extending into mid-2008, is concentrating on the relation between the power output from the auxiliary vapour engine and rate of pressure change in and rate of vapour flow from the energy accumulator. This will be a crucial part of the research programme in indicating the efficacy of the complete CESAR system and in the design of systems successor to the prototype for the several potential applications. The existing steam engine will be replaced with a modern design capable of developing the power outputs and advanced vapour operating conditions for which the CESAR system is suited. Observations of the performance of the prototype equipment supplied through our partners, Doosan-Babcock, with their further collaboration will be used to produce a design improved in material, structural and thermodynamic performance. The test schedule will include joint continuous operation of the combustion and auxiliary engines to maximise thermal efficiency and to demonstrate the ultimate utilisation of the control system and will run continuously into the Spring of 2008.
Up to the present time the total programme of our Company has been almost wholly concerned with research directed to verifying the theoretical predictions that were the foundation of the CESAR system. A substantial development component of the programme will now commence and will require appropriate augmentation of the engineering team. This is essential for design studies of potential applications of the total system and will commence using the empirical data revealed by the research programme. These applications include using the CESAR system to provide refrigeration power for trucks when the main combustion engine is shut down, with a target of road testing an especially directed system in late 2008. Further applications include provision of auxiliary power derived at low recurrent cost from the exhaust heat of combustion engines for other transportation areas, including lighter vehicles than trucks and heavier in the form of railway locomotives. There is also a promising application in marine applications, not excluding commercial vessels but particularly attractive for pleasure craft with their heavy requirement for auxiliary electrical power when not under way.
For the lighter design of the CESAR system, for vans and passenger cars for example, a substantial repetition of all the phases of the test programme will be commenced in Spring 2008 using a smaller multi-cylinder reciprocating engine or a Wankel engine to replace the current Caterpillar C-15 engine. This will require appropriate and novel valve designs which are currently in hand to control the fuel and vapour flows. This second programme would provide design support for all components of the CESAR saturated liquid energy accumulator system with a target of road testing such a vehicle one year later, in late summer 2009.
This extended development testing and design programme will require augmented scientific and engineering manpower, estimated as a further ten professionally or technically qualified staff. To enable this necessary expansion in August 2007 arrangements were put in hand for the purchase of a neighbouring industrial unit to increase to 20,000 square feet the office and workshop space available for the programme. This would include a large open area suited for the retrofitting of CESAR units to trucks, examples of which have already been offered by potential customers.
(c) Off-balance sheet arrangements
Not Applicable