J O H N M . Z A R R O L I

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LaserSense, Inc.Vision

LSI desires to be the exclusive global provider of a unique, proprietary capability that will be used to optimize the productivity of well drilling equipment by providing more accurate and complete information regarding the performance of drill heads

used in shale gas operations

MissionThe mission of LaserSense is to provide well drilling companies with an advanced,

state-of-the-art system, based on accurate measurement of acoustic emissions (AE), for monitoring wear of the drill head while also providing real-time data

regarding drill head effectiveness and rock formation composition

Introduction

Problem: Drilling rigs need to operate as efficiently as possible: They are in short supply in some places Drill head wear reduces efficiency of drill rig operation, Changing / Replacing the drill head is expensive and

time-consuming

Also…

Problem: Variations in underground rock formations affect drill rig performance Is the underground formation changing? How is this

affecting drill head performance and wear? Can we improve how we map underground fractures?

Currently, well drilling rigs use a variety of sensor systems (ie pressure, torque) to monitor the drilling process

The Problem:

How Can Well Drillers Optimize the Drilling Process?

Can Acoustic Emissions (AE) help to optimize the drilling process?

In 1999, Xiaoqing Sun, in a paper titled “A study of acoustic emission in drilling applications”, presented at the The 37th U.S. Symposium on Rock Mechanics, asserted that AE features can be “… used to identify drilling situations such as the extent of bit wear, impending bit failure (damaged bearings) or formation changes.”

The Problem:

How Can Well Drillers Optimize the Drilling Process?

Is AE a viable method for monitoring the drilling process?

As far back as 1992, in a paper titled “Acoustic – Emission Monitoring During Hydraulic Fracturing”, Lisa Stewart & B.R. Cassell asserted that “Acoustic emissions have been used with varying degrees of success to map hydraulic fractures in sedimentary formations.”

But they also stressed that “the high attenuation of seismic waves in sedimentary rock imposes limitations in the instrumentation and acquisition configurations that can listen to fractures.”

What does this mean?

AE can be a powerful tool for providing real-time information regarding drill head wear and performance but current AE tools and techniques lack the capability and robustness to be successful in this application.

A Solution:

RLI (Robust Laser Interferometer) for Measuring AE

RLI Will Enable AE to Become a Powerful New Tool for Monitoring the Drilling Process

What is RLI?An advanced, proprietary device, based on laser

interferometry, that can be tailored to serve as a condition-monitoring (CM) or non-destructive testing (NDT) tool in a wide variety of applications

What does it do?RLI measures vibration and acoustic emissions (AE)

How is it different?RLI relies on light whereas all competitive systems rely

on electro-mechanical sensors

RLI can be tailored to measure AE, for a wide variety of applications

Technical Overview:

What Are Conventional Methods for AE?(They are based on electro-mechanical sensors)

All have limited measurement capability, tend to be costly to install, lack sensitivity in “noisy”, real-world settings

Mass Accelerometer A mass is suspended in an electromagnetic field

and generates a current when the surface it is attached to vibrates (accelerations are associated with movement )

Strain Gauge Small, electrical elements applied to surface of

machines or structures - shortening or lengthening generates changes in resistance of a circuit that is associated with stress

Piezoelectric Accelerometer Similar to mass accelerometer but material itself,

rather than electromagnetic coil generates the electrical signal

AE refers to the generation of transient elastic waves produced by a sudden redistribution of stress in a material. These stresses can be generated by mechanical loading, including the type of events that a drill head experiences as it cuts through rock formations deep underground.

What causes AE?AE starts with stress. There are several different types of mechanical stress:

• Tensile, compressive, bending, shear, torsion

Why does this matter to us?

In response to this stress, the material changes in shape. This change in shape can be elastic (not permanent) or plastic (permanent). We are more concerned with plastic deformation, especially when it is caused by crack development, fracturing etc. This cracking or fracturing process (whether it is the drill bit itself or the surrounding rock that is fracturing) is what we attempt to measure.

Technical Overview:

What is “Acoustic Emissions” (AE)?

A Solution:

Why is RLI Better for Measuring AE (Compared to Current Conventional Methods)?

Superior Performance Bandwidth: 0 Hz to 524,000 Hz Dynamic Range: 180+ dB Improved “sensitivity”, better resolution

Lower Cost Non-Contact version available - no need to mount

accelerometers Minimal installation & calibration of sensors; quick

set-up; simple, user-friendly interface Substantially reduced need for ‘a priori’ information

Higher Resolution Measurements More accurate failure prediction Fewer “false alarms” (false alarms take equipment

out of service when its not necessary) Broader scope of conditions detected

RLI enables AE to be applied in “noisy”, real-world settings

Commercialization Plan Summary (Completed Over 18 months)

1. Demonstrate Feasibility of RLI for Use in Well Drilling Applications

2. Complete Signal Analysis and Modeling of Drilling Process in Laboratory and Field Settings

3. Complete System Prototype

4. Refine “Marketing & Sales Plan”

5. Complete Manufacturing Plan

6. Launch the New System for Well Drilling Applications

7. Implement the LaserSense “Marketing & Sales Plan” for Well Drilling Applications

$25,000 Shale Gas funds would be used for Steps #1 and #2 above

Manufacturing & Assembly

Current System - 4th generation: The combination of mechanical and electronic components is proprietary -

several specific components are proprietary System software is unique and proprietary Currently assembled in NC; R&D in MD, WV and FL Planning enhanced assembly operations in PA by early 2014

Cost reduction in acquisition of parts & streamlined assembly To be led by an experienced Executive with 25+ years high level

manufacturing experience

Future Systems - 5th Generation, 6th Generation etc: Rapid incorporation of system enhancements and options by mid 2014

At least 60% smaller, lighter than 4th Generation system Hand-held point-and-shoot capability Special purpose “front-ends”, processing capabilities for specific

applications

RLI can be tailored for many different applications and configurations

Management Team

Joseph Karpov: VP, Manufacturing & Engineering Previously served as VP - Manufacturing, for a manufacturer of sensors Joe will spearhead preparation and implementation of LSI Manufacturing Plan,

from his office in State College, PA. B.S., Mineral Economics, Penn State University

Jeremy Leahman: Consultant / Board of Advisors Extensive high level management & field technical experience related to

industrial & predictive maintenance and well drilling lubricants MBA, Darden School of Business, University of Virginia

Bruce Lewis: CEO Extensive small business start-up experience Extensive sales and marketing experience related to industrial lubrication,

predictive maintenance, non-destructive testing (NDT) Manages day-to-day business of LaserSense

John Zarroli: Director, Business Development / Co-Founder Extensive small business start-up, sales & field technical experience, related to

predictive maintenance, NDT & Reliability-Centered Maintenance B.S., Industrial & Management Systems Engineering, Penn State UniversityNon-Contact is a key driver of benefit

Financial Projections:

Shale Gas / Well Drilling Revenue & Profit

2013 Projections

2014 Projections

2015 Projections

2016 Projections

Revenue $200,000 $850,000 $2,000,000 $4,500,000

Expenses $240,000 $1,050,000 $1,700,000 $3,200,000

Net ($40,000) ($200,000) $300,000 $1,300,000

Funding Plan

Capital Raised To-Date: $350,310 total Debt: $298,310 Convertible Debt: $272,718 Equity: $52,000

Capital Sought - Round 1: $750,000 by 4th qtr., 2013 Business Development (Internet, Trade Shows & Conferences, Sales

& Marketing Training & Expenses, Market Research & Analysis) Strengthen IP protection strategy

Non-Contact is a key driver of benefit

Use of Funds from Shale Gas Contest: $25,000 Validate RLI as an effective tool for monitoring drilling process:

University laboratory trials (6 months): $17,000 Field trials (2 months): $3,000 Advanced Acoustic Emissions Consultant (2 months): $5,000