aannual report nnual report 22005005...a license agreement was created with ajk industries to...

ANNUAL REPORT 2005ANNUAL REPORT 2005

Design by Joseph A. Engle

Letter from the Chairman of the Board ............................................................................................................... 3

Letter from the President & CEO ............................................................................................................................ 4

Executive Summary ................................................................................................................................................ 5-6

Chemical and Environmental Technologies .................................................................................................. 8-9

Health and Life Sciences .........................................................................................................................................10

Advanced Engineering Systems ..........................................................................................................................11

Financial Statement ..................................................................................................................................................12

Summary of Funding ...............................................................................................................................................13

Staff ................................................................................................................................................................................14

Board of Directors .....................................................................................................................................................15

The Mid-Atlantic Technology Research and Innovation Center (MATRIC) is an independent, nonprofi t 501(c)3 corporation headquartered in South Charleston, West Virginia. World-class scientists in the areas of chemical and environmental technologies, health and life sciences, and advanced engineering systems partner with

higher education, industry and government to conduct life-changing research and development and to commercialize resulting products and services. With superior leadership from a quality professional management team, a proactive board of directors and a staff of eminent scientists and engineers, MATRIC is rapidly making an impact locally, nationally and internationally.

Dear Friends of MATRIC:

MATRIC is entering the third year of its three-year business plan. As you will see from this Annual Report, we are making signifi cant progress.

Our CEO, Keith Pauley, has shown exceptional ability in assembling a highly qualifi ed staff and generating income producing projects. He has also led MATRIC in an important initiative directed by The Honorable Joe Manchin, Governor of the State of West Virginia, relating to the possible establishment of an automotive research center. Suffi ce it to say that Keith, Dr. Parvez Wadia, Dr. George Keller and others have truly established MATRIC as a highly credible research institution, staff ed by experienced, expert and in many instances world renowned scientists and technicians.

We can and must rely upon our staff , a strong and loyal Board of Directors, a great relationship with Dow Chemical Company, and the continued support and leadership of Governor Manchin, State Senator McCabe, and other state legislative leaders, as well as Senators Byrd, Rockefeller and Congresswoman Capito to devise and implement strategies which will allow us to succeed in a more competitive marketplace.

The coming year is critical to the success of MATRIC as a viable and self-sustaining research organization. If our progress continues at its current pace, MATRIC will indeed play a signifi cant role in transitioning our economy to one based on high quality, life-changing research and technology.

Very truly yours,

Thomas E. PotterChairman of the Board

MATRIC • Life-Changing Research and Development • www.matricresearch.com • ANNUAL REPORT 2005 • 3

Dear MATRIC Supporter,

Over the last two years, I have driven the two and a half hours from Morgantown to Charleston, West Virginia over 100 times. I have learned every rest stop and convenience store between these two cities. I have also memorized the off -ramps and mile markers and can estimate within 2 or 3 minutes the time it will take to reach my destination from any point along Interstate 79.

It was with this confi dence in my estimating ability that in 2005, I led the Mid-Atlantic Technology Research and Innovation Center (MATRIC) to develop a plan of progress for the second leg of our start-up journey—the second of three years of building customer relationships and winning research contracts. We developed carefully considered metrics to measure our progress and all was going well. I visualized the milestones and thought I could forecast the future.

However, MATRIC didn’t stick to the plan. Our contract wins exceeded expectations, while we maintained a staggering 39% win rate on competitive awards. We aggressively pursued our fi rst spin-out company around the new Transparent Armor polymer that we created. We started a full-blown laboratory research program in polymers, chemical separations, coal chemistry and biomass energy products.

Most importantly, MATRIC was profi table as of the end of 2005—a full year before the plan said that we should be!

We are now in the process of setting new milestones for MATRIC for 2006 and beyond.

I hope that you will continue to support MATRIC by telling your business relationships about the high quality research MATRIC can deliver and emphasizing the value that we can add to their research and development activities.

Yours truly,

Keith A. PauleyPresident and Chief Executive Offi cer


EXECUTIVE SUMMARY


The Mid-Atlantic technology Research and Innovation Center (MATRIC) was chartered with a specifi c mission which off ers a unique framework for summarizing our corporate development in 2005.

The mission of MATRIC is to create high-quality, life-changing science and technology and develop spin-off businesses that will bring technology advances to the market.

The fi rst part of the mission of MATRIC is the creation of life-changing science and technology. Therefore, the principle aim of our organization is the use of new discoveries through research and development for the betterment of society in general and the quality of life of individuals specifi cally.

The specifi c areas of concentration of our research and development eff orts are Chemical and Environmental Technologies, Health and Life Sciences, and Advanced Engineering Systems. By focusing on these areas, MATRIC hopes to generate results from its research that will be useful in retaining and developing existing business, such as the chemical industry, and attracting new businesses to West Virginia and the Mid-Atlantic Region.

We are convinced that successful research and development activities in these fi elds will not only produce life-changing technology, but will enhance the development of business relationships which will put these innovations into the hands of organizations and individuals that can best use them. These business relationships are expected to produce a signifi cant economic impact throughout the state of West Virginia, our region and nation.

In 2005, MATRIC conducted research for seven customers, including the National Aeronautics and Space Administration, several multinational and regional chemical companies, and the largest hospital in our region of West Virginia. Furthermore, innovation was made in polymer science, utilization of synthesis and natural gas for chemical products, capture of greenhouse gases, removal of mercury from fossil energy plants, software assurance for both spacecraft and medical devices, electronic health records and medical smartcard technology.

If you are known by the company you keep, MATRIC has impressive friends. Including both contractual and proposal partnerships, MATRIC has teamed with leading universities such as Purdue University, University of Pittsburgh, University of Washington, West Virginia University, West Virginia State University and Marshall University; and leading research organizations such as Oak Ridge National Laboratory, Pacifi c Northwest National Laboratory, Naval Surface Warfare Center, and Titan Corporation.

The second part of the mission of MATRIC is the development of spin-off businesses that will bring technology advances to the market. This was accomplished in two ways in 2005 through both licensing and business creation.

A license agreement was created with AJK Industries to develop a new product that acts as a de-icer for coal rail cars. After successful creation and testing of the new product, AKJ Industries sold the product in the winter of 2005/2006. Revenues from the sales will allow AKJ Industries to grow in our region and provide revenue to MATRIC through the licensing agreement.

MATRIC was also able to spin-off its fi rst new business in 2005 using a new polymer material called Transparent Armor. Transparent Armor, LLC was formed and is headed by Dr. Richard Gerkin. After raising seed-stage investment funds, Transparent Armor, LLC is advancing a patent position and building contractual relationships with the Department of Defense and other customers. As a member of the Limited Liability Company, MATRIC holds an equity position and will participate in the dividends extended by this new company in the future.


CCHEMICAL AND ENVIRONMENTALHEMICAL AND ENVIRONMENTAL

TECHNOLOTECHNOLOGIESGIES

HEALTH AND LIFEHEALTH AND LIFE

SCIENCESSCIENCES

ADVANCED ENGINEERINGADVANCED ENGINEERING

SYSTEMSSYSTEMS

Capabilities

The ability of MATRIC to successfully carry out R&D projects is based on the broad range of technical expertise available within the organization. A primary area of expertise within the Chemical and Environmental Technology Business Area is radical process innovation—the development of advanced technologies for application in the chemicals, polymer, environmental, or agricultural fi elds. Individual technical capabilities that contribute to this area of excellence include process chemistry, advanced separations, reaction engineering, catalysis, computational/quantum chemistry, analytical science, polymer science, process safety, modeling and simulation, statistical analysis, experimental design, transport phenomena, materials of construction, process economics, and intellectual property management.

These capabilities are supported by facilities that allow a range of projects to be pursued, including a polymer synthesis lab, a coal chemistry and applications lab, a separations engineering laboratory, and a biomass conversion lab. Laboratories are also being equipped with specialized analytical instrumentation and computational facilities.

Projects

The Chemical and Environmental Technology Business Area successfully carried out R&D on a number of projects in 2005.

• An R&D project was completed for AKJ Industries, a major supplier to the coal and mining industries. The goal was to identify in the laboratory new formulations for side release agents that prevent coal from freezing to the sides of coal rail cars. Several improved formulations were identifi ed, which are being evaluated on a larger scale.

• Statistical expertise is being provided to a process improvement team contracted by a major pharmaceutical company. Statistical methods have allowed the company to increase manufacturing capacity by reducing variation, cycle time, and waste in the critical production steps.

• A process chemistry R&D project was conducted for a major chemical company. Very signifi cant progress was made in the project, and the potential for further development was demonstrated.

• A safety analysis and review was completed for a major petrochemical company, and many suggestions and recommendations were off ered for consideration. This project has led to an additional contract for related work.

• A project to explore new technology for producing ethylene from natural gas is being pursued with support from the U.S. Department of Energy. MATRIC has provided initial economic and process modeling, and this four-year project is continuing.

CHEMICAL AND ENVIRONMENTAL TECHNOLOGIES


• Research on a new family of highly impact-resistant transparent polymers has provided very encouraging initial results. This technology has now been spun off as MATRIC’s fi rst new technology-related business, Transparent Armor, LLC. MATRIC is continuing to provide research support on these promising materials.

In addition to the many continuing projects described above, there are several new projects beginning.

• A collaborative project with West Virginia State University will investigate the application of advanced separations technology to the liquid effl uent from their Bioplex reactor, an anaerobic digester for animal waste. The goal is to reduce the water content of the effl uent and isolate some of the valuable dissolved components.

• MATRIC has developed a connection with an organization having advanced biodiesel technology. Options are being explored to make further technology improvements and participate in commercialization.

• A project funded by the U.S. Department of Energy’s National Energy Technology Laboratory will explore new approaches to removing carbon dioxide from fl ue gas. MATRIC’s initial role will be to provide process engineering support.

• A major chemical company has engaged MATRIC to lead a formal process risk analysis on technology being considered for commercial implementation.

• MATRIC will begin work on a project focused on the practical conversion of a bio-based material to a high-value specialty chemical product. Activities in this project will involve process development, separations, and possibly scale-up.


Capabilities

The division’s intellectual assets include medical device development, healthcare software assurance, and healthcare informatics. These extensive areas of focus encompass a wide range of expertise from biomedical engineering to computer science. Our own intellectual capacity is well complemented by that of our world-class collaborators: clinical researchers, computer scientists, engineers from multiple disciplines, informaticians, and biochemists.

Our capital assets will include, upon successful completion of our laboratory capital campaign, a fully operational medical device development and testing lab, a software assurance lab, and a pharmaceutical support lab. In addition, our division is working towards execution of laboratory joint-use agreements with several major institutions of higher education.

Projects

The Health and Life Sciences Business Area successfully carried out R&D on a number of projects in 2005.

• The Internet Resource for Caregivers of Children with Cancer project assists caregivers parents, other family members, friends, and healthcare professionals) with information dissemination and communication needs for children with cancer. This National Institutes of Health sponsored eff ort was undertaken in collaboration with The University of Pittsburgh, School of Nursing, Division of Health and Community Systems, MATRIC is assisting in this important eff ort by providing content management and by analyzing and interpreting quantitative data (such as usage statistics).

• Observational Engineering is an interdisciplinary technique used to educate engineers in clinical methods and tools, spur innovation, and generate new intellectual property. This process may also lead to research opportunities – both at the bench and clinical research ends. MATRIC has signed a Memorandum of Understanding with the Charleston Area Medical Center (CAMC) and the Charleston Area Medical Center Health Education and Research Institute (CHERI) to achieve these goals.

• Teaming with an industrial technology developer, Aladdin Knowledge Systems, MATRIC has developed a functional prototype for using smartcard technology as portable electronic health records. This solution includes highly secure data storage and a user interface utilizing industry standards to ensure interoperability. The division is currently pursuing multiple opportunities in this arena for pilot projects and novel research eff orts. New paradigms are being developed to increase the quality of care delivered and community health in general.

• The non-invasive measurement of internal organ electrical signatures (electromyography) could enhance the diagnostic capacity for specifi c disorders and reduce overall healthcare costs. Invasive procedures, such as colonoscopy and endoscopy, are expensive, higher in risk, and many times inconclusive (especially in symptomatically prevalent disorders). MATRIC and its partners are pursuing additional funding sources to further refi ne this technology.

HEALTH AND LIFE SCIENCES


Capabilities

The software systems business area is focused on developing and improving software solutions for the most complex systems in the world. MATRIC’s experienced staff personnel have expertise in data mining, data fusion, independent verifi cation and validation, radio frequency identifi cation, robotics and critical control systems.

MATRIC personnel have: led the development of software to search large databases effi ciently to solve technically relevant research problems (e.g., identifi cation of terrorists or weapons of mass destruction); developed software to transform data into usable information (e.g., control displays for spacecraft that synthesize data channels from thousands of sensors); performed independent validation and verifi cation to ensure that software meets critical safety and mission requirements through code exercising and development process and artifact review (e.g., software controlling critical Department of Defense targeting systems); developed systems that communicate through the radio frequency spectrum (e.g., tracking and surveillance of hazardous materials without line-of-sight communications); designed and built production models of unmanned vehicles and robot technicians; and designed critical control software that operates complex systems (e.g., guidance, navigation, and control software onboard the International Space Station). Projects

The Software Systems Business Area successfully carried out R&D on a number of projects in 2005.

• MATRIC was part of the Titan Corporation’s winning team for a fi ve-year, $200-million NASA proposal to support Independent Verifi cation and Validation (IV&V) activities across all agency missions. Our present eff orts include supporting the National Polar-Orbiting Operational Environmental Satellite System (NPOESS), the Phoenix Mars Lander, and New Horizons projects.

a) The NPOESS will be used to globally measure the Earth’s atmospheric, land, and oceanic environmental parameters. MATRIC is performing IV&V on the software for the new 1394 bus architecture (also known as Firewire and considered a successor to the currently used 1553 bus architecture).

b) The Phoenix Mars Lander spacecraft is specifi cally designed to measure volatiles (especially water) and complex organic molecules in the arctic plains of Mars. MATRIC provided IV&V support for several of the instruments to be used on the lander.

c) The New Horizons Pluto-Kuiper Belt spacecraft is focused on exploring the outer edges of our solar system. MATRIC provided IV&V support for the fault protection autonomy system which is responsible for detecting and correcting any in-fl ight problems with the spacecraft and its subsystems.

• MATRIC also assisted in NASA’s research of IV&V techniques necessary for Field Programmable Gate Arrays (FPGAs), digital integrated circuits that are not hard-wired until a fi nal design is established.


ADVANCED ENGINEERING SYSTEMS

FINANCIAL STATEMENT FOR 2005


BALANCE SHEET (Unaudited) Dec 31, 05 ASSETS Current Assets Checking/Savings Cash In Bank-Operating 62,913.03 Total Checking/Savings 62,913.03

Accounts Receivable Accounts receivable 166,600.00 Accounts Receivables-Contracts 74,304.22 Total Accounts Receivable 240,904.22

Total Current Assets 303,817.25

Other Assets Due From MOS/MCR 35,562.32 Equipment 13,827.29 Less - Accumulated Depreciation -1,575.00 Prepaid Deposits & Expenses 602.93 Web Site (Net of Amortization) 3,008.15 Total Other Assets 51,425.69

TOTAL ASSETS 355,242.94

LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable Accounts payable 113.68 Total Accounts Payable 113.68

Other Current Liabilities Payroll Liabilities 8,776.81 Total Other Current Liabilities 8,776.81 Total Current Liabilities 8,890.49

Long Term Liabilities

CADCO Note Payable 43,500.00 Total Long Term Liabilities 43,500.00

Total Liabilities 52,390.49

Equity Opening Bal Equity 16,676.63 Net Income 286,175.82 Total Equity 302,852.45

TOTAL LIABILITIES & EQUITY 355,242.94


SUMMARY OF FUNDING

Period Of 2005Funding Sources Performance Value Receipts Residual Value

ContractsCharlestion Area Medical Center Foundation 04/01/05-05/31/05 $9,200 $9,200

GI LLC 12/01/05-12/31/05 $2,670 $2,670

L-3 Titan 05/19/05-12/31/09 $2,008,830 $72,064 $1,936,766 Federal

Matric Commercial Research 01/01/05-12/31/06 $203,459 $184,637 $18,822

Oak Ridge National Laboratory 02/01/05-01/01/09 $300,000 $300,000 Federal

University of PIttsburg 07/01/05-06/30/06 $43,306 $43,306 Federal

WV State University 10/01/05-09/30/06 $20,000 $20,000 Federal

$2,587,465 $268,571 $2,318,894

DonationsBranch Banking & Trust 2005 $10,000 $5,000 $5,000

CAMC 2005 $20,000 $10,000 $10,000

Columbia Natural Resources 2005 $5,000 $5,000 $0

General Corporation 2005 $20,000 $10,000 $10,000

Huntington National Bank 2005 $15,000 $5,000 $10,000

Individuals 2005 $15,200 $13,600 $1,600

Kay, Casto & Chaney 2005 $10,000 $5,000 $5,000

Thomas Memorial Hospital 2005 $10,000 $10,000 $0

Union Carbide Corporation 2005 $51,906 $51,906 $0

Verizon 2005 $10,000 $10,000 $0

WV American Water 2005 $15,000 $5,000 $10,000

$182,106 $130,506 $51,600

GrantsAppalachian Regional Commission 10/01/05-09/30/06 $100,000 $100,000 Federal

Benedum Foundation 07/01/04-06/30/07 $150,000 $75,000 $75,000

HUD-EDI 10/01/05-09/30/06 $49,600 $49,600 Federal

HUD-EDI 10/01/05-09/30/06 $99,200 $99,200 Federal

State of West Virginia 07/01/05-12/31/06 $600,000 $600,000 $0 State

Clay Foundaton 2005 60,000 30,000 $30,000

Daywood Foundation 2005 10,000 10,000 $0

Herscher Foundation 2005 5,000 5,000 $0

Marshall University Foundation 2005 8,000 4,000 $4,000

McGee Foundation 2005 1,000 1,000 $0

West Virginia University Foundation 2005 10,000 5,000 $5,000

1,092,800 730,000 362,800

Refunds 1004

$3,862,371 $1,130,081 $2,733,294

Administrative Staff Title Area of Expertise

Keith A. Pauley President/CEO Nuclear Engineering; Aerospace EngineeringParvez Wadia, Ph.D. Chief Technology Offi cer Chemical EngineeringJason Cooper, ABD VP, Health and Life Sciences Biomedical EngineeringMark Dehlin, MBA VP, Advanced Engineering Information Technology SystemsDuane Dombek, Ph.D. VP, Chemical and Chemical Science

Environmental SciencesE. Jane Copley Chief Financial Offi cer Contract Administration and FinanceJeff rey A. Wood Director of Business Sales and Marketing DevelopmentMary Helmick Offi ce Administratoin Offi ce Management

Business Area Staff Area of Expertise

Paul Aubry Chemical TechnologyJason Blackhurst Computer ScienceLaurence G. Britton, Ph.D. Chemical Engineering/ConsultantDonald Bunning, Ph.D. Chemical EngineeringRay Chrisman, Ph.D. Analytical ChemistryNye Clinton, Ph.D. Process ChemistryVincent Davis Chemical TechnologyEdmond Derderian, Ph.D. Polymer ChemistryDan Fisher Chemical EngineeringRichard A. Gerkin, Ph.D. Polymer ChemistryPaul Helmick Commercialization/ConsultantLouis A. Kapicak Chemical EngineeringGeorge Keller, Ph.D. Separations TechnologyEdward Leach Polymer Extrusion TechnologyWilliam Lutz Process Safety EngineeringFrank Ma, Ph.D. Applications ChemistryTom Maliszewski, P.E. Process EngineeringDon Martus Automotive EngineeringJon McCullough Electrical EngineeringCharles G. Moyers, Ph.D. Chemical Engineering Ramona Neal, Ph.D. Analytical ChemistryCharles R. Price Robotics/ConsultantJeremy R. Rader Chemical EngineeringJames D. Schreck, Ph.D. Process ChemistryJack Smith, Ph.D. Computational ChemistryWayne Zirk Applied Statistics

STAFF


Mr. Mike Agee Director-At-LargeMr. Paul Arbogast WV RoundtableMr. Charles M. Avampato Clay FoundationMr. Charles E. Bayless WV University Institute of TechnologyDr. Hazo Carter, Jr. West Virginia State UniversityMr. Stan Cavendish Verizon-West VirginiaMichael G. Comer Huntington BanksMr. Clifton Dedrickson The Dow Chemical CompanyMr. Mark Dempsey American Electric PowerDr. Betsy Dulin Marshall UniversityMr. Michael J. Farrell, Farrell Law FirmMr. Allan Fowler The Dow Chemical CompanyMr. Joe W. Gollehon, Charles Ryan AssociatesMr. William Goode Charleston Area AllianceMr. Thomas Graff Bowles, Rice, McDavid, Graff & LoveMr. David Hardesty West Virginia UniversityMr. Charlie Hendrix Director-At-LargeMr. J. Rudy Henley McCabe-Henley-DurbinDr. Paul Hill EPSCoRDr. Carl Irwin West Virginia UniversityDr. George Keller, II New CarbonDr. Stephen J. Kopp, President Marshall UniversityDr. John Maher Chemical Alliance ZoneMr. Reid Maness Research Triangle InstituteMr. John McGee Director-At-LargeMr. Keith Pauley MATRICMr. Thomas Potter Jackson Kelly, PLLCMr. David Ramsey Charleston Area Medical CenterMr. Charles Ryan Charles Ryan AssociatesDr. P. Dwight Sherman Director-At-LargeMr. John Skaff Spherion Professional ServicesDr. Charles Stebbins Director-At-LargeMr. John Stump Steptoe & JohnsonMr. L Newton Thomas, Jr. Director-At-LargeDr. Parvez Wadia MATRICDr. Edwin Welch University of Charleston


BOARD OF DIRECTORS

P.O. Box 8396South Charleston, WV 25303

Phone: 800.611.2296Fax: 800.611.2296

www.matricresearch.com

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