venture capital funds annual report july 2002msa.maryland.gov/megafile/msa/speccol/sc5300/sc... ·...

M A R Y L A N DM A R Y L A N D

VENTURE CAPITAL FUNDSANNUAL REPORT

JULY 2002

DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT

TABLE OF CONTENTS

The Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Financing Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Enterprise Investment FundDescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Company Overviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Challenge Investment FundDescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Program Recipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Enterprise VCLP Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66

Other Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

STATE OF MARYLANDVENTURE CAPITAL FUNDS

Annual ReportJune 30, 2002

Published by Department of Business and

Economic Development

THE YEAR IN REVIEW

Maryland Department of Business & Economic Development 1

Director’s Message

As my first full year in the position of Director of the Investment Financing Group comes to an end, I wouldlike to take you through some of the highlights of the many new exciting changes made, challenges facedand goals achieved over this past fiscal year.

Since its formal inception in 1994, an elite, but small group of highly qualified individuals, whose back-grounds are primarily in the private sector, has staffed the IFG. During this fiscal year we were finally ableto bring staffing levels up to par with the flow of applications we had been receiving. Thus we were able toprovide a greater level of due diligence on business plans and develop a more methodical approach to ourdecision making process.

Over the past year the IFG invested $8.0 million in 33 separate companies. Roughly half of these compa-nies were representative of the life sciences sector and the other half in information technologies, primarilysoftware companies. Of the 16 Enterprise investments made, four had also received Challenge funding dur-ing the fiscal year. We made Challenge investments in 21 individual companies during the year. (See Page 4)

The Program has now invested in over 170 businesses with proprietary technologies. Of those companies,over 75 percent have remained in business for more than five years. This is truly an exceptional track recordgiven the nature of this type of investing.

2002 Highlights

Some highlights from our portfolio companies for the year are as follows:

October 2001 and March 2002 - MetaMorphix announced and finalized an agreement to purchase theAgGen division of Celera, Inc. in exchange for $30 million in stock. Although no independent third party ver-ification has been made regarding this valuation, DBED believes that this announcement has increased thevalue of its investment.

October/November 2001 - DBED liquidated its position in Meridian Medical Technologies. The investment,made in fiscal year 1997, yielded a payout of $544,149 on a total investment of $289,930.

November 2001 - Avalon Pharmaceuticals was able to attract $70 million in a B Round of financing. DBEDwas able to participate in this round and has seen a modest increase in value of its investment.

November 2001 - Deloitte & Touche Technology Fast 500 named Advertising.com, a Rising Star in theranking of the fastest-growing technology companies in the United States and Canada. Ranked fourthamong the 25 Rising Star winners, Advertising.com’s revenues have increased over 74,000 percent since thecompany's inception in 1998.

December 2001 - Ernst & Young, in conjunction with MdBIO, delivered their report on the state of venturecapital investing in the Life Sciences sector. The report bore out already understood characteristics in the

THE YEAR IN REVIEW

Maryland Department of Business & Economic Development

THE YEAR IN REVIEW

Maryland Department of Business & Economic Development2 3

market place that indicate a dearth of private investment in life sciences companies seeking funding in the$2 million - $10 million range. The report’s recommendation was for the State to invest monies in a privateventure capital firm focused solely on life sciences companies in Maryland seeking this type of funding.

February 2002 and May 2002 – The Investment Financing Group sponsored two investment forums for itsportfolio companies. The Challenge Investment Forum, held in February, included technology companiesseeking additional angel investment. In May, the IFG sponsored its second Annual Early Stage Bio VentureForum. Biotech companies seeking angel or venture capital funding presented.

February 2002 – During budget hearings concerning appropriations for programs within the Department ofBusiness & Economic Development, Secretary David S. Iannucci recognized the critical role the InvestmentFinancing Program plays in the growth and development of the State’s economy by investing in early-stagetechnology companies.

March 2002 – Neoreach, a Challenge Investment company, merged with Mobilepro Corp. (OTC-BB-MOBL),a developer of mobile information solutions for business-to-business communications. The transactionresulted in the exchange of thirteen million shares of the capital stock of Neoreach for thirteen millionshares of the common stock of Mobilepro on a one-to-one basis. Neoreach continues to exist and operate asa wholly owned subsidiary of Mobilepro.

April 2002 -The Technology Council of Maryland announced 20/20 GeneSystems, Inc. as the recipient of theBioscience Product of the Year award for its Multi-blot kit for protein gels.

April 2002 - Cylex received FDA approval for their assay for use in monitoring immune suppression in organtransplant patients.

May 2002 - The Mid-Atlantic Venture Association’s, Capital Connections 2002, accepted 15 IFG portfoliocompanies among its 50 presenting companies (30 percent). In this region’s premiere venture capital eventIFG’s programs garnered a tremendous amount of positive publicity.

June 2002 - The Maryland Incubator of the Year Awards honored seven companies, four of which havereceived Challenge investments, with one company also receiving Enterprise funding. The four companiesand respective awards are: Reactive Nanotechnologies for Most Promising Tech Transfer; ChesapeakePERL for Biotech/Life Science; Agentsmith for Information Technology; and In Vitro Technologies forGraduating Incubator Company.

June 2002 - Chesapeake PERL gained national recognition when Fortune Magazine published its CoolCompanies 2002. Fortune Magazine selected PERL as one the nation’s coolest biotech companies for its pro-tein larvae manufacturing process.

Equity Positions

DBED currently holds equity positions in three publicly traded companies: ID Biomedical, Immersion, Inc.and Hoovers. These are successors to HT Medical Systems, Intellivax and Knowledge Link, respectively.

As of June 30, 2002, DBED’s positions in these investments have become liquid. However, given the currentunder-valued status of our positions, we believe that it is in the best interests of the state to hold theseequities until such a time as the markets begin to exhibit strength. Management will review on an ongoingbasis and make determinations as to whether to liquidate or retain positions in these companies based onmarket conditions.

Looking Forward

As in the past, IFG will continue to focus on the earliest of early-stage companies. We remain committed tothe essence of the program developed by our predecessors and trust in our abilities to seek out the bestemerging technology companies in the state of Maryland and invest in them.

As always, we will continue to focus on making investments in companies that exhibit strong intellectualcapital, as evidenced by patents (or by those pending) and by proprietary positions that pose barriers toentry. We will also continue to evaluate companies based on the following characteristics: creativity, defen-sible markets, liquidity, management, proprietary advantage and scalability.

During the next fiscal year it is expected that the year will begin slowly as the private markets exhibit aseasonal slowdown in the months of July and August. However, after Labor Day, business will return tonormal with an influx of business plans and venture capital activity.

Through the balance of the fiscal year, it is our expectation that the quality of business plans will remainhigh and all of the fiscal year 2003 appropriation will be encumbered and only the most compelling of busi-ness models will obtain state investment funding.

We will also face the ongoing challenge of marketing companies deserving of funding to the private venturecapital community. With the migration of private venture capital firms away from seed stage investing, wewill continue to develop relationships with firms that offer not only funding but management expertise andcoaching, to guide these embryonic companies through this very challenging economic climate.

And as always, we expect to persevere, and continue to fulfill our mission of seeding the market with someof the best and most exciting technology that Maryland has to offer. It is our hope that the companies weinvested in during this past fiscal year will yield some of the best investments made in the history of ourprograms.

We hope that we can say that again next year as we enter our 10th year as one of the country’s premierestate funding programs for seed stage venture capital investing.

Best Regards,

Tom Bodnar, DirectorInvestment Financing GroupMaryland Department of Business & Economic Development

ENTERPRISE INVESTMENT FUND OVERVIEW



Maryland Department of Business & Economic Development4

INVESTMENT FINANCING APPROPRIATION - FY 2002Enterprise Investment Fund Commitments

Agentsmith Aptus PharmaceuticalsArtifact Software Atto BioscienceBioSETBluefire Security Tech Chesapeake PERLCodeRyteFunctional Genetics MaxCyte NavtrakParatek Platform Logic SequellaSourcefireYafo Networks

Total

Baltimore CityMontgomery

Baltimore CityMontgomery

Prince GeorgesBaltimore CountyPrince Georges

MontgomeryMontgomeryMontgomery

WicomicoHowardHoward

MontgomeryHoward

Anne Arundel

$ 300,000$ 500,000$ 200,000$ 500,000$ 250,000$ 400,000$ 350,000$ 225,000$ 250,000$ 200,000$ 350,000$ 350,000$ 500,000$ 500,000$ 550,000$ 250,000

$5,675,000

Challenge Investment Program Commitments

20/20 GeneSystems (2)Agentsmith (3)Artifact SoftwarebConvergent BioMat Sciences (2)Bluefire Security Tech Business DevicesDVIP Multimedia Inc.EKA Systems (2)Grey Pilgrim (2)Harta InstrumentsInfinity PharmaceuticalsIpsil (2)LearnScape Metastatin Netta Systems New Hope Pharmaceuticals Phoenix S&T Technologies (3)Platform Logic Plethora Technologies (2)Reactive NanoTechnologies

SubTotal

Dingman Center for Entrepreneurship

Total

MontgomeryBaltimore CityBaltimore CityMontgomeryMontgomery

Baltimore CountyHoward

MontgomeryMontgomeryMontgomeryMontgomeryMontgomeryMontgomery

Prince GeorgesMontgomery

HowardMontgomery

CecilHoward Howard

Baltimore City

Prince Georges

$ 100,000$ 125,000$ 100,000$ 50,000

$ 100,000$ 50,000$ 50,000

$ 100,000$ 100,000$ 150,000$ 50,000$ 50,000

$ 150,000$ 50,000$ 50,000$ 50,000$ 50,000

$ 150,000$ 100,000$ 100,000$ 100,000

$1,825,000

$ 500,000

$ 2,325,000

Total for Enterprise & Challenge Commitments $ 8,000,000

(#) - Denotes number of investments made during fiscal year.

Description

This is truly a State-sponsored venture capital fund, whereby the State/DBED makes equity invest-ments in early-stage, high technology firms who are seeking initial infusions of private equity, usuallyin the $2 million to $10 million ranges. The legislation limits the State’s total equity share in any givenfirm to 25 percent. The Enterprise Investment Fund requires a 3:1 outside investor co-match through asophisticated investor (a proven venture capital firm, a corporate strategic partner and/or a proven angelinvestor). The interpretation of the term “sophisticated” would be at the sole discretion of DBED’sInvestment Financing Group.

The program also provides funds in the amount of $150,000 to $500,000 to be made in any given invest-ment. As an independent control mechanism for this investment initiative, an outside Advisory Boardcomprised of nine members has been established to review these investments. The terms of DBED’sinvestment are for a maximum of 15 years and DBED requires the firm to retain its principal place ofbusiness within the State of Maryland for a period of five years. In the event the firm moves outside theState, the agreement states that DBED has a put to the firm that they repay the investment at cost plus10 percent, or fair market value, whichever is higher.

Performance

The Enterprise Investment Fund has completed equity investments into 52 individual firms. The costbasis of these investments thus far has been $19.2 million since January 1, 1994. The program gener-ated in excess of $47 million as a result of the Visual Networks and Gene Logic stock sales. As of thiswriting, four firms have gone public and five have been acquired by either a publicly traded firm or alarger privately held firm. Additionally, one venture liquidated its assets.

The Investment Financing Group has exited via the sale of held securities in all four public issues andtwo of the five acquisitions. Through June 30, 2002 DBED has realized $48 million in proceeds to bereapplied to the Enterprise Investment Fund. Based on general guidelines used by other venture capi-tal firms, the fair market value for the balance of DBED’s holdings is approximately $16 million, bring-ing the total fair market value of the individual company investments to approximately $64 million asof June 30, 2002. The internal rate of return for the Enterprise Investment Fund from inception throughJune 30, 2002 was 32 percent annually.

The following descriptions of the Enterprise Investment Fund recipients were provided by the company.





FAIR MARKET VALUE (FMV) SUMMARY, June 30, 2002(unless otherwise specified)

Company Investment Investment Realized Status # of MarketDate ($) Value ($) Employees Capitalization

eVIN, Inc. (formerly VinNet, Inc.)

Gene Logic, Inc.

Guilford Pharmaceuticals, Inc.

Hoover’s (aka KnowledgeLink)*

Immersion, Inc. (aka HT Medical Systems, Inc.)*

ID Biomedical (aka Intellivax, Inc.)*

Meridian Medical Technologies

NetBalance, Inc. (formerly NetSolv)

NewComm Net

Visual Networks, Inc.

Sub Total

01/16/97

4/17/96

05/11/94

6/23/98

11/15/95

02/22/97

02/20/96

3/26/97

04/16/99

11/02/94

250,000

500,000

250,000

550,000

250,000

300,000

289,930

250,000

499,999

250,000

3,389,929

36,447

17,169,307

536,092

324,205

262,833

294,808

544,149

22,948

566,666

28,133,879

47,891,334

Sold

Sold

Sold

Public

Public

Public

Sold

Liquidated

Sold

Sold

5

226

254

268

162

80

339

0

47

325

1,706

-

394,400,000

280,200,000

69,300,000

74,900,000

150,100,000

71,300,000

-

-

127,500,000

1,167,700,000

Advanced Bio Nutrition (ABN - ex-Martek)

Advertising.com (TeknoSurf.com)

Antaeus Group*

Artifact Software* (1)

Atto Biosciences

Avalon Pharmaceuticals

BioSET

Biosynexus, Inc.

Bluefire Security Technologies*(1)

Chesapeake PERL*

Claragen, Inc.

CodeRyte (1)

CyberSystem Technologies, Inc.

Cylex Inc. (Biotechnology Transfer)*

CytImmune Sciences, Inc.

FASgen, Inc

Functional Genetics, Inc. (1)

Healthware Solutions International

Internet Cargo Services, LLC*

Intradigm Corporation*

Lion Pharmaceuticals, Inc.

MaxCyte

10/16/01

03/06/00

12/10/96

06/18/02

05/31/02

10/15/01

05/01/02

12/29/99

03/28/02

11/19/01

08/15/00

06/18/02

02/10/98

11/26/01

03/25/97

12/29/00

12/18/00

11/12/94

07/30/98

06/11/01

11/04/97

02/28/02

250,000

499,991

250,000

300,000

500,000

500,001

250,000

500,000

450,000

500,000

425,005

225,000

250,000

575,000

300,000

500,000

750,000

250,000

550,000

300,000

250,000

200,000

250,000

1,221,005

250,000

300,000

500,000

690,951

250,000

1,106,250

450,000

500,000

425,006

225,000

-

599,000

300,000

500,000

750,000

-

527,473

300,000

-

200,000

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

6

155

14

10

39

57

7

34

3

8

6

7

0

18

12

4

19

0

15

13

0

16

2,000,000

70,000,000

2,000,000

3,300,000

4,825,000

80,000,000

2,990,000

15,000,000

7,000,000

1,750,000

4,000,000

2,500,000

4,000,000

6,100,000

1,500,000

3,000,000

10,000,000

10,300,000

10,000,000

1,250,000

5,000,000

6,385,000

6 7

MetaMorphix, Inc.

Navtrak

Neuralstem Biopharmaceuticals

Nextone Communications*

Osiris Therapeutics, Inc.

Panacos Pharmaceuticals, Inc.

Paratek Microwave* (1)

PEM Technologies

Platform Logic, Inc.* (1)

Psychiatric Genomics, Inc.

QRSI

RF Technologies, Inc.*

Sequella (1)

Solution Technology International, Inc.*

Sourcefire, Inc.

The Technology Group

Vapotherm, Inc.*

Wisor Telecom*

Xspeedium.com, Inc. (Bond Systems)*

Yafo Networks

Sub Total

Total

12/27/96

06/30/02

08/14/00

03/10/99

09/22/94

12/29/00

03/19/02

12/06/01

05/21/02

11/08/01

03/14/97

07/29/99

03/19/02

03/13/00

02/01/02

10/22/98

07/20/01

03/22/00

03/25/99

04/22/02

500,000

350,000

500,000

200,000

500,000

250,000

575,000

250,000

350,000

500,000

250,000

249,990

500,000

350,000

550,000

249,999

250,000

400,004

250,000

250,000

$ 15,849,990

$ 19,239,919

1,050,000

350,000

400,767

85,072

104,160

250,000

475,893

250,000

350,000

500,000

-

270,612

500,000

350,000

550,000

-

250,000

785,187

-

250,000

$ 16,116,376

$ 64,007,710

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

Private

15

32

4

20

80

18

74

7

12

30

0

5

13

9

28

0

10

35

0

36

871

2,577

32,000,000

5,000,000

19,999,998

17,920,000

9,258,667

8,000,000

35,000,000

2,200,000

2,500,000

22,000,000

6,000,000

1,500,000

3,000,000

3,500,000

7,500,000

5,000,000

1,750,000

20,000,000

7,500,000

61,000,000

$ 523,528,665

$1,691,228,665

FAIR MARKET VALUE (FMV) SUMMARY, June 30, 2002 (con’t)(unless otherwise specified)

Company Investment Investment Realized Status # of Amount ofDate ($) Value ($) Employees Capital Investment

Overall Rate of Return 332.68%

Annual Rate of Return 32.17%

Leverage Multiple 88.01x

Women/Minority Percentage 25.00%

* - Graduated from Challenge Program 34.62%

(1) Note - Dates shown indicate date commitment made. Actual closing dates have occurred after the end of the fiscal year end.

9Maryland Department of Business & Economic Development

History

ABN was spun out from Martek(MATK) in Q4 of 2001 with a mis-sion to commercialize its science-based aquaculture products. ABNin-licensed over 40 issued patentspertaining to MATK’s animalproducts and technology. ABN isdeveloping its next generation ofproducts, and has filed severalfundamental broad-rangingpatents in the aquaculture dis-ease control area.

Products

Advanced BioNutrition (ABN) isthe first of a new breed ofAquaBiotech companies. It is ascience-based, business-drivenanimal health and nutrition com-pany with existing proprietaryproducts and a strong pipeline ofnew products. ABN markets itsAquaGrow line of nutritionalenrichment feeds to hatcheriesand grow-out facilities through-out the world. AquaGrow prod-ucts have been tested, proven tobe beneficial, and are well accept-

ed by customers. Proven value ata competitive cost putsAquaGrow products ahead of thecompetition. Products in this lineinclude AquaGrow DHA,A q u a G r o w A d v a n t a g e ,AquaGrow Enhance, AquaGrowGreen, and AquaGrow ARA.ABN’s PROTECTTM product line,presently under development,includes probiotics, immunityenhancers, and edible vaccinesdesigned to eliminate the need forantibiotics in agriculture.

Competition

ABN’s nutritional products arefrom microalgae, a sustainableplant resource. Competing prod-ucts are based on fish oil, a non-sustainable resource whose priceis on the rise. In addition, scien-tific publications have demon-strated the superiority of ABN’sproducts over these competitiveproducts. There is no direct com-petition for the disease controlproduct line under development.

Events

In March 2002, ABN raised anadditional tranche for the SeriesA financing, securing a total of$3.6 MM.

ABN opened its European officeMay 2002 in Brighton UK

In June the company addedDaniel R. Glickman, former U.S.Agriculture Secretary, Dr.Charles Arntzen, oral vaccine andplant biology expert, and formerDupont Agriculture executiveWilliam F. Kirk to its Board ofDirectors.

David Alldredge was hired asChief Operating Officer.

Management Team

Dr. David KylePresident and CEO

David AlldredgeChief Operating Officer

John PiechockiDirector of Manufacturing

Dr. F.C. Thomas AllnuttDirector of AquaBiotechnology

Advanced BioNutrition Corporation www.advancedbionutrition.comColumbia, MD MD Employees: 14

Mr. Larry GiessingerDirector of Sales

Al CunniffDirector of CorporateCommunications

Other Co-Investors

Eastbourne Capital

Sherbrooke Capital Partners

Cost to State of Maryland

$250,000

Current Fair Market Value

$250,000

ENTERPRISE INVESTMENT FUND OVERVIEWENTERPRISE INVESTMENT FUND OVERVIEW

Maryland Department of Business & Economic Development8

History

Three years ago, one of thefounders moved into ad servingand tracking, with the develop-ment of Click-Tracker a custom-designed Web visitor and salestracking software. With over 2billion ads served and $75 mil-lion in e-commerce sales, theClick-Tracker software laid thefoundation for Advertising.com’spresent -day market ingproduction system. Today,Advertising.com serves andtracks 3 billion ad impressionsper month in a variety of elec-tronic media, and provides otherconsultative services for Internetadvertisers.

Products

Advertising.com serves andtracks ads in a variety of elec-tronic media, including web pub-lications, electronic mail, soft-ware products, and wirelessdevices. Numerous Fortune 100companies have benefited fromAdvertising.com’s products andservices. The Company fulfills

approximately 200 campaignsper month. Advertising cam-paigns are delivered through anintegrated package of contentplacement solutions and multi-ple delivery channels. TheCompany’s AdLearn Technologyis one of the most sophisticatedcommercially available systemsfor the targeting of electronicadvertisements.

Advertising.com uses its deliv-ery technology to improve theperformance of online marketingcampaigns by offering a richportfolio of targeting options.Advertisers benefit from theability of the technology plat-form to “learn” the best ad place-ment, and to apply this knowl-edge in real-time to greatlyimprove an advertiser’s perform-ance.

Competition

Public Competitors includeDoubleclick, L90, Twenty-FourSeven Media and Engage. Thereare three private companies inthe industry of substantial pres-

ence: Advertising.com, Phase 2Media, and Real Media.

Events

Advertising.com, Inc. acquiredDayrates, Scandinavia's largestInternet direct marketingcompany in March 2002.Dayrates will merge withAdvertising.com's London-basedsubsidiary, Advertising.comInternational. The merger willincrease Advertising.com's inter-national presence substantiallyto include Dayrates' offices inNorway, Sweden, Denmark andGermany, in addition toAdvertising.com's recentlylaunched operations in France.

In November 2001, the Deloitte& Touche Technology Fast 500,named Advertising.com, Inc. aRising Star in the ranking of thefastest-growing technology com-panies in the United States andCanada. Ranked fourth amongthe 25 Rising Star winners,Advertising.com's revenues haveincreased over 74,000% since thecompany's inception in 1998.

Management Team

Scott FerberCEO and Co-Founder

John FerberChief Internet Officer and Co-Founder

Gar RichlinChief Operating Officer

Mike WoosleyChief Financial Officer

Todd WaldermanChief Technology Officer

Advertising.com www.advertising.comBaltimore, MD - NewYork, NY - San Francisco, CA - London, UK MD Employees: 155

Other Co-Investors

Reuters Group PLC

America Online, Inc.

WPP Group plc

WorldCom Venture Fund

Grotech Capital Group

New Enterprise Associates


$499,991


$1,221,005

11Maryland Department of Business & Economic Development10 Maryland Department of Business & Economic Development

History

Antaeus Group was establishedin 1990 by a dentist as a responseto the 1990 Clean Air restrictions.As an alternative to traditionalmedical incinerators, the dentistworked with an engineering firmto develop a device that wouldeliminate emissions of toxicchemical compounds and sterilizesolid waste. The Antaeus Grouphas developed a new technologyutilized by the health care indus-try to safely and economically dis-pose of infectious medical waste.This technology can be trans-ferred to other industries fordestruction of (1) laboratorywaste, (2) out-dated pharmaceuti-cal products, and (3) sensitivedocumentation stored on infor-mation bearing surfaces on alltypes of media including micro-film, microfiche, magnetic tapes,and CDs.

Products

Antaeus currently has two dis-tinct product designs, one for themedical waste industry and a

software modified systemtargeted toward the documenta-tion/media destruction market.The Company’s initial product,the SSM (Steam SterilizerMacerator), processes on site redbag medical waste. It emerges asa confetti-like substance that isnon-infectious, non-hazardous,and non-recognizable, satisfyingOSHA’s definition for non-regu-lated waste. Most hospitals willreduce their medical waste pro-cessing cost by 20% – 50%.Antaeus also utilizes this technol-ogy under the name IBSDestroyer (Information BearingSurface) to target the docu-ment/media destruction market.The IBS Destroyer can destroyany information-bearing surfacessuch as magnetic tapes, blue-prints, CD-ROM, DVD, micro-fiche, high density images, photo-graphs and negatives, toner car-tridges, and video tapes.

Competition

Increasing; probably about 20other firms that have developedalternatives for addressing med-

ical waste issues. Competition formedical waste disposal comes pri-marily from the following compet-ing technologies: on-site incinera-tion, waste haulers, and alterna-tive treatments such as chemicaldisinfection and heat treatment.Competition in the classifiedmedia industry is limited toshredding equipment and/or com-panies that have mobilized shred-ders. For electronic media, theonly two technologies that areused with confidence are inciner-ation or degaussing/demagnetiz-ing.

Events

The company signed a multi-million dollar distribution agree-ment with Hitachi Medical tosupply it with medical wastedestruction equipment.

Installed equipment at JohnsHopkins School of Medicine,Becton Dickinson, Illinois Dept ofPublic Health, U.S Air Force, U.S.Navy, Red Cross (MD) and QuestDiagnostics.

Management Team

William D. NortonPresident and CEO

Scott RobuckChief Financial Officer

Tim PickeringVP, Marketing & Sales

Antaeus Group www.antaeusgroup.comBaltimore, MD MD Employees: 14

Other Co-Investors

David Hungerford

Ralph Gibson

Jay P. Cook, Jr.

MD Small Business DevelopmentFinancing Agency (MSBDFA)

Community Development Fund(CDV)


$250,000


$250,000

ENTERPRISE INVESTMENT FUND OVERVIEW ENTERPRISE INVESTMENT FUND OVERVIEW

History

The principals successfully exitedtheir last venture, SequoiaSoftware (a developer of productsand services for the portal soft-ware marketplace), selling thatcompany to Citrix in an all-cashdeal. Several months later, thechief technical officer devised aplan that addresses a need fordevelopers to streamline theircoding and business processes.

Products

Artifact is an enterprise softwarecompany that has targeted thegrowing market for softwarereuse solutions. The ArtifactManagement Software is a prag-matic approach that serves theneeds of both of the company’stargeted constituencies: thedeveloper and the developmentmanager. Proven and successfulconcepts are taken from the codesharing Web sites to providedevelopers with a solution thatdoes not force them to changetheir behavior, but makes it easyto leverage software artifacts. Tothat, the company is adding addi-tional collaborative and commu-nication capabilities that are crit-ical to solving this problem, yetcannot be fulfilled by a simpleWeb site.

Competition

Companies such as Logic Libraryand Rational provide productsthat are more service-oriented orhave a tendency to deal withmore proprietary solutions.

Events

DBED closed on $100,000 ofChallenge funding in August2002 and expects to close in thenear future on additionalEnterprise funding as part of aSeries A round involving multipleco-investors.

Management Team

Mark WeskerPresident and CEO

Greg HeardCFO/SVP Operations

Jasen FiciCTO/SVP Marketing

Artifact Software www.artifactsoftware.comBaltimore, MD MD Employees: 10

Other Co-Investors

Confidential


$300,000 pending


$300,000

Maryland Department of Business & Economic DevelopmentMaryland Department of Business & Economic Development

History

Formerly known asTherapeutic Genomics, AvalonPharmaceuticals was establishedto develop innovative genomictechnologies along with designat-ed partners to identify cellulartargets for novel cancer drugs.The company, along with twomedical institutions, has initiallytargeted prostate, colorectal,breast and lung cancer as possi-ble focal points.

Products

The company intends to identifycandidate tumor suppressorgenes in specific cancers.Typically, cell lines will indicateeither translocation or deletion ofa particular chromosome. Usingdatabases consisting of genomicsequences, the company will con-struct a genomic map in theregion in question. This approachwill couple both spectral kary-otyping (SKY) and fluorescencein-situ hybridization (FISH)analysis to define the deletion.Functional cloning may be usedto test for biological activity.

Competition

Other methodologies have beenemployed to address the suppres-sion of specific cancers.

Events

The State of Maryland participat-ed in the Series B $70 millioninvestment round which closedOctober 2001.

In the Summer of 2002, the com-pany announced the future relo-cation of its corporate headquar-ters to Germantown. The newfacility will be approximately55,000 square feet in size and willbe exclusively devoted to Avalon’sresearch and development.

Management Team

Kenneth CarterCEO

Thomas G. DavidGeneral Counsel and Director of Operations

Garry LessingChief Financial Officer

Avalon Pharmaceuticals www.avalonrx.comGaithersburg, MD MD Employees: 57

Other Co-Investors

Oxford Bioscience Partners

Forward Ventures (San Diego)

GIMV (Belgium)

Altamira (Canada)

Gene Fund

Ariane Fund

CDP Sofinov

Emerging Technology Partners


$500,001


$690,951

History

Atto Bioscience (Atto) is a 16-year-old biotechnology company,founded by Dr. Gary Brooker andhis son Jeffrey. Atto specializes inoptical instrumentation and rea-gants for the analysis of reactionstaking place in single living cells.Atto’s patented products are usedin basic research, drug discovery,toxicology and clinical diagnos-tics. The company has a portfolioof intellectual property rightsthat include patents developedthrough its own research and anexclusive worldwide license withthe University of California for anassay technology used extensive-ly in modern drug discoveryefforts. Currently, there are 5issued patents and 6+ pending orin preparation.

Products

The Pathway HT system wasdesigned to overcome the chal-lenges of high throughput live-cell bioimaging. The system pro-vides high-resolution full spec-trum confocal imaging of single

cells and allows for kinetics andratiometric analysis. The laser-free design of the Pathway HTsystem allows flexibility in thechoice of fluorescent tags used inbiological assays. Pathway is notlimited by laser lines and can beused at virtually any wavelengthfrom UV to near IR. The Pathwaysystem allows for simultaneouskinetic imaging of multipleflourescent dyes in individual liv-ing cells.

The CARV module attaches tomicroscopes for confocal viewing(similar to the concept of a CATscan) of fluorescent specimenswithout the use of a laser. Thissystem performs confocalmicroscopy with the simplicity ofs tandard f luorescencemicroscopy. The module is solidwith a software package thatallows reconstruction of three-dimensional images of cells.CARV is the only non-laser fullspectrum confocal microscopyproduct on the market. Atto canthus offer greater flexibility and asignificant price advantage overthe laser confocal systems sold byseveral other manufacturers.

Competition

The Atto product line is eitherunmatched by competitors or hassignificant price performanceadvantages over current competi-tors. Atto products are currentlynot widely marketed to the cus-tomer base and thus the advan-tages of Atto products are, for themost part, not well appreciated bythe general customer base.

Events

Atto Bioscience has received a$600,000 award from the DefenseAdvanced Research Agency(DARPA) to apply its imagingplatform and expertise in molecu-lar and cell biology to developolfactory receptor-based biosen-sors for real-time detection ofagents of interest to theDepartment of Defense.

Management Team

Derek Woods, Ph.D.CEO

Gary Brooker, Ph.D.CSO and Founder

Gloria ZakChief Financial Officer

Joel JesseeVP, Research & Development

Jeffrey BrookerVP, Operations

Atto Bioscience, Inc. www.atto.comRockville, MD MD Employees: 39

Other Co-Investors


Alexandria Equities LLC

MdBio


$500,000


$500,000


12 13


History

Biosynexus is a biopharmaceuti-cal company focused on prevent-ing and treating hospitalacquired infections with a diversi-fied portfolio of products and apipeline to sustain continuedgrowth.

Products

The lead product is known asBSYX-A110. It has completedGMP manufacturing. Phase Isafety trials in adults have beencompleted and Phase I/II trialsare currently underway. Theproduct is a highly specific anti-body that binds with a singleantigenic determinant that pro-vides protection against the twomost common types of staph bac-teria. A second product,Lysostaphin, is ready for GMPmanufacturing and clinical trialsare anticipated to begin in late2002/early 2003. Lysostaphin isan enzyme that kills staph bacte-ria. In pre-clinical testing it hasbeen shown to be the most effec-tive treatment for certain severestaph infections. Lysostaphin wasin-licensed in late 2000.

Competition

Antibiotics are generally the onlyother remedies on the market,but staph can become resistant tothese drugs after some time.

Events

The State of Maryland participat-ed to its maximum level in theSeries A and was therefore unableto participate in further financ-ing.

Biosynexus entered into a strate-gic collaboration with AppliedMolecular Evolution to optimizeAMzE’s HU96-110, a treatmentfor staphylococcal bacterial infec-tion, AME successfully optimizedHU96-110 in 2001.

Management Team

Gerald W. Fischer, M.D.President & CEO

James Mond, M.D., Ph.D.Chief Scientific Officer

Jeff FischerChief Financial Officer

BiosynexusGaithersburg, MD MD Employees: 34

Other Co-Investors

Hilal Capital Management


$500,000


$1,106,250

History

BioSET was formed March 2001through a “spin out” to capitalizeon over ten years of research anddevelopment in advanced biocom-patible coating technologies in themedical device industry. BioSETwas “spun out” by a team ofInnerDyne, Inc. managementfrom the merger of Inner Dyne,Inc. with United States Surgical,a division of Tyco HealthcareGroup, LP.

Products

BioSET has developed novel andproprietary methods to chemical-ly and mechanically alter surfaceproperties for siloxane deposition,creating molecular attachmentsites and bonding heparin to avariety of common medical devicesubstrates. These processes rangefrom simple wet chemistry “dip”techniques to gas plasma surfaceetching and deposition, either sin-

gularly or in combination, toachieve a designed outcome. Thecompany is focused in the areas ofthrombo-resistant heparin coat-ings for medical devices, biocom-patible diffusion barriers for con-trolled efflux of localized bioactiveagents, and tissue engineeringapplications to enhance cellmigration and growth attach-ment.

Competition

Numerous product offerings existfrom suppliers of biocompatiblecoatings to address lubricity andthrombogenicity. These productsvary in effectiveness, complexityof manufacture, and cost.Competitors include, BaxterLifesciences, Carmeda, andSurmodics. The competition fordrug delivery on stents forrestenosis is much more intensewi th the l ikes o fAngiotech/Boston Scientific/Cook,Cordis, Guidant, Abbott, and

Medtronic. Many of these compa-nies have recently begun humanclinical trials. A number of thesesame companies are offeringstent-grafts to address the mar-ket for less invasive repair ofabdominal aneurysms. Theseproducts are logical candidatesfor biocompatible coatings andBioSET has specific programsinvolving coatings that are aimedat addressing this need.

Events

The State of Maryland participat-ed in the company’s Series Around of funding which raisedapproximately $3MM.

Originally located in Sunnyvale,CA, BioSET moved its headquar-ters to the University ofMaryland TAP incubator in theSpring of 2002.

Management Team

William MavityChairman and CEO

Tom RouecheVP, Business Development andGeneral Manager

Paul Zamora, Ph.DVP and CSO

Linda FinnVP, Finance and Administration

BioSET www.biosetinc.comCollege Park, MD MD Employees: 7

Other Co-Investors

Boston Scientific

The Vertical Group


$250,000


$250,000


1514



History

Bluefire Security Technologies isthe first company to develop anext generation smart firewall formobile wireless devices. Bluefire’sproprietary security software isdesigned to operate on every PDA(personal digital assistant),smartphone, notebook and otherportable electronic device utiliz-ing wireless networking technolo-gy, either as part of an enterprisenetwork or peer-to-peer (P2P)communications. The smart fire-wall uses Bluefire’s patent pend-ing location sensitive securityprofile system to automaticallyincrease or decrease the securitylevels depending on the locationof the individual using the device(at home, in the office, or in pub-lic spaces).

Products

The Bluefire solution requiresenhancing wireless devices to pro-tect themselves from unfriendly,fraudulent, and hostile connec-tions, even when they are not con-

nected to the enterprise. For moresophisticated wireless devices,such as PDAs and notebooks, theBluefire software is a compactfirewall for small devices and con-trols all wireless communica-tions. The software provides fine-grained, security controls for alldata and services, screens outattacks, and logs all communica-tion activity. Bluefire operateswhenever the device is active,providing “always-on” protection.The software monitors all servicerequests, filters all data packets,and applies the security rulesfrom the security database.

Competition

Currently no competitor is yetfocused on protecting data fromhack attacks at the standaloneportable device level and Bluefirehas filed patents that create a sig-nificant barrier to entry to anycompany attempting to developsimilar firewall and intrusiondetection systems on a wirelessdevice. Potential competitorsinclude traditional firewall com-

panies that may attempt tomigrate their server or PC-basedproducts, designed to protect cor-porations using the publicInternet, to wireless PDAs. Thesecompanies include Checkpoint,Symantec, Network Associates,Network ICE, and Cisco.However, their expertise in devel-oping large server-based firewallsbased on IP networks will nottranslate well to developing smallefficient filter engines capable ofaddressing non-IP based commu-nications across multiple devices.

Events

Bluefire Security has met alldevelopment milestones to pro-duce a beta version of the soft-ware. That software is undergo-ing beta-testing at several large,reference-able clients. BluefireSecurity has closed a Series Bround of financing with JK&BCapital and Walker Ventures.This round had a bifurcated close,with $3.5MM closing May 31,2002 and $2.5MM scheduled toclose August 31, 2002.



History

A University of Maryland gradu-ate student developed a low costmanufacturing system for recom-binant proteins. In 1999 Minh-Quan Pham and one of his profes-sors, William Bentley, partneredtogether to form ChesapeakePERL to commercialize this newsystem. The manufacturing sys-tem changes simple insect larvaeinto efficient mini bioreactorsthat produce recombinant pro-teins at high quality while sub-stantially reducing costs. Thecompany is headquartered in theUniversity of MarylandTechnology AdvancementProgram.

Products

Chesapeake PERL has developeda method of “mass customization”for recombinant (genetically engi-neered) protein manufacturing.The company produces proteinsusing cabbage larvae for thera-peutics, diagnostics, industrialenzymes, agriculture and biore-

mediation. Chesapeake PERLhas initially targeted specific sec-tors with smaller, more attain-able non-FDA regulated markets.PERL has already demonstratedits manufacturing system andhas isolated specific proteins tofurther demonstrate flexibilityand cost competitiveness.

Competition

Current processes are highly spe-cific – one process yields one prod-uct. Any change in process condi-tions, raw materials or productcan disrupt production andrequire additional R&D. PERLhas overcome technical barriersof efficient scale-up and harvest-ing time to give it a competitiveadvantage.

Events

Chesapeake PERL has licensed afully equipped and operating fac-tory donated to the University ofMaryland by DuPont. The com-pany has the option to purchase

the Newark Delaware facility atsubstantially reduced rate.

Cheseapeake PERL completed itsSeries A round of $1.75 MM inNovember 2001.

University of Maryland BusinessPlan Competition Award 2001

Best Biotechnology Company,State of Maryland IncubatorAwards 2002

Fortune Magazine’s CoolCompanies 2002 selected PERLas one of the nations CoolestBiotech Companies.

In Q4 2002 Chesapeake PERLwill begin raising its $3.5 MMSeries B round of Financing.

Management Team

Terry E. ChasePresident

Dr. Nikolai van BeekChief Scientific Officer

David C. DavisPlant Manager

Jeffrey E. TurnerMarketing Manager

Chesapeake PERL, Inc. www.chesapeakeperl.comCollege Park, MD - Newark, DE MD Employees: 8

Dr. William BentleyFounder

Dr. Minh-Quan PhamSecretary and Founder

Other Co-Investors

American Society of Microbiology


$500,000


$500,000

17

Management Team

Mark KomiskyCEO

Dennis KomiskyChief Technology Officer

Will ClemonsChief Financial Officer

Other Co-Investors

Steve Walker & Associates

Maryland Angels Council

J K & B Capital


$450,000


$450,000

Bluefire Security Technologies www.bluefiresecurity.comTowson, MD MD Employees: 3

16





History

CodeRyte is a software companythat uses Natural LanguageProcessing technology (“NLP”) toconquer the labor-intensive cod-ing of physician and hospital bills.CodeRyte™ software uses theclinical information contained inthe transcribed patient chart todetermine the appropriate billingcodes. The technology also lendsitself to utilization for frauddetection/compliance by quicklycomparing or facilitating the com-parison of transcribed medicalrecords to the claims submittedby the medical provider.

Products

CodeRyte has developed threeproducts that appeal to differentend-user markets. One product isdelivered in an ASP model. Thecustomer can submit to theengine transcribed records overthe Internet. CodeRyte processes

each record in fewer than two sec-onds or, in batch mode, up to200,000 per server. The output ofCodeRyte can then be importedinto any transaction system usedby the provider. A semi-integrat-ed product that links CodeRyte totransaction systems is offered bymeans of an enterprise softwarelicense. In a fully integratedinstallation, CodeRyte generatesthe super-bill that then enters theprovider’s transaction systemenroute to producing a bill.

Competition

CodeRyte currently has a directcompetitor in A-Life Medical, Inc.,which uses a rules-basedapproach to NLP. Using thismore primitive version of NLP, A-Life must write millions of rulesfor each and every grammatical,syntactical, semantic and linguis-tic event. This is a more cumber-some, labor-intensive approach tothe technology, which makes it

difficult to scale and adapt.Competition also comes from out-source coding services which arestaffed by human coders. Thisfragmented industry includesmom-and-pop organizations aswell as divisions of various sizedaccounting and consulting firmsand web-based service bureaus.

Events

CodeRyte is in the process of clos-ing a $2.5MM Series A round offinancing.

CodeRyte has approximately fivecustomers and a large salespipeline of opportunities.

Management Team

Richard TorenChairman

Andy KapitCEO & CFO

Michael Niv, Ph.D.Chief CTO

David Yarowsky, Ph.D.Sr. Software Engineer

CodeRyte www.coderyte.comBethesda, MD MD Employees: 7

Other Co-Investors

Solstice Capital

Washington Tech Partners

Commons Capital


$225,000


$225,000

History

Claragen is a development-stagecompany formed in 1996. Thecompany has a license agreementand ongoing research relation-ship with the National Instituteof Health.

Products

Claragen is a biotechnology com-pany developing novel therapeu-tic products that are based onrecombinant (genetically-engi-neered) forms of naturally occur-ring human proteins. The initialfocus is on a class of human pro-teins known as mucosal hostdefense proteins, which areinvolved in regulation of inflam-mation and immunity at mucosalsurfaces such as the lung and gas-trointestinal tract. Claragen hasa research relationship with theNational Institutes of Health(NIH) and a license from the NIHto certain technology relating to

the mucosal host defense pro-teins. The Company’s mostadvanced product is a proteinknown as CC10, which is beingtested in a double-blind, con-trolled clinical trial for the treat-ment of a lung disease affectingnewborn premature infants.There is no current treatment forthe condition, which affects about20,000 infants annually and isfatal to about 8,000.

Competition

Competition for the company’sproducts varies by clinical indica-tion. In asthma, for example,many pharmaceutical productsare approved and in common useand Claragen will have to partnerwith a larger pharmaceuticalcompany. In chronic neonatallung disease, there are no effec-tive products and the companybelieves its product will representa major therapeutic advance.

Events

The State of Maryland participat-ed in the Series B round of financ-ing in September 1998. The com-pany also completed a bridgeround in which the State investedan additional $175K.

Management Team

Mark ZimmerPresident and CEO

Aprile Pilon, Ph.D.Executive Vice President

Claragen, Inc www.claragen.comRockville, MD MD Employees: 6

Other Co-Investors

Venture Management Consultants,LLC

MD Healthcare ProductDevelopment Corp.


$425,005


$425,006

18 19





History

CytImmune is an R&D drugdelivery company that is current-ly the only company focused onthe biodelivery potential of col-loidal gold nanoparticles (col-loidal gold has been used safelyfor over 70 years to treat rheuma-toid arthritis). The Company’sprimary focus is to improve thesafety and efficacy of systemicallydelivered anti-cancer protein bio-logics and approved chemothera-pies through tumor targeting.The Company is developing col-loidal gold as a platform technolo-gy for drug delivery, gene therapy,monoclonal antibody productionand vaccine delivery. CytImmuneis dedicated to producing new for-mulations of drugs to “improvecancer treatment throughimproved biodelivery of cancertherapies.”

Products

CytImmune’s first patented clini-cal therapeutic product, a model

for tumor-targeted drug delivery,is tumor necrosis factor (TNF)bound to colloidal gold (cAu-TNF). This first cancer therapyproduct, which will be ready for aNational Cancer Institute spon-sored clinical trial in 12-15months, will lead to a family ofcancer therapy products com-prised of biologics and chemother-apeutics, such as taxol, bound tocolloidal gold for tumor-targeteddelivery. Following FDA approvalof this product and future prod-ucts, these new drugs will be soldto treat specific cancers.

Competition

Major competitive companiesincluding Alkermes Inc., AlzaCorporation, DOR BioPharma,Elan Corporation, plc, GuilfordPharmaceuticals, and ShireLaboratories are focused on usingliposomes or biodegradable poly-mers for drug delivery. Both tech-nologies are best suited for carry-ing water insoluble molecules,which are released from the carri-

ers all-at-once much like seedsfrom a seedpod. In contrast, thecolloidal gold drug delivery vectoris better suited for protein biolog-ics as well as small molecule ther-apeutics. Because these mole-cules are bound and carried onthe surface of the nanoparticlethey provide both rapid biologicaction by binding to cell surfacereceptors and sustained localrelease as the drug molecules areslowly released from the colloidalgold surface.

Events

Two patents were awarded to theCompany in the third quarter of2001, and 22 other patents arestill pending in the U.S. andabroad. CytImmune’s patentscover the use of cAu for vaccines,monoclonal antibody production,gene therapy and drug delivery.Issued patents cover the treat-ment of cancers with specific con-jugates, including CytImmune’slead clinical therapeutic, cAu-TNF.

Management Team

Lawrence Tamarkin, Ph.D.President & CEO

Giulio F. Paciotti, Ph.D.VP, Research and Development

Don MalinowskiProduct Manager

CytImmune Sciences, Inc. www.cytimmune.comCollege Park, MD MD Employees: 12

Other Co-Investors

J. Dorance Trust Entities

EntreMed


$300,000


$300,000

History

Cylex was originally formed as acompany providing consultingand contract research services toindustry and academia. However,in 1998 the company decided tofocus all efforts on the develop-ment of its platform technologyfor the assessment of cell-mediat-ed immune function, after apatent on T-cell activation wasgranted based on preliminarywork done through an SBIR con-tract with the Department ofDefense.

Products

The company has developed adiagnostic tool, called in vitroCMI, which integrates magneticseparation of blood cells with bio-luminescent detection for themeasurement of immune systemfunction. Cylex’s immunodiagnos-tic kit measures the level of T cellactivation in blood. It has a majorapplication in monitoring AIDS in

humans but also has applicationsin the disease management ofcancer, autoimmunity, and otherinfectious diseases. The companybelieves the in vitro CMI assayprovides information about cellu-lar immune response in a rapidlyprocessed, easy to use form,which is more amenable to moni-toring a disease’s course than theantibody measurements alone.The product’s advantage is thatresults are delivered quickly sincecurrent testing procedures avail-able take a week to perform.

Competition

Competing research assaysemploy radioactive lymphoprolif-eration, but these assays are notavailable or clinically useful.Becton Dickinson and R&DSystems are among the players inthis arena.

Events

The company has received FDAapproval for their assay for use inmonitoring immune suppressionas of April 4, 2002. This not onlyincludes transplant patients, butalso the monitoring of otherimmune-suppressed patientswith illnesses such as HIV,Lupus, etc.

Management Team

Judith A. Britz, Ph.D.President and CEO

Peter SottongVP, Operations

Richard Kowalski, Ph.D.Manager, Product Development

Cylex www.cylex.netColumbia, MD MD Employees: 18

Other Co-Investors

Early Stage Enterprises

The Dinner Club

Rediscovery Capital

Women’s Growth Capital Fund

MDBio

Foxwood Capital


$575,000


$599,000

2120





History

Functional Genetics, Inc. wasformed to develop and commer-cially exploit a proprietarytechnology called RandomHomozygous Knockout (RHKO)that enables the discovery andfunctional analysis of genes thatare most relevant to human dis-eases. This patented technologyis unique in that it enables theidentification and validation ofmammalian cell gene functionusing a procedure that simultane-ously inactivates both copies ofgenes on a genome-wide basis.The scientific founders of thecompany and inventors of thetechnologies are Drs. StanleyCohen and Limin Li, twoStanford scientists. Dr. Cohen isbest known for developing andpatenting (along with Dr. HerbertBoyer) recombinant DNAtechnol-ogy, which has become the corner-stone of the biotechnology indus-try. Dr. Mates, the businessfounder of the company, has beeninvolved in financing and build-ing Biotechnology companies forthe past 13 years.

Products

The RHKO technology willenable gene function to be corre-lated in one step with the geneitself. This will allow the discov-ery of genes that previously wereinaccessible as therapeutic ordiagnostic targets. The goal of thecompany is to discover the genesand their function most relevantto major human diseases.Functional Genetics, Inc. has par-ticular interest in using this tech-nology to uncover gene functionin the areas of: cancer diagnosticsand therapeutics, infectious dis-eases, immunological diseases,neurological disease, cardiovascu-lar disease and pharmacoge-nomics. FGI will sell or licenseinformation, service, cells, genetargets, compounds, and diagnos-tic tools. Furthermore, they willfurther develop a micro-arraytechnology, the GeneDisk, devel-oped and patented by Dr. Li and acolleague.

Competition

Companies such as Rigel, Isis,and Hybridon, among many oth-ers, use several related technolo-gies. FGI’s RHKO approach isdramatically different in that itdirectly discovers medicallyimportant genes on the basis oftheir function and concurrentlyvalidates those genes as targetsfor drug development. FGI’sGeneDisk will compete with themicro-array companies such asAffymetrix, Incyte, and Hyseq.FGI believes the GeneDisk tech-nology has broader applicabilityat a lower cost than its competi-tors’.

Events

Series A financing closed inDecember 2000.

Functional Genetics has collabo-rations with RockefellerUniversity and SUNY StoneyBrook.

The company initiated its $15-20MM Series B round of fundingin 2Q 2002.

Management Team

Sharon Mates, Ph.D. CEO

Lawrence Hineline, CPAChief Financial Officer

Limin Li, M.D, Ph.D. Scientific Director

Functional Genetics, Inc. www.functional-genetics.comRockville, MD MD Employees: 19

Other Co-Investors

Scientia Health Group, Inc

Alafi Capital

Sanders, Morris, Harris


$750,000


$750,000

History

FASgen, Inc. was formed by fourdistinguished Johns Hopkinsresearchers to develop drugsbased on their widely acclaimeddiscoveries related to the mecha-nisms and roles of the fatty acidbiosynthesis (FAS) system. Thefounders have extensive expertisein the study of FAS and have syn-thesized over 250 unique smallmolecule FAS inhibitors and iden-tified several core technologiesstemming from their basicresearch on FAS’s role in diseaseand health.

Products

Fatty acid biosynthesis is a vitalprocess in nearly all existing lifeforms. FASgen has chosen to ini-tially focus its effort in three sig-nificant areas: cancer, obesity,and tuberculosis. FAS inhibitorsselectively destroy common can-cers of the breast, prostate, colon,and lung while sparing the nor-mal tissues. Since cancer cells

have been found to depend on thisFAS mechanism for growth, theresultant small molecules pro-duced will specifically inhibit theprincipal FAS enzyme. FASinhibitors cause weight loss bysuppressing appetite via controlslocated in the brain stem. Thisdevelopment was highlighted inthe June 30, 2000 issue of Sciencemagazine. FAS inhibitors are alsoselectively toxic to mycobacteria,including multiple drug-resistantorganisms that cause TB inhumans and paratuberculosis indomestic animals; this compoundis furthest along in testing and anIND filing is expected next year.

Competition

Various academic and clinicalinstitutions have performedresearch on the FAS process; forexample, Ohio State has initiateda program (funded by theNational Cancer Institute) toidentify molecules to attack FASassociated with brain tumors.Other institutions are research-

ing possible vaccine formulationsto counter the FAS mechanism.These academic efforts can beeasily commercialized. In theweight loss category, many non-medical alternatives currentlyexist. Other forms of competitionattack the same problem but takeother approaches towards afavorable end solution.

Events

FASgen is in the process of clos-ing its Series B financing round.

William McIntosh was hired asthe Chief Business Officer.

Management Team

Albert H. Owens, Jr. , M.D. Chairman and CEO

Eric Stoer Secretary and Treasurer

FASgen, Inc. www.fasgen.comBaltimore, MD MD Employees: 4

Other Co-Investors


CIP Capital


$500,000


$500,000

22 23





History

Intellivax became a subsidiary ofIntellivax International (Canada)in 1998, and DBED’s equity posi-tion in the old entity was convert-ed into the new company.Intellivax, Inc. was founded in1995 in Baltimore. Intellivax’senabling technologies, acquiredfrom the Walter Reed ArmyInstitute of Research,Washington, DC provide a broadplatform to develop a spectrumof vaccines and related therapeu-tics for safe and effective deliveryvia mucosal routes includingintranasally. Intellivax productdevelopment strategy is to use itsunique technologies to developmucosal vaccines and therapiesthat provide mucosal as well assystemic immunity and protectagainst invading microbes beforethey cause internal disease.Intellivax products have severalother advantages over conven-tional vaccine technologies, pro-viding benefits to both health careproviders and patients since theyare designed from non-living,

non-replicating, purified compo-nents that are inhaled or swal-lowed rather than injected.

Products

Intellivax produces intranasaland oral sub-unit vaccinesagainst shigellosis (bacterialdysentery). These vaccines areWHO and US military prioritiesthat have successfully completedsafety and immunogenicity PhaseI clinical trials in volunteers. Thesuccessful completion of three tri-als using two distinct productsserve as proof of principals thatIntellivax vaccine delivery sys-tems elicit mucosal and serumimmune responses in people.Advanced clinical trials todemonstrate protection of volun-teers against shigellosis afterchallenge with virulent shigellaare underway, and large scalePhase 2 safety and immunogenic-ity studies are planned at severalclinical testing sites in Baltimore,Maryland and greater Montreal.Intellivax is in the process of fil-

ing an IND for a nasally-deliveredinfluenza vaccine following posi-tive results in animals.

Competition

Some intranasal vaccines existagainst respiratory problems thatmay not attack the samemicrobes. Other vaccines aremore invasive (injection) and arethe currently favored alternative.Treatments for shigella specifical-ly, include rehydration and othernot-so-guaranteed methods.

Events

ID Biomedical, of Bothell, WA andVancouver, Canada, acquiredIntellivax in May 2001 in a stockswap. The parent company com-plements Intellivax’s own busi-ness - both conduct vaccineresearch. Lock up provisionsexpired during calendar year2002.

Management Team

Anthony Holler, M.D.CEO

Todd R. PatrickPresident and COO

George H. Lowell, M.D. CSO

Intellivax, Inc. (now ID Biomedical) www.idbiomedical.comBaltimore, MD - Ville-St. Laurent, QC, Canada Employees: 80

Other Co-Investors

Le Fonds de Solidarité

Royal Bank Capital Corporation

Biocapital

Innovatech Montreal

Development Bank of Canada

Maryland Health Care ProductDevelopment Corporation


$250,000


$294,808

History

HT Medical Systems, Inc. (previ-ously High Techsplanations)(HTMS) was founded in 1987 byGregory Merril. In June 2000,HTMS moved to Gaithersburg(Montgomery County), Maryland,to accommodate the need formuch larger office space for thecurrent employees and plannedcompany growth. Immersion sub-sequently acquired HT Medical inAugust 2000.

Products

HTMS designs, manufactures,and markets computer-basedmedical simulators that allowmedical personnel to practicemedical procedures without plac-ing patients at risk. HTMS hasprogressed from offering a singleproduct for a single market seg-ment to engaging eight marketsegments with three differentsimulation product portfolios,actively sold in North America,Europe, Asia and Australia. Each

of the product lines consists of anever-expanding menu of softwaremodules that take advantage ofa common tactile feedback inter-face device. CathSim allows med-ical professionals to practice awide range of intravenouscatheterization procedures. ThePreOp Endoscopy simulator pre-pares professionals to performvarious flexible endoscopic proce-dures such as bronchoscopy andsigmoidoscopy. The PreOpEndovascular product allowsphysicians to practice angioplastyand other endovascular tech-niques through the manipulationof simulated guide wires, sheaths,catheters, pacemaker leads, andother devices.

Competition

At this time, HTMS is the onlysignificant company that hasdeveloped this line of manufac-tured technology. Other organiza-tions are pursuing similar ideas,but HTMS’s current and plannedproducts possess a unique combi-

nation of characteristics, and itscompetitors are not currentlymarketing or testing any prod-ucts that include all of the attrib-utes of the company’s products.Most other simulation develop-ment groups are within universi-ty settings, a few are small com-panies, and others are large.None of the potential competitorshave addressed the marketsegments that HTMS hasengaged, and the competitivetechnologies that have beendemonstrated are generally moreexpensive and not as realis-tic.

Events

Immersion Corporation, of SanJose, CA, acquired HT Medical inthe second half of 2000. DBEDhas accepted stock in the newentity subject to lock up provi-sions which have expired.

Management Team

Gregory MerrilCEO and President

HT Medical Systems (Immersion Corporation) ww.immersion.comRockville, MD Employees: 162

Other Co-Investors

Maryland Healthcare Corporation


$250,000


$262,833

2524



Management Team

Dr. Martin WoodleCEO and President

David StricklerVP, Operations and Finance

Partrick LuExecutive VP, Genomics

Dr. Puthupparampil ScariaVP, Synthetic Vectors

Casimir EitnerChief Business Officer

Intradigm Corporation www.intradigm.netRockville, MD MD Employees: 13

Other Co-Investors


Novartis Venture Fund


$300,000


$300,000



Management Team

C.P. ShankarCEO and President

Internet Cargo Services, Inc. www.ecargo.comSilver Spring, MD MD Employees: 15

Other Co-Investors

Ruth S. Kahn Estate

Dealy Investment Group

John Puente

T. Uterburg/Anthony Harris/C.E. Unterberg Tobin LLC


$550,000


$527,473

History

Internet Cargo provides demandchain management solutions forhigh frequency, high volume,repetitive transaction environ-ments and enables the captureand process of a variety of com-mercial transactions at the “pointof intent” versus the traditional“point of sale.” This patentpending technology saves timeand money for participating mer-chants and their customers.

Products

Internet Cargo Services, Inc. pro-vides electronic ordering servicesfor businesses and consumersunder the name E::CARGO. TheE::CARGO software enables theE::PEN to identify purchases bycustomers who scan catalogs andother publications. Orderinginformation is then received fromthe pen after it has been placed ina docking station. Orders arethen dispersed to the respectivemerchants.

Competition

This is the only company usingtechnology of this type. Generallythe companies that offer Internetsites and catalogues have main-tained the status quo with respectto ordering merchandise. Thisproduct also targets those whowould not normally make trans-actions by PC, considering thecosts of buying a home computer.One would expect the price pointsto tend towards negligible, whilemaintaining some monthly fee touse the software/pen combina-tion.

History

Intradigm was founded in mid-2000 by Ms. Jill Glasspool-Malone, Dr. Jim Mixson, and Dr.Martin Woodle. Novartis original-ly owned the non-viral gene deliv-ery technology, which was devel-oped at Genetic Therapy, Inc., butdecided against continuing R&Defforts. The license agreementtransferred contingent on fund-ing from Emerging TechnologyPartners and Novartis’ own ven-ture fund.

Products

Intradigm Corporation is focusedon exploiting its proprietary tar-get discovery and validation tech-nologies to develop new therapeu-tics for cancer, arthritis and othercritical care indications.Intradigm’s approach is unique inthat it rapidly discovers and dis-criminates the proteins that con-trol disease as distinguished fromthose that only correlate with dis-ease. Disease-control validationof targets enables drug develop-ment based on target efficacy

reducing costs and improving thesuccess rate. Intradigm does thisby exploiting its leading expertisein gene delivery in animals toover-express protein targetsand/or to silence them with RNAidirectly in animal models of dis-ease. Intradigm’s method skipsslow and expensive validationsteps by operating directly in theactive disease tissues rapidlyrevealing which proteins provideefficacy.

Competition

The competitors to Intradigminclude commercial entities andacademic laboratories. The com-mercial entities span small toestablished Biotech companies(such as Copernicus inCincinnati, Ohio, TargetedGenetics Inc. in Seattle,Washington, TransGene inStrasbourg, France, ValentisInc. in Burlingame, California,Genzyme Inc. in Cambridge,Massachusetts, Cell Genesis inFoster City, California, andAmgen in Thousand Oaks,California), and divisions of large

pharmaceutical companies (suchas GenCell division of Aventis). Inaddition, a number of academiclaboratories worldwide are work-ing to develop new technology forpolynucleotide delivery and genetherapy. The in vivo genomics tar-get identification and validationbusiness faces very little competi-tion. Most in vivo gene deliveryvector development efforts areproceeding solely for therapeuticapplications. Intradigm is estab-lishing a business method patentfor this application to protect itfrom such competition.

Events

Intradigm closed on its Series Around of funding in June 2001.

Robert Riley was elected to theBoard of Directors.

Intradigm signed an agreementwith Direct Gene to provide thedelivery technology to improveDirect Gene’s product.

The company is currently raisingits Series B round of funding.

26 27



Management Team

Edwin Quattlebaum, Ph.D.President & CEO

Michael R.N. Thomas, F.C.A.Chief Financial Officer

Ronald Stotish, Ph.D.VP, Research & Development

MetaMorphix, Inc.Savage, MD - Davis, CA - Saskatoon, Canada MD Employees: 15

Linda Yaswen-Corkery, Ph.D.Director, Business Development

MaryEllen DeFrancesco Director, Human and GovernmentAffairs

Other Co-Investors

Genetics Institute


$500,000


$1,050,000



History

MaxCyte, formed in June 1999, isa clinical stage biotechnologycompany developing and market-ing a platform technology for rap-idly loading bioactive moleculesinto human cells for therapeuticapplications and gene target vali-dation for drug discovery.Through partnerships with theworld’s leading biopharmaceuti-cal companies, MaxCyte lever-ages its proprietary technology toyield commercially viable thera-peutic products. The companyhas demonstrated a high degreeof success in the laboratory, andcurrently has numerous productsin pre-clinical stage and one ther-apeutic product in Phase I clinicaltrials. MaxCyte is an independ-ent subsidiary of EntreMed.

Products

MaxCyte’s precision-controlledcell loading system enables the

modification of a wide variety ofhuman primary cells (“envoy”cells) with virtually any molecule— safely, effectively, and very rap-idly. Continuous flow—the keybreakthrough—means rapidturnaround and allows for bed-side or outpatient treatment. Thetechnology is protected by fiveU.S. patents issued, and over 35U.S. and international patentspending. Initially, MaxCyte isfocused on three application areaswhich create the greatest near-term market potential: (1) non-viral gene delivery to enable andadvance the efforts of numerouscompanies developing cell andgene-based therapeutics, and (2)cell-based therapeutic deliveryusing platelets for targeted drugdelivery and red blood cells forenhanced oxygen delivery(ErythroMaxTM) and gene-basedtarget validation for drug discov-ery.

Competition

In the field of ex-vivo non-viralgene delivery, MaxCyte has iden-tified no direct substitutes orcompeting methods at compara-ble production or treatment effi-ciencies. For ErythroMaxTM,MaxCyte faces potential competi-tion from “Oxygen enhancement”and “blood substitute” companies.However, these products are onlyeffective for short periods, andnow generally targeted at radia-tion therapy in oncology or high-blood loss trauma situations,respectively. Also, unlikeErythroMaxTM, blood substitutesmay pose toxicity problems.

Events

The State of Maryland participat-ed in the Series B round of fund-ing, which closed February 2002.

Management Team

Douglas DoerflerPresident & CEO

Joseph LehnenChief Financial Officer

Eric RichmanVP, Corporate Development

MaxCyte www.maxcyte.comRockville, MD MD Employees: 16

Other Co-Investors

VenCap

EntreMed, Inc


$200,000


$200,000

History

The company was formed byJohns Hopkins and the GeneticsInstitute and is involved in thecommercialization of veterinarypharmaceuticals based on twobroad technology platforms:growth factors and immunophar-maceuticals. Growth factors areproteins involved in regulatingcell growth and differentiationand offer opportunities forenhanced livestock productionefficiency. The company acquiredthe immunopharmaceuticalassets of Biostar Inc., a Canadianbased biotechnology company inAugust, 2000. The acquisitionprovides the company withenabling carrier protein technolo-gy and several mid-stage develop-ment products.

Products

The company has twelve productsunder active development basedon vaccine, blocker and immuno-suppressant technologies to per-mit natural improvement in pro-duction economics for chicken,turkey, swine, and cattle.Trademarks include MyoVax,MyoXtra, OvaMax, NeuterVaxand Clean.

Events

The company purchased theAgGen division of Celera, Inc.resulting in a doubling of staff.The value of the transaction isestimated at $30 million or$17.50/share.

For valuation purposes DBEDhas discounted that value by 70%to $5.25/share.

The company graduated from theUMBC Tech Center Incubatorand is now headquartered inSavage, MD.

Two Patents were issued regard-ing its Myostatin technology.

2928


History

Founded in 1995 and based onthe breakthrough CentralNervous System (CNS) stem celltechnology invented by Dr. KarlJohe, NeuralStem was created tocapitalize upon the commercial-ization of this patented platformtechnology.

Products

NeuralStem has developed andwholly owns the CNS stem celltechnology, a key technology forgenetic therapies and drug dis-covery. The Company has devel-oped and filed patent claims onthis technology where stem cellsfrom the rodent and/or humanfetal brain and spinal cord areascan be isolated, propagated, andefficiently differentiated togenerate large numbers of neu-rons. For the very first time thistechnology not only allows for thecreation of the many differentkinds of neurons which are foundin the human CNS, it also allows

for their production in commer-cially significant quantities andunder reproducible conditions.

The Company plans to developand commercialize several cell-based genetic therapy productsfor intractable neurodegenerativedisorders such as Parkinson's dis-ease, Huntington's andAlzheimer's and spinal cordinjuries. Second, through a com-bination of joint venture, co-development deals and/or manu-facturing and distribution agree-ments function-based live humancell assays will be applied toscreen libraries of synthetic andnatural compounds. Neuroactivecompounds with the potential totreat disorders such as depres-sion, mania, anxiety, schizophre-nia and epilepsy will be found.Third, NeuralStem intends tocapitalize on its unique cell basedexpertise to create genomics data-bases of gene expression patternsseen during neurogenesis and indrug screening assays.

Competition

A number of companies havefocused on therapies for neurode-generative diseases such asParkinson’s, Huntington’s andAlzheimer’s – several companieshave been involved in stem cellresearch.

Events

NeuralStem received a $2.5 mil-lion DARPA award (phase 1, over18 months) with eligibility foranother $7.5 million for phase 2.

The company will launch its first“neurochip” product this fall in ajoint venture with Mertigenix.These are theme based microflu-idics chips with gene contentderived from experiments donewith NeuralStem’s cells for theGene Logic Database.

Management Team

Richard GarrPresident and CEO

Dr. Karl K. JoheChief Scientific Officer

NeuralStem Biopharmaceuticals, Ltd. www.neuralstem.comGaithersburg, MD MD Employees: 4

Other Co-Investors

SJRJ LLC


$500,000


$400,767


30 Maryland Department of Business & Economic Development

History

Navtrak, Inc. was founded in1999. The company is an early-stage wireless communicationscompany that has developed andis marketing a web-enabled serv-ice providing operators of com-mercial fleets with real-timeaccess to their vehicles. The solu-tion also reports the location andactivities of each vehicle at agiven time. Navtrak has an exclu-sive distribution, marketing andfulfillment alliance with TESSCOTechnologies, Inc. This relation-ship provides Navtrak with exclu-sive access to a network of inde-pendent sales organizations thatwill be difficult for others to repli-cate. Each already has an estab-lished buying relationship, creditterms and return policies withTESSCO, making it "easy" to buythrough TESSCO.

Products

A Mobile Manager and an anten-na are installed in each vehicle.Additional switches or sensorscan also be installed in the vehi-cle. The Mobile Manager receivessignals transmitted from GlobalPositioning System satellites todetermine the location and veloc-ity of the vehicle. These data andany switch or sensor data aretransmitted over a wirelessmodem in the Mobile Manager toNavtrak’s Network OperationsCenter, a network of secureservers. Customers can thenretrieve the information from theweb site using an Internet brows-er. With upgraded service, cus-tomers are able to send andreceive messages to and from avehicle as well as among vehicles.

Competition

There are several competitors inthe marketplace, but none hasthe combination of distributionchannel and technology thatNavtrak possesses. The list ofcompetitors includes @Road, Inc.,Teletrac, Inc. and TracerNet.

Events

Navtrak closed an initial trancheof $2.95 million in its Series Around. Navtrak has expanded theround to a total of $5 million, withexisting investors committing$1.1 million of the remaining $2million not yet funded.

Navtrak has approximately 80independent dealers in sevenregions, 230 customers, 3,250vehicles under 3-year monitoringcontracts, and a 90-day salespipeline of another 5,000 vehicles.

Management Team

Ron HodgesCEO and Founder

Jim DuncanPresident

Margaret Laidlow KelsoVP and COO

Christopher PalencharCTO

Navtrak, Inc. www.navtrak.comSalisbury, MD MD Employees: 32

Other Co-Investors

BaseCamp VenturesSeaCap VenturesRuppert Ventures


$350,000


$350,000


31

History

NexTone Communications wasfounded in February 1998 todesign and develop hardware andsoftware for the transmission ofdata and voice over the Internet.Analog connections would trans-mit via digital media and notcause a company to rewire itsfacility. As carriers implementVoIP networks, they are facedwith a number of technical issuesincluding network security, sig-naling interworking and multi-vendor interoperability.

Products

Nextone sells three productsdesigned to take advantage ofcommunications via the Internet.The NexTone MultiprotocolSignaling Switch (MSW) solvesthese issues by enabling carriersand other service providers todirectly interconnect their net-works with other SIP- and H.323-based networks via IP. TheNexTone Core Proxy (CPX) is acarrier class SIP proxy that func-tions as a centralized route serverfor VoIP networks. iView is aXML based GUI that allows net-work operators to graphicallyview and configure NexTone andassociated third party products.

Competition

Other companies are seekingentry points as next generationservice providers. Theseproviders would use any of themajor broadband access technolo-gies to deliver new value addedservices such as IP Centrex,voice/data Virtual PrivateNetworks (VPN), unified messag-ing and teleconferencing.

Events

In June/July 2002, a Series A-1round of $3.5 million was com-pleted and included Core Capital.



Management Team

William PursleyPresident & CEO

Donald FallonVice President, Finance & CFO

Mark Pittenger, Ph.D.VP, Research

Kerry Atkinson, M.D.VP, Clinical Affairs

Osiris Therapeutics www.osiristx.comBaltimore, MD MD Employees: 71

Other Co-Investors

Friedli Corporate Financial

Cambrex

Novartis


$500,000


$104,160



Management Team

Raj SharmaCEO and President

Ravi NarayanCo-founder and COO

Sridhar RamachandranCo-founder and CTO

NexTone Communications, Inc. www.nextone.comRockville, MD MD Employees: 20

Other Co-Investors

Safeguard Scientifics

Riggs Capital Partners

Blue Rock Capital

Mid-Atlantic Ventures

Core Capital


$200,000


$85,072

History

Osiris Therapeutics, Inc. beganoperations in December 1992 andis located in the Fells Point areaof Baltimore. The Company is pri-marily engaged in the researchand development of novel thera-peutics for regeneration and func-tional restoration of damaged ordiseased tissue.

Products

Osiris Therapeutics, Inc. is aproduct-focused, privately-heldbiotechnology company engagedin the research, development andcommercialization of adulthuman mesenchymal stem cellsfrom bone marrow. The currentproduct development focus is pri-marily for the regeneration ofbone marrow stroma, heart mus-cle, and meniscus that are dam-aged by injury, aging and/or dis-ease or disease intervention.Osiris scientists have proven thefeasibility of its hMSC approachin several large animal models.Osiris has developed a compre-hensive intellectual propertyportfolio from its early entry intothe adult stem cell field. Osiris is

developing hMSC products thatwill not require an immunologicalmatch between the adult bonemarrow donor and the patient.This approach represents true“off-the-shelf” or Universal Cellproducts. Process development iscurrently underway to manufac-ture hundreds to thousands ofdoses of final product from onesingle bone marrow aspirate.

Competition

Osiris believes that its powerfulproprietary technological plat-form combined with an ability tosupply commercial quantities ofits products in a cost effectivemanner will have an importantimpact on its competitive posi-tion. In the area of cord bloodtransplantation support, Osiris isunaware of any products for graftversus host disease (“GVHD”)prophylaxis, although there are avariety of marketed products fortreatment of GVHD. TheCompany is aware that in thearea of cardiac muscle repair, itfaces competition from academicresearch groups and public andprivate companies such asDiacrin, BioHeart and Myosix

(acquired by Genzyme). TheCompany believes the competi-tion in the area of meniscal repairis limited to only two biologicalproducts: Cryograft (Cryolife),and Collagen Meniscus Implant(ReGen Biologics’), refined frombovine Achilles tendon. Both havefailed to win broad marketacceptance.

Events

2001 - Osiris and HowmedicaOsteonics, a Stryker company,entered into a two-year pre-clini-cal research project to evaluatethe use of hMSCs with orthopedicimplants.

2002 - Osiris received two DARPAawards. One is a continuation of aprevious project for approximate-ly $800,000 and the second proj-ect was awarded for approximate-ly $2 million. Both are two yearprojects.

2002 - Osiris received an award of$ 2 million from NIST to fund astudy on regeneration of the cen-tral nervous system with mes-enchymal stem cells.

3332





History

Paratek Microwave, Inc. is aprivately held company estab-lished to develop, manufactureand commercialize ElectronicallyTunable RF (ETRFTM) compo-nents and DynamicallyReconfigurable WirelessNetworks (DRWiNTM) electroni-cally scanning antennas for thewireless telecommunicationsindustry. The technology wasoriginally developed by thefounders while working at theArmy Research Labs inAberdeen, MD.

Products

Currently, ETRFTM componentproducts include tunable filters,oscillators and delay lines operat-ing at frequencies between 30MHz and 40 GHz. DRWiNTMelectronically scanning antennasare focused on L-, X-, Ku- and Ka-band systems for terrestrial

deployment (PCS, MMDS &LMDS). Paratek invented a revo-lutionary new class of materials,ParascanTM, from which theirfast tuning, passive ETRFTMcomponents and DRWiNTM elec-tronically scanning antennas arefabricated. This would enablebroadband wireless communica-tions solutions to be made avail-able to everyone.

Competition

Paratek's core materials technol-ogy ParascanTM competes withferrite and MMIC basedapproaches, neither of whichhave Paratek's performance andcost advantage. No direct compe-tition currently exists for tunablecomponents or electronicallyscanning antennas withParatek's price point and per-formance characteristics.

Events

Paratek raised $17 million in newfinancing in late April 2002,bringing the company's total cap-italization to $53 million. Thecapital raised will be used to fur-ther enhance the commercializa-tion of Paratek's product portfo-lio.

Management Team

Ali PourtaheriCEO and President

Louise SenguptaFounder, CTO

Somnath SenguptaCo-founder and VP, GovernmentSales

Paratek Microwave www.paratek.comColumbia, MD MD Employees: 74

Other Co-Investors

Morganthaler Ventures

Novak Biddle Venture Partners

Investor AB

DB Capital Venture Partners

One Motorola Ventures


$575,000


$475,893

History

Panacos Pharmaceuticals Inc.originally incorporated in 1999 asa subsidiary of a public diagnosticcompany, Boston Biomedica,(NASDAQ:BBII). Panacos spunout to become an independent pri-vate company in November 2000.Panacos became a fully independ-ent company with the completionof the Series B round, in whichthe State participated.

Products

Panacos Pharmaceuticals isdeveloping the next generation ofantiviral drugs for the treatmentof Human ImmunodeficiencyVirus (HIV) infection and othermajor viral diseases. TheCompany’s proprietary discoverytechnologies focus on novel tar-gets in the virus life cycle, includ-ing the first and last steps of virusinfection. The first step in infec-tion is Virus Fusion to a humancell, an important new target fordrug development. Panacos has aleading position in this areabased on its scientists’ provenexpertise in fusion inhibitor dis-covery, combined with a powerfuldrug discovery technology to iden-

tify novel, orally available drugcandidates. The last step in thevirus life cycle is Budding of Virusfrom the infected cell, whichresults in the production of newviral particles that spread theinfection around the body.Inhibition of budding is a newapproach for antiviral drug devel-opment that is generating consid-erable interest within the indus-try. Panacos’ lead HIV inhibitor,PA-457, is the first in a new classof HIV drug candidates that actat this stage in the virus life cycle.With an innovative lead com-pound poised for clinical develop-ment, a powerful drug discoveryprogram and a managementteam with proven drug develop-ment experience, Panacos is wellpositioned to become a majorplayer in the antiviral arena.

Competition

While several companies aredeveloping new HIV drugs, mostof these are in the same classes ascurrently approved drugs(reverse transcriptase [RT] orprotease inhibitors) and cross-resistance often occurs with drugsthat have the same molecular tar-get. To overcome this problem a

small number of companiesincluding Panacos are developingdrugs with novel mechanisms ofaction. Panacos’ strategy is toidentify orally available, smallmolecule drug candidates withnovel mechanisms of action thatare active against the vast major-ity of HIV strains, including thoseresistant to approved drugs.These characteristics will putPanacos’ compounds in thestrongest competitive position.

Events

During Q4, 2001, the manage-ment team was completed withthe hire of Mr. Zelm as CFO andDr. Martin as Vice President,Drug Development. TheCompany has grown to a total of18 employees.

In December, 2001 Panacosmoved into its own facility -10,000 sq. ft. of laboratory andoffice space that will be sufficientfor the Company’s operationsover several years.

In January, 2002, Panacos closeda $5MM round of financing withAM Pappas and Ampersand.

Management Team

Dr. Graham AllawayPresident and CEO

Dr. Carl WildChief Scientific Officer

David Martin, Pharm. DVP, Drug Development

Donald A. ZelmChief Financial Officer

Panacos Pharmaceuticals, Inc. www.panacos.comGaithersburg, MD MD Employees: 18

Other Co-Investors

A.M. Pappas and Associates

Ampersand Ventures


$250,000


$250,000

3534


History

The company is developing asuite of application firewall soft-ware products, called AppFire,which secure high-value web andcorporate applications hosted onservers and deployed on desktops.The company will provide anenterprise-wide product suitethat is easy to deploy and man-age, has predefined policies forpopular applications, makes iteasy to adapt policies, plug-ins toexisting infrastructure, and sup-ports any Windows (only versionsthat are based on NT i.e. XP),UNIX and Linux application

Products

Platform Logic adds policy speci-fication and enforcement mecha-nisms to each target application,server or end user workstationand then actively monitors thatpolicy to ensure compliance withapplication-firewall policies.Predefined policy templates willbe available for applications, and

Platform Logic makes it easy toadapt policies for environmental-ly unique requirements. AppFirethen allows each application toexecute in its own confineddomain having access to only theresources that it needs to performits intended function in the cus-tomer’s environment and nothingmore. The domain paradigm isimplemented at the kernel leveland cannot be bypassed by anyapplication, including those thatare considered privileged by thehost operating system. The prod-uct will have extensive and scala-ble remote management, moni-toring, auditing, alarm mecha-nisms, and utilize popular enter-prise management consoles,which will make it suitable forwide deployment in any sizeenterprise.

Competition

The application security marketcan be segmented into two com-ponents, authorization securityand application security. The

companies that are emerging toprovide solutions that secure theway programs access each otherand the back-end systems theyare linked to are Sanctum,Entercept, and Okena.

Events

The company is on schedule tobegin beta testing in Q3 of thisyear. Platform Logic has verbalagreements to conduct beta test-ing at State Farm, JP MorganChase, Mercantile B&T, and theNSA.

Management Team

Peter BiancoChairman

TJ TajalliPresident and CEO

Steve RiceVP, Engineering

Platform Logic www.openforcesoftware.comGlenwood, MD MD Employees: 12

Other Co-Investors

Confidential


$350,000 pending


$350,000

ENTERPRISE INVESTMENT FUND OVERVIEWENTERPRISE INVESTMENT FUND OVERVIEW


History

The fundamental principles of theplatform technology were invent-ed by Dr. Irving Weinberg, wholeft the National Institutes ofHealth (NIH) in 1995 to found thecompany. PEM devices are smalland easy-to-use versions ofpositron emission tomography(“PET”) scanners.

Products

Patent protected, the PEMdevices employ biochemical imag-ing. With this approach, cancercells metabolize the radio-phar-maceuticals (i.e., the drugs usedwith PET scanners) faster thannormal tissue. The PEM devicerecognizes this difference in orderto provide clear images of cancerlocation and extent. TheCompany’s lead product is a note-book-sized, whole-breast PETscanner (“PEM scanner”) that fitsinto the existing installed base ofover twenty thousand x-ray mam-mography units. The PEM scan-ner will improve biopsy precisionand allow a surgeon to perform alumpectomy with the minimumpossible excision of normal tis-sue. The company is developing asimilar device for imaging pros-trate cancer and plans to developdevice applications for other typesof cancer.

Competition

Current imaging devices cannotprovide the physician with real-time information about the loca-tion and extent of cancer.

Events

PEM Technologies closed their$2.2 MM Series A round onDecember 6, 2001.

Management Team

Dr. Irving WeinbergFounder, President & CSO

Dr. Michael StraussCEO

Steve YarnellVP, Product Development

PEM Technologies, Inc. www.pemtechnologies.comBethesda, MD MD Employees: 7

Other Co-Investors

Maryland Angels Council


$250,000


$250,000

36 37

38 Maryland Department of Business & Economic Development



Management Team

Edwin AddisonChairman

Mark GaertnerPresident

Powerize.com (now Hoover’s) www.powerize.comLinthicum, MD Employees: 268

Other Co-Investors

Sevenson Environmental Services


$550,000


$324,205

History

Founded in January 1997 asKnowledgeLink, Powerize.comwas the leading provider of con-tent integration services forenterprise information portals(EIPs) and high-traffic Websites.Powerize.com’s unique technologyintegrates content from any num-ber of Internet- or intranet-basedinformation sources with its ownvast collection of 10,000+ newspa-pers, journals, and other sources.Hoover’s, a business informationservice, integrated this technolo-gy into their Website and hassince acquired Powerize.com.

Products

Through a patent-pending busi-ness model, Powerize.com is ableto offer its members – and thecustomers of its affiliates and

enterprise partners - free accessto premium content that hasnever before been available tothem for free in one place onthe Internet. Powerize.com’s net-work of high-traffic affiliateWebsites includes CNBC.com,Fox Marketwire, and NetscapeNetcenter, among others.Powerize.com also offers a soft-ware package that betters thestandard Web search engines cur-rently available.

Competition

Sites that integrate content mustrely on multiple partnerships andon proprietary search enginetechnologies to maintain a Webpresence. Numerous parties havedeveloped their own approachesto consolidating data into onesite.

Events

In July 2000 Hoovers.com, fromAustin, TX, completed its acquisi-tion of Powerize.com. Terms ofthe deal combined stock and cash.Under the terms, DBED’s entireequity position is no longer sub-ject to any lock up provisions.

39

Management Team

Richard ChipkinCEO

Michael Palfreyman, Ph.D.President

Psychiatric Genomics, Inc. www.psygenomics.comGaithersburg, MD MD Employees: 30

Other Co-Investors

Oxford Bioscience Partners



$500,000


$500,000

History

Psychiatric Genomics, Inc. (PGI)is a newly formed genomics-baseddrug discovery company focusedon providing breakthrough thera-pies for a wide variety of psychi-atric diseases through partner-ships with pharmaceutical com-panies and using an integratedplatform of genomics-based tech-nologies. Psychiatric diseases andother mental health disorders arethe second largest worldwidemarket with significant unmetmedical need and thus representa tremendous opportunity for thedevelopment of new therapeutics.

Products

PGI intends to produce innova-tive drugs for psychiatric disor-ders by employing a signature-based drug discovery process, asopposed to the traditional methodof target-based discovery. PGI’sstrategy is to screen multiple tar-

gets for drug discovery, combiningcell-based assays with normalhuman neuronal populationswith genomic gene expressionassays. Since human neurons arethe true substrate of psychiatricdiseases where one can recognizepossible therapuetic effects, theseassays assess the molecular sig-natures of a disease and enablePGI to rationally discover newtherapeutics for unknown mecha-nisms of action and yield break-throughs in treatment.

Competition

Pharmaceutical companies main-ly focus on the following CNS dis-orders (in descending order):depression, Alzheimer’s, anxiety,schizophrenia, substance abuse,and eating disorders. Other con-ditions such as Parkinson’s,epilepsy, bipolar disorder, behav-ioral (ADHD), and post-traumaticstress disorder, obtain relativelyless research funding. Still other

neuro-degenerative disorders(such as ALS) or neuro-develop-mental disorders (such as autism)are not well funded by large phar-maceutical companies.

Events

ReNeuron Holdings plc andPsychiatric Genomics Inc. haveannounced an alliance that willexploit neural stem cells as a drugdiscovery platform in the field ofmental disorders. ReNeuron hasgranted Psychiatric Genomics aworld-wide exclusive license touse specific cell lines within thefield of the agreement inexchange for an initial cash pay-ment and warrants overPsychiatric Genomic’s equitywhich become exercisable uponthe achievement of certain mile-stones.



History

RF Technologies Inc. is a private-ly held U.S. corporation, with awholly owned subsidiary inFinland. Production is in both theU.S. and in Finland. RFTechnologies serves the globalmarket, with sales facilities inNorth and South America,Europe, Australia and the PacificRim. Customers belong to thepulp & paper, mineral processing,industrial intermediates, chemi-cal, mining, power generation,and waste treatment industries.

Products

RF Technologies manufactures afull line of On/Off and Controlvalves for slurry and bulk solidshandling services. They solvevalve problems related to abra-sive, scaling, plugging and corro-sive services. The RF Valve, thelatest high performance valvedesign, was introduced to the

market in 1994. The RF Valvehas several unique features thatsolve problems associated withtraditional pinch valves. The RFValve patented design includesan elastomer tube that allows thetube to flex, not stretch, whenclosing, thus optimizing elas-tomeric resistance to wear ensur-ing longer life as well as highernumber of cycles. In addition, theelastomer tube contains a wearmonitoring system that providesan alert of tube wear prior to fail-ure.

Competition

RF competes with all types ofvalves offered in the marketplace,but its line of RF Valve andaiRFlex products can better with-stand the rigors of abrasive, cor-rosive, and scaling flow media.

Events

The State of Maryland invested$250,000 in the company’s SeriesA equity offering. However, atthis time, the Challenge invest-ment has not been converted intoshares. Since the company gener-ates in excess of $500,000 inannual revenues, the State doesreceive 2% royalties on revenuesabove the $500,000 level.

The company expanded its inter-national market to includeAustralia.

Management Team

Esko RiikonenChairman and CEO

Eric FeldmannPresident

Michael VermehrenVice President

RF Technologies, Inc. www.rfvalve.comJessup, MD MD Employees: 5

Other Co-Investors

Denis Seynhaeve

Calvert World Value Fund

GCI Ventures

Venture Management Consultants


$249,990


$270,612



History

Sequella, Inc., founded in 1997, isa vertically integrated biophar-maceutical company whose initialefforts are focused on diagnosisand treatment of TB. Sequella’stechnologies address unmetneeds of the marketplace to pro-vide diagnostics that accuratelydetect the presence of TB disease(latent or active), and therapeu-tics that can be efficiently andeffectively administered. Sequellawill work with global healthcareagencies to introduce its productsinto all markets. All five ofSequella’s front-line technologieshave been supported by one ormore grants, totaling more than$7.9 million.

Products

Transdermal Patch for Active TBSkin test that detects active TBdisease. Status: Phase I/II clini-cal trials complete. Phase IIIscheduled for Q4 2002/Q1 2003.Competitive Advantage: PPD

skin test is unable to distinguishbetween active TB disease andvaccination or exposure. ThePatch detects infectious patientsthat must be treated. Market: 2billion people are infected with M.Tuberculosis. US market is esti-mated at $330 million; globalmarket estimated at over $700million.

Bronx Box for AntibioticSusceptibility TestingA device to confirm TB diagnosisand determine drug sensitivity ofthe patient isolate. Status:Phase I clinical trials are expect-ed to begin 2002. CompetitiveAdvantage: Current tests take 2-6 weeks to determine drug resist-ance; this product can determineantibiotic sensitivity in less than2 days. Market: The estimatedglobal market for this device isover $300 million.

Other products in earlier stages ofdevelopment:

New chemical entity (NCE) fromEthambutol (EMB)

Therapeutic TB DNA Vaccine

Drug Compliance Monitor.

Competition

New product development for TBhas been at a virtual halt for thelast 30 years, with few exceptions.Molecular TB diagnostics wereintroduced in the 1990’s, but werenot registered as primary diag-nostics; they are used to confirmTB diagnosed by antiquated, 100-year old methods of sputumsmear or culture. No TB vaccineshave been introduced since theBCG vaccine.

Events

Tentative closing for Series Around to occur in Oct 2002.

Management Team

Carol Nacy, PhDFounder and CEO

Leo Einck, PhDFounder and President

Maria MarmarinosExecutive Vice President ofBusiness Development

Sequella, Inc. www.sequella.comRockville, MD MD Employees: 13

Other Co-Investors

Confidential


$500,000 pending


$500,000





History

Marty Roesch developed an intru-sion detection software productcalled Snort. The user communityhas helped to refine the opensource product over the last threeyears to the point where the soft-ware has become the foundationfor an enterprise version intendedfor larger corporate customers.

Products

The current product portfolio con-sists of elements for monitoringand analyzing network trafficand alerting when suspiciousactivity is detected. The NetworkSensor provides the most effectivenetwork intrusion detection sys-tem by enhancing the provenSnort technology and adding aneasy to use interface, optimizedhardware, powerful data analy-sis, policy management andforensic capabilities. TheManagement Console providescentralized management of

remote, distributed sensors. Theproducts can accommodate veryhigh data throughput.

Competition

This field is saturated with manyestablished and emerging compa-nies. Considering that Snort hasbeen well received by trade mag-azines and other sources that ratethe product versus commercialproducts, the enterprise versionsshould be even more robust.Internet Security Systems repre-sents the largest pure competitivethreat, with annual revenues ofapproximately $200 million.Many other intrusion detectionpackages are but one offeringfrom larger parent companies,such as Silent Runner fromRaytheon, Cisco’s own offering,and Network Associates’ versionof the Haystack software. Smallcompany threats include NFRSecurity, also located inMaryland.

Events

The company completed an initial$2 million round of funding inFebruary 2002 and has sinceclosed on an additional $5.5 mil-lion. The proceeds will supportsignificant staffing increases, par-ticularly in sales and marketing,as well as continued productresearch and development.

Management Team

Wayne JacksonCEO

Marty RoeschFounder and CTO

Sourcefire, Inc. www.sourcefire.comColumbia, MD MD Employees: 28

Other Co-Investors

Sierra Ventures

Inflection Point Ventures

Core Capital


$550,000


$550,000

History

S o l u t i o n Te c h n o l o g yInternational, Inc. (STI) is basedin Frederick County, MD and hasbeen in operation since November1996. STI commenced as a spe-cialized software developmentservice provider to partly funddesign and development of itsbusiness-to-business-to-con-sumer, e-commerce solution forthe insurance industry.

Products

STI is building Web-based scala-ble e-commerce solutions fordomestic and international insur-ance providers. SurSITE®(B2B2C) solution components tietraditionally separated front-endapplications and back-office lega-cy systems into cost reducingstraight-through-processingframework. SurSITE® turnkeysolutions have three components:a multi-year SurSITE® LicensingAgreement, a Help Desk, and aWeb-hosting Agreement.

Competition

In addition to in-house develop-ment, which is the preferredavenue by the top 200 insurancecompanies, there are a number ofconsulting firms and technologycompanies that are offering somecombination of the Internet, busi-ness-to-business and business-to-consumer application solutionsthat enable e-commerce. STI’smanagement team believes thatmost of these solution providerscurrently suffer from at least one,and frequently several of the fol-lowing common problems: (i) hav-ing a poor back office capabilityfor e-commerce, (ii) not providingthe full spectrum of Web-enabledmodules to support the entire lifecycle of insurance processing, (iii)not being scalable and (iv) highmaintenance overhead.

Events

In 2001 STI was awarded a con-tract to develop an enterprisesolution for the Swiss Pool forAviation Insurance, Zurich,Switzerland. The pool consists of21 insurance companies and 4reinsurance companies. This sys-tem is based on STI's SurSITE™Enterprise Platform.

The company established aSystem Development and WebHosting center in Frederick,Maryland.

Management Team

Dan JonsonPresident & CEO

Randle RodeheaverChief Financial Officer

Urban JonsonSVP Systems Dev. & Operations

Salvatore MastelloneSr. VP, Program Management

Solution Technology International www.stius.comFrederick, MD - McHenry, MD MD Employees: 9

Other Co-Investors

SQL Star International, Inc.

Key Management Group, Inc.


$350,000


$350,000

42 43





History

Operational support systems andservice order management aremajor issues for local exchangecarriers and enterprise cus-tomers. The company was startedto address these issues and keepthe customer from having todevelop this function fromscratch, or perform it manually.

Products

The Wisor Service ManagementSolution (SMS) Suite enhancesthe operational support systems(OSS) so that the processes forordering, provisioning, mainte-nance, repair, etc. are accuratelycoordinated and performed. TheSMS Suite is a solution for anytelecom service offering, usingany network technology. Largeenterprises and communicationscarriers can manage and controlservice by ensuring accurateordering and monitoring of serv-ice delivery across the entireorder fulfillment lifecycle.

Competition

Larger companies provide simi-lar products but are more UNIX-based, have significantly higherprice points, or require extensivecustomization or migration.

Events

Mark Mendes, formerly ChiefOperating Officer at Net2000Communications, assumed thePresident and CEO roles.Furthermore, the sales focus hasshifted from the traditional carri-ers and Competitive LocalExchange Carriers in favor ofsales to enterprise customers.

Management Team

Mark MendesPresident and CEO

Vaikunth GuptaChairman

Robert LongSVP, Sales and Marketing

Wisor Telecom www.wisor.comRockville, MD MD Employees: 35

Other Co-Investors

Keystone Venture Capital

Boston Ventures

Riggs Capital Partners

Megunticook Management

TDF - TelecommunicationsDevelopment Fund

Mid-Atlantic Venture Funds

Hickory Venture Group

Early Stage Enterprises

SAIC Venture Capital


$400,004


$785,187

History

Vapotherm’s high flow air devicewas originally constructed as amuch larger piece that wasapplied to animal markets. Thecurrent management realized itspotential for the human marketsand thus licensed the basic tech-nology and modified units for hos-pitals and other institutions. Theproduct also received FDA’s501(k) approval to market theproduct.

Products

Vapotherm, Inc. has developed ahigh flow therapy system thatcan deliver breathing gas at flowrates of 5-40 lpm via a variety ofpatient interfaces including nasalcannula. Before, Vapotherm,nasal cannula flow was limited toa maximum of 6-8 lpm due toextreme discomfort to the patientat high flows. The patentedVapotherm membrane technologydelivers molecular vapor withnearly 100% relative humidity atbody temperature. This warmthand humidity allows high flows tobe comfortably tolerated by thepatient. The Vapotherm 2000i is asafe, convenient, easy to use, andaffordable respiratory therapydevice that may reduce costs andimprove patient outcomes. Thewarm vapor has many clinicalapplications within today’shealthcare market including hos-pitals, long term care, physicianoffices, hospices, and home care.

Competition

Competitors, such as Respironics,produce lines of equipment thatinclude multiple humidifiers andmasks that can be interchanged,depending on the patient’s needs,effectively driving continuous airflows to the patient.

Events

The intial Challenge investmentof $100,000 converted into equityand an additional $150,000 wasadded through the EnterpriseInvestment Fund in July 2001.

Management Team

Robert Storey CEO and President

William NilandChairman and Director, NewBusiness Development

Vapotherm, Inc. www.vtherm.comAnnapolis, MD MD Employees: 10

Other Co-Investors

Dr. William Cirksena

Caradyne, Ltd.


$250,000


$250,000

4544

THE CHALLENGE INVESTMENT FUND


History

Henry Yaffe, founder of the com-pany, once worked with AnneArundel County firm Ciena. Hehas since developed a product lineof polarization mode dispersion(PMD) products for the opticalfiber market. PMD is a “blurring”of the light signal inside opticalfiber caused by the tendency ofthe two planes of light to travel atdiffering speeds due to stress onthe fiber or deviation from perfectcircularity. PMD becomes a sig-nificant problem in high-speedoptical networks, especially atspeeds of 10 Gigabits per secondor above. PMD also accumulatesover distance, making it a greaterchallenge over long optical links.

Products

Yafo Networks’ real-time adaptivesolutions enable optical systemvendors and service providers toovercome PMD, one of the mostdifficult problems facing thedeployment of high-speed opticalnetworks on today’s fiber plant.PMD is a critical stumbling blockfor the deployment of 10 Gigabitper second (Gbps) networks onlegacy fiber, and for the deploy-ment of 40 Gbps networks on vir-tually any fiber.

Competition

Companies such as Phaethon andNovaPhase represent more directcompetition. Companies such asBig Bear are applying algorithmsto the PMD issue as a substitutefor a physical compensator.

Events

The company recently raised $22million in a third round of financ-ing, bringing the cumulativeamount of funding to $61 million.

The Yafo40, Yafo Networks’ com-pensator for 40 Gigabit per sec-ond (Gbps) networks will undergotrials by Deutsche Telekom in atest of 40 Gbps optical transmis-sion systems. The tests willinclude a laboratory trial on atestbed with PMD generated byYafo’s higher-order emulator andtraditional PMD emulators, aswell as a field trial in the DT net-work at Nuremberg.

Management Team

Richard BackusCEO

Frank MoodyVP, Engineering

David KorotkinVP, Finance

Yafo Networks www.yafonet.comHanover, MD MD Employees: 36

Other Co-Investors

US Venture PartnersNew Enterprise Associates Boulder VenturesMellon VenturesWheatley PartnersWorldCom Venture Fund


$250,000


$250,000


Description

The Challenge Investment Program (CIP) is a seed program that was designed to invest modest dollars($50,000) in pure high technology start-up firms. The program was initiated as a grant program in fiscalyear 1989 and modified to an investment program as of January 1, 1994.

During fiscal year 1996, and with the increase of additional staff to the Investment Financing Group, theCIP became more dynamic, responding to the immediate demands of the start-up firms, as opposed to asemi-annual award system. The CIP requires that the firm retain its principal place of business withMaryland for a period of three years. It further adopted a criterion that a Challenge recipient firm shouldnominally have the potential to be an Enterprise Investment consideration or an attractive equity invest-ment within a two-year period.

All Challenge Investments are 10-year legal agreements having a royalty repayment schedule. Assumingan initial investment, the State is entitled to 2 percent of product sales in excess of $500,000 a year for amaximum repayment of three times the investment over the life of the agreement. The agreement alsoreflects that in the event that the Challenge recipient receives outside equity funding, the company mustrepay DBED 1 percent of the equity raised in excess of $500,000, again to a maximum repayment of threetimes the investment. Total exposure of the recipient’s repayment responsibility would be six times theinvestment over the life of the agreement.

The total of a Challenge Investment was increased during fiscal year 1997 to $100,000 maximum. Initially,$50,000 is invested in a seed stage firm based on the successful review of a submitted business plan followedby a verbal presentation by the principal(s). This investment is further increased in increments of $25,000based on the achievement of mutually accepted milestones, that would enhance the firm’s attractiveness tothe private sector investment community.

The repayment obligation would also reflect these incremental increases in the CIP investment. It has nowbeen adopted, that for an unusually compelling situation, an additional $50,000 be invested in a Challengerecipient with the approval of the Challenge Advisory Committee, with a maximum of $150,000 invested inany one recipient. This increase in funding was initiated to further ‘bridge’ the gap between the ‘seed stage’funding program (Challenge) and the equity program (Enterprise); hence truly fulfilling a financial conti-nuity regarding DBED’s investment strategy. Total exposure of the recipient’s repayment responsibilitywould subsequently be $900,000, or three times the maximum investment amount applied to royalties onrevenue and outside equity financing.

The repayment obligation was further modified that in the event that the recipient received an outside orprivate sector equity investment during the effective term of the agreement, DBED would reserve the optionto convert the indebtedness of the Challenge recipient to equity. The value of this equity investment wouldbe on the same terms and conditions as determined by the initial outside or private sector investor. It is alsothe intent to do this equity conversion along with an additional investment through the Enterprise Fund,hence fulfilling DBED’s goal of offering a continuum for an early stage investment initiative.

46 47





Performance

The Challenge Investment Program has made over 160 investments since fiscal year 1993, resulting in atotal investment of over $7.9 million. Due to the high risks of start-up financing, an impressive 75 percentof the recipient firms are still in business and a modest number of firms have achieved revenues resultingin repayments. Since a more rigorous initial investment criteria have been placed on Challenge recipients,18 firms have qualified as investments for the Enterprise Investment Fund.

To highlight the effectiveness of the Challenge Program, three companies, started with minimum invest-ments of $50,000, graduated to the Enterprise Investment Fund and were eventually merged into larger,publicly traded companies. Today the companies employ over 510 individuals and have a combined marketcapitalization in excess of $290,000,000.

The other 13 graduated to the Enterprise Investment Fund currently employ over 250 highly compensatedindividuals and have a cumulative post valuation of over $100,000,000.

Note: On the following pages, companies in bold indicate graduation to the Enterprise Investment Fund.

48

COMPANY

DATEENTERED

INTOPROGRAM

AMOUNTINVESTED DESCRIPTION STATUS

Agentsmithwww.asmithinc.com

Agentsmith was founded in mid 2001. Its mission is toprovide software and services that manage and ana-lyze revenues, forecast demand, segment customersand set prices for sellers of advertising in the mediaindustry. Agentsmith currently offers the first two prod-ucts in its suite. The first product, Analyzer, integratesall revenue related data, improving a manager’s abili-ty to make pricing and inventory decisions. TheMaximizer, a station-policy driven tool that optimizesand simplifies inventory management, reduces thecost of selling and managing spots. The third product,Rate Manager, is a powerful price management solu-tion that accurately predicts the optimum pricing for amedia outlet’s inventory. All current products areoffered through an ASP.

Active

$ 125,000

$300,000EnterpriseInvestment

Pending

11/26/01

A.L. Tech Biomedicalwww.altechnologies.com

A.L.Tech Biomedical, Inc. is an international biomed-ical research and development company dedicated todeveloping innovative technologies and products thatwill improve diagnosis and treatment of patients suf-fering from genetic-based diseases including can-cers. The Company expects to become the first-to-market and sole-provider of a revolutionary techniqueto test for cancer using a patent protected technologycalled Solution Hybridization (SH). Using ten exclu-sive licenses to the patent protected SolutionHybridization (SH) technique, ALTech will enable asignificantly more accurate and sensitive cancerdetection. ALTech recently successfully completedSBIR Phase I grant with the Dept of Defense.

Active$ 50,0003/12/01

49

AMBA Biosciences, LLC

AMBA Biosciences, based in Gaithersburg, Md.,develops gene transfer, stem cell, and human cellmodification technologies. AMBA is focused primarilyon the development of gene-based and cell-basedtherapies, the discovery of novel cytokines, cytokineproduction, and toxicology testing. AMBA hasdeveloped platform gene transfer and stem celltechnologies, including a functional bone marrowmicroenvironment capable of ex-vivo maintenanceand amplification of human stem cells. These stemcells retain their ability to differentiate into differentmyeloid lineages, such as dendritic cells andmacrophages. The company has used thesedifferentiated cells to produce high levels of alphainterferon. In addition, AMBA's dendritic celltechnology can be used in cancer and AIDS drugdevelopment and in the identification of clinicallyrelevant cytokines.

Subsidiary ofClonexpress, Inc.$ 50,0006/25/97

CHALLENGE INVESTMENT FUND OVERVIEW


COMPANY

DATEENTERED

INTOPROGRAM


America Tomorrowwww.america-tomorrow.com

America Tomorrow, Inc. offers consulting and onlineservices in the use of multimedia andtelecommunications technologies in learning.Education and corporate clients receive computer-based information, communications, training andapplications. The company's products and servicesare delivered via the World Wide Web on the Internet,and include: America Tomorrow, an upbeat informa-tion service containing reports on the good thingshappening in education and training; EdCentral, an"electronic meeting place" where educationprofessionals can keep up to date with educationnews and explore other education-related informationresources; and customized online and Webconsulting.

Active$ 50,0007/15/95

Antaeus Groupwww.anteusgroup.com

The company sells the SSM 150, a device that grindsand sterilizes medical waste so that the end productcan actually be deposited with regular trash. Thewaste is superheated and ground before fluids andsolids are separated by a filter. Although the "box" ispriced around $200,000, it will reduce the costs ofhauling medical waste by a factor of 30.

Graduated toEnterprise

Investment Fund$ 50,0005/11/93



COMPANY

DATEENTERED

INTOPROGRAM


bConvergent, Inc.www.bConvergent.net

bConvergent's unique technology solutions, providedto small offices nationwide as web-hosted applica-tions, provide customers with all the functionality of anintegrated voice-mail, e-mail and wireless paging sys-tem, without having to purchase or maintain tradition-al phone and computer system hardware that oftencosts tens of thousands of dollars. This has resultedin significant savings for small offices, not to mentionthe advantages of having a single integrated, mainte-nance-free communication system for everythingfrom wireless text pages to voicemail, has led tobConvergent's rapid ascendancy on the national levelas an "industry creator."

Active$ 150,0003/9/01

BioArray Technologies, Inc.

Patent pending on mass spectrometry proteomicsdifferential display technology, teamed with JohnsHopkins, an Australian organization, eV corporation(detection), and Bio-Rad Corporation (equipment).Additional patents pending of protein labeling andseparation on proteomics chip. Inquiries for DNAmicroarray custom synthesis/services/partnershipsgrow.

Active$ 75,0001/5/99

Audit Systems Companywww.auditsystems.com

Audit Systems patented EASY 1 DEX system tracksmerchandise sold and money collected from vendingmachines. ASC’s Navigator Software is an ASP/sequel server based package that helps manage theentire operations of vending companies, so thatcustomers can visit their vending machines over theinternet. Vending machines are remotely monitoredwith ASC’s EASYNET Wireless, which is a privatepacket switching network to be installed throughoutthe country.

Active$ 50,0007/15/95

Biological Mimetics, Inc.

Biological Mimetics, Inc. is a vaccine developmentcompany whose focus is on developing vaccines,diagnostics, and therapeutics against a broad array ofhuman and nonhuman pathogens.

Active$ 50,0003/31/97

Artifact Softwarewww.artifactsoftware.com

Artifact is targeting the growing market for softwaredevelopment applications that empower companiesto effectively manage and utilize software artifacts.Software artifacts are any technical asset, such asspecifications, design models, source code, compo-nents, and documentation, deemed necessary forimplementing or updating an application. By leverag-ing existing software artifacts, organizations canbetter allocate and utilize development resources andmore effectively control the spiraling costs and poorvisibility of development projects.



Brassica ProtectionProducts, LLCwww.brassica.com

BPP was created by scientists at Johns HopkinsUniversity School of Medicine to ensure that productsmade from plants that provide the anticancer phyto-chemical sulforaphane (SGS(tm)) are developed andmade available to the public under rigorous and stan-dardized scientific conditions following strict foodsafety standards. BPP markets BroccoSprouts®fresh broccoli spouts in supermarkets in the U.S.,Japan and New Zealand and recently launched intoColorado, Brassica Teas, containing measured levelsof SGS.

Active$ 50,00010/3/97

BioMat Scienceswww.biomatsciences.com

BioMat Sciences develops and commercializes pro-prietary materials technologies for the oral healthmarketplace. It is poised to launch Primagen®, anadhesive that strongly bonds materials to teeth. Itsother technologies include an advanced composite toreplace mercury-containing amalgam, and a systemfor rapidly manufacturing high-performance materialsfor tooth reconstruction.

Active$ 150,0004/30/01



COMPANY

DATEENTERED

INTOPROGRAM


Business Deviceswww.businessdevices.com

The company’s solutions enable corporations to mon-itor real time events in the supply chain from devicessuch as bar code readers, RFID sensors, satellitelocation sensors, process instrumentation and inven-tory tracking units. Linking these devices with enter-prise applications such as ERP, Supply Chain andCRM provides immediate, programmatic insight intothe location, condition, status and security of invento-ry, products, assets, and orders. Lowering the cost,time to deploy, and critical skills required to implementthis capability provides companies with new levels ofcompetitive advantage, thus enabling streamlinedsupply chain business processes and new levels ofcustomer service.

Active$ 50,0007/22/02



Cera Products, Inc.www.ceralyte.com

Established in 1993 in Jessup, Maryland, this woman-owned and operated manufacturer produces a line ofadvanced rehydration and vaccine delivery productsthat are sold both in the United States and in CentralAmerica and Europe. Its key product, CeraLyte, isproven more effective in reducing symptoms of diar-rhea and dehydration as it restores fluid, electrolyteand cell balance, to shorten length of illness and helpshorten hospitalizations. All the Company's productshave been developed and tested with the assistanceof medical experts at major medical centers, includingphysicians at Johns Hopkins, and are registered onthe National Supply System and available from dis-tributors nationally as well as from the companydirectly.

Active$ 100,0004/2/96

COMPANY

DATEENTERED

INTOPROGRAM


Cylex, Inc.(formerly BiotechnologyTransfer)www.cylex.net



Chitin Works(formerly New EarthServices Inc.)

The company's facility will use biochemical technolo-gy from UMBI Center for Agricultural Biotechnology(CAB) to produce a special grade of chitosan fromchitin, the substance that gives crab shells structureand strength. A Maryland composting company and aLouisiana oil and gas production firm have teamed upto convert crab shells to a special grade of chitosanfor oil and gas field drilling. The facility has the capac-ity to store 25 tons of crab wastes at a time. The plantcan handle 3,000 tons of crab waste per year. Thecompany sold out its entire production in the first twoyears and projects the same for this year even withincreased production. The product has now beenproven to perform exceptionally well in the field in theinitial application. There are twelve other potentialapplications in the oil and gas drilling industry. Thecompany, through Venture Chemicals, received SBIRfunding to research specific enzymes to modify largemolecules or polymers of chitosan.

Active$ 150,0008/26/96

Chesapeake PERLwww.chesapeakeperl.com

Chesapeake PERL offers an improved process ofrecombinant (genetically engineered) proteinmanufacturing. Current processes are highly specific- one process yields one product. Any change in rawmaterials, process conditions, or product can disruptthe entire operation and require much additional R&D.Chesapeake PERL's manufacturing procedure, how-ever, can make virtually any protein product withoutdisrupting the process and without requiring furtherR&D. The system is easily customized to producealmost any recombinant protein, automati-cally, at high yield and low cost, with superiorquality and biological activity. The company wants toproduce recombinant proteins using cabbage lar-vae or other living hosts. The color-tagged lar-vae will act as mini-bioreactors via the insertion of aninsect virus into the host or larvae. The low cost pro-duction allows Chesapeake PERL to enter marketswhere the high cost of recombinant protein produc-tion is prohibitive.



D-Fusion, Inc.www.d-fusion.net

D-Fusion is a leading provider of web mining infra-structure tools. Its AlertWorks workstation providesinformation analysts and researchers a powerfulworkstation for managing near real-time updates fromcontent anywhere on the web. AlertWorks allows aninformation analyst to subscribe to customizedupdates from any web page found on the Internet.AlertWorks returns the focus to the analysis of contentand removes the inefficiencies in monitoring and look-ing for content updates. D-Fusion’s AlertStream plat-form provides web content discovery and monitoringservices through a powerful and scalable platform.Web mining applications in a variety of sectors takeadvantage of AlertStream for rapid application devel-opment and scalability. Both its tools and platform arein use in a number of leading industry sectors.

Active$ 100,00011/21/00

The company has developed a diagnostic tool, calledin vitro CMI, which integrates magnetic separation ofblood cells with bioluminescent detection for themeasurement of immune system function. Cylex’simmunodiagnostic kit measures the level of T cell acti-vation in blood. It has a major application in monitor-ing AIDS in humans but also has applications in thedisease management of cancer, autoimmunity, andother infectious diseases. The company believes thein vitro CMI assay provides information about cellularimmune response in a rapidly processed, easy to useform, which is more amenable to monitoring a dis-ease’s course than the antibody measurementsalone. The product’s advantage is that results aredelivered quickly since current testing proceduresavailable take a week to perform.



COMPANY

DATEENTERED

INTOPROGRAM


Epitaxial Technologies

In its fully equipped clean room facility, EpitaxialTechnologies manufactures compound semiconduc-tors and value-added wafer products for the wirelessand optoelectronic industries. Epitaxial Technologiesoffers a low cost foundry service as well as value-added semiconductor materials and wafer products.The company also provides a capability to grow high-ly challenging material structures on GaAs, InP, GaSband InAs.

Active$ 150,0003/5/97

EVA Corporation

E.V.A. Corporation is a startup medical device com-pany dedicated to designing and building devicesintended to be used in the endovascular treatment ofabdominal aortic aneurysms. The Company is cur-rently in the research and development phase.

Active$ 50,0003/11/99

EKA Systemswww.ekasystems.com

Eka Systems’ mission is to be the premier globalprovider of reliable, low-cost, internet-enabled,embedded wireless networks for monitoring, control,and automation applications. Towards this goal, Ekahas developed a distributed wireless network technol-ogy platform, EkaNet™ that is uniquely positioned toprofit from these rapidly expanding markets. EkaSystems is unique because it can vertically integratethis technology into customer-focused solutionswhere EkaNetTM provides a distinct competitiveadvantage. The solutions are comprised of both Eka’sgrowing line of products and products and servicesfrom our strategic partners.

Active$ 100,00011/15/01



DVIP Multimedia, Inc.www.dvipmm.com

The company, recently relocated from a midwesternstate, is working to provide real-time image resolutionsolutions in a number of different industry verticals.

Active$ 100,0007/1/02

COMPANY

DATEENTERED

INTOPROGRAM


Harta Instuments, Inc.www.hartacorporation.com

Harta Instruments is a multi-disciplined, full service,ISO 9001 compliant, electronics engineering compa-ny located in Gaithersburg, Maryland. Using the com-pany’s patented technologies, they have designed,manufactured, and marketed their line of MicroplateLuminometers and Luminometer Reference Plates.Harta’s products are available as OEM. HartaInstruments is also a contract manufacturer of bio-medical instruments and other electronics devices.

Active$ 150,0004/2/96

HT Medical Systems, Inc.www.immersion.com

HTMS designs, manufactures, and markets comput-er-based medical simulators that allow medical per-sonnel to practice medical procedures without placingpatients at risk. HTMS has progressed from offering asingle product for a single market segment to engag-ing eight market segments with three different simu-lation product portfolios, actively sold in NorthAmerica, Europe, Asia and Australia. Each of theproduct lines consists of an ever-expanding menu ofsoftware modules that take advantage of a commontactile feedback interface device. CathSim allowsmedical professionals to practice a wide range ofintravenous catheterization procedures. The PreOpEndoscopy simulator prepares professionals to per-form various flexible endoscopic procedures such asbronchoscopy and sigmoidoscopy. The PreOpEndovascular product allows physicians to practiceangioplasty and other endovascular techniquesthrough the manipulation of simulated guide wires,sheaths, catheters, pacemaker leads, and otherdevices.

Graduated intoEnterprise


GetIntegrated.comwww.getintegrated.com

GetIntegrated provides proactive human resourcesolutions to small and medium-sized businesses inevery phase of the business cycle, to help them moreeffectively attract, retain, and manage human capital.By streamlining their administrative processes andusing one of two, unique solutions-- iComp and iFlex-- we allow managers/employers to focus on the corecompetencies and strategic challenges of theirbusinesses -- the revenue - generating aspects.GetIntegrated's HR professionals deliver value toclients via onsite, call center and online support andcommunication. GetIntegrated began as a bricks-and-mortar HR outsourcing business in 1998, andhas now web-enabled all of its services, so clientsand their employees will have access to personal HRdata 24x7x365 through customized, corporate por-tals.

Active$ 100,0009/11/00



COMPANY

DATEENTERED

INTOPROGRAM


IncenSoftwww.incensoft.com

IncenSoft offers a full-spectrum of incentive compen-sation and business performance management soft-ware designed to motivate employees, boost morale,enhance employee loyalty and improve productivity.Its flagship product, IncentPower Enterprise, can beimplemented throughout an entire organization or atthe divisional level.

Active$ 150,0006/5/00

Infinity Pharmaceuticals

Infinity Pharmaceuticals, Inc. is a functional genomicscompany that applies protemic technologies to drugtarget validation and drug discovery.The company willcommercialize the target-validation processes, thediscovered drug targets and ultimately, thera-peutic candidates. The business model that the com-pany will follow is that of a biotechnology companythat leverages discoveries from platform technologyin order to later become a biopharmaceutical compa-ny. The mission of the company is to discover newprotein and antibody therapeutics for cancer by usingtarget-driven interaction protemics technology andcoupling it with state-of-the-art high throughput drugscreening.

Active$ 50,00010/12/01



Intellivax International,Inc.www.idbiomedical.com

Intellivax produces intranasal and oral sub-unitvaccines against shigellosis (bacterial dysentery).These vaccines are WHO and US military prioritiesthat have successfully completed safety andimmunogenicity Phase I clinical trials in volunteers.The successful completion of three trials using twodistinct products serve as proof of principals thatIntellivax vaccine delivery systems elicit mucosal andserum immune responses in people. Advancedclinical trials to demonstrate protection of volunteersagainst shigellosis after challenge with virulentshigella and large scale Phase 2 safety andimmunogenicity studies are planned at several clin-ical testing sites in Baltimore, Maryland and greaterMontreal.



5756

COMPANY

DATEENTERED

INTOPROGRAM


Intradigmwww.intradigm.net

Intradigm Corporation is focused on exploiting its pro-prietary target discovery and validation technologiesto develop new therapeutics for cancer, arthritis andother critical care indications. Intradigm’s approach isunique in that it rapidly discovers and discriminatesthe proteins that control disease as distinguishedfrom those that only correlate with disease. Disease-control validation of targets enables drug develop-ment based on target efficacy reducing costs andimproving the success rate. Intradigm does this byexploiting its leading expertise in gene delivery in ani-mals to over-express protein targets and/or to silencethem with RNAi directly in animal models of disease.Intradigm’s method skips slow and expensive valida-tion steps by operating directly in the active diseasetissues rapidly revealing which proteins provide effi-cacy.



Intralytixwww.intralytix.com

Intralytix was founded in 1998 to address growingproblems in the control and treatment of diseasecausing bacteria. These problems are presently com-pounded by public and governmental reluctance toemploy new and potentially hazardous chemicalagents or solutions born of recombinant technology.Intralytix is using its core bacteriophage technology todevelop novel natural products for use in food pro-cessing, environmental clean up, sanitation, con-sumer products, and problems of antibiotic resistancein human therapy. In June 2002 Intralytix received anExperimental Use Permit from the US EnvironmentalProtection Agency for the first in a line of productsdesigned to prevent bacterial contamination of foodand food processing plants.

Active$ 100,0004/18/01

Internet Cargo Services,LLC

Company provides electronic ordering services forbusinesses and consumers. The E::CARGO softwareenables the E::PEN to identify purchases by cus-tomers who scan catalogs and other publications.Ordering information is then received from the penafter it has been placed in a docking station. Ordersare then dispersed to the respective merchants.



Ipsilwww.ipsil.com

Ipsil, Incorporated has developed and patented anextremely compact and high performance (line-speed) implementation of a TCP/IP controller. Thisdevice integrates a TCP/IP stack along with severalcommonly used "application layer" services such as aweb server, DHCP, FTP, and TELNET. This allows forthe direct connection of sensors, actuators, and othersuch devices to the Internet without the need for anyadditional processor/controller/network interfaces.Ipsil is marketing to industrial control, automation andembedded systems manufacturers. The company iscurrently seeking its Series A round of financing.

Active$ 150,00011/8/01



COMPANY

DATEENTERED

INTOPROGRAM


LearnScape Corporationwww.learnscape.com

LearnScape is a profitable education technologycompany that provides technology based training pro-grams for adult learners in companies, job-trainingprograms, welfare to work programs, community col-leges, and correctional institutions. LearnScape pro-vides the skillsCOMPASS family of reading, math andwork habits programs to prepare individuals to enterthe workplace or to advance on-the-job.SkillsCOMPASS offers 163 contextual, workplace ori-ented lessons with English and Spanish audio in LANand Internet versions to allow training anywhere andanytime. Xerox Corporation, Ocean SprayCorporation and Aerostructures Corporation aresome of LearnScapes customers.

Active$ 150,00010/3/97

Knowledge Link, LLC(Powerize.com)www.hoovers.com

Powerize.com is the leading provider of contentintegration services for enterprise information portals(EIPs) and high-traffic Web sites. Offers free, sub-scription, and fee-based information services.Revenues are also derived from royalties for sub-scriptions to other publications. Powerize.com’sunique technology integrates content from any num-ber of Internet- or intranet-based information sourceswith its own vast collection of 10,000+ newspapers,journals, and other sources. By also providing robustbilling and customer-management services,Powerize.com has become the "instant informationinfrastructure" for a growing number of high-trafficWebsites and enterprise portals. Powerize.com’sown fast-growing Website is a showcase for the serv-ices that the company offers to its affiliates and busi-ness partners. Powerize.com offers its 500,000+members free, unlimited access to content from morethan 2,400 of its premium sources.





Maxion Technologieswww.maxion.com

Maxion Technologies, Inc. develops semiconductorlasers specifically designed to enable reliable, broad-band, wireless optical communications; the companyalso develops lasers supporting products for chemicalsensing systems and industrial process controls.Based on research commercialized from two institu-tions, the lasers are able to transmit over free spacewhile preventing components from overheating.

Active$ 100,0004/11/02

COMPANY

DATEENTERED

INTOPROGRAM


Minerva Pharmaceuticalswww.minervapharmaceuticals.com

Minerva Pharmaceuticals is a biopharmaceuticalproduct development company dedicated to detectingand eliminating cancer before clinical symptomsoccur. Minerva’s patented intellectual property is thediscovery that some components of the DNA replicat-ing machinery function differently and exist in uniqueforms in cancer cells and alterations from the normalto the cancer-specific form is the first signal of cancer.The Company is currently developing a family of earlyand accurate laboratory diagnostic products. In addi-tion, an understanding of how the switch occursshould lead to the identification of new targets for thedevelopment of cancer specific therapeutic and pro-phylactic drugs based on Minerva’s technology.

Active$ 50,0004/26/99

MicroEnergy Systems(formerly TCS, Inc.)www.microenergysystems.com

MicroEnergy Systems was founded in 1988. Thecompany relies on combustion of activated carbon forDOD and chemical/biological warfare disposal. Itimplements microcoal technology that can be used inmodular and portable power plants, plus operatesmore efficiently. Certain military agencies cannotprocess conventional coal to dispose of chemicalweapons, thus the one application. Some utility plantsare already employing this technology to produceelectricity. Additionally, it has a manufacturingrelationship with Beitzel Corporation of Grantsville,MD.

Active$ 50,0006/26/96

Metastatin Pharmaceuticalswww.metastatin.com

Metastatin Pharmaceuticals is a biopharmaceuticalresearch and development company in the field ofcancer, specializing in the development of new ther-apuetic agents for controlling cancer metastasis andangiogenesis. The Company's initial efforts arefocused on the human protein "Uteroglobin" (UG),which research suggests may have potentcytostatic anti-metastatic and anti-angiogenic activity.Research has shown that recominant humanUteroglobin very markedly prevents cancer cells frominvading through their local environment -- which isone of the first steps in the sequence of events lead-ing to the spread of cancer, known as metastasis.Furthermore, research has shown that as prostatecells change from early into later stages of cancer,there is a progressive loss of Uteroglobin and itspotential protective action against metastasis. Thus,Metastatin intends to develop a set of diagnosticand/or prognostic tests based upon measurements ofthe amount of Uteroglobin in cells and tissues, whichmay aid in the prediction of tumor aggressivenessand metastatic potential.

Active$ 150,00011/13/00



COMPANY

DATEENTERED

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NeuroTrophic ResearchCorp.

Neurotrophic Research Corp. is developing ther-apeutic neurotrophic factors and cell therapy for thetreatment of Parkinson's disease.

Moved toCanada

$ 75,0002/27/97

New Hope Pharmaceuticals

New Hope Pharmaceuticals, Inc. (NHP) has devel-oped certain cell-based response technologies thatidentify which, of the FDA approved anti-cancerdrugs, are likely to work on each individual patient ---permitting pre-treatment, response-based, personal-ization of therapy. It will allow drug discovery at thecellular level rather than at the molecular level.Finally, since new diagnostic categories are beingdefined on the basis of differential drug response,individual genetics and the company’s proprietarygene expression mapping, new knowledge and tar-get gene information is being created on which NHPand its partners can base their design of new drugs.

Active$ 150,00010/23/00

Neuronautics, Inc.

Specializes in the diagnosis and treatment ofAlzheimer's disease and related neurodegenerativedisorders of the elderly. The company believes thatthe presence of tau protein in the formation ofneurofibrillary tangles indicates some progressiontowards Alzheimer's. As a result, it hopes to market adrug screening product and eventually find an agentthat will slow down or suppress the Alzheimer'sdisease altogether.

Moved to Illinois

$ 50,0008/13/98



Neoreach, Inc.www.neoreach.com

Neoreach, Inc., a subsidary of the publicly tradedMobilepro Corp. (OTC BB MOBL), is an advancedcommunications semiconductor company focused on3G modems ASICs and RF CMOS. Neoreach’s lead-ing edge designs have given it a distinct competitiveadvantage in the 3G-modem marketplace. As the new3G networks are rolled out globally, Neoreach is posi-tioned to be both the leading modem supplier tohandset manufacturers and supplier of Pico BaseStation modems.

Active$ 100,0003/2/01

Netta Systemswww.nettasystems.com

Netta Systems is developing a true, multi-level secu-rity solution. This proprietary solution has the poten-tial to provide information security throughout anentire system and its associated networks. This com-plex software architecture, combines mandatoryaccess control, encryption and a proprietary technol-ogy that work closely with the operating system toprovide the trust not inherent to a computer system.

Active$ 50,00010/19/01

6160

COMPANY

DATEENTERED

INTOPROGRAM


OncoImmunin, Inc.

The company was founded in 1994. The Companyhas been issued three U.S. patents on its proprietarydesign for protease inhibitors and fluorogenicsubstrates. Three PCT applications have now enteredinto national phases in Japan and Europe.

Active$ 50,0007/15/95

Paratek Microwavewww.paratek.com

Currently, Electronically Tunable RF (ETRF) com-ponent products include tunable filters, phase shiftersand delay lines operating at frequencies between 30MHz and 35 GHz. Electronically Steered Antenna(ESA) system work is focused on L-, X-, Ku- and Ka-band systems for terrestrial deployment (PCS, MMDS& LMDS). Paratek invented a revolutionarynew class of materials, ParascanTM, from which ourfast tuning, passive ETRF components andelectronically steered antennas are fabricated. Thiswould enable broadband wireless communicationssolutions to be made available to everyone.



NuBase Systems, Inc. Provides a complete IDMS solution for the PCenvironment.

Active$ 50,0006/17/97

NexToneCommunications, Inc.(formerly Netoids, Inc.)www.nextone.com


Investment Fund

$ 50,00010/7/98

Norris Electric OpticalSystems

The company developes a device that can beinstalled in airplane cockpits and can assist pilots dur-ing landings, especially in adverse weather conditionssuch as fog. The company also produces a runwayincursion device, placed on the side of a runway toavoid potential collisions on the ground between air-craft.

Active$ 50,0003/14/95

NexTone Communications is a leading provider ofVoice over Internet Protocol (VolP) infrastructure forservice providers and carriers. NexTone’s solution,known as the Virtual Central Office, enables theseproviders and carriers to interconnect their voice net-works in the most simple and cost effective way,allowing them to bridge between existing (H.323 stan-dards) networks and emerging next generation net-works that employ Session Initiation Protocol (SIP)-based softswitches, media gateways and applicationservers. Their main product, the NexToneMultiprotocol Signaling Switch, unifies the variouscore elements of the network, such as softswitchesand application servers.



COMPANY

DATEENTERED

INTOPROGRAM




Plan It!, LLC GIS for economic development

Minor activity;company moved to

Ohio, but hassome work per-formed in MD.

$ 50,00010/3/97

62 63

Phoenix S&Twww.phoenix-st.com

Phoenix S&T, Inc. (PST) is an early-stage startupdeveloping microscale, low-cost and disposable poly-mer tools for protein profiling, a major sector of theproteomics market. The Company’s eight patentapplications cover microfluidic architecture andmicroinjection molding techniques. With this platform,the Company creates microfluidic arrays for the massspectrometry and multidimensional separation analy-ses of proteins that represent a colossal step changefrom existing tools. The Company’s first product, themass spectrometer use-once disposable interface,enables the mass spectrometer to produce moredefinitive results than existing technology by reducingbackground and improving ion-forming efficiency.This device can be retrofitted to any existing massspectrometers of different makes. The mid-term prod-uct is a multidimensional separation device that aimsto replace the cumbersome and often irreproducible2-D gel separation for proteins.

Active$ 150,0002/11/02

Platform Logicwww.platformlogic.com

The company is developing a suite of application fire-wall software products, called AppFire, which securehigh-value web and corporate applications hosted onservers and deployed on desktops. The company willprovide an enterprise-wide product suite that is easyto deploy and manage, has predefined policies forpopular applications, makes it easy to adapt policies,plugs-into existing infrastructure, and supports anyWindows (only versions that are based on NT i.e. XP),UNIX and Linux application.



Plethora Technologywww.plethoratech.com

The company provides innovative remote access andcollaboration software. Secure Virtual Workspace,Plethora's flagship product, delivers an integratedenterprise security architecture (firewall and VPN)with built in user productivity features such as pres-ence-based text and voice conferencing, file accessand exchange, and real-time collaboration.

Active$ 100,0002/7/02

Projected RealityCorporation

Projected Reality Corporation was established tocommercialize patented technology owned by NASAGoddard and licensed to the Company. The patent isfor large flat panel displays using cathode ray tech-nology which the company intends to market to air-ports, sports complexes, etc.

Active$ 150,0001/10/00

COMPANY

DATEENTERED

INTOPROGRAM


RF Technologies, Inc.

RF Technologies manufactures a full line of On/Offand Control pinch valves for slurry and bulk solidshandling services. They solve valve problems relatedto abrasive, scaling, plugging and corrosive services.



Sitek Research Lab

Study of genetic toxicology. SITEK ResearchLaboratories has been providing high quality testingservices for safety evaluation of chemicals andpharmaceuticals for regulatory submissions for morethan fifteen years. SITEK is a fully compliant GLPlaboratory having JMAFF certification and AAALACaccredited animal facilities. Their study reports aresubmitted to regulatory agencies worldwide and havenever had a study rejected.

Active$ 50,0002/27/97

Smart Surfaces, LLC

The company has developed a coating for ships andpower plants that will effectively ward off zebramussels and like creatures from adhering to theirsurfaces.

Active$ 50,0004/28/00

Royer Biomedical (formerly Buford Biomedical, Inc.)

Royer currently has one product on the market,Silvadex SR, a paste used to treat hoof injuries inhorses, and will soon be releasing its new equinedewormer, Iverdex Equine. The company also has adeep pipeline of products focused on its proprietarycontrolled release technology, Matrix III, which is aresorbable inorganic/biopolymer composite used fordrug delivery.

Active$ 100,0004/24/97

Reactive NanoTechnologieswww.reactivenanotech.com

The company has developed a reactive multi-layer foilthat once ignited, provides enough heat to melt solderor braze without damaging the components to bejoined. This joining method is unique in that the foilprovides all the energy needed to melt the solder orbraze, eliminating the need to heat the componentswith a furnace, torch, or laser. This simplifies andspeeds the joining process, in many cases cutting thecost of joints in half or possibly more. Additionally,damage is prevented to temperature-sensitive com-ponents such as microelectronic devices or polymers,because heating is localized to the interface beingjoined. This technology covers new applications in theareas of metal-to-ceramic joining and the fabricationof laminated magnetic materials. RNT closed its $2million Series A round of financing in July 2002.

Active$ 100,0006/26/02


COMPANY

DATEENTERED

INTOPROGRAM




20/20 GeneSystemswww.2020gene.com

20/20 GeneSystems’ product is a proprietary layeredproteomics technology. 20/20’s technique is amongthe first for simultaneously analyzing the quantities,"on/off" status, and locations of an entire pathway ofproteins from a single tissue sample at the same time.20/20 began selling its first product in September2001 after extensive beta testing at over 50 inde-pendent biomedical laboratories throughout the U.S.Now sold as a biomedical research tool, the companyhas identified needed applications of this platform indiagnostics, drug development, toxicology, bio-terror-ism defense, forensics, agriculture and food testing.20/20 has begun using its technology in collaborationwith a pharmaceutical company to identify differentialproteomes of responders vs. non-responders of theirdrug candidate.

Active$ 100,0004/16/02

6564


Solution TechnologyInternational, Inc.www.stius.com

STI is involved in the building and development of aWeb-based process infrastructure for insuranceproviders that ties traditionally separated front-endapplications and back-office legacy systems intocost-reducing straight-through-processing modules.Termed DirectINSURE by STI, these modules helpconsumers understand and purchase insuranceproducts and services as well as manage them afterpurchase. Initial focus will be on aviation and generalautomotive segments.



Tri-Kor Alloys (formerlyValkor, LLC)

Tri-Kor develops and commercializes novel, ultra-highstrength aluminum alloys. The alloys are innovatedand then sold to OEM's in the sports equipment andtransportation industries. Alloys are sold in varioussemi-finished product forms as well as in fabricatedcomponents.

Active$ 75,0004/13/98

Vapotherm, Inc.www.vtherm.com

Vapotherm, Inc. has developed a high flow therapysystem that can deliver breathing gas at flow rates of5-40 lpm via a variety of patient interfaces includingnasal cannula. Before Vapotherm, nasal cannula flowwas limited to a maximum of 6-8 lpm due to extremediscomfort to the patient at high flows. The patentedVapotherm membrane technology delivers molecularvapor with nearly 100% relative humidity at body tem-perature. This warmth and humidity allows high flowsto be comfortably tolerated by the patient. TheVapotherm 2000i is a safe, convenient, easy to use,and affordable respiratory therapy device that mayreduce costs and improve patient outcomes. Thewarm vapor has many clinical applications withintoday’s healthcare market including hospitals, longterm care, physician offices, hospices, and homecare.



COMPANY

DATEENTERED

INTOPROGRAM


Votara (Formerly SoftwareSolutions Group)www.votara.com

VOTARA is automating business processes usingSpeech Recognition technology. It has deliveredthese platforms to companies such as Verizon andUtz Quality Foods. The company is currently in itsgrowth phase with a focus on the food services verti-cal. VOTARA is currently delivering the platform tomedium sized and multi-billion a year companies.

Active$ 150,0009/20/99

Wireless Internet SolutionsCorporationwww.winternetsolutions.com

The company provides an end-to end- wireless fieldservice solution that provides a highly functional, fullyconfigurable and completely integrated wireless appli-cation platform to keep mobile workers connected inreal-time. This allows for closed loop scheduling,instant dispatch with acknowledgement and remoteorder completion. Dynamic digital mapping informa-tion is also integrated. This enables real time or his-torical geospatial functionality such as the ability tosee the geographic deployment of a workforce, dis-tances, travel times and routing.

Active$ 50,0003/2/01

Wisor Telecom, LLCwww.wisor.com

Operational support systems compatibility is a majorissue as carriers and enterprise customers competingin the Bell territories try to interpret data resultingfrom telephone and data traffic originating and termi-nating at different points. The company was formed toaddress this issue and keep firms from having todevelop this function from scratch. Previous experi-ence base in technology and in marketing product forsale. The Validator software product beefs up theoperational support systems (OSS) so that the report-ing for billing, ordering, maintenance, repair, etc. canbe accurately reported through existing Bell networksand enterprise customers.



Wisdom Builderwww.wisdombuilder.com

The Wisdom Builder product is intended to processthrough data culled from multiple sources and convertit into a well packaged and useful set of information.Data can originate from the Internet, through otheronline sources, and from a repository maintained byWisdom Builder. Such an intelligent product can helpto describe a company's target market, for instance.Wisdom Builder can be run off various computerplatforms and employs query capabilities and otherfeatures that allow a user or enterprise to effectivelyexploit information for competitive advantage. Onetargeted market is law enforcement.

Revenuesbelow

threshold$ 75,00010/3/97

Ware On Earth(formerly HyperspaceCommunications, Inc.)

Software to enable communications between PC andPC, bypassing the server.

Active$ 100,0002/27/98

OTHER INITIATIVES


ENTERPRISE VCLP FUND


History

DBED’s initial foray into investing as a limited partner began in fiscal year 1995 when two $500,000investments were made in Anthem Capital LLC and Churchill Investment Partners. These privatefunds emphasized investing in early stage, high technology companies and offered to invest in compa-nies located in Maryland as part of their agreement with DBED. This complemented the EnterpriseInvestment Fund’s existing initiatives, improved the flow of information between public and privatesectors and provided opportunities to co-invest.

During fiscal year 1998, a portion of DBED was spun off to create a minority private sector fund knownas the Meridian Management Group (MMG). DBED provided a $5 million investment to MMG to investin minority businesses and in economically challenged portions of the state.

On the heels of the two major exits in Gene Logic and Visual Networks (which yielded a windfall of $45million in 1999), the state set aside certain monies for the Maryland Technology DevelopmentCorporation (TEDCO), “E-Initiatives” (see next page) and investments in additional private venturecapital firms. Four Maryland firms were identified for investment (Boulder Ventures, Grotech Partners,Inflection Point Ventures and Steve Walker & Associates) and each firm received a commitment of $1.5million.

As a result of the TEDCO legislation, an eighth venture capital firm, Toucan Capital, received acommitment of $4 million to primarily invest in the life sciences and biotechnology industries. Toucanissued a capital call in August 2001 resulting in a initial funding of $1 million.

Performance

Performance in all funds to date has been severely impacted by the economic downturn of 2001.Virtually every firm took overly pessimistic write downs on assets resulting in negative internal rates ofreturn as of calendar year end 2001. Noted exceptions to this are those firms that made little or noinvestments in 2000 and 2001. The table below has been prepared outlining the various limited part-nerships and their performance as of December 31, 2001.

Company Fiscal Investment Fair Market Focus TotalYear ($) Value ($) Fund Size

Anthem Capital

CIP Capital, LP

Boulder Ventures

Grotech Partners V, LP

Steve Walker & Associates

Inflection Point Ventures

Toucan Capital

Total

1995

1995

1998

2000

2000

2000

2002

475,433

500,000

1,387,500

1,158,615

900,000

282,166

1,000,000

5,703,714

1,131,150

841,650

883,657

611,697

533,216

282,166

1,000,000

5,283,536

IT

General

Optics/Biotech

General

IT

IT

Biotech/IT

$ 42MM

$ 20MM

$ 85MM

$ 300MM

$ 40MM

$ 56MM

$ 108MM

Technology Development Corporation (TEDCO)

During the 1998 legislative session the General Assembly passed House Bill 7 (Chapter 661, Acts of 1998)establishing the Maryland Science, Engineering, and Technology Development Corporation, now knownas the Maryland Technology Development Corporation, or TEDCO. This organization was formed toassist in transferring to the private sector and commercializing the results and products of scientificresearch and development conducted by colleges and universities of the State of Maryland; assist in thecommercialization of technology developed in the private sector; and foster the commercialization ofresearch and development to create and sustain businesses throughout all regions of the State.

No funds were provided at the time the corporation was created; however, TEDCO received a grant of$642,000 from the Enterprise Fund to provide start-up funding for staff and operations during fiscal year2000. The fiscal year 2001 budget provided a total of $7 million from the Enterprise Fund, including a$2.0 million operating grant to TEDCO.

The fiscal 2001 budget also provided $5.0 million from the Enterprise Fund to establish a capital fundfor investments identified by TEDCO. TEDCO has established two programs using the DBEDEnterprise Funds: a Technology Development Investment Fund utilizing $4 million of the appropriatedmonies to promote the commercialization of technologies developed primarily in partnership with feder-al research laboratories and Maryland universities, through seed stage investment; and a UniversityTechnology Transfer Support Program to establish a revolving loan program that provides direct supportof university technology support projects, using the remaining $1 million. TEDCO received severalproposals from qualified venture capital firms to manage the seed stage investment and subsequentlyselected Toucan Capital, from Bethesda, MD, as the firm of choice. Toucan is receiving additional match-ing funds through the Small Business Investment Companies (SBIC) program and is committing at least$12 million to Maryland-based companies.

E-Initiatives

Fiscal 2001 budget amendment number 001-01 appropriated $9.8 million from the Enterprise Fund formarketing of technology-based industries and initiation of the E-Maryland and E-Marketing initiativesestablished by Chapter 5, Acts of 2000. An “Internet Project Plan” was drafted for the Secretary of Budgetand Management and the Office for Information Technology.

66 67

Department of Business & Economic Development

Robert L. Ehrlich, Jr., Governor

Michael S. Steele, Lt. Governor

Aris Melissaratos, Secretary

Vernon J. Thompson, Deputy Secretary

217 East Redwood StreetBaltimore, Maryland 21202

1-888-CHOOSE-MDwww.choosemaryland.org

venture capital funds annual report july 2002msa.maryland.gov/megafile/msa/speccol/sc5300/sc... ·...

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