QNVB Report 2011 - In Wisconsin

Act 255:Early Stage BusinessInvestment Program2012 Annual ReportJuly 2012Prepared by Chris Schiffner,Technology Investment Manager, WEDC,Division of Entrepreneurship and Innovationpage12012QNBV_newdesign0712.indd 17/20/12 3:58 PM

job statisticsCertified businesses provide annual reports with information on jobs, averagewages, grants received and financing received for the annual period. In 2010 thestate invested approximately an $8,174 per job. For 2010 we leveraged 23:1 in totaldebt and equity financing to investment tax credits. The per-job investment in 2011was $10,045. For 2011 we leveraged 10:1 in total debt and equity refinancing toinvestment tax credits.Creating jobsJob GrowthParticipatingYearJobsCompanies1Job Growth, Participating Companies150011257503750Participating Companiespage4Avg.SalaryFederalGrantsFinancing2011 138 1,112 $76,500 $33.2M $118.7 M2010 125 930 $83,000 $29.4M $175.3M2009 106 697 $77,000 $8.1M $95.2M2008 89 545 $79,000 $5.4M $96.6M2007 76 395 NA NA $70.2M2006 60 303 NA NA $44.3M2005 40 262 NA NA $36.8M(1) Note in 2011 WEDC changed the way Jobs are calculated. Prior to 2011 Jobs were total Full Time Positionsregardless of state of employment. The 2011 Numbers show FT and PT Jobs based in WI. Note that companiesthat exit the program, including those that no longer require equity investment, no longer report job and salaryinformation to us. Therefore, the chart above reflects conservative measures of the jobs impacted by QNBVinvestments.2005 2006 2007 2008 2009 2010 2011Jobs“These are critical firststeps for early stageinnovations that thenlead to larger angel andinstitutional investmentsneeded to grow companies,create jobs, support thelocal economy and driverevenue for the State.”Carmine J. Durham,President and CEO,ZurexPharma, Inc.2012QNBV_newdesign0712.indd 47/20/12 3:58 PM

“The Act 255 creditsmake it much easierto put a highgrowth startup dealtogether.”John Torinus,Fund Manager &Angel Investorcredits issuedThe amount of Angel and Early Stage Seed Investment Tax Credits available each year islimited. Since the inception of the program in 2005, the annual limits have been increasedmultiple times including in 2011 when they were increased to $20 million in Angel TaxCredits and $20.5 million in Early Stage Seed Credits annually. There is also an additional$250,000 in credits available to nanotechnology companies under both the Angel and EarlyStage Seed Tax Credit programs.In 2007, WEDC was granted the ability to carry forward unused tax credits into the following taxperiod. Additionally in 2009 WEDC was granted the ability to transfer the unused tax creditsfor use under the JOBS tax credit program. WEDC transferred $3.1 million in unused tax creditsto the JOBS tax credit program in 2009 and $6.8 million in unused credits in 2010.Angel Tax Credit2005$000s2006$000s2007$000s2008$000s2009$000s2010$000s2011$000s2012$000sInitial CreditAllocation$3,000 $3,000 $3,000 $5,500 $5,500 $6,500 $20,000 $20,000Rollover, PreviousYear- - - $950 $3,356 $3,064 $3,194 $16,646Total Available $3,000 $3,000 $3,000 $6,450 $8,856 $9,565 $23,195 $36,646Credits Verified $2,990 $2,418 $2,050 $3,093 $5,474 $4,980 $6,548 -Balance Available $10 $582 $950 $3,356 $3,382 $4,585 $16,646 $36,646Allocated to JTC - - - - $317 $1,391 - -Available forRollover- - $950 $3,356 $3,065 $3,194 $16,646 $36,646Early Stage Seed Credit (Venture Fund Credit)2005$000s2006$000s2007$000s2008$000s2009$000s2010$000s2011$000s2012$000sInitial CreditAllocation$3,500 $3,500 $3,500 $6,000 $6,000 $8,000 $20,500 $20,500Rollover, Prev.Year- - - $900 $2,616 $2,616 $2,703 $18,581Total Available $3,500 $3,500 $3,500 $6,900 $8,616 $10,616 $23,203 $39,081Credits Verified $126 $1,423 $2,600 $4,284 $3,226 $2,467 $4,622 -Balance Available $3,374 $2,077 $900 $2,616 $5,390 $8,149 $18,581 $39,081Allocated to theJTCAvailable forRollover- - - - $2,774 $5,446 - -- - $900 $2,616 $2,616 $2,703 $18,581 $39,081“Why would we even consider investing out of state when Wisconsinis willing to be our 25% partner on deals we feel are worthy?”Thomas M. Shannon, Shamrock Partners, Angel Investor and Serial Entrepreneurpage52012QNBV_newdesign0712.indd 57/20/12 3:58 PM

2011 summaryWisconsin continued to see strong investment activity in 2011 in the industrysectors of biotech and information technology. Total financing leveraged isdown from a high of $175 million in 2010. However, the 2010 numbers arelargely driven by two companies that closed large venture capital-backed equityrounds in 2010. These two companies account for over $85 million in equity in2010.Investment by IndustryIndustryTypeNumber ofInvestments(Individual)QualifiedInvestment(Millions)AverageInvestmentBiotech 227 $17.6 $77,533Health Tech 22 $2.9 $131,818Information Technology 278 $16.7 $60,072Nanotech 2 $0.1 $50,000Energy 3 $0.1 $33,333Other 245 $6.3 $25,714Total 777 $43.7 $56,242qualified newbusiness ventureinvestments50Companies receiving qualifyinginvestments in 2011$118,748,808Total financing leveraged in 2011For a list of businesses that received tax credits in 2011, see Appendix B.Industry Investment, 2011 vs. Annual Average (Millions)Biotech$2.90Health Tech$4.40$16.70IT$8.100 5 10 15 20$17.60$9.40“Entrepreneurship isreally important to all ofus. I think it’s the mostimportant economic enginethat there is in America.”Tim Keane,managing director,Golden Angel InvestorsNanotechEnergy$0.10$0.20$0.10$1.20Other$6.30$3.102011 Historical Averagepage62012QNBV_newdesign0712.indd 67/20/12 3:58 PM

program detailsAdministered by WEDC, the QNBV program provides tax credits to eligible investors who make cash equity investments in qualified earlystagebusinesses. If all eligibility requirements are met, investors receive a tax credit of up to 25 percent of the value of the investment madein the company. The investments incented by this program provide the capital necessary for emerging growth companies to develop newproducts and technologies, move products to market and provide high quality jobs in Wisconsin. A company eligible for certification mustmeet the following criteria:▪▪It is headquartered in Wisconsin.▪▪At least 51% of the employees are based in this state.▪▪It has fewer than 100 employees.▪▪It has been in operation for not more than 10 consecutive years.▪▪It has the potential for increasing jobs in this state, or increasing capital investment in this state.▪▪It is engaged in, or has committed to engage in, innovation in this state.▪▪It is not primarily engaged in real estate development; insurance; banking; lending; lobbying; political consulting; professional servicesprovided by attorneys, accountants, business consultants, physicians or health care consultants; wholesale or retail trade; leisure; hospitality;transportation; or construction, except construction of power production plants that derive energy from a renewable resource.▪▪At the time it is first certified, it has not received aggregate private equity investment in cash of more than $10 million.For a list of certified businesses, see Appendix A.WEDC provides the same tax benefits to certified venture funds investing in QNBV companies. Prior to receiving the tax credit, venture fundsare required to be certified by WEDC. WEDC considers the following when certifying venture funds:▪▪The applicant’s experience in the following:• Managing venture capital funds• Investing in high growth, early stage businesses▪▪The past performance of the following:• Investment funds managed by the applicant• Businesses assisted by the applicant▪▪The portion of the investment fund’s capital that the fund manager expects to invest in qualified new business ventures▪▪Geographic distribution▪▪Focus on targeted industries or target group members▪▪Ability to access follow−on funding▪▪Services provided▪▪Commitment to Wisconsin▪▪Administrative and management feesOn April 5, 2012, there were several changes made to the program. Those changes are as follows:▪▪Certification criteria requiring that the certified company be less than 10 years old, have not received private equity investment of more than$10 million, and that the company has fewer than 100 employees applies only at the time of initial certification and not during subsequentrecertification periods.▪▪Allows for WEDC to impose a financial penalty on any certified business that applies for investor tax credits and relocates out of state within3 years. A business is considered relocated if more than 51% of its employees, payroll, or headquarters activities are located outside ofWisconsin. The penalty is calculated as follows:page72012QNBV_newdesign0712.indd 77/20/12 3:58 PM

Company Name Contact Location TelephoneCertificationDateImaging Biometrics Michael Schmainda Elm Grove 262-439-8252 4/11/12InControl Medical, LLC Buzz Peddicord Brookfield (262) 373-0422 6/18/12Innosoft Thomas Culver Cleveland (920) 207-4977 11/9/11Invenra Inc Roland Green Madison (608) 358-4273 1/25/12Invivo Sciences, LLC Ayla Annac Madison (608) 713-0149 11/1/05ioGenetics, LLC Jane Homan Madison 608/310-9540 3/22/05Kenergy, Inc. Stephen Denker Thiensville (414) 405-5800 4/18/06Keystone Insights, LLC David Noshay Menomonee 262-437-7389 4/25/12FallsLiveyearbook, Inc. Todd DeNoyer Neenah 920/277-4049 6/1/10Lucigen Corporation David A. Mead Middleton 608/831-9011 1/19/05Lumen Healthcare, Inc. Brian Curry Pewaukee 414-232-1325 12/14/09Marvel Medtech, LLC Raymond D. Harter Madison 608/310-9560 2/7/05Medical Cyberworlds, Inc. Frederick William Kron Verona 608/829-0049 8/20/07Medical Engineering Innovations, Inc. James Will Madison 608/310-9556 1/12/11MedTrak Steve Hushek Milwaukee (414) 731-7150 11/4/11Microscopy Innovations, LLC Mark Nelson Marshfield 715/387-8897 11/22/10Montage Talent, Inc. Michael J. Bonk Delafield 262/264-0662 4/19/10Morgan Aircraft, LLC Mark O'Halloran Oostburg 312-865-1000 7/2/07Murfie, Inc. Matthew Younkle Madison 608/234-5015 8/2/10NanoMedex Pharmaceuticals, Inc. David L. Cooper Middleton (608) 826-7367 7/22/08NCD Technologies Bob Shimmel Madison (608) 622-7996 -NeuroGenomeX, Inc. Jacqueline Doeler Madison 608/335-7329 8/31/09NeuWave Medical, Inc. Laura King Madison 608/213-4553 3/21/06New River Technologies, LLC Ted Kanavas Grafton 262/391-6834 1/19/11Northstar Medical Radioisotopes, LLC George P. Messina Madison 608-316-6980 4/1/12NovaScan LLC Bill Gregory Milwaukee 262/893-7165 6/28/05NovaShield, Inc. Praveen Sinha Madison 608/833-2610 2/17/06Odyne Systems, LLC Joseph Dalum Waukesha 262-544-8405 11/1/10Okanjo Partners, Inc. Henk Vlietstra Milwaukee (414) 810-1760 9/9/11oneEvent Technologies Inc. Shawn Guse Mount Horeb (608) 320-0675 12/22/11Pabst Engineering & Manufacturing, Inc. Kirby Pabst Onalaska 608/781-0861 9/2/08PDM Solar, Inc. David Baker Wausau 715-574-4920 7/24/06PerBlue, Inc. Justin Beck Waunakee 608/712-9449 7/28/10Perscitus Biosciences, LLC James Thomas Madison 608/213-9646 5/28/08Phoenix Nuclear Labs Greg Piefer Middleton 608/826-4267 6/3/08Phyllotech, LLC Ryan W. Shepherd Madison 510/209-1367 4/6/10Pilot Training Solutions LLC Chris Johnson Middleton (563) 249-4315 11/23/11Pinpoint Softwares, Inc. Andrew Hoeft Onalaska 608-797-4435 2/2/12PlantPharm Biomed, Ltd. Bob Britt Delavan 262/728-8815 2/20/08Platypus Technologies, LLC Barbara A. Israel Madison 608/237-1270 1/19/05ProCertus BioPharm, Inc. Todd Argall Madison 608/469-5371 1/16/07Procubed, LLC Jim Maerzke Kenosha 262/654-5602 11/8/10Promentis Pharmaceuticals, Inc. Daniel G. Lawton Milwaukee 262/302-9039 11/3/08Quincy Bioscience Holding Company, Inc. Michael Beaman Madison 877/677-8652 3/30/05Quintessence Biosciences, Inc. Ralph Kauten Madison 608/441-2951 1/28/05Quter Todd Wray Neenah (920) 886-8275 -Rapid Diagnostek, Inc. Harry Norris Hudson 651/604-4204 10/29/07Reciprocal Labs Corporation David Van Sickle Madison (608) 251-0470 6/9/11Renewegy, LLC Jeff Ehlers Oshkosh 877-424-4632X201 5/23/11page10appendix a, continued2012QNBV_newdesign0712.indd 107/20/12 3:58 PM

appendix a, continuedCompany Name Contact Location TelephoneCertificationDateRenwig Custom, LLC Brennon Garthwait Whitewater 920-675-6758 4/19/12Riva Solutions, LLC Mohammed Hashim-Waris Madison 608/222-3344 3/8/10Semba Biosciences, Inc. Robert Mierendorf Madison 608/441-8009 6/30/05Shamrock Energy Corporation Charles Gibson Oshkosh 920/851-2312 11/22/10Shindigs Brendon Thomas Milwaukee 414-469-7437 2/22/12SHINE Medical Technologies, Inc. Greg Piefer Middleton (608) 831-0814 12/13/10Shoutlet, Inc. Jason Weaver Madison 608/833-0088 10/27/10Silatronix Inc Mark Zager Madison 414/840-9666 3/12/08Sirkpath, Inc. Mark D. Westfall Neenah 920/428-0929 3/1/05Smoke-Break, LLC Brett Roth Milwaukee 800/372-8332 4/5/11SnowShoeFood, Inc. Claus Moberg Madison (608) 807-7569 12/28/11SoLoMo Identity, LLC Liz Eversoll Madison (608) 220-1900 4/11/12Somna Therapeutics Nick Maris Mequon 262-388-1186 4/16/12Sonoplot, Inc. Glen Donald Middleton 608/824-9311 1/23/08SpeechTails, Inc Amy Reno Elm Grove (414) 659-5482 6/8/12Stablebody Technologies, LLC Joseph Firca Madison 608/698-8445 7/22/10Stealth Therapeutics, Inc. Brad Glenn Madison 920/429-9006 11/27/07Stemina Biomarker Discovery, Inc. Elizabeth L. R. Donley Madison 608-831-3592 4/16/07StrandVision, LLC Mike Strand Menomonie 715/833-9501 11/22/05Stratatech CorporationLynn Allen-Hoffmann, Madison 608/441-2750 3/26/07Ph.D,StudyBlue, Inc. Rebecca Splitt Madison (608) 441-1149 4/15/09Super D Ted Schwarzrock Eau Claire 612-710-1489 3/6/12Surgical Site Solutions, Inc. James Kregel Sheboygan 920/494-4786 7/6/10Swallow Solutions, LLC JoAnne Robbins Madison 608/231-3868 8/18/08Tascet, Inc. Larry Aubol Madison 608-442-8888 9/20/05TermSync, Inc. Mark Wilson Madison 608/316-8380 8/2/10TrafficCast International, Inc. Jing (Connie) Li Madison 608/268-3911 6/20/06Transthermal LLC Troy Livingston Conover 708-370-2700 -U.S. Pride Products, LLC Charles VanDusartz Hammond 715-246-9237 8/9/10U.S. Trail Maps, Inc. Dean Forss Wausau 715/ 845-777 x3 6/28/05Vatrix Medical, Inc. Matthew Ogle Madison 952/224-5797 11/23/09Vibetech, Inc. Jeff Leismer Sheboygan 920/287-1930 4/1/10Virent, Inc. Lee Edwards Madison 608/663-0228 1/7/05Wellsys, LLC Richard Brown Madison 608-663-7100 11/8/10WholeTrees, LLC Amelia Baxter Stoddard (608) 452-3894 6/18/12Xela Innovation, LLC Todd Muderlak Glendale 414/272-3983 12/14/09Xolve, Inc. John Biondi Middleton (608) 203-8362 8/16/10Zurex Pharma, Inc. Carmine J. Durham Middleton (608) 203-9090 7/12/10Zurex PharmAgra, LLC Carmine J Durham Middleton (608) 203-9090 3/8/11page112012QNBV_newdesign0712.indd 117/20/12 3:58 PM

appendix bThe following businesses received investments in 2011 that qualified under WEDC’s Early Stage Business Investment Programunder Wisconsin Statutes § 238.15. Issuance of these certificates solely means that WEDC has found that the investment meetsthe qualifications specified in statute and that the qualified investor or qualified fund’s investor is being awarded tax credits underWEDC’s Investment Tax Credit Program.Certified Company Tax Credit Angel Investment Amount (1) ESS Investment Amount (2)Alice.com $721,521 $2,886,083AquaMOST, LLC $686,693 $2,746,773Aurizon Ultrasonics $12,500 $50,000Aurora Spectral $158,125 $632,500Aver Informatics, Inc. $218,750 $875,000Brazen Careerist, Inc. $111,250 $445,000Cellular Dynamics International $1,000,000 $1,086,668 $2,913,332Cytophil, Inc. $87,750 $351,000Dimensional Technology $25,964 $103,856Door 6, Inc. $15,625 $62,500Engineered Propulsion $135,673 $542,690Esker Technologies, LLC $87,500 $350,000Eso-Technologies, Inc. $41,448 $165,792FluGen Inc. $714,072 $465,100 $2,391,189Frozen Codebase LLC $95,000 $40,000 $340,000HarQen, Inc. $309,800 $717,915 $521,284HSM, LLC $50,200 $200,800Imagination Trends $106,250 $425,000Liveyearbook, Inc. $346,250 $1,385,000Montage Talent, Inc. $741,128 $1,164,510 $1,800,000Morgan Aircraft, LLC $29,167 $116,667Nanomedex Pharmaceuticals $1,004 $4,016NeoClone Biotechnology $12,500 $50,000Networked Insights $294,615 $543,461 $635,000NeuWave Medical, Inc. $878,763 $2,270,522 $1,244,528New River Technologies $39,460 $157,840NovaScan LLC $75,000 $300,000NovaShield, Inc. $102,500 $410,000Okanjo Partners, Inc. $375,000 $1,500,000PDM Solar, Inc. $16,725 $66,900ProCertus BioPharm, $192,500 $70,000 $700,000Quincy Bioscience $59,750 $239,000page12Wisconsin Angel Tax Credit, List of Credits Issued2012QNBV_newdesign0712.indd 127/20/12 3:58 PM

appendix b continuedCertified Company Tax Credit Angel Investment Amount (1) ESS Investment Amount (2)Quintessence $275,584 $1,102,334Quter, Inc. $2,500 $10,000Rapid Diagnostek, Inc. $25,000 $100,000Ratio Inc. $12,500 $50,000Reciprocal Labs Corporation $167,500 $670,000SHINE Medical $1,320,919 $1,383,676 $3,900,000Shoutlet, Inc. $125,000 $500,000Silatronix, Inc. $539,503 $1,157,997 $1,000,016Stealth Therapeutics $90,625 $362,500Stemina Biomarker $62,500 $250,000Stratatech Corporation $31,250 $125,000Surgical Site Solutions, $14,000 $56,000Tascet, Inc. $208,000 $832,000TermSync, Inc. $51,250 $205,000TrafficCast International, $297,866 $150,000 $1,041,465Xolve, Inc. $11,250 $45,000Zurex Pharma, Inc. $67,500 $270,000Zurex PharmAgra, LLC $131,250 $50,000 $475,000(1) Investment amounts do not reflect the total amount invested in the company, only the amount received in tax credits.(2) ESS Tax Credits – Early Stage Seed Investment Tax Credit commonly called the Venture Fund Creditspage132012QNBV_newdesign0712.indd 137/20/12 3:58 PM

Governor Scott Walker chairs theWEDC Board of Directors composedof state legislators, departmental secretariesand private business owners.The 13-member Board of Directorsprovides WEDC with strategic leadershipand operational oversight representingstatewide public and privateeconomic development interests.OfficersChairScott WalkerGovernorState of WisconsinVice-ChairDan AriensPresident and CEOAriens CompanyTreasurerScott KlugManaging Director of Public AffairsFoley and Lardnerwedc.org | 608 210 6701 | 201 W. Washington Ave, Madison, WI 53703SecretaryLisa MauerPresidentTool Service CorporationMembersRep. Peter Barca64th Assembly DistrictRaymond DregerCEO/PresidentSeeds and Stuff Market Inc.Corey HozeSenior Vice PresidentAssociated Banc-Corp.Sen. Julie Lassa24th Senate DistrictPaul RadspinnerPresident and Chief Executive OfficerFluGen, Inc.C. Thomas SylkeOwner and PrincipalSylke Law Offices, LLCDon WeberFounder and CEOLogistics Health IncRep. Mary Williams87th Assembly DistrictLearn more about the WEDC’s Divison ofEntrepreneurship and Innovation at wedc.orgSen. Rich Zipperer33rd Senate District2012QNBV_newdesign0712.indd 147/20/12 3:58 PM