Devices:

Devices are technology products or components that utilize proprietary technology to create valuable capabilities or services. Whether used for consumer or business products, telecommunications, networking, or medical devices, the company must have broad intellectual property protection, strong product development strategies, and a value proposition that clearly shows a path toward rapid customer adoption.

Privaris, one of the newest Fund III investments, has developed a handheld wireless biometric authentication device to access physical and logical networks. The tipping point of biometric adoption has occurred with laptops, doors and even point of sale applications using fingerprint recognition. Privaris offers a highly secure device that integrates physical, logical and point of sale capabilities into one small device with "match on card" technology and eliminates the need and associated risks of centralized fingerprint databases. The devices easily integrate with existing infrastructure, such as building access proximity card readers, allowing a significant layer of security to be added literally overnight while facilitating complex security management needs. Exceptional industry partnerships and a robust patent portfolio promise a bright future for Privaris.

Medical devices are those intended for use in the diagnosis or treatment of disease and/or other conditions. In this sector, River Cities' contrarian strategy favors less regulated devices (those requiring 510K approval vs. the PMA process) with extremely capital efficient business models.

The Firm will continue to be highly selective of medical technology companies setting new standards in clinical excellence without the burden of lengthy regulatory processes. River Cities' interest in devices requiring pre-market approval only comes in the later years of a company's development cycle.

Suros Surgical Systems, a Fund III portfolio company, applied its minimally invasive platform technology to women's health and has become a leading manufacturer of vacuum-assisted breast biopsy and tissue excision devices. This 510K approved device has performed over 100,000 biopsy procedures in more than 450 sites. Compatible with all three leading imaging modalities (MRI, stereotactic and ultrasound), the device achieved a 99.5% satisfaction rating from its customers. With 80%+ gross margins and a growing stream of recurring disposables business, the Company grew from $8 million in revenue in 2003 to over $40 million anticipated in 2006. In July 2006, Hologic, Inc. (NASDAQ: HOLX) acquired Suros for 10x trailing twelve month revenue. The purchase price was $240 million, plus a two year earn-out, and gave River Cities a 5.5x multiple on the investment and an IRR in excess of 100%.