New SRI International Spin-off, Artificial Muscle Inc., Secures Series A Funding from Leading VC Firms

AMI to Commercialize Innovative "Artificial Muscle" Technology into Smart Materials That Expand and Contract Similar to Human Muscles

MENLO PARK, California – May 3, 2004 – SRI International, a leading independent research and development organization, today announced the formation of Artificial Muscle Incorporated (AMI), the latest in a series of spin-off companies. The company will develop and market components made of electroactive polymer “artificial muscle,” a smart material developed and patented by researchers at SRI International. AMI has secured $2.5 million in Series A financing from Vanguard Ventures, ARCH Venture Partners and NGEN Partners. An additional $5 million in Series A funding will follow later this year upon completion of certain milestones.

SRI has granted AMI a broad license for application of the artificial muscle technology, which can be used as a lightweight, highly efficient alternative to small motors, actuators, pumps, solenoids, speakers, sensors, and generators used in virtually any product from audio speakers to air conditioners to automobiles.

“Although AMI is a new company, it has been built around a core technology developed over a 12-year period by SRI International – one of the world's premiere R&D organizations,” said Dan Eilers, general partner of Vanguard Ventures and lead AMI investor. “Artificial muscle can be applied to a wide range of markets, applications and products with a market potential that today exceeds $4 billion annually.”

“AMI is another excellent example of SRI's approach to bringing high-value innovations to the commercial marketplace,” said Dr. Norman Winarsky, SRI International's vice president of ventures and strategic programs. “This is breakthrough technology that can provide the foundation for equally breakthrough applications.”

The thin, flexible material, called artificial muscle because it behaves much like a human muscle, expands when exposed to an electric current and contracts when the electricity is removed, thereby converting electrical potential energy into mechanical motion. It offers significant advantages over typical electromagnetic-based technologies because it is much lighter, smaller, quieter and cheaper, and offers more controllable and flexible configurations.

“Artificial muscle has the potential to fundamentally shift the way many types of industrial, medical, consumer, automotive, and aerospace products are powered and operated,” said Alex Beavers, CEO of Artificial Muscle Inc. “We already have an impressive list of current and potential customers that will work with us to bring artificial muscle into mainstream use.”

Mr. Beavers, formerly CEO of Thomson Industries, also led the manufacturing and supply chain management consulting practice for the Americas at PricewaterhouseCoopers, and served as president of Applicon, one of the original CAD/CAM systems companies, president of Schlumberger Automation Systems Asia, and general manager of the robotics and vision systems business of General Electric.

In addition to Mr. Beavers, members of AMI's seasoned Board of Directors, all recognized for their success in bringing new technologies to market, include Dan Eilers of Vanguard Ventures, Patrick Ennis of ARCH Venture Partners, Steven Parry of NGEN Partners and Mike Gullard of SRI International.

More information about artificial muscle, which was featured on the cover of the October 2003 issue of Scientific American, is available online at www.artificialmuscle.com.

About SRI International

Silicon Valley-based SRI International is one of the world's leading independent research and technology development organizations. Founded as Stanford Research Institute in 1946, SRI has been meeting the strategic needs of clients for more than 55 years. The nonprofit research institute performs contract research and development for government agencies, commercial businesses and private foundations. In addition to conducting contract R&D, SRI licenses its technologies, forms strategic partnerships and creates spin-off companies. SRI's most recent spin-offs include PacketHop, a wireless communications company launched in November 2003, and Artificial Muscle Inc., funded in March 2004.

About Artificial Muscle Incorporated

Artificial Muscle Inc. (AMI) develops and markets components made of artificial muscle, a smart material that can be used for a variety of sensing, actuating and electric power generation applications. Artificial muscle, developed at leading research institute SRI International, serves as a lightweight, highly efficient alternative to small motors, generators, sensors, and speakers used in products ranging from automobiles to audio speakers. AMI is serving a market that currently measures $4 billion in size with artificial muscle-based components for industrial, medical, consumer, automotive, and aerospace applications. Founded in March 2004 and based in Silicon Valley , AMI is funded by premier venture firms Vanguard Ventures, ARCH Venture Partners and NGEN Partners. More information on AMI can be found at www.artificialmuscle.com.

About Vanguard Ventures

Vanguard Ventures is a venture capital firm specializing in seed and early-stage high-technology investments, with offices in Palo Alto and Houston . The five partners have extensive and successful backgrounds as technologists, operating managers, entrepreneur-founders and venture capital investors. Since 1981, Vanguard has funded 117 startups; more than 30 of these have already become major corporate successes and many others in this Vanguard portfolio are destined for success. In aggregate, these companies created over $70 billion in market value and returned approximately $1 billion to investors.

About ARCH Venture Partners

ARCH Venture Partners has been investing in seed and early-stage technology companies for more than 18 years and has special expertise in building technology companies with leading scientists and researchers from universities and national laboratories. ARCH has more than $1 billion under management through six venture funds and operates nationally with offices in Seattle, Austin, Chicago , New York and Albuquerque.

About NGEN Partners LLC

NGEN Partners is a venture capital fund dedicated to identifying and nurturing emerging companies that address large market opportunities in the materials fields. Based in Santa Barbara , California , the fund is engineered so as to support portfolio companies in accelerating product development progress. Investors in the fund, the fund's limited partners, include Air Products and Chemicals, BASF, Bayer, BHP Billiton, Boeing, DSM, Dupont, Henkel, Schott Glas, CDP Capital – Technology Ventures and Unilever.

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