September 28, 2004

CipherOptics secures $10.3 million Series C financing led by Adams Capital Management
New capital to accelerate sales & marketing and fund next generation of products

(Raleigh, NC: Sept. 28, 2004) -CipherOptics Inc., a leading innovator of high-speed network security appliances, announced today that it has closed a Series C round of venture funding totaling $10.3 million. The financing, led by Adams Capital Management, was supported by existing investors, including Kodiak Venture Partners, Origin Partners L.P., and Axiom Venture Partners L.P. CipherOptics will use the funding to expand its sales and marketing activities, and for further development of its family of next-generation network security products. Martin Neath, general partner at Adams Capital Management, will join the CipherOptics board of directors.

"CipherOptics has established a strong base of world-class accounts, protecting some of the most security-sensitive networks in the world," said CipherOptics CEO Ron Willis. "Our significant year-to-year growth underscores the growing need to secure data in transit over untrusted IP networks, and this round of funding will help provide the extra fuel we need to meet that burgeoning demand."

The valuation for the Series C round of financing is in line with the company’s previous rounds and reflects the company’s recent growth. "As the clear leader in the high-speed network security encryption market, we are excited about working with CipherOptics and seeing its vision and technological innovation recognized on a global basis," said Mr. Neath. "In particular, the growing list of US government, military, and commercial customers who have selected and deployed the CipherOptics solution is testimony to the fact that no other solution offers comparable real-time high-speed throughput, extreme low latency, and price/performance numbers."

CipherOptics network security appliances protect data in transit traveling over untrusted networks. They enable customers to protect their sensitive information with a simple, sophisticated solution that provides security they can count on for their high-speed core IP networks. CipherOptics provides affordable security without compromising networking capabilities, allowing customers to reduce their security infrastructure costs while maintaining network performance and speed.

About Adams Capital Management
Adams Capital Management, Inc. is a national venture capital firm specializing in early-stage applied technology investments in the information technology, semiconductor and telecommunications markets. Adams Capital invests in companies with compelling market opportunities and the ability to exploit discontinuities created by changes in industry standards, regulations, technology convergence and distribution channels. The firm is based in Pittsburgh, with offices in Austin, Boston, and Palo Alto. ACM currently manages $700 million in private equity capital through three limited partnerships. For further information, visit www.acm.com.

About Kodiak Venture Partners
Kodiak Venture Partners is a Waltham, MA-based venture capital firm focused on seed and early stage investments in emerging communications/IT, semiconductor and software companies. With a focus in the eastern regions of the U.S. and Canada, Kodiak Venture Partners builds relationships with entrepreneurs seeking accelerated market success. Kodiak's investment partners are successful high-technology business entrepreneurs who take a high-impact, hands-on approach to forming, operating, building and funding market leaders. For more information, visit www.kodiakvp.com.

About Origin Partners L.P.
Origin Partners is a traditional venture capital firm specializing in startup and emerging-growth companies in IT, communications, and medical technology. Managed by seasoned venture capital investors and proven operating executives, Origin has a strong record of assisting entrepreneurs in building exceptional start-ups that become change-makers in their field. The firm has offices in the Boston, NY/NJ, and Austin, TX metro markets. More information about Origin Partners is available at www.originpartners.com.

About Axiom Venture Partners L.P.
Axiom Venture Partners provides capital and strategic assistance to rapidly growing high technology companies. Axiom's professionals bring substantial investing experience and industry expertise to the venture capital process. With over $200M in capital under management, the firm seeks to consider investment proposals in two main industry areas. The first is high technology, which includes communications, software, Internet infrastructure, and information technology. Biotechnology constitutes the second area. Through its office in Connecticut, Axiom invests actively throughout the United States in early or late stage companies. For more information, visit www.axiomventures.com.

About CipherOptics, Inc.
CipherOptics designs, manufactures and sells market-leading network security appliances to protect information traveling over high-speed communication networks, storage area networks and communications service provider (CSP) network cores.
The CipherOptics family of network security appliances is the only field-proven, government-certified solution available that encrypts data at full Gigabit line-rates with minimal latency for transmission over non-secure wired or wireless networks. In mission-critical applications at financial institutions, federal government/Homeland Security, and global enterprises, we enable organizations to completely secure all data communications while maximizing broadband network capacities at a very affordable cost – all with minimal complexity and ease of installation. For more information, please visit www.cipheroptics.com.