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Originator-Name: [email protected]
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<SEC-DOCUMENT>0000897101-03-000677.txt : 20030626
<SEC-HEADER>0000897101-03-000677.hdr.sgml : 20030626
<ACCEPTANCE-DATETIME>20030626170659
ACCESSION NUMBER: 0000897101-03-000677
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20030331
FILED AS OF DATE: 20030626
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CNS INC /DE/
CENTRAL INDEX KEY: 0000814258
STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
IRS NUMBER: 411580270
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0331
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-16612
FILM NUMBER: 03759119
BUSINESS ADDRESS:
STREET 1: PO BOX 39802
CITY: MINNEAPOLIS
STATE: MN
ZIP: 55439
BUSINESS PHONE: 6128206696
MAIL ADDRESS:
STREET 1: PO BOX 39802
STREET 2: PO BOX 39802
CITY: MINNEAPOLIS
STATE: MN
ZIP: 55439
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>cns032695_10-k.htm
<TEXT>
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<TITLE>10-K</TITLE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNITED STATES<BR>SECURITIES
AND EXCHANGE COMMISSION<BR>Washington, D.C. 20549</FONT></H1>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORM 10-K</FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(MARK ONE) </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>|X|</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B> </FONT></TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>For the fiscal year
ended March 31, 2003 </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OR</FONT></H1>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>|_|</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B> </FONT></TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>For the Transition
period from _________ to __________ </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>COMMISSION FILE
NUMBER: 0-16612</FONT></H1>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>CNS, INC.</B>
<BR>(Exact name of registrant as specified in its charter) </FONT></P>
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<tr valign="bottom" align="center">
<td nowrap><font face="Times New Roman, Times, serif" size="2"> <u><b>Delaware</b></u>
<br>
(State or other jurisdiction <br>
of incorporation or organization)<br>
</font></td>
<td width="30%"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td nowrap><font face="Times New Roman, Times, serif" size="2"> <u><b>41-1580270</b></u>
<br>
(I.R.S. Employer <br>
Identification No.)</font></td>
</tr>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>7615 Smetana
Lane<BR>Eden Prairie, MN 55344</B><BR>(Address of principal executive offices and zip code) </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Registrant’s telephone number,
including area code: (952) 229-1500 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities registered
pursuant to section 12(b) of the Act: None<BR>Securities registered pursuant to
section 12(g) of the Act: </FONT></P>
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<table border="0" cellspacing="0" cellpadding="0" width="600">
<tr>
<td><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td><font face="Times New Roman, Times, serif" size="2"><U>Title of each class </U>
<br>
Common Stock, par value of $.01 per share<br>
Preferred Stock purchase rights </font></td>
</tr>
</table>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES |X| No |_| </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if
disclosure of delinquent filers pursuant to Rule 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of March 31, 2003, the
aggregate market value of the Company’s Common Stock held by non-affiliates
is $71,501,532, computed by reference to the closing sales price of the
Company’s Common Stock of $5.74 on September 30, 2002, the last business
day of the Company’s most recently completed second fiscal quarter. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicated by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2): Yes |_| No
|X| </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of June 13, 2003, the
Company had outstanding 13,305,792 shares of Common Stock of $.01 par value per
share. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Documents Incorporated by
Reference: Portions of the Company’s Proxy Statement for its Annual Meeting
of Stockholders to be held on August 27, 2003, are incorporated by reference
into Part III of this Form 10-K. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>TABLE OF
CONTENTS</U></FONT></H1>
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<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<th colspan=2></th>
<th nowrap></th>
<th nowrap></th>
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<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td nowrap align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="2"><u>Page</u></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td nowrap align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td nowrap align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2"><u>PART
I</u></font></b></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td nowrap align=LEFT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td nowrap align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A001">Item 1</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A001">Business</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">3</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A002">Item 2</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A002">Properties</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">16</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A003">Item 3</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A003">Legal
Proceedings</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">16</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A004">Item 4</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A004">Submission
of Matters to a Vote of Security Holders</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">16</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2"><u>PART
II</u></font></b></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A005">Item 5</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A005">Market
for Registrant’s Common Equity and Related Stockholder Matters</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"> 17</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A006">Item 6</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A006">Selected
Financial Data</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">19</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT valign="top"><font face="Times New Roman, Times, serif" size="2"><A HREF="#A007">Item
7</A> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A007">Management’s
Discussion and Analysis of Financial Condition</A><br>
<A HREF="#A007">and Results of Operations</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">20</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A008">Item 7A</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A008">Quantitative
and Qualitative Disclosures about Market Risk</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">31</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A009">Item 8</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A009">Financial
Statements and Supplementary Data</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">32</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT valign="top"><font face="Times New Roman, Times, serif" size="2"><A HREF="#A010">Item
9</A> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A010">Changes
in and Disagreements with Accountants on Accounting and</A><br>
<A HREF="#A010">Financial Disclosure</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">32</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2"><u>PART
III</u></font></b></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A011">Item 10</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A011">Directors
and Executive Officers of the Registrant</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">32</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A012">Item 11</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A012">Executive
Compensation</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">33</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A013">Item 12</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A013">Security
Ownership of Certain Beneficial Owners and Management</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">33</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A014">Item 13</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A014">Certain
Relationships and Related Transactions</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">34</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A015">Item 14</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A015">Controls
and Procedures</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">34</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2"><u>PART
IV</u></font></b></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A016">Item 15</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A016">[Reserved]</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">35</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT valign="top"><font face="Times New Roman, Times, serif" size="2"><A HREF="#A017">Item
16</A> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"><A HREF="#A017">Exhibits,
Financial Statement Schedules, and</A><br>
<A HREF="#A017">Reports on Form 8-K</A></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">35</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A018">SIGNATURES</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">36</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A019">CERTIFICATIONS</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">38,
39</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A020">EXHIBIT
INDEX</A></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">40</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT colspan="3"><font face="Times New Roman, Times, serif" size="2"><A HREF="#A021">INDEX
TO FINANCIAL STATEMENTS</A> </font></td>
<td align=RIGHT nowrap><font face="Times New Roman, Times, serif" size="2">F-1</font></td>
</tr>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Forward-Looking
Statements</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Certain
statements contained in this Annual Report on Form 10-K and other written and
oral statements made from time to time by the Company do not relate strictly to
historical or current facts but provide current expectations or forecasts of
future events. As such, they are considered “forward-looking
statements” under the Private Securities Litigation Reform Act of 1995 and
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those presently anticipated or projected. Such
forward-looking statements can be identified by the use of terminology such as
“may,” “will,” “expect,” “plan,”
“intend,” “anticipate,” “estimate,” or
“continue” or similar words or expressions. It is not possible to
foresee or identify all factors affecting the Company’s forward-looking
statements and investors therefore should not consider any list of factors to be
an exhaustive statement of all risks, uncertainties or potentially inaccurate
assumptions. Factors that could cause actual results to differ from the results
discussed in the forward-looking statements include, but are not limited to, the
following factors: (i) the Company’s revenue and profitability is reliant
on sales of Breathe Right® nasal strips; (ii) the Company currently has a
seasonal pattern of sales that is typically higher in the third and fourth
quarters of each fiscal year due to increased nasal strip usage during the
cough/cold season and its revenues and earnings may be impacted by the<B>
</B>severity of such season; (iii) the Company’s success and future growth
will depend significantly on its ability to effectively market Breathe Right
nasal strips and upon its ability to develop and achieve markets for additional
products; (iv) the Company’s competitive position will, to some extent, be
dependent on the enforceability and comprehensiveness of the patents on its
Breathe Right nasal strip technology which have been, and in the future may be,
the subject of litigation and could be narrowed as a result of the outcome of
the reexamination of one such patent by the United States Patent and Trademark
Office (see Item 1, “Patents, Trademarks and Proprietary Rights”); (v)
the Company has faced and will continue to face challenges in successfully
developing and introducing new products; (vi) the Company operates in
competitive markets where recent and potential entrants into the nasal dilator
segment pose competitive challenges (see Item 1, “Competition”); (vii)
the Company is dependent upon contract manufacturers for the production of
substantially all of its products; and (viii) the Company currently purchases
its nasal strip products from different contract manufacturers that obtain the
raw materials from a single supplier (see Item 1, “Manufacturing and
Operations”). </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I</FONT></H1>
<A NAME=A001></A>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 1. BUSINESS</U> </FONT></H2>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>General</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
CNS,
Inc. (the “Company”) is in the business of developing and marketing
consumer health care products, including Breathe Right® nasal strips, Breath
Right Snore Relief™ throat spray and FiberChoice® chewable fiber
tablets. The Company focuses on products that address important consumer needs
within the aging well/self care market, including better breathing and digestive
health. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s principal product, the Breathe Right nasal strip, improves
breathing by reducing nasal airflow resistance. It can be effective in providing
temporary relief for nasal congestion, reducing snoring and reducing breathing
difficulties due to a deviated nasal septum. In 2000, the Company expanded its
Breathe Right product line to include mentholated vapor strips for colds that
are sized for the entire family, and nasal strips for children that are
available in multiple colors. Breathe Right with mentholated vapor strips were
introduced in selected overseas markets in 2001. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company further extended the Breathe Right brand in fiscal 2003 by launching
Breathe Right Snore Relief throat spray. Snore Relief spray lubricates and
soothes dry throats, while a natural astringent firms loose tissue to reduce the
vibrations that cause snoring. Breathe Right strips open nasal passages and
reduce mouth breathing that leads to snoring. These two products provide a
portfolio of solutions for snoring. In addition to expanding the Breathe
Right® brand and introducing other new products, the Company is exploring
possibilities for acquiring new consumer health care products that have
established consumer brands, particularly those that complement the
Company’s drug-free, better breathing platform. The Company is also
considering opportunities for licensing new products and technologies. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>3 </FONT></P>
<HR SIZE=5 NOSHADE>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company introduced its FiberChoice® chewable fiber tablets in March, 2000.
The FiberChoice product is an orange-flavored, chewable fiber tablet that offers
consumers an effective, convenient and good-tasting way to supplement their
daily intake of dietary fiber. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
1999, the Company introduced its FLAIR™ equine nasal strip, a product that
enables horses to breathe more easily during strenuous exercise. In March 2002,
the Company established an exclusive, worldwide distribution relationship for
its FLAIR equine nasal strip product with a joint venture entity comprised of
Merial, LLC, an affiliate of Merck & Co., Inc. and Aventis. The Company has
had limited sales of its FLAIR product to date. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
During
June, 2001, the Company completed a restructuring and organizational realignment
plan. The Company eliminated 20 positions across all areas for a 25% work force
reduction. These actions enabled the Company to focus its resources on better
leveraging the success of the Breathe Right brand, both in the United States and
abroad, and operate the FiberChoice business more flexibly and efficiently. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
On
January 23, 2002, the Company changed its fiscal year-end from December 31 of
each year to March 31 of each year. The change in its fiscal year-end aligns the
Company’s financial reporting period with its business and
customer-planning cycle. The Company believes this change provides a clearer
picture of the Company’s financial results by including an entire
cough/cold season within the same fiscal year. </FONT></P>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Management</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s management structure is organized into strategic business teams
to expand the Breathe Right and Fiber-Choice brands and to develop and launch
new products: Breathe Right Brand Team; FiberChoice Team; International Team and
New Business Development Team. The Company believes that its team focus enables
the Company to more effectively implement its business strategies. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Breathe
Right Brand Team.</I></B> The Company’s Breathe Right Brand Team is
responsible for the strategic development and management of the domestic Breathe Right
nasal strip business and other products that carry the Breathe Right brand name.
Breathe Right nasal strip products currently represent the cornerstone of the
Company’s business. The Company intends to exploit new markets and
opportunities that it believes exist for its current nasal strip products and
plans to commercialize potential new Breathe Right branded products. This team
is responsible for developing and launching additional Breathe Right products.
The Company introduced two new products in the United States during the fall of
2000 to coincide with the cough/cold season: mentholated vapor strips for colds
for the entire family and nasal strips with stars for children. During
2002, the Company launched Breathe Right Snore
Relief™ throat spray. This product leverages the Company’s
existing position in the better breathing/snoring product category and
complements existing Breathe Right offerings. In the 2003 cough/cold season, the
Company intends to launch Breathe Right VaporShot!™ personal vaporizer.
This product builds on the existing line of Breathe Right mentholated vapor
strips for colds. The VaporShot! product gives consumers a
drug-free breathing solution that can be used in the daytime, complementing the
Breathe Right nasal strips, which are generally used to relieve nighttime
breathing conditions. VaporShot! works by dropping an effervescent tablet into
hot water in the VaporShot! cup with a customized lid. The VaporShot! cup
delivers an intense shot of mentholated vapors that instantly relieves congested
noses. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>FiberChoice
Team.</I></B> The Company introduced FiberChoice® chewable fiber
tablets in March, 2000. The FiberChoice Team is responsible for the strategic
development and management of the FiberChoice chewable fiber supplement
business. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>International
Team.</I></B> The Company began shipping Breathe Right® nasal strips to new
distributor partners in Europe, Australia and Japan during 2000. Breathe Right
mentholated vapor strips for colds were introduced in selected overseas markets
in 2001. In 2003, the Company introduced Breathe Right nasal strips for kids in
Japan and Italy and introduced Breathe Right Snore Relief™ throat spray in
the UK. The Company intends to expand the distribution of Breathe Right Snore
Relief throat spray into several more countries during fiscal 2004. The
International Team is responsible for developing and managing the Company’s
overseas business and its relationships with distributors and representatives in
international markets. See Item 1, “International Distribution.” </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>4 </FONT></P>
<HR SIZE=5 NOSHADE>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>New
Business Development Team.</I></B> The New Business Development Team is
committed to the expansion of the Company’s product base through the
development, acquisition or licensing of promising consumer health care
products. The New Business Development Team is responsible for identifying and
evaluating potential new products, inventions and other business prospects that
will enable the Company to achieve its long-term growth and profit objectives,
including opportunities for the acquisition of established product lines. </FONT></P>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Products</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Breathe
Right Nasal Strips.</I></B> The Breathe Right nasal strip is a
nonprescription, single-use disposable device that improves breathing by opening
the nasal passages. The Company has 510(k) clearance from the United States Food
and Drug Administration (“FDA”) to market the Breathe Right nasal
strip for improvement of nasal breathing, temporary relief of nasal congestion,
elimination or reduction of snoring and temporary relief of breathing
difficulties due to a deviated nasal septum. See Item 1, “Government
Regulation.” Breathe Right nasal strips come in tan, clear, mentholated and
stars-for-kids varieties. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Breathe Right nasal strip includes two embedded plastic strips. When folded down
onto the sides of the nose, the Breathe Right nasal strip lifts the side walls
of the nose outward to open the nasal passages. The product improves nasal
breathing upon application and does not include any drugs, thereby avoiding any
medicinal side effects. The Breathe Right nasal strip is offered in three sizes
(kids, small/medium and large) to accommodate the range of nose sizes. The
Breathe Right nasal strip is packaged for the consumer market in various
quantities ranging between 10 to 38 strips per box. The Company believes that
Breathe Right nasal strips are priced less than medicinal decongestants on a
daily or nightly basis at retail prices ranging between $3.99 and $11.99 per
box. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company expanded the Breathe Right nasal strip line with the introduction of
Breathe Right nasal strips with mentholated vapors and Breathe Right nasal strip
for kids in 2000. In March 2000, the Company licensed the Vicks® trademark
from The Proctor & Gamble Company for use with the mentholated nasal strip
product. Effective July, 2003 the Vicks trademark will no longer be used. The
mentholated vapor strip uses traditional Breathe Right strip technology but
contains a soothing mentholated aroma for additional relief. The mentholated
vapors are released when the strip surface is rubbed. The Company believes that
its mentholated vapor strip product has increased the Company’s customer
base for nasal strip products by more clearly communicating that Breathe Right
nasal strips can ease the congestion associated with the common cold. The
kids’ strips are sized specifically to fit children and include a
brightly-colored version and a mentholated version. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>5 </FONT></P>
<HR SIZE=5 NOSHADE>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Breathe
Right® Brand Products.</I></B> Breathe Right saline nasal spray is a
non-habit forming, drug-free product that restores moisture to comfort and
soothe dry, irritated nasal passages due to colds, allergies, dry air (low
humidity), air pollution and the overuse of nasal decongestants. Breathe Right
Snore Relief™ throat spray is a drug-free product that addresses a
different cause of snoring than nasal strips and lubricates and soothes dry
throats while a natural astringent firms loose tissues to reduce the vibrations
that produce snoring. This product leverages the Company’s existing
position in the better breathing/snoring product category and complements
existing Breathe Right product offerings. The Company intends to introduce
additional non-nasal strip products in the future that carry the Breathe Right
brand name to extend the product line. For example, the Company intends to
launch a new product during the fall 2003 cough/cold season — Breathe Right<BR>
VaporShot!™ personal vaporizer. This product builds the Company’s
existing line of Breathe Right mentholated vapor strips for colds. Breathe Right
VaporShot! personal vaporizer works by dropping an effervescent tablet into hot
water in the customized VaporShot! cup which delivers an intense shot of
mentholated vapors that instantly relieves congested noses. This product
leverages the Company’s existing position in the better breathing product
category and complements existing Breathe Right product offerings. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>FiberChoice®
Chewable Fiber Tablets.</I></B> The Company introduced its FiberChoice
chewable fiber tablets in March, 2000. FiberChoice is an orange-flavored,
chewable tablet that offers consumers an effective, convenient, good-tasting way
to supplement their daily intake of dietary fiber. The tablets contain four
grams of fiber per dose and provide more than twice the amount of fiber per dose versus
other convenient fiber supplements. The active ingredient in FiberChoice tablets
is inulin, a natural fiber source. Inulin is also a prebiotic that helps promote
the growth of healthy intestinal tract bacteria. FiberChoice tablets can be
taken without water and have been clinically proven to be as effective as powder
alternatives. The product is available in both regular and sugar-free varieties
and is packaged in 90-count and 36-count bottles and 10-count tubes. </FONT></P>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Markets</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Breathe
Right Brand Product Line.</I></B> The Breathe Right brand of products includes
Breathe Right nasal strips, Breathe Right saline nasal spray and Breathe Right
Snore Relief throat spray. The Company intends to expand the Breathe Right brand
in 2003 during the fall cough/cold season with the introduction of its Breathe
Right VaporShot! personal vaporizer. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Air
impedance in the nose accounts for approximately one-half of the total airway
resistance involved in the respiratory system (i.e., one-half of the energy
required for breathing). If the effort to breathe through the nose during sleep
is excessive, the person will resort to mouth breathing, promoting snoring, dry
mouth, sore throat and mini-awakenings which disrupt sleep. In addition, nasal
breathing difficulties during sleep are often caused by nasal congestion found
in people who have a common cold, allergies and sinusitis and by those who
experience nasal obstruction due to a deviated nasal septum. The Company
believes that people with chronic conditions such as snoring or allergies or
with structural problems such as deviated septa may be more predisposed to use
Breathe Right products on a regular or daily basis, while seasonal sufferers are
likely to use Breathe Right products as needed. These chronic conditions are
aggravated when people have nasal congestion, thus increasing the opportunity
for usage and consumer trial during the cough/cold season. People suffering from
these conditions are currently the primary users of the Company’s Breathe
Right products and are the main targets of its advertising. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
1999, the Company began to emphasize the Breathe Right nasal strip position as a
product that provides instant, drug-free relief for those suffering from nasal
congestion and other symptoms due to the common cold, allergies and sinusitis.
The Company’s advertising emphasizes the ability of Breathe Right nasal
strips to provide immediate relief from nasal congestion due to colds, and in a
separate campaign, it promotes both Breathe Right nasal strips and Breathe Right
Snore Relief throat spray as solutions for snoring. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>6 </FONT></P>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s marketing efforts capitalize on the benefits of Breathe
Right® products to consumers in various, and often overlapping, consumer
market segments: </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> •</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Nasal Congestion
Relief</U>.</I> Most Americans suffer some nasal congestion annually as a result of the
common cold. Nasal congestion as a result of allergies affects approximately 35
million Americans. The Company believes that Breathe Right nasal strips are
often used as either an alternative or as an adjunct to decongestant drugs
(including nasal sprays and oral decongestants). This broad cough/cold/allergy
market represents significant potential for the Breathe Right brand. In 1999,
the Company commenced marketing efforts aimed at repositioning the Breathe Right
nasal strip as a product that provides relief for the common cold. In the fall
of 2000, this repositioning as a product for colds was reinforced by the
introduction of Breathe Right mentholated vapor strips for colds. At the same
time, the product line was extended into children’s sizes, with a brightly
colored “stars” strip and a Kid Strip with mentholated vapors. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Snoring
Relief</U>.</I> Based on results from clinical trials, Breathe Right products were
effective in reducing snoring loudness in approximately 85% of the participants.
This market remains very important to the Company since approximately 37 million
people snore regularly, while another 50 million people snore occasionally. The
Company believes that snorers can be targeted effectively and directly through
relationship marketing efforts as well as through broad-based
advertising.</FONT></TD>
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<BR>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> •</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Improved
Breathing for Consumers with Deviated Septum</U>.</I> Approximately 12 million people in
the United States suffer from a deviated septum, a bend in the cartilage or bone
that divides the nostrils. Breathe Right nasal strips were cleared by the Food
and Drug Administration in 1996 to provide temporary relief from breathing
difficulties associated with a deviated septum.</FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> •</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Athletic
Market</U>.</I> The Company believes that Breathe Right nasal strips make nasal
breathing more comfortable and may improve endurance during athletic activity,
particularly when a mouth guard is used. An exercise physiology study published
in peer-reviewed medical literature in 1997 concluded that Breathe Right nasal
strips provided physiologic advantages in ventilation and heart rate during
mid-level exercise. Other exercise physiology studies have been conducted and
add to the substantiation of the positive effects of Breathe Right nasal strips
during exercise. The Company continues to use athletes to endorse Breathe Right
nasal strips to increase the visibility of the product, which leads to greater
awareness of the product and the Breathe Right brand.</FONT></TD>
</TR>
</TABLE>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>FiberChoice®
Chewable Fiber Tablets.</I></B> Approximately 10 million U.S. households
annually purchase bulk fiber products, primarily to promote regularity and
improve digestive health. The bulk fiber category represents approximately $325
million in U.S. retail sales. The Company believes there is a significant
opportunity to expand this category due to both the aging of the baby-boomer
generation and the marketing of a better consumer solution to existing dietary
fiber products–FiberChoice chewable fiber tablets. As people age, they
frequently develop digestive problems. People over 55 years old are three times
more likely to purchase a bulk fiber supplement than those younger than 55. The
first year the baby-boom generation turned 55 was in 2001. This generation is
generally more active and demanding than their parents. These consumers search
for solutions that do not hamper their active lifestyles. Additionally, most
Americans only get 10-15 grams of fiber a day, while experts recommend 25-30
grams daily. The Company believes that its FiberChoice chewable fiber tablet
represents such a solution in that it provides an effective, convenient and
good-tasting alternative for supplementing dietary fiber intake. The tablets
provide four grams of fiber per dose and can be taken anytime and anywhere, with
or without water. </FONT></P>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Business
Strategies</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s business strategy includes attempting to increase sales of its
Breathe Right® nasal strip and other Breathe Right brand products through
advertising, expanding its Breathe Right product line with value added line
extensions like Breathe Right mentholated vapor strips for colds and
children’s nasal strips, maximizing the potential of recently introduced
products and successfully introducing new products with an emphasis on
drug-free, better breathing such as the Company’s Breathe Right Snore
Relief™ throat spray and Breathe Right VaporShot!™ personal vaporizer. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Increasing
New Consumer Product Trial and Increasing Product Usage.</I></B> The
Company uses a combination of advertising, sampling, promotions, public
relations and celebrity endorsements to increase consumer awareness and to
encourage consumer trial of the Breathe Right nasal strip. In 1999, the Company
began to increase its emphasis on positioning the Breathe Right nasal strip as a
product that provides instant, drug-free relief for those suffering from nasal
congestion and other breathing conditions such as the common cold, allergies and
sinusitis. The Company’s advertising introduced Breathe Right mentholated
vapor strips for colds, emphasizing the ability of Breathe Right nasal strips to
provide instant, drug-free relief from nasal congestion. In 2001, the Company
began separately advertising Breathe Right nasal strips as a product that
provides drug-free relief from nasal congestion and for snoring. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Marketing
New Breathe Right Brand Products.</I></B> The Company believes that the
Breathe Right brand name is one of its most valuable assets. In 1998, the
Company introduced Breathe Right saline nasal spray. The Company has also
expanded the Breathe Right product line to include mentholated vapor strips for
colds and nasal strips for children, both of which were introduced during the
fall of 2000 in order to coincide with the cough/cold season. In the 2002
cough/cold season the Company launched Breathe Right Snore Relief throat spray.
This product leverages the Company’s existing position in the better
breathing/snoring product category and complements existing Breathe Right
offerings. In the 2002 cough/cold season, the Company intends to launch
Breathe Right VaporShot! personal vaporizer. This product also leverages the
Company’s existing position in the better breathing product category and
complements existing Breathe Right offerings. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Expanding
Company Presence in International Markets.</I></B> The Company believes that
there is significant market potential for its products outside the United
States. The Company is devoting significant resources to the development of its
international business. The Company entered into agreements with new
distributors and representatives for the distribution of the Company’s
nasal strip products in Japan, Australia and a number of major markets in Europe
in 2000 and in Hong Kong in 2001. The Company is considering additional
distributors and representatives for distribution of its nasal strip products in
international markets. During 2001, the Company launched its Breathe Right
mentholated vapor strips for colds in some international markets in conjunction with
each market’s cough/cold season. During fiscal 2003, the Company
test-marketed Breathe Right nasal strips in China. The Company intends to launch
Breathe Right Snore Relief throat spray in Canada, Italy and Spain in fiscal
2004. The Company believes that the network that it has established for the
international distribution of Breathe Right nasal strips will also enable the
Company to build its international marketing and distribution capacity for other
products. See Item 1, “International Distribution.” </FONT></P>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Acquiring,
Developing and Marketing New Products.</I></B> The Company plans to take
advantage of its position as the drug-free, better breathing company and its
marketing and distribution strengths by acquiring, developing or licensing the
rights to new products that it believes have merit and bringing them to market.
The FiberChoice® chewable fiber tablet was launched in March, 2000 and the
FLAIR™ equine nasal strip was introduced in 1999. Breathe Right Snore
Relief throat spray was launched during the fall of 2002 and Breathe Right
VaporShot! personal vaporizer will be launched in the second quarter of fiscal
2004. See Item 1, “Marketing Strategies.” In addition, the Company is
evaluating opportunities for licensing new products and acquiring product lines
that have an established base of consumer acceptance. </FONT></P>
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<BR>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Marketing
Strategies</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Breathe
Right® Nasal Strips.</I></B> The Company’s marketing efforts for
Breathe Right products are directed to different consumer markets — the
nasal congestion market and the snoring market. The Company has primarily used
television advertising to market its products. The Company’s advertising
focuses on the Breathe Right brand benefits of providing instant, drug-free
relief from nasal congestion and snoring. The Company also uses product
promotion programs, such as sampling, coupons and public relations activities to
encourage product trial and repeat purchases. Introduction of the Breathe Right
mentholated vapor strips for colds has aided in expanding the Company’s
penetration into this significant market. Marketing communications are generally
designed to promote trial of Breathe Right brand products by increasing consumer
awareness of the benefits of each product. In January 2003, the Company
concluded a highly successful promotion for Breathe Right nasal strips and
Breathe Right Snore Relief™ throat spray by having NFL wide receiver Jerry
Rice select the loudest snorer in the Company’s “NFL’s Loudest
Snorer” contest. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Marketing
efforts for Breathe Right nasal strips as an aid in the prevention of snoring
also included direct mail sampling and sampling through direct response
television. In both programs, self-identified snorers were sent a sample of
Breathe Right nasal strips along with a brochure explaining the causes of
snoring and how the Company’s Breathe Right products can alleviate the
condition. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Because
Breathe Right nasal strips are sold as a consumer product, sales of the product
will depend in part upon the degree to which the consumer is aware of the
product and is satisfied with its use, which also influences repeat usage and
word of mouth referrals. The most recent research data collected by a nationally
recognized consumer market research firm indicated that approximately 35% of
those in the United States who had purchased Breathe Right nasal strips have
purchased additional product in the same year. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>FiberChoice®
Chewable Fiber Tablets.</I></B> The Company’s marketing efforts for
FiberChoice tablets are directed toward all consumers who don’t get enough
fiber in their diet. In 2002, the Company tested a new advertisement in four
focused markets that simply states how busy people usually don’t get the
fiber they need from their diets and that FiberChoice tablets offer at least
twice as much fiber per dose than any other convenient fiber supplement. During
fiscal 2003, the Company expanded its successful four-market advertising test to
thirteen markets. The Company intends to broaden the FiberChoice brand marketing
efforts to 68% of the United States in fiscal 2004. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>New Products
Strategy</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company is committed to the future expansion of its product base through the
acquisition and development of unique consumer health care products and
technologies that have good market potential, particularly those that complement
the Company’s drug-free, better breathing platform. The Company routinely
evaluates the merit of product concepts and acquisition opportunities and, from
time to time, may acquire or license the rights to products which it believes
could successfully be sold through the Company’s established distribution
channels. The Company also seeks to extend the Breathe Right brand awareness
through licensing to other better breathing products in new categories. The
Company intends to launch a new product during the fall 2003 cough/cold
season–Breathe Right VaporShot!™ personal vaporizer. This product will
leverage the Company’s existing position in the better breathing category
and complement existing Breathe Right offerings. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Most,
if not all, of the Company’s current products are regulated to varying
degrees by the FDA and other regulatory bodies. See Item 1, “Government
Regulation.” Products that the Company may acquire or develop in the future
could also be subject to a variety of regulatory requirements. Some products
will require extensive clinical studies and regulatory approvals prior to
marketing and sale. There can be no assurance that any required regulatory
approvals will be obtained or that the Company will market or sell any of these
products. </FONT></P>
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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Domestic
Distribution</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Breathe
Right® nasal strips, Breathe Right saline nasal spray, Breathe Right Snore
Relief™ throat spray and FiberChoice® chewable fiber tablets are sold
primarily as consumer products in mass merchant stores, drug stores, grocery
stores, warehouse clubs and military base stores in the United States. The
Company sells its products through a direct sales force that concentrates on
serving certain key retail accounts as well as through a network of independent
sales representatives referred to in the industry as brokers. The Company uses
direct sales people and brokered sales forces who call on the mass merchant,
chain drug, and grocery accounts and the wholesalers who serve primarily the
independent drug stores and many of the grocery stores in the United States. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Breathe
Right nasal strips are typically positioned in the cough, cold and allergy
sections of stores because they provide benefits similar to those obtained with
other decongestant products. Breathe Right saline nasal spray is also usually
positioned in the same section of the store as Breathe Right nasal strips since
the products are typically used by those suffering from congestion, allergies
and colds. Breathe Right Snore Relief throat spray is also usually positioned in
the cough/cold section of stores, adjacent to Breathe Right nasal strips.
FiberChoice chewable tablets are positioned in the bulk fiber and laxative
sections of stores. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s retail customers include national chains of mass merchants, drug
stores and grocery stores such as Wal-Mart, Kmart, Target, Eckerd, Walgreens,
RiteAid, CVS, Kroger and Albertson’s and warehouse clubs such as Sam’s
Club and Costco, as well as regional and independent stores in the same store
categories. In fiscal 2003, Wal-Mart accounted for approximately 25% of sales.
The loss of this customer or any other large retailer would require the Company
to replace the lost sales through other retail outlets and could disrupt
distribution of the Company’s products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>International
Distribution</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
From
August of 1995 through September of 1999, The 3M Company (“3M”) was
the exclusive distributor of the Company’s Breathe Right nasal strip
products outside the United States and Canada. The contractual relationship with
3M produced less than anticipated results in international markets. The Company
believed that international markets required an increased level of focus,
advertising and promotion to reach their potential. On September 30, 1999, the
Company and 3M agreed to terminate the existing distribution agreement in a
manner that enabled the Company to take a direct and immediate role in the sale,
marketing and distribution of its nasal strip products in international markets.
As part of the agreement, 3M also agreed not to sell any nasal dilator devices
for a period of two years, which period ended on June 30, 2002. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
2000, the Company established a broad-ranging international distribution system
for the Breathe Right nasal strip business that consists of both sales
representatives and reselling distributors. The Company has established
relationships with distributors in Canada, Australia, Japan, Hong Kong, China
and most of the major markets in Europe. The Company is also pursuing additional
distribution opportunities. Sales are supervised by the Company from its
Minnesota headquarters and by CNS International, Inc., a wholly-owned domestic
subsidiary with one business manager in Europe. The business manager supervises
and coordinates the activities of the distributors and sales representatives in
Europe. Distributors are appointed largely on an exclusive basis, with
territories consisting of one or more countries, and it is expected that this
pattern will continue. The Company retains control over the packaging and
advertising in all territories. Most shipments are made in bulk, either to
reselling distributors who package for the local market, or to warehouse
facilities abroad, where final packaging is arranged by the Company directly
before shipment to retailers. </FONT></P>
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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Manufacturing
and Operations</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company currently subcontracts with multiple manufacturers to produce Breathe
Right® nasal strips, Breathe Right saline nasal spray, Breathe Right Snore
Relief™ throat spray and FiberChoice® chewable fiber tablets. The
Company does no in-house product production. These contract manufacturers
provide full turnkey service and ship product to the Company that is completely
packaged ready to be sold to retailers or provide semi-finished goods to the
Company that require final packaging. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Each
of the manufacturers makes Breathe Right nasal strips to the Company’s
specifications using materials specified by the Company. The contract
manufacturers have all entered into confidentiality agreements with the Company
to protect the Company’s intellectual property rights. Company quality
control and operations personnel regularly inspect the contract manufacturers to
observe processes and procedures in an attempt to ensure compliance with FDA
Good Manufacturing Practice Standards. Finished goods are also inspected to
ensure that they meet quality requirements. The Company works closely with its
material vendors and contract manufacturers to reduce scrap and waste, improve
efficiency and improve yields to reduce the manufacturing costs of the product.
The Company has received certification that it has established and maintains a
quality system which meets the requirements of ISO 9001:2000/EN 46001. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
To
ensure consistent quality and supply, the Company has multi-year contracts with
manufacturers that purchase most of the major components for the Breathe Right
nasal strips directly from 3M. In 2001, the Company entered into a multi-year
contract with 3M that provides for consistent supply, adherence to
specifications and pricing. Although similar materials are currently available
from other suppliers, the Company has historically utilized 3M components in its
products. Although the Company believes that this relationship will not be
disrupted or terminated, the inability to obtain sufficient quantities of these
components or the need to develop alternative sources in a timely and
cost-effective manner could adversely affect the Company’s operations until
new sources of these components become available, if at all. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Competition</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>Breathe
Right Nasal Strips.</I></B> The market for decongestant products is highly
competitive. The Company’s competition in the consumer market for
decongestant products and other cold, allergy and sinus relief products consists
primarily of pharmaceutical products sold over the counter, other nasal sprays
and external nasal dilators, while competition in the snoring remedies market
also consists primarily of nasal dilators, throat sprays, herbs, supplements and
homeopathic remedies. Although the Company is currently the leading manufacturer
of external nasal dilation products, Schering Plough Corp. entered the market in
September, 1998 with an external nasal dilation device. Schering Plough Corp.
recently sold its nasal strip business to Aso Corp., a subsidiary of Aso
International of Japan. In May 2003, Aso Corp. announced it was acquiring the
marketing, sales and distribution of Schering Plough’s nasal strip device
effective June 3, 2003. Other companies have also entered the nasal dilation
market with private label products. Many of the companies that compete with the
Breathe Right nasal strip and other Breathe Right products have significantly
greater financial and operating resources than the Company. The Company has
developed and implemented marketing strategies aimed at minimizing the impact of
competitive products. As a result of these strategies and other steps taken by
the Company, the Breathe Right nasal strip has maintained approximately 90% of
the nasal dilator market despite the entry of other competitors into the market
place. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
patents owned and licensed by the Company on the Breathe Right nasal strip will
limit the ability of others to introduce competitive external nasal dilator
products similar to the Breathe Right nasal strip in the United States and major
international markets. The Company intends to aggressively enforce its patent
rights covering the Breathe Right nasal strip and has engaged in litigation to
protect its patent rights. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
There
can be no assurance that potential competitors will not be able to develop nasal
dilation products which circumvent the Company’s patents. In addition,
external nasal dilator products compete in the consumer markets with
decongestant and sinus relief products and snoring remedies in many
international markets where the Company does not yet have, and may not in the
future have, patent protection on the Breathe Right® nasal strip. </FONT></P>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<B><I>FiberChoice®
Chewable Fiber Tablet.</I></B> The market for dietary fiber supplements is
highly competitive and dominated by large companies with resources greater than
the Company’s and established brands, such as Metamucil®, Citrucel®
and FiberCon®. The Company believes that its FiberChoice chewable fiber
tablet is a unique product with significant market potential that offers
consumers an effective, convenient and good-tasting alternative to existing
products with more fiber per dose than any other convenient fiber supplement.
The technology of the FiberChoice chewable fiber tablet is currently protected
by one issued U.S. patent with other U.S. and international patents pending. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Government
Regulation</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
As
a manufacturer and marketer of medical devices, the Company is subject to
regulation by, among other governmental entities, the FDA and the corresponding
agencies of the states and foreign countries in which the Company sells its
products. The Company must comply with a variety of regulations, including the
FDA’s Good Manufacturing Practice regulations, and is subject to periodic
inspections by the FDA and applicable state and foreign agencies. If the FDA
believes that its regulations have not been fulfilled, it may implement
extensive enforcement powers, including the ability to ban products from the
market, prohibit the operation of manufacturing facilities and effect recalls of
products from customer locations. The Company believes that it is currently in
compliance with applicable FDA regulations. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
FDA
regulations classify medical devices into three categories that determine the
degree of regulatory control to which the manufacturer of the device is subject.
In general, Class I devices involve compliance with labeling and record keeping
requirements and are subject to other general controls. Class II devices are
subject to performance standards in addition to general controls. Class III
devices are those devices, usually invasive, for which pre-market approval (as
distinct from pre-market notification) is required before commercial marketing
to assure product safety and effectiveness. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Before
a new medical device can be introduced into the market, the manufacturer
generally must obtain FDA clearance through either a 510(k) pre-market
notification or a pre-market approval application (“PMA”). A 510(k)
clearance will be granted if the submitted data establish that the proposed
device is “substantially equivalent” to a legally marketed Class I or
II medical device, or to a Class III medical device for which the FDA has not
called for PMAs. The PMA process can be expensive, uncertain and lengthy,
frequently requiring from one to several years from the date the PMA is
accepted. In addition to requiring clearance for new products, FDA rules may
require a filing and waiting period prior to marketing modifications of existing
products. The Company has received 510(k) approvals to market the Breathe Right
nasal strip as a device that can (i) temporarily relieve the symptoms of nasal
congestion and stuffy nose, (ii) eliminate or reduce snoring, (iii) improve
nasal breathing by reducing nasal airflow resistance, and (iv) temporarily
relieve breathing difficulties due to a deviated nasal septum. Nasal dilators
have since been classified by the FDA as Class I devices and exempt from
pre-market notification. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s FiberChoice product is considered to be a dietary supplement and
is regulated under the Federal Food, Drug, and Cosmetic Act as amended by the
Dietary Supplement Health and Education Act “DSHEA” of 1994, and under
the Fair Packaging and Labeling Act. There is generally no requirement that a
company obtain a license or approval from FDA before marketing dietary
supplements in the United States. The FDA is developing regulations for certain
provisions of the DSHEA which will be published as final rules in the Federal
Register. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Sales
of the Company’s products outside the United States are subject to
regulatory requirements that vary widely from country to country. The Company
has selected a third party to act as an “Authorized Representative” in
the European Union. The Company believes that it has the necessary documentation
to support affixing the “CE” mark, an international symbol of quality
and compliance with applicable European medical device directives, to the
Company’s Breathe Right® nasal strips in Europe. Regulatory approvals
have also been obtained for the Breathe Right nasal strip in Australia and
additional approvals in other jurisdictions will be sought by the Company as
needed for all of its products. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>12 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TR>
</TABLE>
<BR>
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<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
No
assurance can be given that the FDA or state or foreign regulatory agencies will
give on a timely basis, if at all, the requisite approvals or clearances for
additional applications for the Breathe Right nasal strip or for any of the
Company’s other products. Moreover, after clearance is given, the Company
is required to advise the FDA and these other regulatory agencies of
modifications to its products. These agencies have the power to withdraw the
clearance or require the Company to change the device or its manufacturing
process or labeling, to supply additional proof of its safety and effectiveness
or to recall, repair, replace or refund the cost of the medical device if it is
shown to be hazardous or defective. The process of obtaining clearance to market
products is costly and time-consuming and can delay the marketing and sale of
the Company’s products. Furthermore, federal, state and foreign regulations
regarding the manufacture and sale of medical devices and other products are
subject to future change. The Company cannot predict what impact, if any, such
changes might have on its business. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company is also subject to substantial federal, state and local regulation
regarding occupational health and safety, environmental protection, hazardous
substance control, waste management and disposal, among others. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Patents,
Trademarks and Proprietary Rights</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has registered trademarks, owns several patents and pending patent
applications, and has a number of patents through licenses which are used in
connection with its business. Some of these patents and licenses cover
significant product formulations, methods and designs for the Company’s
current and possible future products. The Company believes its trademarks are
important as protection for the Company’s image in the marketplace. The
Company’s success is and will continue to be dependent upon the existence
of and ability to protect its patents, trademarks and those under its licenses
and the Company intends to take such steps as are necessary to protect its
intellectual property rights. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
There
can be no assurance that the Company’s technology and proprietary rights
will not be challenged on the grounds that its products infringe on patents,
copyrights or other proprietary information owned or claimed by others, or that
others will not successfully utilize part or all of the Company’s
technology without compensation to the Company. Nor can there be any assurance
that others will not attempt to challenge the validity or enforceability of the
Company’s patents and licensed patents on the basis of prior art or
introduce competitive products. In addition to seeking patent protection for its
products, the Company also intends to protect its proprietary technologies and
proprietary information as trade secrets. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company entered into license agreements pursuant to which the Company acquired
from the licensors the exclusive worldwide rights to manufacture and sell the
Breathe Right nasal strip in its various versions and the FiberChoice®
chewable fiber tablet. Specifically, the Company has the exclusive right
pursuant to those license agreements to manufacture, sell and otherwise practice
any invention claimed in the licensors’ patents issued in any country,
including those that issue on pending applications. The Company is obligated to
pay royalties to the licensors based on sales of the products typically
including certain minimum royalty amounts in order to maintain its exclusivity. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
original licensor of the Breathe Right nasal strip has filed patent applications
with the U.S. Patent and Trademark Office seeking patent protection for
different aspects of the Breathe Right nasal strip technology. Seven of these
patent applications have resulted in issued patents in the United States,
including one with claims that cover the single-body construction of the Breathe
Right® nasal strip. The licensor of the Breathe Right nasal strip also has
one patent application which is currently pending. In addition, that licensor
has obtained patent protection on the Breathe Right nasal strip in several
foreign countries and has various applications pending which seek further patent
protection in these and a number of additional countries. The later licensor of
the Breathe Right mentholated vapor strip has filed several patent applications
with the U.S. Patent and Trademark Office as well as international patent
offices resulting in both issued and pending applications. The Company, in
addition to the patents and patent applications pending in the U.S. mentioned
above, has filed corresponding patent applications seeking protection in several
foreign countries to protect certain rights to nasal dilation technology that it
acquired. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>13 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TR>
</TABLE>
<BR>
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<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
licensor of the FiberChoice® chewable fiber tablet has one issued U.S.
Patent and other issued and pending international patents seeking patent
protection for different aspects of this product. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Although
the Company believes that its owned and licensed patents on nasal strips will
limit the ability of others to introduce competitive external nasal dilator
products in the United States, there can be no assurance that the patents on the
Breathe Right nasal strip, or any additional patents on this or other products
that may be issued in the future, if any, will effectively foreclose the
development of competitive products or that the Company will have sufficient
resources to pursue enforcement of any patents issued. The Company does,
however, intend to aggressively enforce the patents covering nasal strips and
its other products. In order to enforce any patents issued covering nasal
strips, including the Breathe Right nasal strip, or any of its other products,
the Company may have to engage in litigation which may result in substantial
cost to the Company and counterclaims against the Company. Any adverse outcome
of such litigation could have a negative impact on the Company’s business. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has engaged in litigation to enforce its patent rights relating to the
Breathe Right nasal strip. In 1999, the Company brought a suit in federal
district court to enforce one of the licensed nasal strip patents containing the
broadest claims and providing the most comprehensive protection. In the course
of this suit, the defendant requested reexamination in the U.S. Patent and
Trademark Office (the “Patent Office”) of the Company’s primary
licensed patent. On September 29, 2000, the Patent Office issued an Office
Action in Reexamination and rejected certain of the claims. Other claims that
were not subject to reexamination remain in effect. The Company has joined the
licensor in the exercise of its right to contest the action of the Patent Office
and has provided reasons that it believes establish that the claims should not
have been rejected. The Company and its licensor are also seeking to amend
certain claims to provide the Company with additional protection under the
patent. The final outcome of the reexamination by the Patent Office is therefore
uncertain. Although an adverse ruling from the Patent Office would narrow the
protection available for nasal dilators and limit the breadth of the
Company’s patent protection, the Company believes that its current
portfolio of both pending patent applications and newly issued patents will
enable it to maintain significant patent protection for its nasal strip
products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has registered its Breathe Right and FiberChoice trademarks in the
United States and in several foreign countries and is seeking further
registration of those trademarks and other trademarks. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has one patent pending for Breathe Right Snore Relief™
throat spray and two patents pending for the Breathe Right
VaporShot!™ vaporizer technology. Both Snore Relief and VaporShot!
are trademarks of the Company and their registrations are pending. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Employees</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
At
June 13, 2003, the Company had 53 full-time employees and 4 part-time employees,
of whom 15 were engaged in operations, 22 in general administration, and 20 in
marketing and sales. There are no unions representing Company employees.
Relations with its employees are believed to be positive and there are no
pending or threatened labor employment disputes or work interruptions. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>14 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TR>
</TABLE>
<BR>
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<BR>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXECUTIVE
OFFICERS OF THE COMPANY</FONT></H1>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
following table sets forth the names and ages of the Company’s current
Executive Officers together with all positions and offices held with the Company
by such executive officers. Officers are appointed to serve until the meeting of
the Board of Directors following the next Annual Meeting of Stockholders and
until their successors have been elected and have qualified. </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<th colspan=2 nowrap></th>
<th nowrap></th>
</tr>
<tr valign=Bottom>
<td nowrap align=LEFT><font face="Times New Roman, Times, serif" size="2">Name
and Age</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td nowrap align=center><font face="Times New Roman, Times, serif" size="2">Office</font></td>
</tr>
<tr valign=top>
<td nowrap align=LEFT>
<hr size="1" noshade align="left" width="95">
</td>
<td align=LEFT> </td>
<td nowrap align=center>
<hr size="1" noshade align="center" width="45">
</td>
</tr>
<tr valign=Bottom>
<td nowrap align=LEFT><font face="Times New Roman, Times, serif" size="2">Daniel
E. Cohen (50)</font></td>
<td width=100% align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td nowrap align=LEFT><font face="Times New Roman, Times, serif" size="2">Chairman
of the Board and Director</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Marti
Morfitt (45)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">President,
Chief Executive Officer and Director</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Marcia
O’Brien (47)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Interim
Chief Financial Officer</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Milton
Anderson, Ph.D (52)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Vice
President of Product Development</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">and
Regulatory</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">John
J. Keppeler (41)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Vice
President of Worldwide Sales</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Linda
Kollofski (50)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Vice
President of New Business Development</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">John
Kundtz (41)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Vice
President of Marketing</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Larry
R. Muma (52)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Vice
President of Operations</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Carol
J. Watzke (55)</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT nowrap><font face="Times New Roman, Times, serif" size="2">Vice
President of Consumer Strategy</font></td>
</tr>
</table>
<BR>
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<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Daniel
E. Cohen</I> has served as the Company’s Chairman of the Board since 1993,
its Chief Executive Officer from 1989 to June 2001 and a director since 1982. He
also served as the Company’s Treasurer from 1982 to March of 1999. Mr.
Cohen, a founder of the Company, is a medical doctor and board-certified
neurologist. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Marti
Morfitt</I> has served as the Company’s President and a director since
March 1998 and its Chief Executive Officer since June 2001. She also served as
the Company’s Chief Operating Officer from 1998 to June 2001. From
September of 1982 through February of 1998, Ms. Morfitt served in a series of
positions of increasing responsibility with The Pillsbury Company, a
Minneapolis-based manufacturer and distributor of food products, most recently
serving from May of 1997 to February of 1998 as Vice-President, Meals, and from
February 1994 to May 1997 as Vice-President, Green Giant Brands. She also serves
as a director of Graco, Inc., a Minneapolis-based manufacturer of fluid handling
systems. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Marcia
O’Brien</I> has served as the Company’s Interim Chief Financial
Officer since March 31, 2003. From 1985 to 2002, Ms. O’Brien served as
Executive Vice President and Chief Financial Officer of Signal Financial
Corporation, a $1.1 billion bank holding company based in Minnesota that was
acquired by Associated Bank in 2002. Prior to Signal, she served as a senior
manager at accounting firm KPMG, as well as a senior auditor at Deloitte &
Touche. Ms. O’Brien is a certified public accountant. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Milton
Anderson, Ph.D</I> has served as the Company’s Vice President of Product
Development and Regulatory since 1998, Vice President of Clinical and Regulatory
Affairs from 1994 to 1998, and Vice President of Research and Development from
1990 to 1994. He has served in various other capacities since joining the
Company in 1984, including Director of Applications Research and Director of
Research and Development. Prior to joining the Company in 1984, Dr. Anderson was
an Assistant Professor at the University of Minnesota’s College of
Pharmacy. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>15 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
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<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>John
J. Keppeler</I> has served as the Company’s Vice President of Worldwide
Sales since August of 1999, and has served as the Company’s Vice President
of Sales from 1998 to 1999. From November of 1986 to June of 1998, Mr. Keppeler
served in a series of sales and marketing positions of increasing responsibility
with The Pillsbury Company, a Minneapolis-based manufacturer and distributor of
food products, most recently serving as Director of Category & Customer
Development for the Green Giant and Progresso Business. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Linda
Kollofski</I> has served as the Company’s Vice President of New Business Development
since November of 2002. Prior to joining the Company in 2002, Ms. Kollofski was
principal of Linda K. Consulting, Inc. from October of 1994 to October of 2002. Ms.
Kollofski provided marketing expertise to various Pillsbury brands including
Hagen-Daz, Totino’s and Green Giant as well as to Telex Communications, Hazeldon
Foundation publishing business and the Company’s FiberChoice business. Previously,
Ms. Kollofski served in senior marketing and new business development positions with
the Hazeldon Foundation, Dow Brands, Pillsbury and Munsingwear. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>John
Kundtz</I> has served as the Company’s Vice President of Marketing since
July of 2002. From 2001 to 2002, Mr. Kundtz served as Vice President, Strategic
Marketing for Eagan, MN based West Group, a division of The Thompson
Corporation, the nation’s leading legal information company. From 1987 to
2000, Mr. Kundtz served in a series of senior marketing and management positions
with the Pillsbury Company, a Minneapolis-based manufacturer and distributor of
food products, most recently serving as Vice President of Channel Development
and Vice President of the Totinos brand. In addition, Mr. Kundtz co-founded Dogs
Howling, Inc., which operates an upscale restaurant and entertainment venue. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Larry
R. Muma</I> has served as the Company’s Vice President of Operations since
January of 2001. From May of 2000 to December of 2000, Mr. Muma served as
Director of Supply Chain for Novartis, Inc., a worldwide manufacturer and
distributor of health care and pharmaceutical products. From February of 1992 to
April of 2000, Mr. Muma served in various operations positions of increasing
responsibility with The Pillsbury Company, a Minneapolis-based manufacturer and
distributor of food products, serving from February 1994 to April of 1999 as
Vice President of Operations for Pillsbury North America and most recently from
April of 1999 to April of 2000 as Vice President of Operations Frozen Division. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Carol
J. Watzke</I> has served as the Company’s Vice President of Consumer
Strategy since July of 1998. Prior to joining the Company, Ms. Watzke served in
a series of positions of increasing responsibility since 1974 with The Pillsbury
Company, a Minneapolis-based manufacturer and distributor of food products, most
recently serving as Consumer Insights Director from May of 1997 to July of 1998
and as Market Research Director, Green Giant Brands, from 1994 to 1997. </FONT></P>
<A NAME=A002></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 2. PROPERTIES</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company leases approximately 73,000 square feet of office, manufacturing and
warehouse space in Eden Prairie, Minnesota. The lease expires in November of 2010 and
contains a renewal option. Monthly payments on the lease are $61,766. </FONT></P>
<A NAME=A003></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 3. LEGAL
PROCEEDINGS</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
From
time to time, the Company may be involved in litigation that arises through the
normal course of its business. As of the date of this Annual Report on Form
10-K, the Company is not a party to any litigation the Company believes could
reasonably be expected to have a material adverse effect on its business or
results of operations. </FONT></P>
<A NAME=A004></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
None. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>16 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 17; page: 17" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II</FONT></H1>
<A NAME=A005></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 5. MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Market
Information</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s Common Stock has been traded on The Nasdaq Stock Market under the symbol
“CNXS” since April 8, 1994. The following table sets forth the high and low last sale
prices of the Company’s Common Stock for the period indicated which cover the
Company’s fiscal years ending March 31, 2003 and December 31, 2001 and the transition
period of January 1, 2002 to March 31, 2002. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<th></th>
<th></th>
<th colspan=2></th>
<th></th>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, Serif" size=2>
</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, Serif" size=2>Fiscal
Year Ended March 31, 2003</font></b></td>
<td align=center><b><font face="Times New Roman, Times, Serif" size="1">High</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, Serif" size=2> </font></b></td>
<td align=center><b><font face="Times New Roman, Times, Serif" size="1">Low</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td align=LEFT> </td>
<td align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT> </td>
<td align=RIGHT>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT width="100%" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Quarter
Ended March 31, 2003</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">7.19</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">5.87</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Quarter
Ended December 31, 2002</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6.79</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.08</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Quarter
Ended September 30, 2002</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6.15</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">5.00</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Quarter
Ended June 30, 2002</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7.11</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.54</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2">Transition
Period</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1">High</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2"> </font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1">Low</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Quarter
Ended March 31, 2002</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6.92</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.90</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2">Fiscal
Year Ended December 31, 2001</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1">High</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="2"> </font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1">Low</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Quarter
Ended December 31, 2001</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.95</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.66</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Quarter
Ended September 30, 2001</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">5.13</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3.15</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Quarter
Ended June 30, 2001</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6.08</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.25</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Quarter
Ended March 31, 2001</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">5.13</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3.50</font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
On
June 13, 2003, the last sale price of the Common Stock was $8.40 per share. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Shareholders</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
As
of June 13, 2003, there were approximately 700 owners of record of Common Stock and an
estimated 7,000 beneficial holders whose shares were registered in the names of
nominees. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Dividends</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has never paid any dividends on its Common Stock. The Company currently intends
to retain any earnings for use in its operations and does not anticipate paying cash
dividends in the foreseeable future. The payment of dividends, if any, in the future
will be at the discretion of the Board of Directors and will depend upon, among other
things, future earnings, capital requirements, restrictions in future financing
agreements, the general financial condition of the Company and general business
considerations. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>17 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Information
Regarding Equity Compensation Plans</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
following table sets forth information regarding the Company’s equity
compensation plans in effect as of March 31, 2003. Each of the Company’s
equity compensation plans is an “employee benefit plan” as defined by
Rule 405 of Regulation C of the Securities Act of 1933. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities
Authorized for Issuance under Equity Compensation Plans</FONT></H1>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<th></th>
<th colspan=2></th>
<th colspan=3 align="left"></th>
<th></th>
<th></th>
</tr>
<tr valign=Bottom align="center">
<td align=left nowrap><b><font face="Times New Roman, Times, serif" size="1">Plan
Category</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"> Number
of shares <br>
of common stock to <br>
be issued upon <br>
exercise of <br>
outstanding options,<br>
warrants and rights <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1">
Weighted-average <br>
exercise price of <br>
outstanding options,<br>
warrants and rights <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"> Number
of shares of <br>
common stock remaining<br>
available for future <br>
issuance under equity<br>
compensation plans </font></b></td>
<td nowrap> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT> </td>
</tr>
<tr valign=Bottom>
<td width=100% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Equity
compensation plans</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT bgcolor="#c0c0c0"> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">approved
by stockholders</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,084,504</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
$4.58</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">86,710</font></td>
<td align=RIGHT bgcolor="#c0c0c0"> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Equity
compensation plans not</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">approved
by shareholders</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">-0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">-</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">-0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">- </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">-0</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">-</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Totals</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,084,504</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
$4.58</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">86,710</font></td>
<td align=RIGHT bgcolor="#c0c0c0"> </td>
</tr>
</table>
<BR>
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<TR VALIGN=TOP>
<TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
equity compensation plans approved by CNS, Inc. shareholders are the 2000 Stock
Option Plan, the 1994 Amended Stock Plan, the 1990 Stock Plan and the 1987
Employee Incentive Stock Option Plan. No shares remain available for future
awards under any of the 1994, 1990 or 1987 Plans. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company also maintains a 1989 Employee Stock Purchase Plan, participation in
which is available to substantially all of the Company’s employees.
Participating employees may purchase the Company’s common stock at the end
of each participation period at a purchase price equal to 85% of the lower of
the fair market value of the stock at the beginning or end of the period. The
six-month participation period runs from January 1 to June 30 and from July 1 to
December 31 each year. Employees may contribute up to 10% of their base
compensation to the plan subject to certain IRS limits on stock purchases
through the plan. This plan has been approved by the Company’s
shareholders. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>18 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A006></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 6. SELECTED
FINANCIAL DATA</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
following selected financial data should be read in conjunction with the Company’s
Consolidated Financial Statements and Notes thereto together with the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” all of which
are included elsewhere in this Report. The Consolidated Statements of Operations and
Balance Sheet data presented below as of and for the years ended December 31, 1998
through March 31, 2003 have been derived from the Company’s Consolidated Financial
Statements included elsewhere in this Report, which have been audited by KPMG LLP,
independent certified public accountants. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>FINANCIAL HIGHLIGHTS</B>
<BR>(In thousands, except per share amounts) </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<th></th>
<th colspan=3 align="left"></th>
<th colspan=3 align="left"></th>
<th colspan=3 align="left"></th>
<th colspan=3 align="left"></th>
<th colspan=2 align="left"></th>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14"><b><font face="Times New Roman, Times, serif" size="1">Years
ended</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Mar
31<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Dec
31<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Dec
31<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Dec
31<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Dec
31</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td colspan="14" align=left>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2003<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001 <br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">1999<br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">1998</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td colspan="14" align=left>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td width="40%" align=LEFT><font face="Times New Roman, Times, serif" size="2">Net
sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 79,075</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 76,242</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 61,777</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 38,409</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 49,037</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
income (loss)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,639</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1,225</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(17,843</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(18,696</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">701</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Net income
(loss)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,516</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(15,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(13,756</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,982</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Diluted
net income (loss) per share</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.46</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.01</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (1.09</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (0.89</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.16</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Working
capital</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 45,266</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 32,712</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 32,507</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 50,183</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 72,025</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Total assets</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">65,375</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">50,618</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">56,344</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">65,337</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">84,963</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Stockholders’
equity</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">49,054</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">36,612</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">36,937</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">53,584</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">75,866</font></td>
</tr>
</table>
<BR>
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<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>19 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<TD>
<BR>
<A NAME=A007></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND</U><BR>
<U>RESULTS OF OPERATIONS</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
following discussion of the financial condition and results of operations should
be read in conjunction with the Company’s audited consolidated financial
statements and notes thereto appearing elsewhere in this Annual Report. Fiscal
2001 and 2000 amounts have been restated to give effect to the adoption on
January 1, 2002 of the provisions of EITF Issue No. 01-9. These new accounting
standards had no impact on the Company’s net income; however, they did
require reclassification of certain promotional costs. In this discussion, our
fiscal years ended March 31, 2003; December 31, 2001 and 2000 are referred to as
fiscal year 2003, 2001 and 2000, respectively. In the opinion of the
Company’s management, the quarterly unaudited information set forth below
has been prepared on the same basis as the audited financial information, and
includes all adjustments (consisting only of normal, recurring adjustments)
necessary to present this information fairly when read in conjunction with the
Company’s consolidated financial statements and notes thereto. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Overview</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company was founded in 1982. From 1987 until 1995, the Company designed,
manufactured and marketed computer-based diagnostic devices for sleep disorders.
In 1995, the Company divested itself of the assets related to its sleep
disorders business to focus on the Breathe Right® nasal strip. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company obtained the exclusive license to manufacture and sell the Breathe Right
nasal strip in 1992 and received FDA clearance in October 1993 to market the
Breathe Right nasal strip as a product that improves nasal breathing. The
Company has also received FDA clearance to market the Breathe Right nasal strip
for the reduction or elimination of snoring, for the temporary relief of nasal
congestion and for the temporary relief of breathing difficulties due to a
deviated nasal septum. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
August 1995, the Company signed an exclusive international distribution
agreement with the 3M Company (“3M”) to market Breathe Right nasal
strips outside the U.S. and Canada. On September 30, 1999, the Company and 3M
amended the distribution agreement in a manner that enabled the Company to
regain control of the marketing, sales and distribution of Breathe Right nasal
strips in international markets. In exchange for the one-time contract
termination fee, the international distribution agreement with 3M terminated on
June 30, 2000. During 2000, the Company established an international
distribution network that consists of both sales representatives and reselling
distributors and reintroduced nasal strips in Europe, Japan and Australia. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
July 1996, U.S. Utility Patents were issued covering the basic invention of the
Breathe Right nasal strip and additional elements incorporated in the product.
During 1997, the Company became aware of a foreign reference to a nasal dilator,
not commercially available. During 2000, the U.S. Patent and Trademark Office
(“Patent Office”) reexamined the Company’s primary licensed
patent and rejected certain claims. The Company has joined its licensor in the
exercise of its right to contest the action of the Patent Office. The Company
and its licensor have amended and are also seeking to further amend certain
claims to provide the Company with additional protection under the patent. The
final outcome of the reexamination is uncertain. Although an adverse ruling
could narrow the range of protection available for nasal dilators and limit the
breadth of the Company’s patent protection, the Company believes that its
current portfolio of both pending patent applications and issued patents will
enable it to maintain significant patent protection for its nasal strip
products. </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>20 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Beginning
in 1998, the Company strengthened its management team to add consumer packaged
goods and new products experience. The Company also formed teams to focus on
individual product lines. The Company completed positioning research work to
expand the Breathe Right® brand and developed a road map for new product
development. During 1999 and 2000, the Company invested aggressively in
marketing, selling and product development expenses to build the Breathe Right
brand and launch additional products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
2000, the Company expanded its domestic Breathe Right product line to include
nasal strips for colds with mentholated vapors that are sized for the entire
family and nasal strips for children that are available in multiple colors.
Breathe Right nasal strips for colds with mentholated vapors were introduced in
selected overseas markets in 2001. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
During
2000, the Company launched FiberChoice® chewable fiber tablets. The tablets
are positioned in the bulk fiber supplement market and give the Company an entry
into the digestive health products market. FiberChoice chewable fiber tablets
can be taken without water and have been clinically proven to be as effective as
powder alternatives. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
2001, the Company streamlined and realigned the Company’s resources to
better match its strategic goals and to focus on building the core businesses.
The Company recorded a special charge related to costs associated with this
plan. Approximately 25% of the workforce, from throughout the organization, was
eliminated. These cost-cutting actions were expected to result in annual savings
of approximately $2 to $2.5 million. The cost savings relating to this plan were
realized beginning in July of 2001. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
2002, the Company changed its fiscal year-end from December 31 to March 31. The
change in its fiscal year end aligns the Company’s financial reporting with
its business and customer planning cycle. The Company believes this change
provides a clearer picture of the Company’s financial results by including
an entire cough/cold season within the same fiscal year. The first period to be
reported in 2002 was a three-month stub period ending March 31, 2002. Fiscal
2003 is from April 1, 2002 through March 31, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
fiscal 2003, the Company continued to expand its Breathe Right product line by
launching Breathe Right Snore Relief™ throat spray. Snore Relief spray
lubricates and soothes dry throats, while a natural astringent firms loose
tissue to reduce the vibrations that cause snoring. Breathe Right strips open
nasal passages and reduce the mouth breathing that leads to snoring. These two
products provide a portfolio of solutions for snoring. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Accounting
Policies</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management must
make decisions which impact the reported amounts and the related disclosures.
Such decisions include the selection of the appropriate accounting principles to
be applied and the assumptions on which to base accounting estimates. In
reaching such decisions, management applies judgment based on its understanding
and analysis of the relevant circumstances. Note 1 to the consolidated financial
statements provides a summary of the significant accounting policies followed in
the preparation of the financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s critical accounting policies include the following: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Sales
Returns and Other Allowances, and Allowance for Doubtful Accounts.</I> Revenue
from sales is recognized at the time products are shipped less estimated sales
returns, certain promotional costs and other allowances. Management must make
estimates of potential future product returns and other allowances related to
current period revenue. Management analyzes historical returns, current trends,
and changes in customer and consumer demand when evaluating the adequacy of the
sales returns and other allowances. The Company has established a reserve of
$1.4 million for future sales returns and other allowances as of March 31, 2003.
Similarly, management must make estimates of the uncollectability of accounts
receivables. Management specifically analyzes customer account balances,
historical bad debts, current economic trends and changes in the timing of
customer payments. The balance of accounts receivable was $11.0 million, net of
the allowance for doubtful accounts of $330,000 as of March 31, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>21 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 22; page: 22" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Inventory
Valuation.</I> Inventory is valued at the lower of cost, determined on a
first-in, first-out basis (FIFO), or market. The Company analyzes the cost and
the market value of inventory items and establishes the appropriate valuation
reserves. The Company has established a reserve of $667,000 as of March 31,
2003. Management believes that the inventory valuation results in carrying
inventory at the lower of cost or market. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Accounting
for Income Taxes.</I> As part of the process of preparing financial statements,
the Company is required to estimate income taxes, both state and federal. This
process involves management estimating the actual current tax exposure together
with assessing temporary differences resulting from different treatment for tax
and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included within the consolidated balance sheet.
Management must then assess the likelihood that deferred tax assets will be
utilized to offset future taxable income during the periods in which these
temporary differences are deductible. Based on the level of historical taxable
income and projections of future taxable income for the periods, in which the
deferred tax assets are deductible, management believes that it is more likely
than not the Company will realize the benefits of these deductible differences.
Accordingly, the Company has eliminated the valuation allowance of $9.1 million
against the net deferred tax assets as of March 31, 2002. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Valuation
of Product Rights.</I> Management assesses the impairment of product rights
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors that are considered important for the assessment
include significant underperformance of a product line relative to projected or
historical results, significant change in the market in relation to competitive
products and significant negative industry or economic trends. Management
currently does not believe that it is necessary to record an impairment charge
at this time and that the carrying value of these assets will be recoverable. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Operating Results</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
On
January 23, 2002, the Company changed its fiscal year-end from December 31 to
March 31. The first period to be reported in 2002 was a three-month stub period
ended March 31, 2002. The change in fiscal year-end aligns the Company’s
financial reporting period with its business and customer-planning cycle. The
Company believes this change provides a clearer picture of the Company’s
financial results by including an entire cough/cold season within the same
fiscal year. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
following discussion of historical operating results compares the fiscal year
ended March 31, 2003 to the previous fiscal year ended December 31, 2001 and
compares the fiscal year ended December 31, 2001 to the fiscal year ended
December 31, 2000. Additionally, the three-month transition period ended March
31, 2002 is compared to the same unaudited period in the prior year. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
tables below set forth certain selected financial information of the Company and
the percentage of net sales represented by certain items included in the
Company’s statements of operations for the periods indicated. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>22 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 23; page: 23" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Certain
prior period amounts have been reclassified to conform to the current
period’s presentation. These reclassifications had no impact on the
operating net income (loss) or net income (loss) for 2001 and 2000. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15" nowrap><b><font face="Times New Roman, Times, serif" size="1">Three
Months Ended</font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">
Year <br>
Ended</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Mar
31,<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Jun
30,<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Sep
30,<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Dec
31,<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Mar
31,<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">
Mar 31,<br>
</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="17" nowrap>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2003 <br>
</font></b></td>
<td nowrap> </td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">
2003 </font></b></td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="17" nowrap>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="17" nowrap valign="top"><b><font face="Times New Roman, Times, serif" size="1">(In
thousands)</font></b></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td width=35% align=LEFT><font face="Times New Roman, Times, serif" size="2">Domestic
net sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 15,195</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 12,711</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 15,346</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 19,088</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 18,117</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 65,262</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">International
net sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,940</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,812</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,040</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,826</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,135</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,813</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">19,135</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,523</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">17,386</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">25,914</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">21,252</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">79,075</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,390</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,319</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,912</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,119</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,642</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">25,992</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,745</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,204</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">11,474</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">17,795</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,610</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">53,083</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,796</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,115</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,881</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,407</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">10,527</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">30,930</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Selling,
general and</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> administrative</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,213</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,763</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,015</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,204</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,532</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,514</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,009</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,878</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,896</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16,611</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,059</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">43,444</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Operating
income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">736</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,326</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,578</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,184</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">551</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,639</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">272</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">229</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">240</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">240</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">130</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">839</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Income
before income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,008</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,555</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,818</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,424</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">681</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">10,478</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Income
tax expense (benefit)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(9,126</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,000</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,300</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">550</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">112</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,962</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 10,134</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 1,555</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,518</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 874</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 569</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 6,516</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
</tr>
</table>
<BR>
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<TR VALIGN=TOP>
<TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>23 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Three
Months Ended</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Year
<br>
Ended</font></b></td>
</tr>
<tr valign=Bottom>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Mar
31,<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Jun
30,<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Sep
30,<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Dec
31,<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Dec 31,</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15" valign="top"><b><font face="Times New Roman, Times, serif" size="1">(In
thousands)</font></b></td>
</tr>
<tr valign=Bottom>
<td width=45% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Domestic
net sales</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
18,727</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
11,448</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
13,709</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
16,344</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
60,228</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">International
net sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,741</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,922</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,340</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,011</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16,014</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Net
sales</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">23,468</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,370</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">17,049</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">21,355</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">76,242</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,706</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,557</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,059</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,376</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">27,698</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,762</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">8,813</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">10,990</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">13,979</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">48,544</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,935</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,529</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,175</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,617</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">34,256</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Selling,
general and administrative</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4,766</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,519</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,247</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,051</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,583</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Special
charges</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,100</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(170</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">930</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">18,701</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">12,148</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6,422</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">12,498</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">49,769</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Operating
income (loss)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(3,939</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(3,335</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,568</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,481</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1,225</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">362</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">345</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">269</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">330</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">1,306</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Income
(loss) before income taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(3,577</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2,990</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,837</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,811</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Income
taxes</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
income (loss)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (3,577</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (2,990</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 4,837</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 1,811</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td colspan=2 align=left> </td>
<td></td>
<td colspan=2 align=left> </td>
<td></td>
<td colspan=2 align=left> </td>
<td></td>
<td colspan=2 align=left> </td>
<td></td>
<td colspan=2 align=left> </td>
<td></td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Three
Months Ended</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Year
<br>
Ended</font></b></td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Mar
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Jun
30,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Sep
30,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Dec
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Dec 31,</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="15" valign="top"><b><font face="Times New Roman, Times, serif" size="1">(In
thousands)</font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Domestic
net sales</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
13,210</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
11,210</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
14,899</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
16,408</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
55,727</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">International
net sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">286</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">598</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,588</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,578</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,050</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Net
sales</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">13,496</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">11,808</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">17,487</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">18,986</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">61,777</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,846</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,110</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,875</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,076</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">24,907</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">8,650</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6,698</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">10,612</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">10,910</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">36,870</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">10,920</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,503</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,756</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16,400</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">39,579</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Selling,
general and administrative</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,915</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,470</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,756</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,993</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">15,134</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,835</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,973</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">11,512</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">20,393</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">54,713</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Operating
loss</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(6,185</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(1,275</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(900</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(9,483</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(17,843</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">498</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">566</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">507</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">612</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,183</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Loss
before income taxes</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(5,687</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(709</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(393</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(8,871</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(15,660</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Income
taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Net
loss</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(5,687</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(709</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(393</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(8,871</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(15,660</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>24 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
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<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="9" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Three
Months Ended</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">
Year <br>
Ended</font></b></td>
</tr>
<tr valign=Bottom>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Mar
31,</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Jun
30,</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Sep
30,</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Dec
31,</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Mar
31,</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">
Mar 31,</font></b></td>
</tr>
<tr valign=Bottom>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11" nowrap align="center">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2002 <br>
</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2003 <br>
</font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2003 </font></b></td>
</tr>
<tr valign=Bottom>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11" nowrap align="center">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td width=100% align=LEFT><font face="Times New Roman, Times, serif" size="2">Net
sales</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">33.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">36.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">34.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">31.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">31.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">32.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">66.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">63.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">66.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">68.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">68.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">67.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">46.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">28.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">51.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">49.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">39.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Selling,
general and</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> administrative</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">19.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">17.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">15.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">62.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">47.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">33.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">64.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">66.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">54.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Operating
income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">32.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Income
before income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> taxes</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">17.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">33.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Income
tax expense (benefit)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(47.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">52.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">10.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">20.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="7" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Three
Months Ended</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Year
<br>
Ended</font></b></td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Mar
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Jun
30,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Sep
30,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Dec
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Dec 31,</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="10">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2001<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="10">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td width=100% align=LEFT><font face="Times New Roman, Times, serif" size="2">Net
sales</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">37.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">38.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">35.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">34.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">36.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">62.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">61.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">64.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">65.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">63.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">59.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">52.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">18.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">45.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">44.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Selling,
general and administrative</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">20.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">24.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">19.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">19.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Special
charges</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(0.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">79.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">84.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">37.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">58.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">65.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Operating
income (loss)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(16.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(23.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">26.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Income
(loss) before income taxes</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">15.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">20.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">28.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Income
taxes</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
income (loss)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(15.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(20.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">28.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="7" nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Three
Months Ended</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Year
<br>
Ended</font></b></td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Mar
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Jun
30,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Sep
30,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">Dec
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">Dec 31,</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="10">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align="center"><b><font face="Times New Roman, Times, serif" size="1">2000<br>
</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap align=center><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="10">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT width="100%"><font face="Times New Roman, Times, serif" size="2">Domestic
net sales</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">International
net sales</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
sales</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">100.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">35.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">43.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">39.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">42.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">40.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">64.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">56.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">60.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">57.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">59.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">80.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">38.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">44.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">86.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">64.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Selling,
general and administrative</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">29.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">29.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">21.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">21.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">24.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">109.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">67.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">65.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">107.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">88.6</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Operating
loss</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(45.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(10.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(5.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(49.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(28.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4.8</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2.9</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.5</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Loss
before income taxes</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(42.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(6.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(46.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(25.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Income
taxes</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
loss</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(42.1</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(6.0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2.3</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(46.7</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(25.4</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)%</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TD>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>2003 Compared to 2001</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Net
Sales.</I> Net sales for 2003 of $79.1 million increased 3.8% over 2001 sales of $76.2
million. Domestic sales of Breathe Right® products grew to $57.9 million,
representing an increase of 7.6% over 2001 sales of $53.8 million.
FiberChoice® tablet sales for 2003 grew to $7.1 million from $6.4 million for the
previous year, representing an increase of 10.9%, primarily as the result of expanding
the advertising support to thirteen U.S. markets. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
International
sales decreased by 13.8% to $13.8 million dollars compared to 2001 sales of $16.0
million. This decrease resulted from some international partners decreasing their
inventory levels. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has experienced in the past, and expects that it will continue to experience in
the future, quarterly fluctuations in both domestic and international sales and
earnings. These fluctuations are due in part to advertising levels and seasonality
of sales as described below, as well as increases and decreases in purchases by
distributors and retailers in anticipation of future demand by consumers. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Gross
Profit.</I> Gross profit was $53.1 million for 2003 compared to $48.5 million for 2001.
Gross profit as a percentage of net sales increased to 67.1% for 2003 compared to 63.7%
for 2001. The improvement in gross profit is due to lower product costs on products sold. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Advertising
and Promotion.</I> Advertising and promotion expenses were $30.9 million for 2003 compared
to $34.3 million for 2001. Advertising and promotion expenses as a percentage of net
sales decreased to 39.1% in 2003 from 44.9% in 2001. This decrease in spending rate was
the result of a planned lower support level for FiberChoice tablets. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Selling,
General and Administrative.</I> Selling, general and administrative expenses were
$12.5 million for 2003 compared to $14.6 million for 2001. Selling, general and
administrative expenses as a percentage of net sales decreased to 15.8% for 2003
compared to 19.1% for 2001. This decrease was primarily the result of the corporate
restructure that included a workforce reduction and that enabled the Company to
streamline its resources to focus on building the core businesses. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Investment
Income.</I> Investment income was $.8 million for 2003 compared to $1.3 million for
2001. The decrease in investment income was primarily due to a decrease in market
interest rates. The Company also incurred $100,000 of interest expense relating to an
IRS audit in 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>26 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 27; page: 27" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Income
Tax Expense (Benefit).</I>Income tax expense was $4.0 million for 2003 compared to $0
for 2001. The Company did not recognize an income tax benefit in 2001 due to the
increase in net income before tax, offset by changes in deferred tax assets, including
utilization of net operating loss carryforwards for which a full valuation allowance
had been established. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>2001 Compared to 2000</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Net
Sales.</I> Net sales for 2001 of $76.2 million showed a 23.3% increase over 2000 sales of
$61.8 million. Domestic sales of Breathe Right® products grew to $53.8
million, representing an increase of 8.9% over 2000 sales of $49.4 million. FiberChoice® tablet
sales for 2001 of $6.4 million remained flat from sales of $6.4 million in 2000. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
International
sales increased by 162.3% to $16.0 million compared to 2000 sales of $6.1 million.
This increase was the result of a full year of distribution in Japan, Europe, and
Australia as well as the launch of Breathe Right nasal strips for colds with mentholated
vapors in selected countries. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Gross
Profit.</I> Gross profit was $48.5 million for 2001 compared to $36.9 million for 2000.
Gross profit as a percentage of net sales increased to 63.7% for 2001 compared to 59.7%
for 2000. Gross profit in 2000 was unfavorably impacted by the lower gross profit on
10-count FiberChoice chewable tablets, disposal of an excess inventory of pillow
covers and higher costs associated with expediting inventory purchases and deliveries. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Advertising
and Promotion.</I> Advertising and promotion expenses were $34.3 million for 2001 compared
to $39.6 million for 2000. Advertising and promotion expenses as a percentage of net
sales decreased to 44.9% in 2001 from 64.1% in 2000. This decrease in spending rate
was the result of a planned lower support level for FiberChoice tablets in the year
following its introduction and the elimination of less effective expenditures for the
Breathe Right brand. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Selling,
General and Administrative.</I> Selling, general and administrative expenses were
$14.6 million for 2001 compared to $15.1 million for 2000. Selling, general and
administrative expenses as a percentage of net sales decreased to 19.1% compared to
24.5% for 2000. This decrease was primarily the result of the corporate restructure
that included a workforce reduction that enabled the Company to streamline its resources
to focus on building the core businesses. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Special
Charges.</I> The Company recorded a special charge of $930,000 in 2001 for the costs of
implementing the Company’s corporate restructuring plan to streamline and realign the
Company’s resources. The charge was primarily for severance benefits. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Investment
Income.</I> Investment income was $1.3 million for 2001 compared to $2.2 million for 2000.
The decrease in investment income was the result of a decrease in funds invested and
lower market interest rates. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Income
Tax Expense (Benefit).</I> There was no income tax benefit for 2001 and 2000 due to fully
reserving for tax loss carryforwards for which a full valuation allowance had been
established. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>27 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 28; page: 28" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Three Months ended March
31, 2002 Compared to the Three Months ended March 31, 2001 (unaudited)</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Net Sales</I>. Net sales for
the March 2002 quarter were $19.1 million compared to $23.5 million (unaudited)
for the 2001 quarter, representing a decrease of 18.7%. Domestic sales for the
March 2002 quarter were $15.2 million compared to $18.7 million (unaudited) for
the same quarter of 2001. As anticipated, sales for the 2002 March quarter were
comparably lower due to the significant sales boost generated by the
introduction of mentholated strips in 2001, as well as industry-wide slower
sales of cough/cold products during the 2001/2002 cough/cold season. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
International
sales were $3.9 million for the March 2002 quarter compared to $4.7 million
(unaudited) for the same quarter of 2001. Sales for the 2002 March quarter were
lower due to the timing of purchases by international distributors. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Gross
Profit.</I> Gross profit was $12.7 million for the March 2002 quarter compared to $14.8
million (unaudited) for the same quarter of 2001. Gross profit as a percentage of
net sales increased to 66.6% for the March 2002 quarter compared to 62.9% (unaudited) for
the same quarter of 2001. The lower gross profit percentage in 2001 resulted primarily
from higher deductions from sales for promotional expenditures in conjunction with the
launch of new products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Advertising
and Promotion.</I> Advertising and promotion expenses were $8.8 million for the March 2002
quarter compared to $13.9 million (unaudited) for the same quarter in 2001. The
decrease resulted primarily from elimination of less effective advertising expenditures
and the planned reduction in spending for FiberChoice® tablets in the year following
the launch. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Selling,
General and Administrative.</I> Selling, general and administrative expenses were $3.2
million for the March 2002 quarter compared to $4.8 million (unaudited) for the same
quarter of 2001. This decrease was primarily the result of the June 2001 corporate
restructuring that included a workforce reduction and that has enabled the Company to
streamline its resources to focus on building the core businesses. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Investment
Income.</I> Investment income was $272,000 for the March 2002 quarter compared to
$362,000 (unaudited) for the same quarter of 2001. This decrease was primarily the
result of a decrease in market interest rates. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Income
Tax Expense (Benefit).</I> Income tax benefit was $9.1 million for the March 2002 quarter
compared to $0 (unaudited) taxes for the same quarter of 2001. The Company
recognized a tax benefit of $9.1 million during the March quarter of 2002 as a result of
reinstating net deferred tax assets, including the benefit of net operating loss
carryforwards. Management believes, based on the level of historical taxable income and
projections of future taxable income for the periods in which the deferred tax assets are
deductible, that it is more likely than not the Company will realize the benefits of the
deductible differences. There were no income taxes recognized for the March quarter of
2001 as the Company was in a net operating loss carryforward position. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Seasonality</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company believes that a portion of Breathe Right® nasal strip use is for the
temporary relief of nasal congestion and congestion-related snoring. Sales of
nasal congestion remedies are higher during the fall and winter seasons because
of increased use during the cough/cold season. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>28 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 29; page: 29" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Liquidity and
Capital Resources</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
At
March 31, 2003, the Company had cash, cash equivalents and marketable securities
of $41.6 million and working capital of $45.3 million. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Operating
Activities.</I> The Company had cash provided by operations of $19.2 million in 2003
primarily due to net income for the year, an increase in operating liabilities and a
decrease in deferred income taxes. The Company used cash in operations of $2.8 million in
2001 primarily due to a decrease in operating liabilities. The Company used cash in
operations of $4.4 million in 2000 primarily due to the net loss for the year, partially
offset by an increase in operating liabilities. The Company used cash in operations of
$53,000 for the three months ended March 31, 2002 compared to $11.4 million (unaudited)
for the same quarter in 2001. The use of cash in 2002 was the result of net income offset
primarily by the non-cash deferred income tax benefit and a decrease in operating
liabilities. The use of cash in the March quarter of 2001 was due to the net loss for the
quarter along with a decrease in operating liabilities. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Investing
Activities.</I> Purchases of marketable securities exceeded sales and maturities by $5.9
million in 2003. Marketable securities purchased consisted primarily of U.S. Government
obligations. Sales and maturities of marketable securities exceeded purchases by $10.6
million in 2001. Net proceeds were used primarily to fund the cash used in operations and
to purchase treasury shares. Sales and maturities of marketable securities exceeded
purchases by $8.8 million in 2000. Net proceeds were used to fund the cash used in
operations, purchase property and equipment and purchase treasury shares. Purchases of
marketable securities exceeded sales and maturities by $372,000 for the three months
ended March 31, 2002. Sales and maturities of marketable securities exceeded purchases by
$10.5 million (unaudited) for the March 31, 2001 quarter. Net proceeds were used
primarily to fund the cash used in operations. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company purchased $60,000 and $394,000 of property and equipment in 2003 and 2001,
respectively, primarily associated with upgrading personal computers and software. The
Company purchased $2.0 million of property and equipment in 2000 primarily associated
with the Company’s move to different facilities. The Company purchased $8,000 and
$255,000 (unaudited) of property and equipment in the March 2002 and March 2001 quarter,
respectively. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company purchased $510,000; $357,000 and $141,000 of product rights during the years
ended March 31, 2003; December 31, 2001 and 2000, respectively. The Company purchased
$148,000 (unaudited) of product rights during the quarter ended March 31, 2001. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Financing
Activities.</I> The Company purchased 458,000 shares of its common stock for $2.8
million in 2003 and purchased 202,000 shares for $1.0 million in 2001. The Company
purchased 482,000 shares of its common stock for $2.4 million during the quarter ended
March 31, 2002. These treasury shares will be used to meet the Company’s obligations
under its employee stock purchase plan and stock option plans, and for possible future
acquisitions. The Company received $949,000 in 2003 and $288,000 in 2001 from the
exercise of stock options and issuance of stock under the employee stock purchase plan.
The Company received $72,000 from the exercise of stock options during the quarter ended
March 31, 2002. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>29 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 30; page: 30" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Significant
Agreements and Lease Obligations. </I>The Company has entered into certain
agreements and leases in order to secure product rights and office space. The
following is a summary of significant agreements and lease obligations: </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td colspan="2" align=left nowrap><b><font face="Times New Roman, Times, serif" size="1">Year
ending March 31,</font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">
Minimum <br>
Royalties<br>
</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">Operating<br>
Leases <br>
</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">Total</font></b></td>
</tr>
<tr valign=top>
<td colspan="11" align=RIGHT>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2004</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 795</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 766</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 1,561</font></td>
</tr>
<tr valign=Bottom>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2005</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">795</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">741</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,536</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2006</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">795</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">741</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,536</font></td>
</tr>
<tr valign=Bottom>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2007</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">795</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">741</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,536</font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2008</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">795</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">741</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,536</font></td>
</tr>
<tr valign=Bottom>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">Later
years</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,977</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=top>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left colspan="2">
<hr NOSHADE size=1>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">Total</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 5,707</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=top>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left colspan="2">
<hr NOSHADE size=1>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company has agreements that exclusively license intellectual property rights for
certain products. Royalties due under these agreements are based on various
percentages of net sales. The licensing agreements are valid for the lives of
the related patents, however, they may be terminated earlier under certain
conditions. Total minimum royalties are not determinable since royalties
continue for the life of current and potential future patents related to the
licensed intellectual property. The Company has entered into operating leases
for office space and office equipment. Leases expire at various dates beginning
in 2003 through 2010. Management is not aware of any significant agreements or
obligations that would have a material negative impact upon the Company’s
short-term or long-term liquidity. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company believes that its existing funds will be sufficient to support its planned
operations for the foreseeable future. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Recent
Accounting Pronouncements</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
June 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with
Exit or Disposal Activities.” This statement provides guidance on accounting for
restructuring activities. This statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. The provisions of the statement are effective for exit or disposal
activities initiated after December 31, 2002, with early adoption encouraged. The
Company will apply the provisions of SFAS No. 146 for exit or disposal activities
initiated after December 31, 2002, as required. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
December 2002, the FASB issued SFAS No. 148, “Accounting for Stock Based
Compensation.” This statement supercedes SFAS No. 123, “Accounting for Stock
Based Compensation”. This statement provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
compensation. In addition, the statement amends disclosure requirements to require
prominent disclosures in annual and interim financial statements about the method of
accounting used for stock-based employee compensation and the effect of the method used
on reported results. The interim disclosure provisions became effective for the
Company for the interim period beginning January 1, 2003. The annual disclosure
provisions became effective for the Company for the year ended March 31, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others” which requires certain guarantees to be recorded at fair value. This
Interpretation also requires a guarantor to make certain disclosures about
guarantees, including product warranties, even when the likelihood of making any
payments under the guarantee is remote. The Company has adopted the disclosure
requirements in this Interpretation as of January 1, 2003, as required. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>30 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 31; page: 31" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
In
May 2003, the FASB issued SFAS No.150, “Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity” which
requires that certain types of financial instruments with characteristics of a
liability be presented as a liability. The Company is required to implement SFAS
No. 150 beginning with the quarter ending June 30, 2003. Management does not
expect this statement to have a material impact on the Company’s
consolidated financial position. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Forward
Looking Statements</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Certain
statements contained in this Annual Report and other written and oral statements made
from time to time by the Company do not relate strictly to historical or current facts
but provide current expectations or forecasts of future events. As such, they are
considered “forward-looking statements” under the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties that could cause
actual results to differ materially from those presently anticipated or
projected. Such forward-looking statements can be identified by the use of terminology
such as “may,” “will,” “expect,” “plan,”
“intend,” “anticipate,” “estimate,” or
“continue” or similar words or expressions. It is not possible to foresee or identify
all factors affecting the Company’s forward-looking statements and investors
therefore should not consider any list of factors to be an exhaustive statement of all
risks, uncertainties or potentially inaccurate assumptions. Factors that could cause
actual results to differ from the results discussed in the forward-looking statements
include, but are not limited to, the following factors: (i) the Company’s revenue and
profitability is reliant on sales of Breathe Right® nasal strips; (ii) the Company
currently has a seasonal pattern of sales that is typically higher in the third and
fourth quarters of each fiscal year due to increased nasal strip usage during the
cough/cold season and its revenues and earnings may be impacted by the severity of such
season; (iii) the Company’s success and future growth will depend significantly on its
ability to effectively market Breathe Right nasal strips and upon its ability to
develop and achieve markets for additional products; (iv) the Company’s competitive
position will, to some extent, be dependent on the enforceability and
comprehensiveness of the patents on its Breathe Right nasal strip technology which have
been, and in the future may be, the subject of litigation and could be narrowed as a
result of the outcome of the reexamination of one such patent by the United States Patent
and Trademark Office; (v) the Company has faced and will continue to face challenges in
successfully developing and introducing new products; (vi) the Company operates in
competitive markets where recent and potential entrants into the nasal dilator segment
pose competitive challenges; (vii) the Company is dependent upon contract
manufacturers for the production of all of its products; and (viii) the
Company currently purchases its nasal strip products from different contract
manufacturers that obtain the raw materials from a single supplier. </FONT></P>
<A NAME=A008></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s market risk exposure is primarily interest rate risk related to its cash and
cash equivalents and investments in marketable securities. The Company has
investment guidelines which limit the types of securities in which it may invest as
well as the length of maturities. No investment may exceed 36 months in maturity and
the weighted average life of the portfolio may not exceed 18 months. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
table below provides information about the Company’s cash and cash equivalents and
marketable securities as of March 31, 2003: </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=500>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"><b><font face="Times New Roman, Times, serif" size="1">(In
Thousands)</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Cost</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Fair
Value</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td width=70% align=LEFT><font face="Times New Roman, Times, serif" size="2">Due
within one year</font></td>
<td align=left width="2%"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT width="8%"><font face="Times New Roman, Times, serif" size="2"> 27,056</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left width="2%"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT width="8%"><font face="Times New Roman, Times, serif" size="2"> 27,112</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Due after
one year through three years</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,237</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,503</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 41,293</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 41,615</font></td>
</tr>
<tr valign="top">
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=2 align=left>
<hr NOSHADE size=2>
</td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>31 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 32; page: 32" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A009></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Consolidated Balance Sheets of the Company as of March 31, 2003 and 2002, and the
related Consolidated Statements of Operations, Stockholders’ Equity and Comprehensive
Income (Loss), and Cash Flows for each of the years ended March 31, 2003, December
31, 2001 and December 31, 2000 and for the three months ended March 31, 2002 and 2001
(unaudited), the Notes to the Consolidated Financial Statements and the Report of KPMG
LLP, independent certified public accountants, are listed under Item 16 of this Report. </FONT></P>
<A NAME=A010></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND</U><BR>
<U>FINANCIAL DISCLOSURE</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
None. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III</FONT></H1>
<A NAME=A011></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Directors</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
following sets forth certain information with respect to the Company’s directors: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Daniel
E. Cohen</I>, 50, has served as the Company’s Chairman of the Board since 1993 and has
served as a director of the Company since its formation in 1982. Mr. Cohen also served
as the Company’s Chief Executive Officer from 1989 to June 2001 and as Treasurer
from 1982 to March 1999. Mr. Cohen, a founder of the Company, is a medical doctor
and board-certified neurologist. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Patrick
Delaney</I>, 60, has served as a director of the Company since 1983 and as the Company’s
Secretary since 1995. In December 2002, Mr. Delaney retired as a partner in the
Minneapolis-based law firm of Lindquist & Vennum P.L.L.P., counsel to the Company.
He was in the private practice of law since 1967. He is also a director of
Community First Bankshares, Inc., a multi-bank holding company. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>R.
Hunt Greene</I>, 52, has served as a director of the Company since 1985. Mr.
Greene has been an investment banker for over twenty years. He is presently
Managing Director and Member of Greene Holcomb & Fisher LLC
(“GH&F”), a Minneapolis investment banking firm that was formed in
1995. GH&F has provided the Company with certain financial advisory and
investment banking services from time to time since 1996. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Andrew
J. Greenshields</I>, 65, has served as a director of the Company since 1986. Mr.
Greenshields has been President of Pathfinder Ventures, Inc., Minneapolis,
Minnesota, since 1980. He is also a general partner of Pathfinder Venture Capital
Fund III and a general partner of Spell Capital Partners, LP, both of which are
Minneapolis-based financial limited partnerships. Mr. Greenshields is also a director
of Aetrium, Inc., a manufacturer of semi-conductor handling equipment. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>H.
Robert Hawthorne</I>, 58, has served as a director of the Company since 1999.
Mr. Hawthorne served as Chief Executive Officer of Ocean Spray Cranberries, Inc.,
a Boston-based food and beverage company, from February 2000 to November 2002.
From 1997 to 1999, Mr. Hawthorne served as a director, President and Chief
Executive Officer of Select Comfort Corporation, a Minneapolis-based company
that manufactures air beds and sleep related products. From 1986 to 1997, Mr.
Hawthorne served in a series of positions of increasing responsibility with The
Pillsbury Company, a Minneapolis-based manufacturer and distributor of food
products, most recently serving from February 1992 to December 1997 as President
of The Pillsbury Brands Group, a subsidiary of The Pillsbury Company. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>32 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 33; page: 33" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Marti
Morfitt</I>, 45, has served as the Company’s President and Chief Executive
Officer since June 2001, its President and Chief Operating Officer from March
1998 to June 2001. Ms. Morfitt has served as a director of the Company since
1998. From September 1982 to February 1998, Ms. Morfitt served in a series of
positions of increasing responsibility with The Pillsbury Company, a
Minneapolis-based manufacturer and distributor of food products, most recently
serving from May 1997 to February 1998 as Vice-President, Meals, and from
February 1994 to May 1997 as Vice-President, Green Giant Brands. She also serves
as a director of Graco, Inc., a Minneapolis-based manufacturer of fluid handling
systems. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Richard
W. Perkins</I>, 72, has been a director of the Company since 1993. Mr. Perkins has been
President, Chief Executive Officer and a director of Perkins Capital Management, Inc.,
a Minneapolis-based investment management company, since 1985. He is also a general
partner of Spell Capital Partners, LP, a Minneapolis-based venture capital
limited partnership. He is also a director of the following publicly-held companies:
Synovis Life Technologies, Inc., a manufacturer of medical products; Intellefilm
Corp., a producer of television and internet commercials; PW Eagle, Inc., a
manufacturer of plastic pipe; Lifecore Biomedical, Inc., a medical device company;
Nortech Systems, Inc., a contract manufacturer for the electronics industry; Vital
Images, Inc., a medical diagnostic software company; and Paper Warehouse, Inc., a
retailer specializing in party supplies and paper products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
<I>Morris
J. Siegel</I>, 53, has served as a director of the Company since April 18, 2003. Mr.
Siegel is the founder and retired chairman of Celestial Seasonings, Inc., a
manufacturer and marketer of specialty herb teas. In 2000, Celestial Seasonings merged
with The Hain Food Group, a natural, specialty, organic and snack food company. Mr.
Siegel then served as vice chairman of the merged company, The Hain Celestial Group,
Inc. and was Chief Executive Officer of Celestial Seasonings until September 2002. In
1987, Mr. Siegel founded Earth Wise, Inc., a marketer of environmentally friendly
cleaning products and recycled trash bags. Mr. Siegel also currently serves as a
director of Annie’s Homegrown Foods, Inc., which manufactures, markets and sells
premium all natural and organic macaroni and cheese dinners, all natural pasta meals
and other all natural and organic food products, and is a subsidiary of Solera Capital
LLC. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Cutoff Rule" FSL="Project" -->
<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=CENTER>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Certain
other information required under this Item with respect to directors is contained in
the Section “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting
Compliance” in the Company’s Proxy Statement for the Annual Meeting of Stockholders
to be held on August 27, 2003 (the "2003 Proxy Statement”), a definitive copy of which
will be filed with the Commission within 120 days of the close of the last fiscal year,
and is incorporated herein by reference. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Executive
Officers</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Information
concerning executive officers is set forth in the Section entitled “Executive Officers
of the Company” in Part I of this Form 10-K pursuant to Instruction 3 to paragraph (b) of
Item 401 of Regulation S-K. </FONT></P>
<A NAME=A012></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 11. EXECUTIVE
COMPENSATION</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Information
required under this item is contained in the section entitled “Executive
Compensation” in the Company’s 2003 Proxy Statement and is incorporated herein by
reference. </FONT></P>
<A NAME=A013></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Information
required under this item is contained in the section entitled “Security Ownership of
Principal Stockholders and Management” in the Company’s 2003 Proxy Statement and is
incorporated herein by reference. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>33 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 34; page: 34" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A014></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Information
required under this item is contained in the section entitled “Certain Relationships
and Related Transactions” in the Company’s 2003 Proxy Statement and is incorporated
herein by reference. </FONT></P>
<A NAME=A015></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 14. CONTROLS AND
PROCEDURES</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(a) Evaluation
of Disclosure Controls and Procedures.</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
The
Company’s Chief Executive Officer, Marti Morfitt, and interim Chief
Financial Officer, Marcia O’Brien, have reviewed the Company’s
disclosure controls and procedures within 90 days prior to the filing of this
report. Based upon this review, each such officer believes that the
Company’s disclosure controls and procedures are effective in ensuring that
material information related to the Company is made known to her by others
within the Company. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(b) Changes in
Internal Controls.</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
There
were no significant changes in the Company’s internal controls or in other factors that
could significantly affect these controls during the quarter covered by this report or
from the end of the reporting period to the date of this Form 10-K. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>34 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 35; page: 35" -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART IV</FONT></H1>
<A NAME=A016></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 15. [RESERVED]</U> </FONT></H2>
<A NAME=A017></A>
<!-- MARKER FORMAT-SHEET="Head Minor Underlined" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><U>Item 16.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K</U> </FONT></H2>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Documents
filed as part of this Report: </FONT></TD>
</TR>
</TABLE>
<BR>
<A NAME=A021></A>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td width=3% align=LEFT nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td width=3% align=LEFT nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td width=2% align=LEFT nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td width=86% align=LEFT nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td width=3% align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">
Form 10-K<br>
Page Reference</font></b></td>
</tr>
<tr valign=top>
<td width=3% align=LEFT> </td>
<td width=3% align=LEFT> </td>
<td width=2% align=LEFT> </td>
<td width=86% align=LEFT> </td>
<td width=3% align=center nowrap>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td width=3% align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=3% align=LEFT><font face="Times New Roman, Times, serif" size="2">1.</font></td>
<td width=2% align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=86% align=LEFT><font face="Times New Roman, Times, serif" size="2">Financial
Statements.</font></td>
<td width=3% align=center nowrap><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT width="100%"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A022">Independent
Auditors’ Report</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">F-1</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A023">Consolidated
Statements of Operations for the Years Ended</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A023">March
31, 2003, December 31, 2001 and December 31, 2000 and</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A023">for
the three months ended March 31, 2002 and March 31, 2001 (unaudited)</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">F-2</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A024">Consolidated
Balance Sheets as of March 31, 2003 and 2002</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">F-3</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A025">Consolidated
Statements of Stockholders’ Equity and Comprehensive</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A025">Income
(Loss) for the Years Ended March 31, 2003, December 31, 2001</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A025">and
December 31, 2000 and for the three months ended</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A025">March
31, 2002 and March 31, 2001 (unaudited)</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">F-4</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A026">Consolidated
Statements of Cash Flows for the Years Ended</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A026">March
31, 2003, December 31, 2001 and December 31, 2000 and</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> <A HREF="#A026">for
the three months ended March 31, 2002 and March 31, 2001 (unaudited)</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">F-5</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"><A HREF="#A027">Notes to
Consolidated Financial Statements</A></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">F-6</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">2.</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Financial
Statement Schedules.</font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">None.</font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">3.</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Exhibits.</font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">See “Exhibit
Index” on the page following the Signature Page.</font></td>
<td align=center nowrap><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reports
on Form 8-K. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 2" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%> </TD>
<TD WIDTH=89%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>None.</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>35 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 36; page: 36" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A018></A>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES</FONT></H1>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Project" -->
<table width=600 cellspacing=0 cellpadding=0 border=0>
<tr valign=TOP>
<td width=40%><font face="Times New Roman, Times, Serif" size=2><br>
<br>
<br>
<br>
Dated: June 26, 2003</font></td>
<td width=10%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=50%><font face="Times New Roman, Times, Serif" size=2>CNS, INC.<br>
(“Registrant”)<br>
<br>
<br>
By /s/ Marti Morfitt<br>
————————————————<br>
Marti Morfitt<br>
Chief Executive Officer and Director</font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on June 26, 2003 on behalf of the Registrant in the
capacities indicated. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Power of
Attorney and Signatures)</FONT></H1>
<!-- MARKER FORMAT-SHEET="Para 10" FSL="Project" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Each
person whose signature appears below constitutes and appoints DANIEL E. COHEN and
MARTI MORFITT as his or her true and lawful attorneys-in-fact and agents, each acting
alone, with the full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any or all
amendments to this Annual Report on Form 10-K and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all said
attorneys-in-fact and agents, each acting alone, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue thereof. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti
Morfitt<BR>————————————————<BR>Marti
Morfitt<BR>Chief Executive Officer and Director<BR>(Principal Executive Officer)
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marcia
O’Brien<BR>————————————————<BR>Marcia
O’Brien<BR>Interim Chief Financial Officer<BR>(Principal Financial and Accounting
Officer) </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Daniel E. Cohen<BR>
————————————————<BR>Daniel
E. Cohen<BR>Chairman of the Board and Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Patrick Delaney<BR>
————————————————<BR>Patrick
Delaney<BR>Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>36 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 37; page: 37" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ H. Robert Hawthorne<BR>
————————————————<BR>H.
Robert Hawthorne <BR>Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ R. Hunt Greene<BR>
————————————————<BR>R.
Hunt Greene <BR>Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Andrew J. Greenshields<BR>
————————————————<BR>Andrew
J. Greenshields <BR>Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Richard W. Perkins<BR>
————————————————<BR>Richard
W. Perkins <BR>Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Morris J. Siegel<BR>
————————————————<BR>Morris
J. Siegel <BR>Director </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>37 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 38; page: 38" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A019></A>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATIONS</FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Marti Morfitt, certify
that: </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form 10-K of CNS, Inc.; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> a) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed
such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made
known to me by others within those entities, particularly during the
period in which this annual report is being prepared;</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluated
the effectiveness of the registrant’s disclosure controls and procedures as of a
date within 90 days prior to the filing date of this annual report (the
“Evaluation Date”); and</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> c) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>presented
in this annual report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I have disclosed, based on our most recent evaluation, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent function): </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> a) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all
significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant’s ability to record, process, summarize and
report financial data and have identified for the registrant’s
auditors any material weaknesses in internal controls; and</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> b) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal controls; and</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I have indicated in this annual report whether or not there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Project" -->
<table width=600 cellspacing=0 cellpadding=0 border=0>
<tr valign=TOP>
<td width=40%><font face="Times New Roman, Times, Serif" size=2><br>
Date June 26, 2003</font></td>
<td width=10%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=50%><font face="Times New Roman, Times, Serif" size=2><br>
/s/ Marti Morfitt<br>
——————————————<br>
Chief Executive Officer</font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>38 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 39; page: 39" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATIONS</FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Marcia O’Brien,
certify that: </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form 10-K of CNS, Inc.; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this annual report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to
the period covered by this annual report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this annual report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> a) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed
such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made
known to me by others within those entities, particularly during the
period in which this annual report is being prepared;</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluated
the effectiveness of the registrant’s disclosure controls and procedures as of a
date within 90 days prior to the filing date of this annual report (the
“Evaluation Date”); and</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> c) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>presented
in this annual report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have disclosed, based on our most recent evaluation, to the registrant’s auditors
and the audit committee of registrant’s board of directors (or persons performing
the equivalent function): </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> a) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all
significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant’s ability to record, process, summarize and
report financial data and have identified for the registrant’s
auditors any material weaknesses in internal controls; and</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> b) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal controls; and</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses. </FONT></TD>
</TR>
</TABLE>
<BR>
<table width=600 cellspacing=0 cellpadding=0 border=0>
<tr valign=TOP>
<td width=40%><font face="Times New Roman, Times, Serif" size=2><br>
Date June 26, 2003</font></td>
<td width=10%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=50%><font face="Times New Roman, Times, Serif" size=2><br>
/s/ Marcia O’Brien<br>
——————————————<br>
Interim Chief Financial Officer</font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>39 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 40; page: 40" -->
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A020></A>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>CNS, INC.<BR><U>EXHIBIT INDEX</U> </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Exhibit No.</U></B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Description</U></B> </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company’s
Certificate of Incorporation as amended to date (incorporated by reference to Exhibit
3.1 to the Company’s Annual Report on Form 10-K for the year
ended December 31, 1995 (the "1995 Form 10-K”)). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company’s
Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 of the
Company’s Annual Report on Form 10-K for the year ended December 31,
2001). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Amended and Restated Rights Agreement dated as of December 20, 2002 by and between
CNS, Inc. and Wells Fargo Bank Minnesota, N.A., as Rights Agent
(incorporated by reference to Exhibit 4.1 to the Company’s
Amendment No. 1 to Registration Statement on Form 8-A/A, Commission File No. 0-16612). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS,
Inc. 1987 Employee Incentive Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Registration Statement on Form S-18,
Commission File No. 33-14052C). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS,
Inc. 1989 Employee Stock Purchase Plan, as amended (incorporated by reference to
Exhibits 4.1 and 4.2 to the Company’s Registration Statement on Form
S-8, Commission File No. 333-68310). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS,
Inc. 1990 Stock Plan (incorporated by reference to Exhibit 10.11 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 1990). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS,
Inc. 1994 Amended Stock Plan (incorporated by reference to Exhibit 10.5 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 1997). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS,
Inc. 2000 Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company’s
Registration Statement on Form S-8 (File No. 333-42108)). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.6** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement dated January 30, 1992 between the Company and Creative Integration and
Design, Inc. (incorporated by reference to Exhibit 10.11 to the
Company’s Registration Statement on Form S-2, Commission File
No. 33-46120). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.7** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement dated November 10, 1997 between the Company and Onesta Nutrition, Inc.
(incorporated by reference to Exhibit 10.9 to the Company’s Annual
Report on Form 10-K for the year ending December 31, 1999 (the
“1999 Form 10-K”)). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.8** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement dated March 12, 1999 between the Company and WinEase LLC (incorporated by
reference to Exhibit 10.10 to the Company’s 1999 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.9** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Addendum
to License Agreement between the Company and WinEase LLC dated March 21, 2002
(incorporated by reference to Exhibit 10.9 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2001). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.10** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement dated June 21, 1999 between the Company and Peter Cronk and Kristen Cronk
(incorporated by reference to Exhibit 10.11 of the 1999 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>40 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 41; page: 41" -->
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.11** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement dated March 1, 2000 between the Company and Proctor and Gamble (incorporated
by reference to Exhibit 10.10 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2000 (the "2000 Form
10-K”)). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.12 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment
to Trademark License Agreement effective as of March 20, 2001 by and between the Company
and the Procter & Gamble Company (incorporated by reference to
Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the period ended March
31, 2001). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.13** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Second
Amendment to Trademark License Agreement effective as of April 27, 2001 by and
between the Company and the Procter & Gamble Company (incorporated by
reference to Exhibit 10.12 to the Company’s Quarterly Report on
Form 10-Q for the period ended March 31, 2001). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.14** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Distributor
Agreement between the Company and Eisai Co., Ltd. dated August 1, 2000 (incorporated
by reference to Exhibit 10.11 to the Company’s 1999 Form
10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.15** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Repackaging
Agreement between the Company and Herusu, Co., Ltd. dated August 1, 2000
(incorporated by reference to Exhibit 10.12 to the Company’s 2000 Form
10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.16** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supply
Agreement between the Company and Tapemark, Inc. dated October 15, 2001 (incorporated
by reference to Exhibit 10.15 to the Company’s Quarterly Report
on Form 10-Q for the period ended September 30, 2001 (the
“September 30, 2001 Quarterly Report”)). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.17** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supply
Agreement between the Company and WebTec Converting, LLC dated October 5, 2001
(incorporated by reference to Exhibit 10.16 to the September 30, 2001
Quarterly Report). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.18** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Medical
Specialties Material Purchase Agreement between the Company and Minnesota Mining and
Manufacturing Company dated August 1, 2001 (incorporated by
reference to Exhibit 10.17 to the September 30, 2001 Quarterly
Report). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.19* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and Daniel E. Cohen dated February 12, 1999
(incorporated by referenced to Exhibit 10.9 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 1998 (the
“1998 Form 10-K”)). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.20* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>First
Amendment to Executive Employment Agreement between the Company and Daniel E. Cohen
dated June 29, 2001 (incorporated by reference to Exhibit 10.19 to
the September 30, 2001 Quarterly Report). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.21* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and Marti Morfitt dated February 12, 1999 (incorporated by
referenced to Exhibit 10.10 to the 1998 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.22* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and John J. Keppeler dated February 12, 1999 (incorporated
by referenced to Exhibit 10.13 to the 1998 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.23* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and Carol J. Watzke dated February 12, 1999 (incorporated
by referenced to Exhibit 10.15 to the 1998 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.24* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and M. W. Anderson dated February 12, 1999 (incorporated by
referenced to Exhibit 10.17 to the 1998 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>41 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 42; page: 42" -->
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.25* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and Larry R. Muma dated January 2, 2001 (incorporated by
reference to Exhibit 10.21 to the 2000 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.26* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agreement
between the Company and Teri P. Osgood dated February 14, 2002. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.27* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and Linda Kollofski dated October 29, 2002. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.28* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and John Kundtz dated July 22, 2002. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21.1 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsidiaries
of the Company (incorporated by reference to Exhibit 21.1 to the 1999 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of KPMG LLP. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24.1 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Powers
of Attorney (included on signature page hereof). </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=11%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.1 </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=86%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification
Pursuant to 18 U.S.C. Section 1350. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
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<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=LEFT>
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</TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicates
Compensatory Agreement </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>** </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain
portions of this Exhibit have been deleted and filed separately with the Commission
pursuant to a request for confidential treatment under Rule 24b-2. Spaces corresponding
to the deleted portions are represented by brackets with asterisks. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>42 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 43; page: 43" -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A022></A>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Independent
Auditors’ Report</FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>The Board of
Directors and Stockholders<BR>CNS, Inc.:</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the
accompanying consolidated balance sheets of CNS, Inc. and subsidiaries as of
March 31, 2003 and 2002 and the related consolidated statements of
operations, stockholders’ equity and comprehensive income (loss), and cash
flows for the years ended March 31, 2003, December 31, 2001 and 2000 and the
three months ended March 31, 2002. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of CNS, Inc. and subsidiaries as of
March 31, 2003 and 2002 and the results of their operations and their cash flows
for the years ended March 31, 2003, December 31, 2001 and 2000 and the three
months ended March 31, 2002 in conformity with accounting principles generally
accepted in the United States of America. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>April 23, 2003 </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 44; page: 44" -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A023></A>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>CNS, INC.</B><BR>
Consolidated Statements of Operations<BR>
(in thousands, except per share amounts) </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="8" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td align=center nowrap rowspan="2"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three<br>Months Ended</font></b></td>
<td align=LEFT rowspan="2"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td colspan="5" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="14" align=center nowrap>
<hr NOSHADE size=1>
</td>
<td align=center nowrap> </td>
</tr>
<tr valign=Bottom>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom align="right">
<td colspan="15" valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td> </td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td width=40% align=LEFT><font face="Times New Roman, Times, serif" size="2">Net
sales</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 79,075</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 76,242</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 61,777</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 19,135</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 23,468</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
goods sold</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">25,992</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">27,698</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">24,907</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,390</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,706</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Gross
profit</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">53,083</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">48,544</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">36,870</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,745</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,762</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Operating
expenses:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Advertising
and promotion</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">30,930</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">34,256</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">39,579</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,796</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,935</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Selling,
general and administrative</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,514</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,583</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">15,134</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,213</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,766</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Special
charges</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">930</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
operating expenses</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">43,444</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">49,769</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">54,713</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,009</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">18,701</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Operating
income (loss)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,639</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1,225</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(17,843</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">736</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(3,939</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Investment
income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">821</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,242</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,234</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">236</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">345</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Gain (loss)
on sales of marketable securities</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">18</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">64</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(51</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">36</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">17</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Income
(loss) before income taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">10,478</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(15,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,008</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(3,577</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Income
tax expense (benefit)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,962</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(9,126</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
income (loss)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 6,516</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (15,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 10,134</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (3,577</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=2>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Basic net
income (loss) per share</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.48</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> .01</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (1.09</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> .74</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (.25</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=2>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Weighted
average number of common shares<br>
outstanding</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,467</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,131</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,372</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,711</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,123</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=2>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Diluted
net income (loss) per share</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.46</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> .01</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (1.09</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> .71</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (.25</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=2>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Weighted
average number of common</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> and
assumed conversion shares outstanding</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,044</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,431</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,372</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,198</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,123</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=2>
</td>
<td align=LEFT> </td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are
an integral part of the consolidated financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-2 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A024></A>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>CNS, INC.</B><BR>
Consolidated Balance Sheets<BR>
(in thousands, except per share amounts) </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=center> </td>
<td colspan="5" align=center><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=center> </td>
<td colspan="6" align=center>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, Serif" size=2>Assets</font></b></td>
<td colspan="2" align=center><b><font face="Times New Roman, Times, serif" size="1"> 2003</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"> </font></b></td>
<td colspan="2" align=center><b><font face="Times New Roman, Times, serif" size="1"> 2002</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"> </font></b></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT width="100%"><font face="Times New Roman, Times, serif" size="2">Current
assets:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Cash
and cash equivalents</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 16,554</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 5,633</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Marketable
securities</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">25,061</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">19,029</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accounts
receivable, net of allowance for doubtful accounts<br>
of
$330 in 2003 and $500 in 2002</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">11,011</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">11,682</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Inventories</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,266</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,465</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Deferred
income taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,879</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Prepaid
expenses and other current assets</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,035</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">999</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
current assets</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">61,587</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">47,687</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Property
and equipment, net</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,605</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,400</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Product
rights, net</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,293</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,179</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Deferred
income taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">890</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,220</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 65,375</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 54,486</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=2>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=center><b><font face="Times New Roman, Times, serif" size="2">Liabilities
and Stockholders’ Equity</font></b></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Current
liabilities:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accounts
payable</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 7,615</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,413</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accrued
expenses</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,948</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,330</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accrued
income taxes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">758</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">521</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
current liabilities</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16,321</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">10,264</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Stockholders’
equity:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Preferred
stock - authorized 8,484 shares;</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> none
issued or outstanding</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Common
stock - $.01 par value; authorized 50,000 shares;</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> issued
19,295 shares in 2003 and 2002</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Additional
paid-in capital</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">59,879</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">60,796</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Treasury
shares - at cost; 5,989 shares in 2003 and 5,756 shares in 2002</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(26,694</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(25,821</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Retained
earnings</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">15,472</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,956</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accumulated
other comprehensive income</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">204</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">98</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Total
stockholders’ equity</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">49,054</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">44,222</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Commitments
(notes 10 and 11)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 65,375</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 54,486</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td colspan=6>
<hr NOSHADE size=2>
</td>
<td> </td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-3 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 46; page: 46" -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A025></A>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>CNS, INC.</B><BR>Consolidated
Statements of Stockholders’ Equity and Comprehensive Income (Loss) <BR>(in thousands) </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=700>
<tr valign=Bottom align="center">
<td nowrap rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="4"><b><font face="Times New Roman, Times, serif" size="1">Common
stock</font></b></td>
<td nowrap rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="2" rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1">Additional<br>
paid-in <br>
capital <br>
</font></b></td>
<td nowrap rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="4"><b><font face="Times New Roman, Times, serif" size="1">Treasury
shares</font></b></td>
<td nowrap rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="2" rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1">
Retained<br>
earnings<br>
(deficit)<br>
</font></b></td>
<td nowrap rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="2" rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1">
Accumulated <br>
other <br>
comprehensive<br>
income (loss)<br>
</font></b></td>
<td nowrap rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="2" rowspan="3"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1">
Total<br>
stockholders’<br>
equity </font></b></td>
<td nowrap rowspan="3"> </td>
</tr>
<tr valign=Bottom align="center">
<td nowrap colspan="4">
<hr NOSHADE size=1>
</td>
<td nowrap colspan="4">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"> Number
<br>
of shares<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="2"><b><font face="Times New Roman, Times, serif" size="1">
Par <br>
value<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"> Number
<br>
of shares<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Cost</font></b></td>
</tr>
<tr valign="top">
<td colspan=22>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">Balance
at December 31, 1999</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">19,295</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 61,531</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">4,838</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> (22,221</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">) </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 14,401</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=right width="5%"><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT width="5%"><font face="Times New Roman, Times, serif" size="1"> (320</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">) </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 53,584</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
issued in connection with</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Employee
Stock Purchase Plan</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(131</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(26</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">214</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">83</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
options exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(218</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(29</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">238</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">20</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Treasury
shares purchased</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">396</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(1,510</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(1,510</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Comprehensive
loss:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Net
loss for the year</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(15,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(15,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Unrealized
gains on marketable securities</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> net
of income tax effect of $0</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">420</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">420</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left colspan="2">
<hr NOSHADE size=1>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Total
comprehensive loss</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(15,240</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr>
<td colspan=22>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">Balance
at December 31, 2000</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">19,295</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">61,182</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">5,179</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(23,279</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(1,259</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">100</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">36,937</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
issued in connection with</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Employee
Stock Purchase Plan</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(189</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(36</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">303</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">114</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
options exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(262</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(51</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">436</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">174</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Other</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">54</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">54</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Treasury
shares purchased</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">202</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(1,010</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(1,010</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Comprehensive
income:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Net
income for the year</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">81</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Unrealized
gains on marketable securities</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> net
of income tax effect of $0</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">262</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">262</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left colspan="2">
<hr NOSHADE size=1>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Total
comprehensive income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">343</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr>
<td colspan=22>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">Balance
at December 31, 2001</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">19,295</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">60,785</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">5,294</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(23,550</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(1,178</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">362</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">36,612</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
options exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(95</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(20</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">167</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">72</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Other</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">106</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">106</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Treasury
shares purchased</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">482</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(2,438</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(2,438</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Comprehensive
income:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Net
income for the period</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">10,134</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">10,134</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Unrealized
losses on marketable securities</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> net
of income tax effect of $58</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(264</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(264</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left colspan="2">
<hr NOSHADE size=1>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Total
comprehensive income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">9,870</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr>
<td colspan=22>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">Balance
at March 31, 2002</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">19,295</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">60,796</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">5,756</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(25,821</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">8,956</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">98</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">44,222</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
issued in connection with</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Employee
Stock Purchase Plan</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(69</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(19</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">163</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">94</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Stock
options exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(862</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(206</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">1,717</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">855</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Other</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">14</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">2</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">16</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Treasury
shares purchased</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">458</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(2,755</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">(2,755</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Comprehensive
income:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Net
income for the year</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">6,516</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">6,516</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Unrealized
gains on marketable securities</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> net
of income tax effect of $60</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">106</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">106</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left colspan="2">
<hr NOSHADE size=1>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom bgcolor="#c0c0c0">
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> Total
comprehensive income</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">6,622</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr>
<td colspan=22>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">Balance
at March 31, 2003</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">19,295</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 193</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 59,879</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1">5,989</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> (26,694</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 15,472</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=right><font face="Times New Roman, Times, serif" size="1">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 204</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="1">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="1"> 49,054</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr>
<td colspan=22>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="1"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are
an integral part of the consolidated financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-4 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<BR>
<A NAME=A026></A>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>CNS, INC.</B><BR>
Consolidated Statements of Cash Flows<BR>(in thousands) </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=625>
<tr valign=Bottom>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="8" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td align=center nowrap rowspan="2"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months Ended</font></b></td>
<td align=LEFT rowspan="2"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td colspan="5" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="14" align=center nowrap>
<hr NOSHADE size=1>
</td>
<td align=center nowrap> </td>
</tr>
<tr valign=Bottom>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td align=center nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" align=center nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="15" align=LEFT>
<hr NOSHADE size=1>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom align="right">
<td colspan="15" valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2>Operating
activities:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap width="100%"><font face="Times New Roman, Times, Serif" size=2> Net
income (loss)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 6,516</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 81</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> (15,660</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>) </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 10,134</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> (3,577</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Adjustments
to reconcile net income (loss) to net </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> cash
provided by (used in) operating activities:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Depreciation
and amortization</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,251</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,244</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,051</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>330</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>271</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Deferred
income taxes</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,489</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(9,126</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Other</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>16</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>90</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>81</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>74</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Changes
in operating assets and liabilities:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Accounts
receivable</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>671</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>275</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,212</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>626</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,182</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Inventories</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,199</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,070</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>153</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,357</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,767</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Prepaid
expenses and other current assets</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(36</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,964</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,546</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>294</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>362</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Accounts
payable and accrued expenses</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>6,057</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(5,401</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>7,654</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(3,742</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(5,544</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Net
cash provided by (used in) operating<br>
activities</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>19,163</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,817</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(4,387</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(53</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(11,437</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2>Investing
activities:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Purchases
of marketable securities</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(36,255</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(44,911</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(63,151</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(11,218</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(6,970</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Sales
and maturities of marketable securities</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>30,389</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>55,550</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>71,967</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>10,846</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>17,425</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Payments
for purchases of property and equipment</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(60</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(394</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,019</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(8</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(255</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Payments
for product rights</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(510</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(357</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(141</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(148</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Net
cash provided by (used in) investing<br>
activities</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(6,436</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>9,888</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>6,656</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(380</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>10,052</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2>Financing
activities:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Proceeds
from the issuance of common stock</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> under
Employee Stock Purchase Plan</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>94</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>114</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>83</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Proceeds
from the exercise of stock options</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>855</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>174</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>20</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>72</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>88</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Purchase
of treasury shares</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,755</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,010</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,510</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,438</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(51</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Net
cash provided by (used in) financing<br>
activities</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,806</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(722</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,407</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,366</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>37</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Net
increase (decrease) in cash and cash<br>
equivalents</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>10,921</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>6,349</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>862</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,799</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,348</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2>Cash
and cash equivalents:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Beginning
of period</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>5,633</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,083</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,221</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>8,432</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,083</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> End
of period</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 16,554</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 8,432</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 2,083</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 5,633</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 735</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr>
<td colspan=15 nowrap>
<hr NOSHADE size=2>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
<td align=left> </td>
<td align=RIGHT> </td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2>Supplemental
disclosure of cash flow information:</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Cash
paid during the year for interest</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2>$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr valign=Bottom bgcolor="#C0C0C0">
<td align=LEFT nowrap><font face="Times New Roman, Times, Serif" size=2> Cash
paid during the year for income taxes</font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>237</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>35</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=left><font face="Times New Roman, Times, Serif" size=2> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>0</font></td>
<td align=LEFT><font face="Times New Roman, Times, Serif" size=2> </font></td>
</tr>
<tr>
<td colspan=15>
<hr NOSHADE size=2>
</td>
<td> </td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the consolidated financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-5 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
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<TD>
<BR>
<A NAME=A027></A>
<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, INC.<BR>Notes to
Consolidated Financial Statements<BR>March 31, 2003, December
31, 2001 and 2000</FONT></H1><BR>
<!-- MARKER FORMAT-SHEET="Head Minor" FSL="Project" -->
<H2 ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2></FONT></H2>
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</TD>
</TR>
</TABLE>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(1) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Summary
of Significant Accounting Policies</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Principles
of Consolidation</B> The accompanying consolidated financial statements include the
accounts of CNS, Inc. and its subsidiaries (“the Company”). All material
intercompany accounts and transactions have been eliminated in
consolidation.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Business</B>
The Company designs, manufactures and markets consumer products, including Breathe
Right® nasal strips, Breathe Right Snore Relief™ throat spray and FiberChoice® tablets.
The Company’s products are sold over-the-counter in retail outlets, including
mass merchant, drug, grocery and club stores. The Company primarily uses
international distributors to market Breathe Right nasal strips outside
the U.S.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Fiscal
Year Change</B> In 2002, the Company changed its fiscal year-end from December 31 to March
31. The three-month transition period ended March 31, 2002 bridges the gap
between the Company’s old and new fiscal year-ends.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Principles
of Consolidation</B> The accompanying consolidated financial statements include the
accounts of CNS, Inc. and its subsidiaries (“the Company”). All material
intercompany accounts and transactions have been eliminated in
consolidation.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Accounting
Estimates</B> The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from
those estimates. The Company’s estimates and assumptions
primarily arise from risks and uncertainties associated with potential future product
returns, the uncollectibility of accounts receivable and inventory
obsolescence.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Basis
of Presentation</B> Certain amounts from prior years’ financial statements have been
reclassified to conform to the current year presentation.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Change
in Method of Accounting for Sales Incentives and Consideration Paid to a Reseller</B>
Effective January 1, 2002, the Company implemented Emerging Issues Task Force
bulletins Number 00-14 “Accounting for Certain Sales Incentives”,
Number 00-25 “Vendor Income Statement Characterization of Consideration Paid to a
Reseller” and Number 01-9 “Accounting for Consideration
Given by a Vendor to a Customer”. These new accounting standards had no impact
on the Company’s net income; however, they did require
reclassification of certain promotional costs such as sales incentives, promotional
funds, and consumer coupon redemptions that were previously reported as a
component of advertising and promotion expense as a reduction of net
sales.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-6 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
following table presents the impact of the adoption of the provisions of EITF Issue
Nos. 00-14, 00-25 and 01-9 discussed above, on the consolidated statements of
operations for the years ended December 31, 2001 and 2000, respectively:</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap colspan="5"><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended<br>
December 31, <br>
</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5">
<hr NOSHADE size=1>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"> </font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr>
<td> </td>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Net
sales - previous reporting basis</font></td>
<td bgcolor="#C0C0C0" align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
83,934</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
68,892</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Impact
of adopting accounting changes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(7,692</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(7,115</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Net
sales - current reporting basis</font></td>
<td align=left bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
76,242</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
61,777</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=6>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Advertising
and promotion expense -</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> previous
reporting basis</font></td>
<td align=left bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
41,948</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
46,694</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Impact
of adopting accounting changes</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(7,692</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(7,115</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=6>
<hr NOSHADE size=1>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Advertising
and promotion expense -</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> current
reporting basis</font></td>
<td align=left bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
34,256</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
39,579</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan=6>
<hr NOSHADE size=2>
</td>
<td><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company’s results of operations for the years disclosed above were not affected by
the adoption of the provisions of these three announcements.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Change
in Method of Accounting for Long-Lived Assets</B> Effective January 1, 2002, the
Company adopted Statement of Financial Accounting Standards (“SFAS”) No.
144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.” This statement superceded SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of.” SFAS No. 144 retains the previously existing accounting requirements related
to the recognition and measurement of the impairment of long-lived
assets to be held and used while expanding the measurement requirements of
long-lived assets to be disposed of by sale. It also expands the previously
existing reporting requirements for discontinued operations to include a
component of an entity that either has been disposed of or is classified as held for sale.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Revenue
Recognition</B> Revenue from sales is recognized at the time products are shipped less
estimated sales returns, certain promotional costs and other allowances.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Fair
Value of Financial Instruments</B> All financial instruments are carried at amounts that
approximate fair value.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Cash
Equivalents</B> Cash equivalents consist primarily of money market funds.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Marketable
Securities</B> The Company classifies its marketable debt securities as
available-for-sale and records these securities at fair market value. Net realized
and unrealized gains and losses are determined on the specific
identification cost basis. Any unrealized gains and losses, net of deferred income
taxes, are included in stockholders’ equity as a separate component
of other comprehensive income. A decline in the market value of any available-for-sale
security below cost that is deemed other than temporary, results in a
charge to operations resulting in the establishment of a new cost basis for the
security. Realized securities gains or losses are included in gain
(loss) on sales of marketable securities in the consolidated statements of operations.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-7 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Inventories</B>
Inventories are valued at the lower of cost (determined on a first-in, first-out
basis) or market. Inventory reserves have been established for potential
product obsolescence.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>
Property
and Equipment</B> Property and equipment are stated at cost. Equipment is depreciated using
the straight-line method over three to five years. Leasehold improvements
are amortized over the lesser of the estimated useful life of the
improvement or the term of the lease.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>
Product
Rights</B> Product rights, consisting of patents, trademarks and other product
rights, are stated at cost and are amortized over three to seven years using the
straight-line method.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Stock-Based
Compensation</B> The Company accounts for stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion (“APB”)
No. 25, “Accounting for Stock Issued to Employees,” and
complies with the disclosure provisions of SFAS No. 148, “Accounting for
Stock-Based Compensation”. Under APB No. 25, compensation cost is
determined based on the difference, if any, on the grant date between the fair value of
the Company’s stock and the amount an employee must pay to acquire
the stock. Accordingly, no compensation expense associated with the fair market
value of stock option grants or shares sold to employees under the
Employee Stock Purchase Plan has been recognized in the Company’s
financial statements.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
fair value of each stock option grant issued and shares sold to employees under the
Employee Stock Purchase Plan are estimated on the date of grant or purchase using
the Black-Scholes option-pricing model. The following assumptions were
made in estimating fair value:</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="8" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td align=center rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months<br>
Ended <br>
</font></b></td>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=center colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td align=center colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="14" align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14" align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="3" align=right valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Expected
lives (Years)</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">6</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">6</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">6</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">6</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">6</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Dividend
Yield</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">% </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Expected
volatility</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">60.00</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">60.00</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">65.00</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">60.00</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">60.00</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Risk-Free
Interest Rate</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6.50</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.00</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">%</font></td>
</tr>
</table>
<BR>
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<TR VALIGN=TOP>
<TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-8 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Had
compensation cost for the Company’s stock option plan been determined pursuant to
SFAS No. 148, net earnings and earnings per share would have been as follows: </FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="8" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td align=center rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months<br>
Ended <br>
</font></b></td>
<td align=LEFT rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=center colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td align=center colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
</tr>
<tr valign=Bottom>
<td colspan="14" align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td align=center><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=center colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14" align=RIGHT>
<hr size="1" noshade>
</td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=RIGHT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="3" align=right valign="top" height="20"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td align=LEFT height="20"><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Net
income (loss),</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> as
reported</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
6,516</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
81</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(15,660</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
10,134</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(3,577</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Deduct:
Total stock-based</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> compensation
expense</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> determined
under the fair</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> value
based method for all</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> awards,
net of related tax</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> effects</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">456</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">523</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">325</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">124</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">89</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT colspan="14">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Proforma
net income (loss)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
6,060</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(442</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(15,985</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
10,010</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(3,666</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT colspan="14">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Earnings
(loss) per share:</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Basic
- as reported</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.48</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.01</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (1.09</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> .74</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (.25</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> Basic
- proforma</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
0.45</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(0.03</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(1.11</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
.73</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(.26</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Diluted
- as reported</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.46</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 0.01</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (1.09</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> .71</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (.25</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> Diluted
- proforma</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
0.43</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(0.03</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(1.11</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
.71</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
(.26</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
</table>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Foreign
Currency Transactions</B> Most foreign transactions are in U.S. dollars, although some
are conducted in functional local currencies. The functional currency is
translated into U.S. dollars for the balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue and expense
accounts using a weighted average exchange rate during the fiscal
year. Gains and losses resulting from transactions denominated in foreign
currencies are included in the consolidated statements of operations.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Advertising</B>
The Company capitalizes the production costs of advertising and expenses these costs the
first time the advertising runs.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Income
Taxes</B> Deferred tax assets and liabilities and the resultant provision for income taxes
are determined based on the difference between the financial statement and
tax bases of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. Deferred tax assets are
recognized when management determines that it is more likely than not
that the asset will be realized.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Net Income (Loss) Per Share</B> Basic net income (loss) per share and diluted net
income (loss) per share have been computed based upon the weighted average
number of common shares outstanding during the year. Assumed conversion shares
were excluded from the net loss per share computation as their effect is
antidilutive. Common stock options could potentially dilute basic earnings per
share in future periods if the Company generates net income. Diluted net income
per share has been computed based upon the weighted average number of common and
assumed conversion shares outstanding during the year.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-9 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Comprehensive
Income (Loss)</B> Comprehensive income (loss) consists of the Company’s net income
(loss) and unrealized gains (losses) on marketable securities and is presented
in the consolidated statements of stockholders’ equity and
comprehensive income (loss).</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Recent
Accounting Pronouncements</B> In June 2002, the Financial Accounting Standards Board (“FASB”)
issued Statement of Financial Accounting Standards (“SFAS”) No. 146,
“Accounting for Costs Associated with Exit or Disposal
Activities.” This statement provides guidance on accounting for restructuring
activities. This statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. The provisions of the statement are effective for exit or
disposal activities initiated after December 31, 2002, with early adoption encouraged.
The Company will apply the provisions of SFAS No. 146 for exit or
disposal activities initiated after December 31, 2002, as required.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
Compensation”. This statement supercedes SFAS No. 123, “Accounting for
Stock-Based Compensation”. This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based compensation. In addition, the statement
amends disclosure requirements to require prominent disclosures in annual and interim
financial statements about the method of accounting used for stock-based
employee compensation and the effect of the method used on reported results. The
interim disclosure provisions became effective for the Company for the
interim period beginning January 1, 2003. The annual disclosure provisions became
effective for the Company for the year ended March 31, 2003.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others” which requires certain guarantees to be
recorded at fair value. This Interpretation also requires a guarantor to make certain
disclosures about guarantees, including product warranties, even when
the likelihood of making any payments under the guarantee is remote. The Company has
adopted the disclosure requirements in this Interpretation as of January
1, 2003, as required.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
May 2003, the FASB issued SFAS No.150, “Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity” which requires
that certain types of financial instruments with characteristics of a
liability be presented as a liability. The Company is required to implement SFAS No.
150 beginning with the quarter ending June 30, 2003. Management does not
expect this statement to have a material impact on the Company’s consolidated
financial position.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-10 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(2) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Marketable
Securities</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Marketable
securities, including estimated fair value based on quoted market prices or valuation
models, are summarized as follows (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11"><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="11">
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Cost</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Fair
Value</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Cost</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">Fair
Value</font></b></td>
</tr>
<tr valign="top">
<td> </td>
<td colspan=12>
<hr NOSHADE size=1>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Commercial
paper</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
5,415</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
5,415</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
3,148</font></td>
<td bgcolor="#C0C0C0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td bgcolor="#C0C0C0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
3,148</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Certificate
of deposit</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,000</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">997</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">Corporate
bonds</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">7,225</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">7,361</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">9,075</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">9,240</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">U.S. Government
obligations</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,099</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,285</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,650</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,644</font></td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"></font> </td>
<td colspan=12>
<hr NOSHADE size=1>
</td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"> </font>
</td>
<td colspan=12> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> Total
marketable securities</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
24,739</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
25,061</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
18,873</font></td>
<td align=LEFT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#C0C0C0"><font face="Times New Roman, Times, serif" size="2">
19,029</font></td>
</tr>
<tr>
<td><font face="Times New Roman, Times, serif" size="2"></font> </td>
<td colspan=12>
<hr NOSHADE size=2>
</td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Maturities
of marketable securities at March 31, 2003 are as follows (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Cost</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Fair
Value</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td colspan="6" align=LEFT>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Due
within one year</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
10,502</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
10,558</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Due after
one year through three years</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,237</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">14,503</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan="6" align=LEFT>
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Total
marketable securities</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
24,739</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
25,061</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td colspan="6" align=LEFT>
<hr size="2" noshade>
</td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Gross
unrealized gains on marketable securities available for sale totaled $324,000 and
$195,000 at March 31, 2003 and 2002, respectively. Gross unrealized losses on
marketable securities available for sale totaled $2,000 and $39,000
at March 31, 2003 and 2002, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Realized
gains on sales of marketable securities were $18,000; $64,000 and $0 for the
years ended March 31, 2003; December 31, 2001 and 2000, respectively. Realized gains
on sales of marketable securities were $36,000 and $17,000
(unaudited) for the three months ended March 31, 2002 and 2001, respectively.
Realized losses on sales of marketable securities were $51,000 for
the year ended December 31, 2000.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(3) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Advertising</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At
March 31, 2003 and 2002, $668,000 and $686,000, respectively, of advertising
costs were reported as assets. Advertising expense was $22,657,000,
$19,486,000 and $26,027,000 for the years ended March 31, 2003,
December 31, 2001 and 2000, respectively. Advertising expense was $6,708,000 and
$9,081,000 (unaudited) for the three months ended March 31, 2002 and
2001, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-11 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(4) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Details
of Selected Balance Sheet Accounts</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Details
of selected balance sheet accounts are as follows (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT colspan="11">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT> </td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Allowance
for doubtful accounts:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td width="60%" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Balance
beginning of period</font></td>
<td width="2%" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td width="6%" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
500</font></td>
<td width="2%" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width="2%" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td width="6%" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
500</font></td>
<td width="2%" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width="2%" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td width="6%" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
300</font></td>
<td width="2%" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width="2%" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td width="6%" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
280</font></td>
<td width="2%" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Plus
provision for doubtful accounts</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">55</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">31</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">316</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">26</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Less
charge offs</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">225</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">31</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">116</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Balance
end of period</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 330</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 500</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 500</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 300</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"> </td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5"><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT colspan="8"><font face="Times New Roman, Times, serif" size="1"> </font></td>
<td align=LEFT colspan="5">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="1"> </font></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2"><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT> </td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Inventories:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Finished
goods</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
2,225</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
2,602</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Raw
materials and component parts</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,041</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,863</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Total
inventories</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
3,266</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
4,465</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Property
and equipment:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Warehouse
and production equipment</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 760</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 760</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Office
equipment and information systems</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,680</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3,650</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Leasehold
improvements</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,050</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,050</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Less
accumulated depreciation</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(3,885</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(3,060</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Property
and equipment, net</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 1,605</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 2,400</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Product
rights:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Product
rights</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
3,416</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
2,906</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Less
accumulated amortization</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2,123</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1,727</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Product
rights, net</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
1,293</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
1,179</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Accrued
expenses:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Promotions
and allowances</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 4,703</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,347</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Royalties
and commissions</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">778</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">951</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Salaries,
incentives and paid time off</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,829</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,638</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Restructuring
costs</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">26</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">206</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Other</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">612</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">188</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Total
accrued expenses</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
7,948</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
6,330</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="12">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(5) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Stockholders’ Equity</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Stock
Options </B>The Company’s stock option plans allow for the grant of options to
officers, directors, and employees to purchase up to 3,650,000 shares of common stock
at exercise prices not less than 100% of fair market value on the dates
of grant. The term of the options may not exceed ten years and options vest in
increments over 1 to 5 years from the grant date. The plans allow for
the grant of shares of restricted common stock. No shares of restricted common
stock have been granted under these plans as of March 31, 2003. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-12 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Stock
option activity under these plans is summarized as follows: </FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">Weighted-average<br>
Exercise Price <br>
Per Share <br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"> Shares
<br>
Outstanding<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"> Shares
<br>
Available<br>
For Grant<br>
</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td align=LEFT colspan="7">
<hr size="1" noshade>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Balance
at December 31, 1999</font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
4.47</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,771,390</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">64,750</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> New
2000 Plan</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">700,000</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Granted</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.01</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">358,400</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(358,400</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4.18</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(69,690</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Canceled</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">5.18</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(168,100</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">168,100</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="7">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Balance
at December 31, 2000</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4.33</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,892,000</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">574,450</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Granted</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.26</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">345,960</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(345,960</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3.36</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(51,800</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Canceled</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.47</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(102,970</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">102,970</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Expired</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(7,280</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="7">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Balance
at December 31, 2001</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.33</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,083,190</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">324,180</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Granted</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5.98</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">117,100</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(117,100</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Exercised</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">3.63</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(19,696</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Canceled</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4.09</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(4,560</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,560</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Expired</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(3,000</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="7">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Balance
at March 31, 2002</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 4.43</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,176,034</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">208,640</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Granted</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6.01</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">175,460</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(175,460</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Exercised</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4.15</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(205,900</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Canceled</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.68</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(61,090</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">61,090</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Expired</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(7,560</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="7">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Balance
at March 31, 2003</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
4.58</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,084,504</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">86,710</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="7">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Information
on outstanding and currently exercisable options by price range as of March 31, 2003, is
summarized as follows:</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr align="center">
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap valign="bottom"><b><font face="Times New Roman, Times, serif" size="1">Price
Range<br>
Per Share <br>
</font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1">
Total <br>
Number of<br>
Shares <br>
</font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1">
Weighted- <br>
average <br>
Remaining <br>
Life (Years)<br>
</font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap valign="bottom"><b><font face="Times New Roman, Times, serif" size="1">Weighted-<br>
average <br>
Exercise<br>
Price <br>
</font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1">Exercisable<br>
Number of <br>
Shares <br>
</font></b></td>
<td valign="bottom" nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap valign="bottom"><b><font face="Times New Roman, Times, serif" size="1">Weighted-<br>
average <br>
Exercise<br>
Price </font></b></td>
</tr>
<tr>
<td align=LEFT> </td>
<td colspan="14" align=left>
<hr size="1" noshade>
</td>
</tr>
<tr>
<td valign="bottom" align=LEFT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td valign="bottom" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td valign="bottom" align=CENTER nowrap bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2.31
- 2.81</font></td>
<td valign="bottom" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td valign="bottom" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">192,303</font></td>
<td valign="bottom" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td valign="bottom" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">5.6</font></td>
<td valign="bottom" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td valign="bottom" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td valign="bottom" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
2.77</font></td>
<td valign="bottom" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td valign="bottom" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">192,303</font></td>
<td valign="bottom" align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td valign="bottom" align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td valign="bottom" align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
2.77</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=CENTER valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom"><font face="Times New Roman, Times, serif" size="2">3.10
- 3.94</font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">379,000</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">2.8</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">3.26</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">337,200</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">3.21</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=CENTER valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.00
- 4.50</font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">608,381</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">7.2</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.23</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">443,613</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">4.25</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=CENTER valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom"><font face="Times New Roman, Times, serif" size="2">5.00
- 5.94</font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">640,600</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">4.6</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">5.37</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">532,600</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">5.38</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=CENTER valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6.05
- 6.85</font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">174,220</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">9.0</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6.40</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">34,740</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6.05</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=CENTER valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom"><font face="Times New Roman, Times, serif" size="2">7.25</font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">90,000</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">4.3</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">7.25</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">90,000</font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2">7.25</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom">
<hr size="1" noshade>
</td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom">
<hr size="1" noshade>
</td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=CENTER valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,084,504</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">1,630,456</font></td>
<td align=LEFT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT valign="bottom" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
</tr>
<tr>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=CENTER nowrap valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom">
<hr size="2" noshade>
</td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom">
<hr size="2" noshade>
</td>
<td align=LEFT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT valign="bottom"><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-13 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At
March 31, 2003, the weighted-average remaining contractual life of outstanding
options was 5.5 years. At March 31, 2003; December 31, 2001 and 2000, currently
exercisable options aggregated 1,630,456; 1,409,570 and 1,207,232
shares of common stock, respectively and the weighted-average exercise price of those
options was $4.43; $4.46 and $4.55, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
per share weighted-average fair value of stock options granted during the year ended
March 31, 2003; December 31, 2001 and 2000 is estimated as $3.54; $2.55 and
$2.60, respectively on the date of grant using the Black-Scholes
option pricing model with the following assumptions: volatility of 60% in 2003 and
2001 and 65% in 2000; risk-free interest rate of 5.00% in 2003 and 2001
and 6.50% in 2000, and an expected life of 6 years.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Employee Stock Purchase Plan</B> The Employee Stock Purchase Plan allows eligible
employees to purchase shares of the Company’s common stock through payroll
deductions. The purchase price is the lower of 85% of the fair market value of
the stock on the first or last day of each six-month period during which an
employee participated in the plan. The Company has reserved 400,000 shares under
the plan of which employees as of March 31, 2003 have purchased 243,884 shares.
Common shares sold to employees under the Purchase Plan in fiscal 2003, 2001 and
2000 were 19,517, 35,860 and 25,857, respectively. There was no common stock
sold to employees during the periods ended March 31, 2002 and 2001.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
weighted-average fair value of each purchase right granted in fiscal 2002, 2001 and 2000
was $2.26, $2.25 and $1.44, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Warrants</B>
In connection with agreements to license certain intellectual property rights to
potential products, licensors were issued warrants. During 1999, warrants were
issued to purchase 50,000 shares of the Company’s common stock
exercisable at a price of $3.44 per share exercisable evenly over three years and
for a period of 10 years. The issuance of the warrants resulted in an
expense of $110,000. Warrants were issued during 1997 to purchase 25,000 shares
at a price of $8.00 per share exercisable in 2000 and for a period of
five years. Of these warrants, 65,000 shares are currently exercisable.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Preferred Stock</B> At March 31, 2003, the Company is authorized to issue 1,000,000
shares of Series A Junior Participating Preferred Stock upon a triggering event
under the Company’s stockholders’ rights plan and is authorized to
issue up to an additional 7,483,589 shares of undesignated preferred
stock.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-14 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(6) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Income
Taxes</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Income
tax expense (benefit) for the years ended March 31, 2003; December 31, 2001 and
2000 and for the three months ended March 31, 2002 and 2001 is as follows (in
thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="8" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months Ended</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14" align=right valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT><font face="Times New Roman, Times, serif" size="2">Current
income tax</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> expense
(benefit)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Federal</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
224</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> State</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">115</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">339</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Deferred
income tax</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> expense
(benefit)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Federal</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,366</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(8,388</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> State</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">257</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(738</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,623</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(9,126</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Total
income tax</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> expense
(benefit)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
3,962</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(9,126</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
following table is a reconciliation of the statutory federal income tax expense
(benefit) to the effective income tax expense (benefit) for the years ended March
31, 2003; December 31, 2001 and 2000 and for the three months
ended March 31, 2002 and 2001 (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="8" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months Ended</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14" align=right valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT width="100%" bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Computed
tax</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> expense
(benefit)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
3,667</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
28</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(5,481</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
353</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(1,252</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">State taxes,
net of</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> federal
benefit</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">242</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(554</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(480</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Change
in deferred tax</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> valuation
allowance</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(46</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">6,018</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(9,126</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">1,252</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Other</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">53</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">18</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">17</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">127</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Actual
tax</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> expense
(benefit)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
3,962</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
(9,126</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company recognized a tax benefit of $9.1 million during the March quarter of 2002
as a result of reinstating net deferred tax assets, including the benefit of net
operating loss carryforwards.</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-15 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 58; page: 58" -->
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities for 2003 and 2002 are presented
below (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap>
<hr size="1" noshade>
</td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td align=LEFT colspan="6">
<hr size="1" noshade>
</td>
<td align=LEFT> </td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT><font face="Times New Roman, Times, serif" size="2">Deferred
tax assets:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Inventory
items</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
383</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
324</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accounts
receivable allowance</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">122</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">185</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Product
rights</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">304</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">304</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Accrued
expenses</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,108</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,128</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Contract
termination</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">770</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
operating loss and credit carryforwards</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,166</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,400</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="6">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Less
valuation allowance</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="6">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,853</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,341</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="6">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Deferred
tax liabilities:</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Unrealized
gains on marketable securities</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(119</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(58</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Property
and equipment</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(184</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(184</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="6">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(303</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">(242</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">)</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="6">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Net
deferred tax assets</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 5,550</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 9,099</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="6">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
assessing the realization of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Based on the level of
historical taxable income and projections of future taxable income over the periods
in which the deferred tax assets are deductible, management believes that
it is more likely than not the Company will realize the benefits of these deductible
differences.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of March 31, 2003, the Company has reported federal net operating loss carryforwards of
approximately $3,900,000. The federal net operating loss carryforwards begin to
expire in 2019. Additionally, the Company has a federal credit
carryforward for alternative minimum tax of approximately $730,000 that has no
expiration date.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(7) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Sales</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company had one significant customer who accounted for 25%, 22% and 20% of net sales in
the years ended March 31, 2003; December 31, 2001 and 2000, respectively. The
Company had one significant customer who accounted for
approximately 22% and 21% (unaudited) of net sales for the three months ended
March 31, 2002 and 2001, respectively. Accounts receivable from this
customer as of March 31, 2003 and 2002 were $2,611,000 and $2,223,000, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-16 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
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<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
sales by geographic area are as follows (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="8" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months Ended</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14" align=right valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Domestic</font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
65,262</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
60,228</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
55,727</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
15,195</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
18,727</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">International</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Japan</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,360</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">8,055</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,083</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,996</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,644</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> UK</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,275</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2,378</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">767</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">426</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">665</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Italy</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,020</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,312</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">808</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">260</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">621</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Netherlands</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">1,632</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">1,178</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">750</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">522</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">333</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> Canada</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,161</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,102</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">928</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">346</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">296</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Other</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">1,365</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">989</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">714</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">390</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">182</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Total</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">international</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">13,813</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">16,014</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,050</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,940</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,741</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> Net
sales</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
79,075</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
76,242</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
61,777</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
19,135</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$ </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
23,468</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 -- Bold" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(8) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Employee
Benefit Plan</B> </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company provides a defined contribution plan which covers all eligible employees.
Generally, employees may contribute up to 50% of base compensation to the plan, not
to exceed annual limits. The Company matches 25% of employee
contributions up to 5% each year, with certain limitations. The Company may also
make additional discretionary contributions. Employee benefit plan
expense was $204,000; $269,000 and $166,000 for the years ended March 31,
2003; December 31, 2001 and 2000, respectively. Employee benefit plan
expense was $46,000 and $120,000 (unaudited) for the three months ended March 31,
2002 and 2001, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 -- Bold" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(9) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Special
Charges</B> </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
June 26, 2001, the Company announced a plan to streamline and realign the Company’s
resources to better match its strategic goals. The Company recorded a special charge
of $930,000 for costs associated with this restructure plan.
Approximately 20 jobs, or 25% of the workforce from throughout the Company, were
eliminated. These cost-cutting actions were expected to result in
annualized savings of approximately $2 to $2.5 million. Cost savings relating to
this plan were realized beginning in July of 2001. During 2001, the
Company utilized $608,000 of the $930,000 accrual, primarily for severance
benefits. During the three months ended March 31, 2002, the Company
utilized $116,000 for severance payments and during the year ended March 31, 2003, the
Company utilized $180,000 for severance payments.</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 -- Bold" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(10) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>License
Agreements</B> </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has agreements to exclusively license intellectual property rights to certain
products. Royalties due under these agreements are based on various percentages of
net sales. To maintain the Company’s licenses, it must make
minimum royalty payments of $795,000 each year until patents for the products
expire. Royalties are classified as a component of cost of goods sold.
Royalty expense was approximately $2,652,000, $3,524,000 and $2,692,000 for
the years ended March 31, 2003; December 31, 2001 and 2000,
respectively. Royalty expense was approximately $724,000 and $1,040,000
(unaudited) for the three months ended March 31, 2002 and 2001, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-17 </FONT></P>
<HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Page Width End" FSL="Project" -->
</TD>
</TR>
</TABLE>
<BR>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 60; page: 60" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 -- Bold" FSL="Project" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(11) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Operating
Leases</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company leases equipment and office space under noncancelable operating leases that
have initial or noncancelable lease terms in excess of one year. Future minimum
lease payments due in accordance with these leases as of March 31, 2003
are as follows (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td align=LEFT><b><font face="Times New Roman, Times, serif" size="1">Year
ending March 31, </font></b></td>
<td colspan="2" align=center><b><font face="Times New Roman, Times, serif" size="1">Amount</font></b></td>
</tr>
<tr valign=top>
<td align=LEFT> </td>
<td align=LEFT colspan="3">
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2004</font></td>
<td bgcolor="#c0c0c0" align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
766,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">2005</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">741,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2006</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">741,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">2007</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">741,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">2008</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">741,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Later years</font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,977,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="3">
<hr size="1" noshade>
</td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Future
minimum lease payments</font></td>
<td align=left bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">$</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">
5,707,000</font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="3">
<hr size="2" noshade>
</td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Total
rental expense for operating leases was $781,000, $789,000 and $559,000 for
the years ended March 31, 2003; December 31, 2001 and 2000, respectively. Total rental
expense for operating leases was $195,000 and $195,000 (unaudited)
for the three months ended March 31, 2002 and 2001, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(12) </B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Net
Income (Loss) Per Share</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
reconciliation of basic and diluted weighted average common shares outstanding is as
follows (in thousands):</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=600>
<tr valign=Bottom align="center">
<td rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="8" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Years Ended</font></b></td>
<td nowrap rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">For
the Three Months</font></b></td>
<td rowspan="4"><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">March
31,</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">December
31,</font></b></td>
<td colspan="5" nowrap><b><font face="Times New Roman, Times, serif" size="1">
Ended March 31,</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2003</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2000</font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2002</font></b></td>
<td nowrap><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="2" nowrap><b><font face="Times New Roman, Times, serif" size="1">2001</font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14">
<hr size="1" noshade>
</td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom align="center">
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
<td colspan="14" align=right valign="top"><b><font face="Times New Roman, Times, serif" size="1">(unaudited)</font></b></td>
<td><b><font face="Times New Roman, Times, serif" size="1"></font></b></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td width=100% align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">Weighted
average common</font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td bgcolor="#c0c0c0" align=RIGHT><font face="Times New Roman, Times, serif" size="2">
</font></td>
<td bgcolor="#c0c0c0" align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> shares
outstanding</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">13,467</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,131</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,372</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">13,711</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,123</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Assumed
conversion of</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> stock
options</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">577</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">300</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">487</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2">0</font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="1" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2">Average
common and</font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> assumed
conversion shares</font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,044</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,431</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,372</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,198</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
<td align=RIGHT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2">14,123</font></td>
<td align=LEFT bgcolor="#c0c0c0"><font face="Times New Roman, Times, serif" size="2"> </font></td>
</tr>
<tr valign=Bottom>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
<td align=LEFT colspan="15">
<hr size="2" noshade>
</td>
<td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=6%> </TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of March 31, 2003, a total of 191,000 options and warrants to purchase shares of
common stock with a range of exercise prices from $6.79 to $8.00 per share were
outstanding but were not included in the computation of diluted
earnings per share because the exercise price was greater than the average market price
of the common shares. The options expire from 2003 to 2011.</FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Page Number w/ Rule" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>F-18 </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
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<BR>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>cns032695_ex10-26.txt
<TEXT>
EXHIBIT 10.26
[CNS Letterhead]
February 14, 2002
Teri Osgood
6905 Howard Lane
Eden Prairie, MN 55346
Dear Teri:
This letter describes our agreement regarding your resignation as
Vice-President, US Marketing and officer of CNS, Inc. ("CNS") effective April
15, 2002.
We will provide you with the following benefits in connection with your
departure from CNS:
1. We will pay you Salary Continuation pursuant to the terms of Paragraph 7 of
the Employment Agreement as follows: 24 semi-monthly paychecks of
$7,299.05, subject to applicable withholding, beginning with the later of
(a) our April 30, 2002 payday or (b) our first regular payday following
expiration of the 15-day rescission period described on page 3 of this
agreement and our receipt of Exhibit A, signed and dated by you after
expiration of the rescission period. Exhibit A is your certification that
you took no steps to exercise your right of rescission. In the event of a
Change in Control, as that term is defined in the "Executive Employment
Agreement" dated February 12, 1999, the above- referenced semimonthly
paychecks will be accelerated and payable, in full, on demand by you. We
will also pay you for your accrued unused paid time off ($9,287.78 or
110.28 hours, as of February 15, 2002.)
You will be eligible to receive a bonus consistent with CNS business
performance under the CNS Management Incentive Plan for 2001/2002 based on
your April 15, 2002 Resignation Date, the terms of the Plan and provided
that the Plan objectives have been met. Payment of any available bonus
would occur at the normal payout time for all employees. We estimate the
payout to be made in May 2002.
<PAGE>
Teri Osgood Separation Letter
Page Two
2 We will continue to pay the employer share, and you will continue to be
responsible for the employee share, as applicable, of your CNS group
health, dental and life insurance premiums through April 30, 2003 or, if
earlier, the date on which you are eligible to participate in other group
plans through your new employer, provided you make the appropriate timely
written elections to continue your CNS group coverage's. Your share of the
premiums will be deducted from the Salary Continuation payments described
in paragraph 1. You agree to notify CNS immediately if your eligibility
under other group plans through your new employer occurs. If you are not
covered under other such group plans as of April 30, 2003, you will have
the right to continue your group coverage's at your own expense for up to
an additional six months, in accordance with applicable state and federal
group insurance continuation laws and the terms of the plans. All rights
which you may have under CNS's group plans, are subject to the terms of the
plans, applicable laws and the continuation of said plans for active CNS
employees. Information and election forms concerning your group coverages
will be mailed to you.
3. We are providing you with the opportunity to voluntarily resign from your
employment. If any prospective employer of yours wishes to contact CNS for
employment information, you agree to direct that employer to make a written
inquiry to Michelle Beuning, Director of Human Resources. Ms. Beuning will
provide the prospective employer, in writing, with your job title, the
scope of your responsibilities, your dates of employment, and the fact that
you voluntarily resigned your employment.
4. We will provide an executive outplacement package that we have selected
with Right Management Consultants at our expense.
5. To the extent required under applicable law, we will indemnify you and hold
you harmless with respect to any action in which you are a named defendant
which arises out of your CNS employment responsibilities.
6. We will remove all restrictive legends on any shares of CNS common stock
held by you. In connection with the removal, you agree that for a period of
90 days from the date you cease to be employed by CNS, any shares that you
sell will be sold in compliance with the applicable requirements of Rule
144 under the Securities Act of 1933.
<PAGE>
Teri Osgood Separation Letter
Page Three
As of April 15, 2002 the remaining 50,400 shares of your stock options will be
exercisable according to the terms of the applicable Stock Option Plan. Your
stock options are set forth on Exhibit B.
In consideration of the benefits to be afforded to you as outlined above, you
agree to do the following things:
1. You hereby release CNS, Inc., its past and present affiliates, and its and
their past and present officers, directors, agents, shareholders,
employees, attorneys, insurers and indemnitors (collectively, the
"Releasees") from any and all claims and causes of action, known or
unknown, which you may have against any and all of them. Through this
release, you extinguish all causes of action against the Releasees
occurring up to the date on which you sign this agreement, including but
not limited to any contract, compensation or benefit claims; intentional
infliction of emotional distress, defamation or any other tort claims; and
all claims arising from any federal, state or municipal law or ordinance,
including the Employee Retirement Income Security Act, the Family and
Medical Leave Act. This release extinguishes any potential claims of
employment discrimination arising from your employment with and resignation
from CNS, including specifically any claims under the Minnesota Human
Rights Act, the Americans With Disabilities Act, Title VII of the Civil
Rights Act of 1964, the Older Workers Benefit Protection Act, and the Age
Discrimination in Employment Act. This release does not extinguish any
claims that arise against CNS after you sign this agreement. You certify
that you (a) have not filed any claims, complaints or other actions against
any Releasee and (b) are hereby waiving any right to recover from any
Releasee under any lawsuit or charge filed by you or any federal, state or
local agency on your behalf based upon any event occurring up to the date
on which you sign this agreement. You are advised by CNS to review your
rights and responsibilities under this agreement with your own lawyer.
<PAGE>
Teri Osgood Separation Letter
Page Four
You have 21 days to review and consider this offer. If you sign this letter
before 21 days have elapsed from the date on which you first receive it,
then you will be voluntarily waiving your right to the full 21-day review
period. You also have the right to rescind this agreement within 15
calendar days of the date upon which you sign it. You understand that if
you desire to rescind this agreement, you must put the rescission in
writing and deliver it to Michelle Beuning, CNS, Inc., 7615 Smetana Lane,
P.O. Box 39802, Minneapolis, MN 55439-0802 by hand or by mail within 15
calendar days of the date on which you sign this agreement. If you deliver
the rescission by mail, it must be postmarked within 15 calendar days of
the date on which you sign this agreement and sent by certified mail,
return receipt requested. If you rescind this agreement, all of CNS's
obligations to you, other than payment of accrued unused paid time off,
will immediately cease, and CNS will owe you nothing hereunder.
2. At our specific request and at mutually convenient times while you are
receiving payments under this agreement, you agree to consult with me or my
designee with respect to transitional CNS business matters. You also agree
to cooperate with CNS in any current or future claims or lawsuits involving
CNS where you have knowledge of the underlying facts. In addition, you
agree that you will not voluntarily aid, assist, or cooperate with any
claimants or plaintiffs or their attorneys or agents in any claims or
lawsuits commenced in the future against CNS, provided, however, that
nothing in this agreement will be construed to prevent you from testifying
truthfully as required by valid legal or administrative process.
3. You agree that you will continue to speak positively and with respect
towards CNS as you have in the past.
4. All knowledge and information not already available to the public which you
have acquired with respect to product development, improvements,
modifications, discoveries, designs, methods, systems, computer software,
programs, codes and documentation, research, designs, formulas,
instructions, methods, inventions, trade secrets, services or other private
or confidential matters of CNS (such as those concerning sales, costs,
profits, organizations, customer lists, pricing methods, etc.), or of any
third party which CNS is obligated to keep confidential, shall be regarded
by you as strictly confidential and shall not be used by you directly or
indirectly or disclosed to any persons, corporations or firms. All of the
foregoing knowledge and information are collectively referred to as
"Confidential Information". Your obligations under this paragraph will not
apply to any information which (a) is or becomes known to the general
public under
<PAGE>
Teri Osgood Separation Letter
Page Five
circumstances involving no breach by you of the terms of this paragraph,
(b) is generally disclosed to third parties by CNS as a continuing practice
without restriction on such third parties, (c) is approved for release by
written authorization of CNS' Board, or (d) you are obligated by law to
disclose. Confidential Information also includes the terms of this
agreement. You agree that you will not disclose its terms to anyone other
than your family members, tax and legal advisors and as otherwise required
by law.
5. During the one-year period following your termination date, you shall not
directly or indirectly engage in, enter into or participate in the business
of CNS or in any business or commercial activity which does or is
reasonably likely to compete with or adversely affect the Business or
products of CNS, either as an individual for your own account, as a partner
or a joint venturer, or as an officer, director, consultant or holder of
more than five percent (5%) of the entity interest in, any other person,
firm, partnership or corporation, or an employee, agent or salesman for any
person. In addition, during such period you shall not: avail yourself of
any advantages or acquaintances you have made with any person who has,
within the twelve (12) month period ended on the date of termination of
your employment, been a customer of CNS or its affiliates, and which would,
directly or indirectly, materially divert business from or materially and
adversely affect the Business of CNS; interfere with the contractual
relations between CNS and any of its employees; or employ or cause to be
employed in any capacity or retain or cause to be retained as a consultant
any person who was employed in any capacity by CNS during the twelve (12)
month period ended on the date of termination of your employment.
For purposes of this Agreement, the "Business of CNS" or "Business" means
and includes the business of the manufacture, production, sale, marketing
and distribution of the Breathe Right strip, FiberChoice, Flair strips and
any other products currently offered or currently under development by CNS
or offered or currently under development by CNS during the 12 months prior
to the date of termination of your employment.
<PAGE>
Teri Osgood Separation Letter
Page Six
6. For one year following your termination date, you agree that you will not,
directly or indirectly, solicit any current or prospective CNS customer,
broker, vendor or distributor who is not, as of your termination date, a
current customer, broker, vendor or distributor of your new employer,
consulting business or any other enterprise in which you become involved
after your resignation from CNS, for the purpose of providing products or
services for or on behalf of said customer, broker, vendor or distributor
which are currently competitive with the products or services being
provided by CNS, which are in the development stages of being competitive
with the products or services being provided by CNS, or which would in any
way cause said customer, broker, vendor or distributor to discontinue or
reduce its business relationship with CNS. Current CNS customers, brokers,
vendors or distributors include those customers, brokers, vendors or
distributors with whom CNS has had a business relationship at any time
within the two years immediately preceding your resignation date.
Prospective CNS customers, brokers, vendors and distributors are those with
whom (a) a CNS representative has been in direct personal contact and (b)
CNS has a reasonable opportunity of entering into a business relationship
within six months following your resignation date. You also agree that
during the same one-year period, you will not directly or indirectly
solicit any CNS employee to terminate his or her employment with CNS. This
employee nonsolicitation obligation shall apply to employees of CNS as of
your resignation date.
If, in your opinion, the restrictions in this paragraph 6 or in paragraph 5
prevent you from obtaining employment, you may make a written request for
modification of the restrictions with respect to a specific position that
you are considering. The president of CNS will review and consider your
request and if she determines, in her sole discretion, that the requested
modification will not be adverse to CNS's business interests, she will
provide you with the modification, which must then be memorialized in
writing and signed by both parties. In addition, if you have any questions
with respect to the scope of your obligations hereunder, you agree to seek
clarification from the president.
This agreement shall not in any way be construed as an admission of liability by
CNS or as an admission that CNS has acted wrongfully with respect to you. CNS
specifically denies and disclaims any such liability or wrongful acts. If any
provision of this agreement is found to be illegal or unenforceable, such
provision will be severed or modified to the extent necessary to make it
enforceable, and as so severed or modified, the remainder of this agreement
shall remain in full force and effect.
You understand that if you violate any obligation which you have to CNS under
this agreement, all payments and benefits to you hereunder will immediately
cease. In such event, your release
<PAGE>
Teri Osgood Separation Letter
Page Seven
of your claims shall remain fully in effect in consideration of the payments and
benefits which you received prior to any such breach.
This agreement sets forth our entire agreement and fully supersedes any prior
agreements, contracts or understandings between you and CNS. CNS asks that our
records reflect that you conclude your employment on terms you understand and
accept. Therefore, we ask you to declare that you have entered into this
agreement voluntarily, without coercion, duress, or reliance on any
representations by any CNS employee, agent or lawyer.
If this letter accurately reflects our understanding and agreement, please sign
both copies and return the original to me. We appreciate all of your efforts and
contributions to CNS over the past 3 1/2 years and wish you success in your
future career.
Sincerely,
CNS, INC.
/s/ Marti Morfitt
- ------------------------------------
Marti Morfitt
President & CEO
Acknowledged and agreed to, with declarations confirmed, this 22nd day of
February, 2002.
/s/ Teri Osgood
- ------------------------------------
Teri Osgood
<PAGE>
EXHIBIT A
TO
RELEASE AGREEMENT
March 11, 2002
Ms. Michelle Beuning
Director of Human Resources
CNS, Inc.
7615 Smetana Lane
P. O. Box 39802
Minneapolis, MN 55439-0802
Dear Michelle:
This letter, signed and dated more than 15 days after I signed the Agreement
between CNS and me dated February 14, 2002, is to certify that I have taken no
steps to exercise my 15-day right of rescission, as described in the Agreement.
Sincerely,
/s/ Teri Osgood
- ------------------------------------
Teri Osgood
<PAGE>
EXHIBIT B
STOCK OPTION SCHEDULE
As of 4/15/02
- --------------------------------------------------------------------------------
OPTION PLAN PRICE DATE GRANTED REMAINING VESTED SHARES
- --------------------------------------------------------------------------------
1994 Stock Option Plan 4.125 08/17/98 30,000
- --------------------------------------------------------------------------------
1994 Stock Option Plan 2.8125 04/15/99 15,000
- --------------------------------------------------------------------------------
1990 Stock Option Plan 4.00 05/03/00 2,400
- --------------------------------------------------------------------------------
2000 Stock Option Plan 4.375 03/15/01 3,000
- --------------------------------------------------------------------------------
The stock option exercise period for the grants dated 8/17/98, 4/15/99 and
5/3/00 has been extended from 30 days to 90 days to the extent exercisable at
date of termination for the lesser of 90 days from the date of termination or
the balance of the option's term.
This will constitute the only amendment to these stock option agreements.
/s/ Marti Morfitt
- ------------------------------------
Marti Morfitt
President and CEO
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>cns032695_ex10-27.txt
<TEXT>
EXHIBIT 10.27
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of October 29, 2002 (the "Effective Date") between
CNS, INC. a Delaware corporation ("CNS") and Linda Kollofski ("Employee").
WHEREAS, CNS considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of CNS
and its shareholders; and
WHEREAS, Employee has made and is expected to continue to make, due to his
experience and knowledge, a significant contribution to the profitability,
growth and financial strength of CNS; and
WHEREAS, CNS, as a publicly held corporation, recognizes that the possibility of
a change in control may exist and that such possibility and the uncertainty and
questions which it may raise among management may result in the departure or
distraction of the performance of Employee's duties to the detriment of CNS and
its shareholders; and
WHEREAS, Employee is willing to continue his employment with CNS upon the
understanding that CNS will provide income security if Employee's employment is
terminated under certain terms and conditions;
WHEREAS, it is in the best interests of CNS and its stockholders to employ
Employee and to reinforce and encourage his continued attention and dedication
to his assigned duties without distraction and to ensure his continued
availability to CNS in the event of a Change in Control; and
WHEREAS, it is further in CNS's best interests to receive certain assurances
from Employee regarding CNS's confidentiality, competition and other proprietary
business concerns;
THEREFORE, in consideration of the foregoing and of this agreement, certain
change in control protection, continued employment and other benefits hereunder,
as well as other mutual covenants and obligations hereinafter set forth, CNS and
Employee agree as follows:
1. Employment. CNS agrees to continue to employ Employee as its Vice
President, New Business Development under the terms, conditions and
benefits set forth herein and Employee accepts continued employment with
CNS on said terms, conditions and benefits.
2. Term. The term of Employee's employment shall continue until terminated
pursuant to paragraph 6, 7, or 8 herein.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 2
3. Duties. In his position as Vice President, New Business Development,
Employee will continue to faithfully and diligently perform such executive
management responsibilities as may be assigned to him from time to time by
the Chief Executive Officer, President or Chairman of the Board of
Directors of CNS (the "Board"); devote his full time, energy and skill to
CNS's business, as is reasonably necessary to execute fully his duties
hereunder, except for vacations, absences made necessary because of
illness, and service on other corporate, civic, or charitable boards or
committees not significantly interfering with his duties hereunder; and
promote CNS's best interests. The principal place of employment and the
location of Employee's principal office and normal place of work shall be
in the Minneapolis, Minnesota metropolitan area. Employee will be expected
to travel to other locations, as necessary, in the performance of his
duties during the term of this Agreement. Employee shall notify the
President of any other paid position which he is considering accepting,
including but not limited to a board of directors position, a position as
an employee or an independent consultant, or any position, whether or not
for pay, which could constitute a conflict of interest with CNS. The
Employee agrees not to accept any such position without the President of
CNS's prior approval.
4. Compensation. For all services rendered by Employee, CNS shall pay Employee
the compensation described in Exhibit A, payable at such times as salaried
employees of CNS are customarily paid. The President of CNS shall, from
time to time during Employee's employment, review his annual salary in
connection with possible increases, giving consideration to inflation
factors, performance of Employee and CNS, salaries paid for positions of
similar responsibility for other companies, and other relevant factors, and
shall provide for such increases when deemed appropriate. Employee shall in
addition be eligible to participate in the annual management incentive
bonus program, as approved by the Board of Directors. In the event of
termination of this Agreement by CNS without Good Cause, as defined in
paragraph 7 herein, the Board may, in good faith and in its sole
discretion, determine and cause to be paid a partial bonus based on
Employee's performance through the date of termination, and such
determination shall be final and binding.
5. Benefits. Employee shall be entitled to Paid Time Off consistent with CNS
policy and such insurance, 401(k) program and other benefits available to
all salaried employees of CNS, subject to any limitations on such benefits
to officers, directors or highly paid employees in order that such benefit
programs qualify under federal or state law for favored tax or other
treatment. Such benefit programs may be changed from time to time by the
Board. Employee shall also be entitled to reimbursement of his reasonable
and necessary expenses incurred in connection with the performance of his
duties hereunder.
6. Termination by Employee. Employee may resign his employment with CNS
effective upon 30 days' advance written notice to the President. If
Employee resigns under this paragraph, the President retains the right to
terminate his employment, effective upon written notice to Employee, at any
time during the 30-day notice period, provided, however, that base salary
and the employer portion of his health insurance premiums will continue to
be paid by CNS for the duration of the 30-day notice period. In connection
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 3
with his termination, Employee will receive any accrued unused Paid Time
Off to which he is entitled.
7. Termination by CNS. CNS shall have the right to terminate Employee's
employment in any of the following ways:
a. CNS may, by written notice to Employee, terminate his employment
without Good Cause, in which event Employee will be paid his base
salary up to the date of termination. Employee is also entitled to
receive Salary Continuation for one year from his termination date.
"Salary Continuation" shall mean payment by CNS of the Employee's base
salary as of his termination date, payable to Employee on the same
schedule and in the same amount as the payment of base salary prior to
termination of his employment, until such time as the full Salary
Continuation obligation shall be discharged, as provided in this
paragraph 7. During the period when Salary Continuation is payable to
Employee, CNS will also continue to provide to Employee all group
medical, dental and life plan benefits provided to its other senior
executives. Employee shall also receive any accrued unused Paid Time
Off to which he is entitled. Receipt of Salary Continuation is subject
to Employee's compliance with his obligations under paragraphs 9, 10,
11 and 12 of this Agreement and his execution of a standard release
agreement which includes, in addition to release of claims against CNS
and related releasees, an obligation not to speak negatively about or
harm CNS, confidentiality with respect to the termination process, and
cooperation with the transition of responsibilities. Payment of the
employer portion of Employee's group medical, dental and life plan
premiums under this paragraph and under paragraphs 6 and 8 herein
shall cease as of the date on which Employee is covered under other
such group plans if such coverage occurs prior to termination of any
salary continuation periods set forth in said paragraphs.
b. CNS, by written notice to Employee, may terminate his employment for
Good Cause, as defined below. In the event of termination under this
subparagraph 7.b., Employee shall be paid his base salary up to the
date of termination. "Good Cause" for the purpose of this Agreement
shall mean one or more of the following: (i) willful and premeditated
failure or refusal of Employee to render services to CNS in accordance
with his obligations under paragraph 3; (ii) the commission by
Employee of an act of fraud or embezzlement against CNS; (iii) the
commission by Employee of any other willful or reckless act which
injures CNS in a substantial or material way (it being understood that
mere negligence in performance of duties is not Good Cause under this
Agreement); (iv) the breach by Employee of any provision of this
Agreement; or (v) the commission of a substantial act of moral
turpitude by Employee which is deemed by CNS's Board to have a
material adverse effect on CNS; or (vi) unsatisfactory performance
after specific notice of performance deficiencies, description of
expectations and opportunity to cure.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 4
c. CNS, by written notice to Employee, may terminate Employee's
employment under this Agreement if he becomes physically or mentally
disabled during the term so that he has not been able to substantially
perform, for a period of 120 consecutive days, with reasonable
accommodation, the usual duties assigned to him hereunder
("Disability"). Upon such determination, CNS shall pay to Employee his
base salary up to the date of such termination to the extent not
covered by any disability plan.
d. This Agreement shall terminate upon the Employee's death during its
term, except that CNS shall pay to the legal representative of
Employee's estate all base salary due him up to the date of his death.
8. Termination Following a Change in Control.
DEFINITION.
a. For purposes of this Agreement, "Change in Control" shall mean the
occurrence of one of the following events:
i. ACQUISITION OF 25% OF STOCK IN CNS
any "person" [as such term is used in Section 13(d) and 4(d) of
the Securities Exchange Act of 1934, as amended ("Exchange
Act")], other than a trustee or other fiduciary holding
securities under an employee benefit plan of CNS is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities representing
25% or more of the combined voting power of CNS's then
outstanding securities;
ii. CHANGE IN 50% OF BOARD DIRECTORS WHO WERE NOT APPROVED BY BOARD
during any period of two consecutive years (not including any
period ending prior to the effective date of this Agreement),
individuals who at the beginning of such period constitute the
Board of Directors of CNS, and any new director [other than a
director designated by a person who has entered into agreement
with CNS to effect a transaction permitted by Section 6(a)(I),
(iii) or (iv)] whose election by the Board of Directors of CNS or
nomination for election by CNS's stockholders was approved by
vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
("Continuing Directors"), cease for any reason to constitute at
least a majority of the Board of Directors of CNS;
iii. MERGER OR CONSOLIDATION WHERE CNS SHAREHOLDERS OWN LESS THAN 50%
OF SURVIVING COMPANY'S STOCK
the stockholders of CNS approve a merger or consolidation of CNS
with
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 3
any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of CNS outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the merged or consolidated entity) 50% or more of
the combined voting power of the voting securities of CNS or such
merged or consolidated entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of CNS or similar
transaction in which no "person" acquires more than 25% of the
combined voting power of CNS's then outstanding securities;
iv. SALE OF CNS ASSETS FOR VALUE TOTALING 50% OR MORE OF CNS STOCK
MARKET VALUE
the stockholders of CNS approve a plan of complete liquidation or
a sale or disposition by CNS of all or substantially all of CNS's
assets. "The sale or disposition by CNS of all or substantially
all of CNS's assets" shall mean a sale or other disposition
transaction or series of related transactions involving assets of
CNS or of any direct or indirect subsidiary of CNS (including the
stock of any direct or indirect subsidiary of CNS) in which the
value of the assets or stock being sold or otherwise disposed of
(as measured by the purchase price being paid therefor or by such
other method as the Board of Directors of CNS determines is
appropriate in a case where there is no readily ascertainable
purchase price) constitutes more than 50% of the fair market
value of CNS. For purposes of the preceding sentence, the "fair
market value of CNS" shall be the aggregate market value of CNS's
outstanding common stock (on a fully diluted basis) plus the
aggregate market value of CNS's other outstanding equity
securities. The aggregate market value of CNS's common stock
shall be determined by multiplying the number of shares of CNS
common stock (on a fully diluted basis) outstanding on the date
of the execution and delivery of a definitive agreement
("Transaction Date") with respect to the sale or disposition by
CNS of all or substantially all of CNS's assets by the average
closing price for CNS's common stock for the ten trading days
immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of CNS shall be determined
in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of
CNS's common stock or by such other method as the Board of
Directors of CNS shall determine is appropriate; and
Employee agrees that, subject to the terms and conditions of this
Agreement, in the event of a Change in Control of CNS occurring after
the date hereof, Employee will remain in the employ of CNS for a
period of 30 days from the occurrence of such Change in Control.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 6
b. Applicability. In the event of a Change in Control, the terms of this
subparagraph 8.b shall be effective for a period of 24 months
following the Change in Control. At the expiration of such 24 month
period this Agreement in its entirety shall be terminated and be of no
further effect. Employee shall be entitled to receive the benefits set
forth in subparagraph 8.f if, within 24 months of such Change in
Control, his employment is terminated by CNS or its successor without
Good Cause (as defined in paragraph 7.a above), or by Employee for
Good Reason (as defined in subparagraph 8.b.i, below). Employee shall,
in return for the benefits provided under subparagraph 8.f., sign a
standard release agreement with CNS, in which he agrees to release any
and all claims and causes of action which he might have against CNS
and in which he affirms and acknowledges his obligations under
paragraphs 9, 10, 11 and 12 of this Agreement.
i. Termination for Good Reason shall be effective immediately upon
written notice from the Employee to the President. Good Reason
shall exist if CNS has materially breached any of the terms of
this Agreement; Employee is assigned duties which are materially
inconsistent with his position, duties, responsibilities and
status as Vice President, New Business Development; his
compensation, including any incentive compensation or bonus plan,
is reduced; or relocation of CNS would require him to relocate
his principal residence outside reasonable commuting distance of
the Twin Cities Metropolitan area.
ii. Termination without Good Cause shall be effective upon 30 days'
advance notice by CNS to the Employee. For purposes of this
paragraph 8, Good Cause shall be defined as in subparagraph 7.b.
c. Notice of Termination. Any purported termination of employment under
this paragraph 8 and also under paragraphs 6 and 7 shall be
communicated by written Notice of Termination to the other party
hereto in accordance with paragraph 20 hereunder. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement relied
upon and which sets forth the facts and circumstances claimed to
provide a basis for termination of Employee's employment.
d. Date of Termination. For purposes of this paragraph 8 and also
paragraphs 6 and 7 of this Agreement, "Date of Termination" shall
mean:
i. if Employee's employment is terminated for Disability, as defined
in paragraph 7.c. hereunder, 30 days after Notice of Termination
is given (provided that Employee shall not have returned to the
full-time performance of Employee's duties during such 30 day
period); and
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 7
ii. if Employee's employment is terminated pursuant to a provision
contained in paragraph 6, 7 or 8 herein or for any other reason
(other than Disability), the date specified in the Notice of
Termination, consistent with the provisions in said paragraphs.
e. Dispute of Termination. If, within ten days after any Notice of
Termination is given under this paragraph 8, the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by mutual written
agreement of the parties, or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or the time
for appeal therefrom having expired and no appeal having been
perfected); provided, that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such
dispute, CNS shall continue to pay Employee full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue Employee as
a participant in all compensation, benefit and insurance plans in
which Employee was participating when the notice giving rise to the
dispute was given, to the extent permissible under the terms of the
applicable group plans and state and federal law, until the dispute is
finally resolved in accordance with this subparagraph. Amounts paid
under this subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts under this Agreement.
f. Compensation Upon Termination. Following a Change in Control, as
defined in subparagraph 8.a. above, to the extent provided in
subparagraph 8.b. above, Employee shall be entitled to the following
benefits in lieu of any benefits which would otherwise be available to
him upon termination under paragraphs 6 or 7 hereunder:
i. CNS shall pay Employee through the Date of Termination Employee's
base salary at the rate in effect at the time the Notice of
Termination is given and any other form or type of other
compensation otherwise payable for such period, including any
applicable incentive bonus, commensurate with his performance and
the performance of CNS.
ii. In lieu of any further salary payments for periods subsequent to
the Date of Termination, CNS shall pay a severance payment (the
"Severance Payment") equal to 24 months of Employee's
Compensation as defined below based on the average monthly
Compensation paid to Employee during the 24 month period ending
immediately prior to the Date of Termination (without giving
effect to any reduction in such Compensation which would
constitute a breach of this Agreement). If the Employee has not
been employed by CNS for 24 months as of the Date of Termination,
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 8
average monthly Compensation shall be the Employee's average
monthly Compensation for the number of months during which the
Employee has been employed at CNS. For purposes of this
subparagraph, Compensation shall mean and include every type and
form of compensation paid to Employee by CNS (or any corporation
("Affiliate") affiliated with CNS within the meaning of Section
1504 of the Internal Revenue Code of 1986, as may be amended from
time to time (the "Code")) and included in Employee's gross
income for federal income tax purposes, but excluding
compensation income arising from (1) hiring bonuses and (2)
compensation income recognized as a result of the exercise of
stock options or sale of the stock so acquired. All of Employee's
contributions to any qualified plan pursuant to Section 401(k) of
the Code or any flexible benefit plan pursuant to Section 125 of
the Code shall be deemed to be included in gross income for
federal tax purposes for purposes of this subparagraph. The
Severance Payment shall be made in a single lump sum within 60
days after the Date of Termination.
iii. For 18 months following the Employee's Date of Termination, CNS
shall arrange to provide, at its sole expense, Employee with
group medical, dental and life plan benefits substantially
similar to those which Employee was receiving or entitled to
receive immediately prior to the Notice of Termination. The cost
of providing such benefits shall be in addition to (and shall not
reduce) the Severance Payment. Benefits otherwise receivable by
Employee pursuant to this paragraph (iii) shall be reduced to the
extent comparable benefits are actually received by Employee
during such period from any third party, and any such benefits
actually received by Employee shall be reported to CNS.
iv. CNS shall also pay to Employee all legal fees and expenses
incurred by Employee as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this paragraph).
v. The Severance Payment shall be reduced and offset by the amount
of any other payment received or to be received by Employee in
connection with his termination of employment pursuant to any
policies of CNS.
vi. If a determination is made by legislation, regulations, rulings
directed to CNS or Employee, or court decision that the aggregate
amount of any payment made to Employee hereunder, or pursuant to
any plan, program or policy of CNS in connection with, on account
of, or as a result of, a Change of Control constitutes an "excess
parachute payment" as defined in Section 280G of the Code subject
to the excise tax provisions of Section 4999 of the Code, or any
successor sections thereof, Employee shall be
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 9
entitled to receive from CNS, in addition to any other amounts
payable hereunder, an amount which shall be equal to such excise
tax, plus, on a net after-tax basis, an amount equal to the
aggregate amount of any interest, penalties, fines or additions
to any tax, including income tax, which are imposed in connection
with the imposition of such excise tax. Such amount shall be
payable to Employee as soon as may be practicable after such
final determination is made. Employee and CNS shall mutually and
reasonably determine whether or not such determination has
occurred or whether any appeal to such determination should be
made.
vii. Employee shall be entitled to receive all benefits payable to
Employee under the CNS, Inc. Profit Sharing Plan and Trust or any
successor of such Plan and Trust and any other plan or agreement
relating to retirement benefits, and, in addition, if Employee is
not fully vested in his account balance under such Plan, a single
lump sum payment in cash from CNS representing the nonvested
portion of his account, which shall be in addition to, and not
reduced by, any other amounts payable to Employee under this
paragraph 8.
viii. Employee shall not be required to mitigate the amount of any
payment provided for in this paragraph 8 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this paragraph 8 be reduced by any
compensation earned by Employee as the result of employment by
another employer or by retirement benefits after the Date of
Termination, or otherwise except as specifically provided in this
paragraph 8.
ix. In order to assure the performance of CNS or its successor of its
obligations under this paragraph, CNS may deposit in trust an
amount equal to the maximum payment that will be due Employee
under the terms hereof. Under a written trust instrument, the
Trustee shall be instructed to pay to Employee (or Employee's
legal representative, as the case may be) the amount to which
Employee shall be entitled under the terms hereof, and the
balance, if any, of the trust not so paid or reserved for payment
shall be repaid to CNS. If CNS deposits funds in trust, payment
shall be made no later than the occurrence of a Change in
Control. If and to the extent there are not amounts in trust
sufficient to pay Employee under this Agreement, CNS shall remain
liable for any and all payments due to Employee. In accordance
with the terms of such trust, at all times during the term of
this Agreement, Employee shall have no rights, other than as an
unsecured general creditor of CNS, to any amounts held in trust
and all trust assets shall be general assets of CNS and subject
to the claims of creditors of CNS. Failure of CNS to establish or
fully fund such trust shall not be deemed a revocation or
termination of this Agreement by CNS.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 10
x. As a condition of receiving the Severance Payment and other
benefits provided in this subparagraph 8.f and in subparagraph
8.g, Employee shall be required to sign a standard release
agreement with CNS in which he agrees to release any and all
claims and causes of action which he might have against CNS and
in which he affirms and acknowledges his obligations under
paragraphs 9, 10, 11 and 12 of this Agreement.
g. Stock Options. Employee shall, immediately upon a Change in Control,
vest in all stock options which have been granted to him and he shall
be entitled to exercise all rights and to receive all benefits
accruing to him under any and all CNS stock purchase and stock option
plans or programs, including the CNS, Inc. 1994 Amended Stock Plan, or
any successor to any such plan or program, which shall be in addition
to and not reduced by any other amounts payable to Employee under this
paragraph 8.
9. Confidential Information. All knowledge and information not already
available to the public which Employee may acquire or has acquired with
respect to product development, improvements, modifications, discoveries,
designs, methods, systems, computer software, programs, codes and
documentation, research, designs, formulas, instructions, methods,
inventions, trade secrets, services or other private or confidential
matters of CNS (such as those concerning sales, costs, profits,
organizations, customer lists, pricing methods, etc.), or of any third
party which CNS is obligated to keep confidential, shall be regarded by
Employee as strictly confidential and shall not be used by Employee
directly or indirectly or disclosed to any persons, corporations or firms.
All of the foregoing knowledge and information are collectively termed
"Confidential Information" herein. Employee's obligations under this
paragraph will not apply to any information which (a) is or becomes known
to the general public under circumstances involving no breach by Employee
of the terms of this paragraph, (b) is generally disclosed to third parties
by CNS as a continuing practice without restriction on such third parties,
(c) is approved for release by written authorization of CNS's Board, or (d)
Employee is obligated by law to disclose.
10. Disclosure and Transfer of Product Developments, etc.
a. Employee will make full and prompt disclosure to CNS or all product
developments, improvements, modifications, discoveries, computer
software, programs, codes and documentation, research, designs,
formulas, configurations, instructions, methods and inventions (all of
which are collectively termed "Developments" herein), whether
patentable or not, made, discovered, conceived or first reduced to
practice by Employee or under his direction during his employment,
alone or with others, whether or not made or conceived during normal
working hours or on the premises of CNS which relate in any material
way to the business or to research or development work of CNS.
Employee confirms by his acceptance of this Agreement that CNS owns
and shall own all of the Developments.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 11
b. Employee also agrees on behalf of himself and his heirs and legal
representatives that he will promptly communicate, disclose and
transfer to CNS, free of encumbrances and restrictions, all of his
right, title and interest in the Developments covered by subparagraph
10.a. and any patents or patent applications covering such
Developments and to execute and deliver such assignments, patents and
applications, and any other documents as CNS may direct, and to
cooperate fully with CNS to enable it to secure any patents or
otherwise protect such Developments in any and all countries. Employee
shall assign to CNS any and all copyrights and reproduction rights to
all material prepared by Employee in connection with his employment.
c. Notwithstanding subparagraphs 10.a. and b., however, this paragraph 10
shall not apply to Developments for which no equipment, supplies,
facility or trade secret information of CNS was used and which was
developed entirely on the Employee's own time, and (1) which do not
relate (a) directly to the business of CNS or (b) to CNS's actual or
demonstrably anticipated research or development, or (2) which does
not result from any work performed by Employee for CNS.
This will confirm that Employee's obligations to CNS under paragraphs 9, 10
and 11 will continue after the termination of Employee's employment.
11. Non-Competition. During the term of Employee's employment by CNS and for
twelve (12) months thereafter, Employee shall not directly or indirectly
engage in, enter into or participate in the business of CNS or in any
business or commercial activity which does or is reasonably likely to
compete with or adversely affect the Business or products of CNS, either as
an individual for Employee's own account, as a partner or a joint venturer,
or as an officer, director, consultant or holder of more than five percent
(5%) of the entity interest in, any other person, firm, partnership or
corporation, or an employee, agent or salesman for any person. In addition,
during such period Employee shall not: avail himself of any advantages or
acquaintances he has made with any person who has, within the twelve (12)
month period ended on the date of termination of his employment, been a
customer of CNS or its affiliates, and which would, directly or indirectly,
materially divert business from or materially and adversely affect the
Business of CNS; interfere with the contractual relations between CNS and
any of its employees; or employ or cause to be employed in any capacity or
retain or cause to be retained as a consultant any person who was employed
in any capacity by CNS during the twelve (12) month period ended on the
date of termination of Employee's employment.
For purposes of this Agreement, the "Business of CNS" or "Business" means
and includes the business of the manufacture, production, sale, marketing
and distribution of the Breathe Right strip and any other products
currently offered or currently under development by CNS or offered or
currently under development by CNS during one (1) year prior to the date of
termination of Employee's employment.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 12
Inasmuch as the activities of CNS are conducted on an international basis,
the restrictions of this paragraph 11 shall apply throughout the United
States, Canada, Japan and Europe.
12. Non-Solicitation. During the term of Employee's employment by CNS and for
twelve (12) months thereafter, Employee shall not directly or indirectly
solicit any current or prospective CNS customer, broker, vendor or
distributor for the purpose of providing products or services for or on
behalf of said customer, broker, vendor or distributor which are
competitive with the products or services being provided by CNS, which are
in the development stages of being competitive with the products or
services being provided by CNS, or which would in any way cause said
customer, broker, vendor or distributor to discontinue or reduce its
business relationship with CNS. Current CNS customers, brokers, vendors or
distributors include those customer, brokers, vendors or distributors with
whom CNS has had a business relationship at any time within one year
immediately preceding Employee's termination date. Prospective CNS
customers, brokers, vendors and distributors include those with whom (a) a
CNS representative has been in direct personal contact and (b) CNS has a
reasonable opportunity of entering into a business relationship within six
months following Employee's termination date. Employee also agrees that
during his employment in the one year period following his employment, he
will not directly or indirectly solicit any CNS employees to terminate his
or her employment with CNS. This Employee non-solicitation obligation
applies to Employees of CNS during Employee's employment and as of his
termination date.
13. Remedies. Employee acknowledges that the restrictions set forth in
paragraphs 9, 10, 11 and 12 hereof are reasonably necessary to protect
legitimate business interests of CNS. It is understood that if Employee
violates his obligations under any of these paragraphs, CNS would suffer
irreparable harm for which a recovery of money damages would be an
incomplete and inadequate remedy. It is therefore agreed that CNS, in
addition to any remedies at law, shall be entitled, as a matter of right,
in any court of competent jurisdiction, to a mandatory injunction
restraining Employee pending litigation, as well as upon final
determination thereof, from violating this Agreement. In addition, CNS will
discontinue payment to Employee of any Severance or Salary Continuation
Payments, benefits or bonus which he may be entitled to receive or is
receiving under paragraphs 6, 7 or 8 hereunder or otherwise, in the event
of his violation of any of his obligations under this Agreement. In the
event of cessation of payments and benefits, Employee's release of his
claims against CNS shall remain valid and fully enforceable in
consideration of the benefits which Employee received prior to set breach.
14. Severability. The parties intend that the covenants and agreements
contained herein shall be deemed to be a series of separate covenants and
agreements, one for each and every state of the United States and political
subdivision outside the United States where the business described is
conducted. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in such action, then such
unenforceable covenants shall be deemed eliminated from the provisions of
this Agreement for the purpose of such proceeding to the extent necessary
to permit the remaining covenants to be enforced in such proceeding.
Further, in the event that any
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 13
provision is held to be overbroad as written, such provision shall be
deemed amended to narrow its application to the extent necessary to make
the provision enforceable according to applicable law and enforced as
amended
15. Binding Effect.
a. CNS will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets as defined in subparagraph 8.a of
CNS to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that CNS would be required to
perform it if no such succession had taken place, in which case, the
term "CNS" as used in this Agreement shall instead refer to CNS'
successor. Failure of CNS to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Employee to compensation from CNS in
the same amount and on the same terms as he would be entitled
hereunder if he terminated his employment for Good Reason following a
Change in Control, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective
shall be deemed the Date of Termination.
b. This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, successors, heirs, and
designated beneficiaries. If Employee should die while any amount
would still be payable to Employee hereunder if Employee had continued
to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's
designated beneficiaries, or, if there is no such designated
beneficiary, to Employee's estate.
16. Entire Agreement. From and after the date of this Agreement the terms and
provisions of this Agreement constitute the entire agreement between the
parties and this Agreement supersedes any previous oral or written
communications, representations, or agreements with respect to any subject,
including the subject matter of compensation, bonus, participation and
profit sharing and termination compensation.
17. Waiver and Interpretation. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the breaching party. No
waiver shall be valid unless in writing and signed by the party providing
such waiver. If any provision of this Agreement is held by any court to be
unenforceable, then such provision shall be deemed to be eliminated from
the Agreement to permit enforceability of the remaining provisions. If any
provision is held to be overbroad, such provision shall be amended to
narrow its application to the extent necessary for enforceability. For
purposes of the release agreement which Employee shall be required to
execute as a condition of receiving any payments and benefits hereunder,
"CNS", as referred to in this Agreement, shall include CNS and all its
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 14
affiliates, shareholders, officers, directors, employees, agents,
attorneys, insurers and indemnitors.
18. Applicable Law. All questions pertaining to the validity, construction,
execution and performance of this Agreement shall be construed and governed
in accordance with the laws of the State of Minnesota. The parties consent
to the personal jurisdiction of the State of Minnesota, waive any argument
that such a forum is not convenient, and agree that any litigation relating
to this Agreement shall be venued in Minneapolis, Minnesota.
19. Tax Withholding. CNS may withhold from any payment of benefits under this
Agreement (and forward to the appropriate taxing authority) any taxes
required to be withheld under applicable law.
20. Notice. Any notice required or desired to be given under this Agreement
shall be deemed given if in writing sent by certified mail to his residence
in the case of Employee, or to its principal office in the case of CNS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first set forth above.
CNS, INC.
By /s/ Marti Morfitt
--------------------------------------
Marti Morfitt
Its President & CEO
EMPLOYEE
/s/ Linda Kollofski
----------------------------------------
Linda Kollofski
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT A
NAME: Linda Kollofski
DATE: October 29, 2002
POSITION: Vice President, New Business Development
DEPARTMENT: New Business Development
BASE SALARY: $175,000
MANAGEMENT INCENTIVE PLAN LEVEL: 15% at Threshold
30% at Plan
60% at Maximum
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>cns032695_ex10-28.txt
<TEXT>
EXHIBIT 10.28
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of July 22, 2002 (the "Effective Date") between CNS,
INC. a Delaware corporation ("CNS") and John F. Kundtz ("Employee").
WHEREAS, CNS considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of CNS
and its shareholders; and
WHEREAS, Employee has made and is expected to continue to make, due to his
experience and knowledge, a significant contribution to the profitability,
growth and financial strength of CNS; and
WHEREAS, CNS, as a publicly held corporation, recognizes that the possibility of
a change in control may exist and that such possibility and the uncertainty and
questions which it may raise among management may result in the departure or
distraction of the performance of Employee's duties to the detriment of CNS and
its shareholders; and
WHEREAS, Employee is willing to continue his employment with CNS upon the
understanding that CNS will provide income security if Employee's employment is
terminated under certain terms and conditions;
WHEREAS, it is in the best interests of CNS and its stockholders to employ
Employee and to reinforce and encourage his continued attention and dedication
to his assigned duties without distraction and to ensure his continued
availability to CNS in the event of a Change in Control; and
WHEREAS, it is further in CNS's best interests to receive certain assurances
from Employee regarding CNS's confidentiality, competition and other proprietary
business concerns;
THEREFORE, in consideration of the foregoing and of this agreement, certain
change in control protection, continued employment and other benefits hereunder,
as well as other mutual covenants and obligations hereinafter set forth, CNS and
Employee agree as follows:
1. Employment. CNS agrees to continue to employ Employee as its Vice President
Marketing, Breathe Right Brand under the terms, conditions and benefits set
forth herein and Employee accepts continued employment with CNS on said
terms, conditions and benefits.
2. Term. The term of Employee's employment shall continue until terminated
pursuant to paragraph 6, 7, or 8 herein.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 2
3. Duties. In his position as Vice President Marketing, Breathe Right Brand,
Employee will continue to faithfully and diligently perform such executive
management responsibilities as may be assigned to him from time to time by
the President and Chief Executive Officer or Chairman of the Board of
Directors of CNS (the "Board"); devote his full time, energy and skill to
CNS's business, as is reasonably necessary to execute fully his duties
hereunder, except for vacations, absences made necessary because of
illness, and service on other corporate, civic, or charitable boards or
committees not significantly interfering with his duties hereunder; and
promote CNS's best interests. The principal place of employment and the
location of Employee's principal office and normal place of work shall be
in the Minneapolis, Minnesota metropolitan area. Employee will be expected
to travel to other locations, as necessary, in the performance of his
duties during the term of this Agreement. Employee shall notify the
President of any other paid position which he is considering accepting,
including but not limited to a board of directors position, a position as
an employee or an independent consultant, or any position, whether or not
for pay, which could constitute a conflict of interest with CNS. The
Employee agrees not to accept any such position without the President of
CNS's prior approval.
4. Compensation. For all services rendered by Employee, CNS shall pay Employee
the compensation described in Exhibit A, payable at such times as salaried
employees of CNS are customarily paid. The President and CEO of CNS shall,
from time to time during Employee's employment, review his annual salary in
connection with possible increases, giving consideration to inflation
factors, performance of Employee and CNS, salaries paid for positions of
similar responsibility for other companies, and other relevant factors, and
shall provide for such increases when deemed appropriate. Employee shall in
addition be eligible to participate in the annual management incentive
bonus program, as approved by the Board of Directors. In the event of
termination of this Agreement by CNS without Good Cause, as defined in
paragraph 7 herein, the Board may, in good faith and in its sole
discretion, determine and cause to be paid a partial bonus based on
Employee's performance through the date of termination, and such
determination shall be final and binding.
5. Benefits. Employee shall be entitled to Paid Time Off consistent with CNS
policy and such insurance, 401(k) program and other benefits available to
all salaried employees of CNS, subject to any limitations on such benefits
to officers, directors or highly paid employees in order that such benefit
programs qualify under federal or state law for favored tax or other
treatment. Such benefit programs may be changed from time to time by the
Board. Employee shall also be entitled to reimbursement of his reasonable
and necessary expenses incurred in connection with the performance of his
duties hereunder.
6. Termination by Employee. Employee may resign his employment with CNS
effective upon 30 days' advance written notice to the President. If
Employee resigns under this paragraph, the President and CEO retains the
right to terminate his employment, effective upon written notice to
Employee, at any time during the 30-day notice period, provided, however,
that base salary and the employer portion of his health insurance premiums
will continue to be paid by CNS for the duration of the 30-day notice
period. In connection
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 3
with his termination, Employee will receive any accrued unused Paid Time
Off to which he is entitled.
7. Termination by CNS. CNS shall have the right to terminate Employee's
employment in any of the following ways:
a. CNS may, by written notice to Employee, terminate his employment
without Good Cause, in which event Employee will be paid his base
salary up to the date of termination. Employee is also entitled to
receive Salary Continuation for one year from his termination date.
"Salary Continuation" shall mean payment by CNS of the Employee's base
salary as of his termination date, payable to Employee on the same
schedule and in the same amount as the payment of base salary prior to
termination of his employment, until such time as the full Salary
Continuation obligation shall be discharged, as provided in this
paragraph 7. During the period when Salary Continuation is payable to
Employee, CNS will also continue to provide to Employee all group
medical, dental and life plan benefits provided to its other senior
executives. Employee shall also receive any accrued unused Paid Time
Off to which he is entitled. Receipt of Salary Continuation is subject
to Employee's compliance with his obligations under paragraphs 9, 10,
11 and 12 of this Agreement and his execution of a standard release
agreement which includes, in addition to release of claims against CNS
and related releasees, an obligation not to speak negatively about or
harm CNS, confidentiality with respect to the termination process, and
cooperation with the transition of responsibilities. Payment of the
employer portion of Employee's group medical, dental and life plan
premiums under this paragraph and under paragraphs 6 and 8 herein
shall cease as of the date on which Employee is covered under other
such group plans if such coverage occurs prior to termination of any
salary continuation periods set forth in said paragraphs.
b. CNS, by written notice to Employee, may terminate his employment for
Good Cause, as defined below. In the event of termination under this
subparagraph 7.b., Employee shall be paid his base salary up to the
date of termination. "Good Cause" for the purpose of this Agreement
shall mean one or more of the following: (i) willful and premeditated
failure or refusal of Employee to render services to CNS in accordance
with his obligations under paragraph 3; (ii) the commission by
Employee of an act of fraud or embezzlement against CNS; (iii) the
commission by Employee of any other willful or reckless act which
injures CNS in a substantial or material way (it being understood that
mere negligence in performance of duties is not Good Cause under this
Agreement); (iv) the breach by Employee of any provision of this
Agreement; or (v) the commission of a substantial act of moral
turpitude by Employee which is deemed by CNS's Board to have a
material adverse effect on CNS; or (vi) unsatisfactory performance
after specific notice of performance deficiencies, description of
expectations and opportunity to cure.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 4
c. CNS, by written notice to Employee, may terminate Employee's
employment under this Agreement if he becomes physically or mentally
disabled during the term so that he has not been able to substantially
perform, for a period of 120 consecutive days, with reasonable
accommodation, the usual duties assigned to him hereunder
("Disability"). Upon such determination, CNS shall pay to Employee his
base salary up to the date of such termination to the extent not
covered by any disability plan.
d. This Agreement shall terminate upon the Employee's death during its
term, except that CNS shall pay to the legal representative of
Employee's estate all base salary due him up to the date of his death.
8. Termination Following a Change in Control.
DEFINITION.
a. For purposes of this Agreement, "Change in Control" shall mean the
occurrence of one of the following events:
i. ACQUISITION OF 25% OF STOCK IN CNS
any "person" [as such term is used in Section 13(d) and 4(d) of
the Securities Exchange Act of 1934, as amended ("Exchange
Act")], other than a trustee or other fiduciary holding
securities under an employee benefit plan of CNS is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities representing
25% or more of the combined voting power of CNS's then
outstanding securities;
ii. CHANGE IN 50% OF BOARD DIRECTORS WHO WERE NOT APPROVED BY BOARD
during any period of two consecutive years (not including any
period ending prior to the effective date of this Agreement),
individuals who at the beginning of such period constitute the
Board of Directors of CNS, and any new director [other than a
director designated by a person who has entered into agreement
with CNS to effect a transaction permitted by Section 6(a)(I),
(iii) or (iv)] whose election by the Board of Directors of CNS or
nomination for election by CNS's stockholders was approved by
vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
("Continuing Directors"), cease for any reason to constitute at
least a majority of the Board of Directors of CNS;
iii. MERGER OR CONSOLIDATION WHERE CNS SHAREHOLDERS OWN LESS THAN 50%
OF SURVIVING COMPANY'S STOCK
the stockholders of CNS approve a merger or consolidation of CNS
with
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 5
any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of CNS outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the merged or consolidated entity) 50% or more of
the combined voting power of the voting securities of CNS or such
merged or consolidated entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of CNS or similar
transaction in which no "person" acquires more than 25% of the
combined voting power of CNS's then outstanding securities;
iv. SALE OF CNS ASSETS FOR VALUE TOTALING 50% OR MORE OF CNS STOCK
MARKET VALUE
the stockholders of CNS approve a plan of complete liquidation or
a sale or disposition by CNS of all or substantially all of CNS's
assets. "The sale or disposition by CNS of all or substantially
all of CNS's assets" shall mean a sale or other disposition
transaction or series of related transactions involving assets of
CNS or of any direct or indirect subsidiary of CNS (including the
stock of any direct or indirect subsidiary of CNS) in which the
value of the assets or stock being sold or otherwise disposed of
(as measured by the purchase price being paid therefor or by such
other method as the Board of Directors of CNS determines is
appropriate in a case where there is no readily ascertainable
purchase price) constitutes more than 50% of the fair market
value of CNS. For purposes of the preceding sentence, the "fair
market value of CNS" shall be the aggregate market value of CNS's
outstanding common stock (on a fully diluted basis) plus the
aggregate market value of CNS's other outstanding equity
securities. The aggregate market value of CNS's common stock
shall be determined by multiplying the number of shares of CNS
common stock (on a fully diluted basis) outstanding on the date
of the execution and delivery of a definitive agreement
("Transaction Date") with respect to the sale or disposition by
CNS of all or substantially all of CNS's assets by the average
closing price for CNS's common stock for the ten trading days
immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of CNS shall be determined
in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of
CNS's common stock or by such other method as the Board of
Directors of CNS shall determine is appropriate; and
Employee agrees that, subject to the terms and conditions of this
Agreement, in the event of a Change in Control of CNS occurring after
the date hereof, Employee will remain in the employ of CNS for a
period of 30 days from the occurrence of such Change in Control.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 6
b. Applicability. In the event of a Change in Control, the terms of this
subparagraph 8.b shall be effective for a period of 24 months
following the Change in Control. At the expiration of such 24 month
period this Agreement in its entirety shall be terminated and be of no
further effect. Employee shall be entitled to receive the benefits set
forth in subparagraph 8.f if, within 24 months of such Change in
Control, his employment is terminated by CNS or its successor without
Good Cause (as defined in paragraph 7.a above), or by Employee for
Good Reason (as defined in subparagraph 8.b.i, below). Employee shall,
in return for the benefits provided under subparagraph 8.f., sign a
standard release agreement with CNS, in which he agrees to release any
and all claims and causes of action which he might have against CNS
and in which he affirms and acknowledges his obligations under
paragraphs 9, 10, 11 and 12 of this Agreement.
i. Termination for Good Reason shall be effective immediately upon
written notice from the Employee to the President and CEO. Good
Reason shall exist if CNS has materially breached any of the
terms of this Agreement; Employee is assigned duties which are
materially inconsistent with his position, duties,
responsibilities and status as Vice President Marketing, Breathe
Right Brand; his compensation, including any incentive
compensation or bonus plan, is reduced; or relocation of CNS
would require him to relocate his principal residence outside
reasonable commuting distance of the Twin Cities Metropolitan
area.
ii. Termination without Good Cause shall be effective upon 30 days'
advance notice by CNS to the Employee. For purposes of this
paragraph 8, Good Cause shall be defined as in subparagraph 7.b.
c. Notice of Termination. Any purported termination of employment under
this paragraph 8 and also under paragraphs 6 and 7 shall be
communicated by written Notice of Termination to the other party
hereto in accordance with paragraph 20 hereunder. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement relied
upon and which sets forth the facts and circumstances claimed to
provide a basis for termination of Employee's employment.
d. Date of Termination. For purposes of this paragraph 8 and also
paragraphs 6 and 7 of this Agreement, "Date of Termination" shall
mean:
i. if Employee's employment is terminated for Disability, as defined
in paragraph 7.c. hereunder, 30 days after Notice of Termination
is given (provided that Employee shall not have returned to the
full-time performance of Employee's duties during such 30 day
period); and
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 7
ii. if Employee's employment is terminated pursuant to a provision
contained in paragraph 6, 7 or 8 herein or for any other reason
(other than Disability), the date specified in the Notice of
Termination, consistent with the provisions in said paragraphs.
e. Dispute of Termination. If, within ten days after any Notice of
Termination is given under this paragraph 8, the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by mutual written
agreement of the parties, or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or the time
for appeal therefrom having expired and no appeal having been
perfected); provided, that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such
dispute, CNS shall continue to pay Employee full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue Employee as
a participant in all compensation, benefit and insurance plans in
which Employee was participating when the notice giving rise to the
dispute was given, to the extent permissible under the terms of the
applicable group plans and state and federal law, until the dispute is
finally resolved in accordance with this subparagraph. Amounts paid
under this subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts under this Agreement.
f. Compensation Upon Termination. Following a Change in Control, as
defined in subparagraph 8.a. above, to the extent provided in
subparagraph 8.b. above, Employee shall be entitled to the following
benefits in lieu of any benefits which would otherwise be available to
him upon termination under paragraphs 6 or 7 hereunder:
i. CNS shall pay Employee through the Date of Termination Employee's
base salary at the rate in effect at the time the Notice of
Termination is given and any other form or type of other
compensation otherwise payable for such period, including any
applicable incentive bonus, commensurate with his performance and
the performance of CNS.
ii. In lieu of any further salary payments for periods subsequent to
the Date of Termination, CNS shall pay a severance payment (the
"Severance Payment") equal to 24 months of Employee's
Compensation as defined below based on the average monthly
Compensation paid to Employee during the 24 month period ending
immediately prior to the Date of Termination (without giving
effect to any reduction in such Compensation which would
constitute a breach of this Agreement). If the Employee has not
been employed by CNS for 24 months as of the Date of Termination,
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 8
average monthly Compensation shall be the Employee's average
monthly Compensation for the number of months during which the
Employee has been employed at CNS. For purposes of this
subparagraph, Compensation shall mean and include every type and
form of compensation paid to Employee by CNS (or any corporation
("Affiliate") affiliated with CNS within the meaning of Section
1504 of the Internal Revenue Code of 1986, as may be amended from
time to time (the "Code")) and included in Employee's gross
income for federal income tax purposes, but excluding
compensation income arising from (1) hiring bonuses and (2)
compensation income recognized as a result of the exercise of
stock options or sale of the stock so acquired. All of Employee's
contributions to any qualified plan pursuant to Section 401(k) of
the Code or any flexible benefit plan pursuant to Section 125 of
the Code shall be deemed to be included in gross income for
federal tax purposes for purposes of this subparagraph. The
Severance Payment shall be made in a single lump sum within 60
days after the Date of Termination.
iii. For 18 months following the Employee's Date of Termination, CNS
shall arrange to provide, at its sole expense, Employee with
group medical, dental and life plan benefits substantially
similar to those which Employee was receiving or entitled to
receive immediately prior to the Notice of Termination. The cost
of providing such benefits shall be in addition to (and shall not
reduce) the Severance Payment. Benefits otherwise receivable by
Employee pursuant to this paragraph (iii) shall be reduced to the
extent comparable benefits are actually received by Employee
during such period from any third party, and any such benefits
actually received by Employee shall be reported to CNS.
iv. CNS shall also pay to Employee all legal fees and expenses
incurred by Employee as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this paragraph).
v. The Severance Payment shall be reduced and offset by the amount
of any other payment received or to be received by Employee in
connection with his termination of employment pursuant to any
policies of CNS.
vi. If a determination is made by legislation, regulations, rulings
directed to CNS or Employee, or court decision that the aggregate
amount of any payment made to Employee hereunder, or pursuant to
any plan, program or policy of CNS in connection with, on account
of, or as a result of, a Change of Control constitutes an "excess
parachute payment" as defined in Section 280G of the Code subject
to the excise tax provisions of Section 4999 of the Code, or any
successor sections thereof, Employee shall be
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 9
entitled to receive from CNS, in addition to any other amounts
payable hereunder, an amount which shall be equal to such excise
tax, plus, on a net after-tax basis, an amount equal to the
aggregate amount of any interest, penalties, fines or additions
to any tax, including income tax, which are imposed in connection
with the imposition of such excise tax. Such amount shall be
payable to Employee as soon as may be practicable after such
final determination is made. Employee and CNS shall mutually and
reasonably determine whether or not such determination has
occurred or whether any appeal to such determination should be
made.
vii. Employee shall be entitled to receive all benefits payable to
Employee under the CNS, Inc. Profit Sharing Plan and Trust or any
successor of such Plan and Trust and any other plan or agreement
relating to retirement benefits, and, in addition, if Employee is
not fully vested in his account balance under such Plan, a single
lump sum payment in cash from CNS representing the nonvested
portion of his account, which shall be in addition to, and not
reduced by, any other amounts payable to Employee under this
paragraph 8.
viii. Employee shall not be required to mitigate the amount of any
payment provided for in this paragraph 8 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this paragraph 8 be reduced by any
compensation earned by Employee as the result of employment by
another employer or by retirement benefits after the Date of
Termination, or otherwise except as specifically provided in this
paragraph 8.
ix. In order to assure the performance of CNS or its successor of its
obligations under this paragraph, CNS may deposit in trust an
amount equal to the maximum payment that will be due Employee
under the terms hereof. Under a written trust instrument, the
Trustee shall be instructed to pay to Employee (or Employee's
legal representative, as the case may be) the amount to which
Employee shall be entitled under the terms hereof, and the
balance, if any, of the trust not so paid or reserved for payment
shall be repaid to CNS. If CNS deposits funds in trust, payment
shall be made no later than the occurrence of a Change in
Control. If and to the extent there are not amounts in trust
sufficient to pay Employee under this Agreement, CNS shall remain
liable for any and all payments due to Employee. In accordance
with the terms of such trust, at all times during the term of
this Agreement, Employee shall have no rights, other than as an
unsecured general creditor of CNS, to any amounts held in trust
and all trust assets shall be general assets of CNS and subject
to the claims of creditors of CNS. Failure of CNS to establish or
fully fund such trust shall not be deemed a revocation or
termination of this Agreement by CNS.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 10
x. As a condition of receiving the Severance Payment and other
benefits provided in this subparagraph 8.f and in subparagraph
8.g, Employee shall be required to sign a standard release
agreement with CNS in which he agrees to release any and all
claims and causes of action which he might have against CNS and
in which he affirms and acknowledges his obligations under
paragraphs 9, 10, 11 and 12 of this Agreement.
g. Stock Options. Employee shall, immediately upon a Change in Control,
vest in all stock options which have been granted to him and he shall
be entitled to exercise all rights and to receive all benefits
accruing to him under any and all CNS stock purchase and stock option
plans or programs, including the CNS, Inc. 1994 Amended Stock Plan, or
any successor to any such plan or program, which shall be in addition
to and not reduced by any other amounts payable to Employee under this
paragraph 8.
9. Confidential Information. All knowledge and information not already
available to the public which Employee may acquire or has acquired with
respect to product development, improvements, modifications, discoveries,
designs, methods, systems, computer software, programs, codes and
documentation, research, designs, formulas, instructions, methods,
inventions, trade secrets, services or other private or confidential
matters of CNS (such as those concerning sales, costs, profits,
organizations, customer lists, pricing methods, etc.), or of any third
party which CNS is obligated to keep confidential, shall be regarded by
Employee as strictly confidential and shall not be used by Employee
directly or indirectly or disclosed to any persons, corporations or firms.
All of the foregoing knowledge and information are collectively termed
"Confidential Information" herein. Employee's obligations under this
paragraph will not apply to any information which (a) is or becomes known
to the general public under circumstances involving no breach by Employee
of the terms of this paragraph, (b) is generally disclosed to third parties
by CNS as a continuing practice without restriction on such third parties,
(c) is approved for release by written authorization of CNS's Board, or (d)
Employee is obligated by law to disclose.
10. Disclosure and Transfer of Product Developments, etc.
a. Employee will make full and prompt disclosure to CNS or all product
developments, improvements, modifications, discoveries, computer
software, programs, codes and documentation, research, designs,
formulas, configurations, instructions, methods and inventions (all of
which are collectively termed "Developments" herein), whether
patentable or not, made, discovered, conceived or first reduced to
practice by Employee or under his direction during his employment,
alone or with others, whether or not made or conceived during normal
working hours or on the premises of CNS which relate in any material
way to the business or to research or development work of CNS.
Employee confirms by his acceptance of this Agreement that CNS owns
and shall own all of the Developments.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 11
b. Employee also agrees on behalf of himself and his heirs and legal
representatives that he will promptly communicate, disclose and
transfer to CNS, free of encumbrances and restrictions, all of his
right, title and interest in the Developments covered by subparagraph
10.a. and any patents or patent applications covering such
Developments and to execute and deliver such assignments, patents and
applications, and any other documents as CNS may direct, and to
cooperate fully with CNS to enable it to secure any patents or
otherwise protect such Developments in any and all countries. Employee
shall assign to CNS any and all copyrights and reproduction rights to
all material prepared by Employee in connection with his employment.
c. Notwithstanding subparagraphs 10.a. and b., however, this paragraph 10
shall not apply to Developments for which no equipment, supplies,
facility or trade secret information of CNS was used and which was
developed entirely on the Employee's own time, and (1) which do not
relate (a) directly to the business of CNS or (b) to CNS's actual or
demonstrably anticipated research or development, or (2) which does
not result from any work performed by Employee for CNS.
This will confirm that Employee's obligations to CNS under paragraphs 9, 10
and 11 will continue after the termination of Employee's employment.
11. Non-Competition. During the term of Employee's employment by CNS and for
twelve (12) months thereafter, Employee shall not directly or indirectly
engage in, enter into or participate in the business of CNS or in any
business or commercial activity which does or is reasonably likely to
compete with or adversely affect the Business or products of CNS, either as
an individual for Employee's own account, as a partner or a joint venturer,
or as an officer, director, consultant or holder of more than five percent
(5%) of the entity interest in, any other person, firm, partnership or
corporation, or an employee, agent or salesman for any person. In addition,
during such period Employee shall not: avail himself of any advantages or
acquaintances he has made with any person who has, within the twelve (12)
month period ended on the date of termination of his employment, been a
customer of CNS or its affiliates, and which would, directly or indirectly,
materially divert business from or materially and adversely affect the
Business of CNS; interfere with the contractual relations between CNS and
any of its employees; or employ or cause to be employed in any capacity or
retain or cause to be retained as a consultant any person who was employed
in any capacity by CNS during the twelve (12) month period ended on the
date of termination of Employee's employment.
For purposes of this Agreement, the "Business of CNS" or "Business" means
and includes the business of the manufacture, production, sale, marketing
and distribution of the Breathe Right strip and any other products
currently offered or currently under development by CNS or offered or
currently under development by CNS during one (1) year prior to the date of
termination of Employee's employment.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 12
Inasmuch as the activities of CNS are conducted on an international basis,
the restrictions of this paragraph 11 shall apply throughout the United
States, Canada, Japan and Europe.
12. Non-Solicitation. During the term of Employee's employment by CNS and for
twelve (12) months thereafter, Employee shall not directly or indirectly
solicit any current or prospective CNS customer, broker, vendor or
distributor for the purpose of providing products or services for or on
behalf of said customer, broker, vendor or distributor which are
competitive with the products or services being provided by CNS, which are
in the development stages of being competitive with the products or
services being provided by CNS, or which would in any way cause said
customer, broker, vendor or distributor to discontinue or reduce its
business relationship with CNS. Current CNS customers, brokers, vendors or
distributors include those customer, brokers, vendors or distributors with
whom CNS has had a business relationship at any time within one year
immediately preceding Employee's termination date. Prospective CNS
customers, brokers, vendors and distributors include those with whom (a) a
CNS representative has been in direct personal contact and (b) CNS has a
reasonable opportunity of entering into a business relationship within six
months following Employee's termination date. Employee also agrees that
during his employment in the one year period following his employment, he
will not directly or indirectly solicit any CNS employees to terminate his
or her employment with CNS. This Employee non-solicitation obligation
applies to Employees of CNS during Employee's employment and as of his
termination date.
13. Remedies. Employee acknowledges that the restrictions set forth in
paragraphs 9, 10,11 and 12 hereof are reasonably necessary to protect
legitimate business interests of CNS. It is understood that if Employee
violates his obligations under any of these paragraphs, CNS would suffer
irreparable harm for which a recovery of money damages would be an
incomplete and inadequate remedy. It is therefore agreed that CNS, in
addition to any remedies at law, shall be entitled, as a matter of right,
in any court of competent jurisdiction, to a mandatory injunction
restraining Employee pending litigation, as well as upon final
determination thereof, from violating this Agreement. In addition, CNS will
discontinue payment to Employee of any Severance or Salary Continuation
Payments, benefits or bonus which he may be entitled to receive or is
receiving under paragraphs 6, 7 or 8 hereunder or otherwise, in the event
of his violation of any of his obligations under this Agreement. In the
event of cessation of payments and benefits, Employee's release of his
claims against CNS shall remain valid and fully enforceable in
consideration of the benefits which Employee received prior to set breach.
14. Severability. The parties intend that the covenants and agreements
contained herein shall be deemed to be a series of separate covenants and
agreements, one for each and every state of the United States and political
subdivision outside the United States where the business described is
conducted. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in such action, then such
unenforceable covenants shall be deemed eliminated from the provisions of
this Agreement for the purpose of such proceeding to the extent necessary
to permit the remaining covenants to be enforced in such proceeding.
Further, in the event that any
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 13
provision is held to be overbroad as written, such provision shall be
deemed amended to narrow its application to the extent necessary to make
the provision enforceable according to applicable law and enforced as
amended
15. Binding Effect.
a. CNS will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets as defined in subparagraph 8.a of
CNS to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that CNS would be required to
perform it if no such succession had taken place, in which case, the
term "CNS" as used in this Agreement shall instead refer to CNS'
successor. Failure of CNS to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Employee to compensation from CNS in
the same amount and on the same terms as he would be entitled
hereunder if he terminated his employment for Good Reason following a
Change in Control, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective
shall be deemed the Date of Termination.
b. This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, successors, heirs, and
designated beneficiaries. If Employee should die while any amount
would still be payable to Employee hereunder if Employee had continued
to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's
designated beneficiaries, or, if there is no such designated
beneficiary, to Employee's estate.
16. Entire Agreement. From and after the date of this Agreement the terms and
provisions of this Agreement constitute the entire agreement between the
parties and this Agreement supersedes any previous oral or written
communications, representations, or agreements with respect to any subject,
including the subject matter of compensation, bonus, participation and
profit sharing and termination compensation.
17. Waiver and Interpretation. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the breaching party. No
waiver shall be valid unless in writing and signed by the party providing
such waiver. If any provision of this Agreement is held by any court to be
unenforceable, then such provision shall be deemed to be eliminated from
the Agreement to permit enforceability of the remaining provisions. If any
provision is held to be overbroad, such provision shall be amended to
narrow its application to the extent necessary for enforceability. For
purposes of the release agreement which Employee shall be required to
execute as a condition of receiving any payments and benefits hereunder,
"CNS", as referred to in this Agreement, shall include CNS and all its
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 14
affiliates, shareholders, officers, directors, employees, agents,
attorneys, insurers and indemnitors.
18. Applicable Law. All questions pertaining to the validity, construction,
execution and performance of this Agreement shall be construed and governed
in accordance with the laws of the State of Minnesota. The parties consent
to the personal jurisdiction of the State of Minnesota, waive any argument
that such a forum is not convenient, and agree that any litigation relating
to this Agreement shall be venued in Minneapolis, Minnesota.
19. Tax Withholding. CNS may withhold from any payment of benefits under this
Agreement (and forward to the appropriate taxing authority) any taxes
required to be withheld under applicable law.
20. Notice. Any notice required or desired to be given under this Agreement
shall be deemed given if in writing sent by certified mail to his residence
in the case of Employee, or to its principal office in the case of CNS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first set forth above.
CNS, INC.
By: /s/ Marti Morfitt
-------------------------------------
Marti Morfitt
Its: President & CEO
EMPLOYEE
/s/ John F. Kundtz
----------------------------------------
John F. Kundtz
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT A
NAME: John F. Kundtz
DATE: July 22, 2002
POSITION: Vice President Marketing, Breathe Right Brand
DEPARTMENT: Marketing
BASE SALARY: $175,000
MANAGEMENT INCENTIVE PLAN LEVEL: 15% at Threshold
30% at Plan
60% at Maximum
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>6
<FILENAME>cns032695_ex23-1.htm
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 3.2 Final//EN">
<HTML>
<HEAD>
<!-- Created by EDGAR Ease Plus (EDGAR Ease+ 1.2b) -->
<!-- Project: X:\JOBS\03-56131\d03-56131.eep -->
<!-- Control Number: 03-56131 -->
<!-- Rev Number: 1.0 -->
<!-- Client Name: CNS, Inc. -->
<!-- Project Name: Form Type: 10-K -->
<!-- Firm Name: American Financial Printing, Inc. -->
<TITLE>EX-23.1</TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
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<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para Right 10" FSL="Project" -->
<P ALIGN="RIGHT"><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>Exhibit 23.1</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Center 10" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>INDEPENDENT AUDITORS’ CONSENT </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors<BR>CNS, Inc.: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
We
consent to incorporation by reference in the registration statements Nos.
333-68310, 333-42108, 333-60017, 33-59719, 33-42971, 33-29454, 33-19043,
33-15044 and 33-14052 on Form S-8 of CNS, Inc. of our report dated April 23,
2003, relating to the Consolidated Balance Sheets of CNS, Inc. and subsidiaries
as of March 31, 2003 and 2002, and the related Consolidated Statements of
Operations, Stockholders’ Equity and Comprehensive Income (Loss), and Cash
Flows for the years ended March 31, 2003, December 31, 2001 and December 31,
2000 and the three months ended March 31, 2002, which report is included in the
March 31, 2003, annual report on Form 10-K of CNS, Inc. </FONT></P>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>June 26, 2003 </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>
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</TD>
</TR>
</TABLE>
<BR>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>7
<FILENAME>cns032695_ex99-1.htm
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 3.2 Final//EN">
<HTML>
<HEAD>
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<!-- Project: X:\JOBS\03-56131\d03-56131.eep -->
<!-- Control Number: 03-56131 -->
<!-- Rev Number: 1.0 -->
<!-- Client Name: CNS, Inc. -->
<!-- Project Name: Form Type: 10-K -->
<!-- Firm Name: American Financial Printing, Inc. -->
<TITLE>EX-99.1</TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Page Width Begin" FSL="Project" -->
<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
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<TD>
<BR>
<!-- MARKER FORMAT-SHEET="Para Right 10" FSL="Project" -->
<P ALIGN="RIGHT"><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><B>Exhibit 99.1</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATION OF<BR>PRESIDENT
AND CHIEF FINANCIAL OFFICER</FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PURSUANT TO<BR>18 U.S.C.
SECTION 1350,<BR>AS ADOPTED PURSUANT TO<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</FONT></H1>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
I,
Marti Morfitt, the President of CNS, Inc. (the “Company”) in
compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, hereby certify that, the Company’s Annual
Report on Form 10-K for the period ended March 31, 2003 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and fairly presents, in all material respects, the financial condition and
results of operations of the Company. </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
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<table width=600 cellspacing=0 cellpadding=0 border=0>
<tr valign=TOP>
<td width=40%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=10%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=50%><font face="Times New Roman, Times, Serif" size=2> <br>
/s/ Marti Morfitt<br>
——————————————————————<br>
Marti Morfitt<br>
Title: President and Chief Executive Officer CNS, Inc.<br>
Dated: June 26, 2003</font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
I,
Marcia O’Brien, the Chief Financial Officer of CNS, Inc. (the
“Company”) in compliance with 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that
the Company’s Annual Report on Form 10-K for the period ended March 31,
2003 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and fairly presents, in all material respects,
the financial condition and results of operations of the Company. </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<table width=600 cellspacing=0 cellpadding=0 border=0>
<tr valign=TOP>
<td width=40%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=10%><font face="Times New Roman, Times, Serif" size=2></font></td>
<td width=50%><font face="Times New Roman, Times, Serif" size=2> <br>
/s/ Marcia O’Brien<br>
——————————————————————<br>
Marcia O’Brien<br>
Title: Interim Chief Financial Officer, CNS, Inc.<br>
Dated: June 26, 2003</font></td>
</tr>
</table>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
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