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<SEC-DOCUMENT>0000897101-04-001140.txt : 20040614
<SEC-HEADER>0000897101-04-001140.hdr.sgml : 20040611
<ACCEPTANCE-DATETIME>20040614171648
ACCESSION NUMBER: 0000897101-04-001140
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 12
CONFORMED PERIOD OF REPORT: 20040331
FILED AS OF DATE: 20040614
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: 04862218
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>cns042906_10k.htm
<TEXT>
<HTML>
<HEAD><TITLE>CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
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<div style="margin-left:72pt; margin-right:72pt;">
<BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>UNITED STATES</B></font>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>SECURITIES AND EXCHANGE COMMISSION</B></font>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549 </FONT></P>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>FORM 10-K</B> </FONT> </P>
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<TD WIDTH=98%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(MARK ONE) </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="wingdings" SIZE=2>x </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><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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<BR>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the fiscal year ended March 31, 2004 </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=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="wingdings" SIZE=2>o </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><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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<BR>
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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>
<P align=center>
<IMG SRC="cns_logo.gif">
</P>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>CNS, INC.</B> </font>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Exact name of registrant as specified in its charter) </FONT></P>
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<TD WIDTH=45% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Delaware</B></U> </FONT> </TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=45% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>41-1580270</B></U> </FONT> </TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(State or other jurisdiction</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(I.R.S. Employer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>of incorporation or organization)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Identification No.)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
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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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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%>
<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 <U> X </U>
No <U> </U> </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. </FONT><FONT FACE="wingdings" SIZE=2>x </font></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of March 31, 2004, the aggregate
market value of the Company’s Common Stock held by non-affiliates is $141,098,952,
computed by reference to the closing sales price of the Company’s Common Stock of
$11.01 on September 30, 2003, 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 <U> X </U>
No <U> </U> </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of June 4, 2004, the Company had
outstanding 13,845,743 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 25, 2004, are
incorporated by reference into Part III of this Form 10-K. </FONT></P>
</div>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>TABLE OF CONTENTS </FONT></H1>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Page </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>PART I</B></U> </FONT> </TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=74% 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> </FONT></TD>
<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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><BR><A HREF="#item_1_business">Item 1.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_2_properties">Item 2.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Properties</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_3_legal_proceedings">Item 3.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Legal Proceedings</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_4_submission_of_matters_to_a_vote_of_security_holders">Item 4.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Submission of Matters to a Vote of Security Holders</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U><B>PART II</B></U> </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><BR><A HREF="#item_5">Item 5</A>.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market for Registrant’s Common Equity, Related Stockholder Matters</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> and Issuer Repurchases of 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>15</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_6_selected_financial_data">Item 6.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selected Financial Data</FONT></TD><TD ALIGN=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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_7">Item 7</A>.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management’s Discussion and Analysis of Financial Condition</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> and Results of Operations</FONT></TD><TD ALIGN=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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_7a">Item 7A</A>.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quantitative and Qualitative Disclosures about Market Risk</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_8_financial_statements_and_supplementary_data">Item 8.</A></FONT></TD><TD ALIGN=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 Statements and Supplementary Data</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_9">Item 9</A>.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes in and Disagreements with Accountants on Accounting and</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> Financial Disclosure</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_9a_controls_and_procedures">Item 9A.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Controls and Procedures</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U><B>PART III</B></U> </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><BR><A HREF="#item_10_directors_and_executive_officers_of_the_registrant">Item 10.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Directors and Executive Officers of the Registrant</FONT></TD><TD ALIGN=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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_11_executive_compensation">Item 11.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Compensation</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_12">Item 12</A>.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Security Ownership of Certain Beneficial Owners and Management</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> and Related Stockholder Matters</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_13_certain_relationships_and_related_transactions">Item 13.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain Relationships and Related Transactions</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_14_principal_accountant_fees_and_services">Item 14.</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Principal Accountant Fees and Services</FONT></TD><TD ALIGN=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</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U><B>PART IV</B></U> </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><BR><A HREF="#item_15">Item 15</A>.</FONT></TD><TD ALIGN=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, Financial Statement Schedules, and Reports on Form 8-K</FONT></TD><TD ALIGN=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</FONT></TD>
<TD ALIGN=RIGHT><FONT 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 colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><A HREF="#signatures">SIGNATURES</A></FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#exhibit_index">EXHIBIT INDEX</A></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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#index_to_financial_statements">INDEX TO FINANCIAL STATEMENTS</A></FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_1_business">Item 1. BUSINESS</A></U> </FONT> </H1>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General </FONT></H1>
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<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, Breathe Right Vapor Shot!™ personal vaporizer 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>
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<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. Nasal strips provide temporary relief from nasal
congestion, reduce snoring and reduce breathing difficulties due to a deviated nasal
septum. Breathe Right nasal strips, and the entire Breathe Right product line, provide
“drug free” solutions to these consumer conditions. </FONT></P>
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<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 works by lubricating and soothing dry
throats, while a natural astringent firms loose throat tissue to reduce the vibrations
that cause snoring. Breathe Right nasal strips are also an effective snoring treatment.
Nasal strips work by opening nasal passages and thereby reducing mouth breathing that
leads to snoring. These two product lines provide a portfolio of solutions for snoring. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
fiscal 2004, the Company launched Breathe Right Vapor Shot!™ personal vaporizer.
Vapor Shot! is a drug-free convenient personal vaporizer designed to relieve day-time
congestion related to colds, flu and allergies. This product builds on the existing line
of Breathe Right mentholated vapor strips, which are primarily used to relieve night-time
congestion. </FONT></P>
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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 a chewable fiber tablet that offers consumers an effective,
convenient and good-tasting way to supplement their daily intake of dietary fiber. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
addition to expanding the Breathe Right® and FiberChoice brands and introducing other
new products, the Company is exploring possibilities for acquiring or licensing new
consumer health care products that have established consumer brands, particularly those
that complement the Company’s drug-free, better breathing and digestive health
platforms. The Company is also considering opportunities for licensing new products and
technologies. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
January 23, 2002, the Company implemented a fiscal year-end change 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 cold/flu season within the same fiscal year. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management </FONT></H1>
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<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 and organization model enables the Company to
more effectively implement its business strategies. </FONT></P>
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<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 Breathe Right nasal strip
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. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>FiberChoice
Team.</I></B> The FiberChoice Team is responsible for the strategic development and
management of the FiberChoice fiber supplement business including new product development
related to the “digestive health” product platform. The Company introduced
FiberChoice® chewable fiber tablets in March, 2000. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>International
Team.</I></B> The International Team is responsible for developing and managing the
Company’s overseas markets and its relationships with international distributors and
representatives. The Company began shipping Breathe Right® nasal strips to new
distributor partners in Europe, Australia and Japan during 2000. The international team is
focused on continued development of nasal strips in existing country markets, as well as
the future introduction of selected Breathe Right new products within international
markets, and further geographic expansion over time into new country markets that present
meaningful opportunities. </FONT></P>
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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 focused on
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 and
brands that may become the basis for a third brand platform. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Products </FONT></H1>
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<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>
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<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 8 to 38 strips per box. The Company believes that the
Breathe Right nasal strips are priced competitively compared to medicinal decongestants
with retail prices ranging between $3.99 and $14.99 per box. </FONT></P>
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<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. The
mentholated vapor strip uses traditional Breathe Right strip technology but contains a
soothing mentholated aroma for additional relief. 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 reduce
nasal congestion. In fiscal 2004, the Company will increase advertising and promotion of
its clear nasal strip, as a good solution for consumers with dry or sensitive skin types. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Other
Breathe Right Brand Products.</I></B> Breathe Right Snore Relief™ throat spray
is a drug-free product that addresses a different cause of snoring than nasal strips by
lubricating and soothing 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. 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 provides soothing comfort for your nose. This product leverages the Company’s
line of Breathe Right mentholated vapor strips for colds. 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. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>FiberChoice®
Chewable Fiber Tablets.</I></B> FiberChoice is an orange-flavored, chewable tablet
that offers consumers an effective, convenient, good-tasting way to supplement their daily
intake of dietary fiber. Two tablets contain four grams of fiber 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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Markets </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 strip, Breathe Right Snore Relief throat spray, Breathe Right Vapor Shot!
personal vaporizer and Breathe Right saline nasal spray. The Company intends to continue
expanding the Breathe Right brand with the introduction of additional products within the
better breathing product category. </FONT></P>
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<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. 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 nasal problems such as deviated septa are 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 especially during the
cold/flu season. Consumers 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>
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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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT 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=94%><P ALIGN=LEFT><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, while 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 cold/flu/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 well as the
Breathe Right brand as a product that provides relief for the common cold. This
repositioning as a product for colds was reinforced by the introduction of
Breathe Right mentholated vapor strips and Breathe Right Vapor Shot! personal
vaporizer. </FONT></P></TD>
</TR>
</TABLE>
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<TR VALIGN=TOP>
<TD ALIGN=RIGHT 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=94%><P ALIGN=LEFT><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 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>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>
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<TR VALIGN=TOP>
<TD ALIGN=RIGHT 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=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Improved
Breathing for Consumers with Deviated Septa</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></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT 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=94%><P ALIGN=LEFT><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 retains the services of selected
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></P></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 $340 million in U.S. retail
sales. The Company believes this is an attractive product category due to the aging of the
baby-boomer generation. 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. Baby boomers are 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 dietary experts
recommend 25-30 grams daily. Two FiberChoice tablets provide four grams of fiber per dose
and can be taken with or without water. The Company believes that its FiberChoice chewable
fiber tablet represents a solution as an effective, convenient and good-tasting
alternative for supplementing dietary fiber intake. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Growth Strategies </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Marketing
Campaigns for 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. Marketing
communications are generally designed to promote trial of Breathe Right brand products by
increasing consumer awareness of the benefits of each product. </FONT></P>
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<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 have 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>
<BR><BR><BR>
<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> In
fiscal year 2005, the Company intends to build its Breathe Right brand by focusing its
marketing efforts on the relaunch of clear nasal strips and on building additional
awareness and trial of Breathe Right VaporShot! and mentholated vapor nasal strips. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Marketing
Campaigns for FiberChoice® Chewable Fiber Tablets</I>.</B> The Company’s
marketing efforts for FiberChoice tablets are directed toward all consumers who do not get
the recommended amount of fiber in their diet. In 2002, the Company tested a new
advertisement in four markets that simply states that busy people usually do not 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 broadened the FiberChoice brand marketing efforts to 68% of the United States in
fiscal 2004 with strong results. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Increasing
Product Trial and Frequency of 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 and repeat
purchases of its products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Developing
New Products.</I></B> The Company believes that the Breathe Right and FiberChoice
brand names are two of the Company’s most valuable assets and intends to leverage
these assets by future introduction of new products. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company is focused on the future expansion of its product lines 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 or digestive health 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. </FONT></P>
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<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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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Developing
Domestic Distribution.</I></B> Breathe Right® and FiberChoice products are sold
to mass merchandise stores, drug stores, grocery stores,
warehouse clubs, military base stores and on-line retailers 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 sales representatives referred to in the
industry as brokers. </FONT></P>
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<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
and Breathe Right Vapor Shot! personal vaporizer are also usually positioned in the
cold/flu 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 Indent" FSL="Default" -->
<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 retail channels. In fiscal 2004, Wal-Mart accounted
for approximately 26% 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 or result in a loss of revenue. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>
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<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
devotes significant resources to the development of its international business. The
Company is considering additional distributors and representatives for distribution of its
nasal strip products in additional international markets. 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. The Company is currently testing FiberChoice in selected international
markets. </FONT></P>
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<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 lower 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 Indent" FSL="Default" -->
<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 and 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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing and Operations </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company currently subcontracts with multiple manufacturers to produce its products. The
Company does no in-house product production. Each of the manufacturers makes Breathe Right
and FiberChoice products 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 Indent" FSL="Default" -->
<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. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Competition </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Many
of the Company’s competitors 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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company believes 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 most 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 Indent" FSL="Default" -->
<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 broader consumer markets with many alternative decongestant and sinus
relief products and snoring remedies in the United States and international markets. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 greater resources and better
established brand recognition than the Company. Competitors included Metamucil®
manufactured by Proctor and Gamble, Citrucel® manufactured by GlaxoSmithKline and
FiberCon® manufactured by Wyeth. 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>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Government Regulation </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<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. Nasal dilators, such as
the Company’s Breathe Right strips, have been classified by the FDA as Class I
devices. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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) pre-market notification 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. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 currently developing regulations for certain provisions of the DSHEA that may
affect the regulation of the Company’s FiberChoice product line. However, at this
time, the impact of any proposed regulation on the Company or its products is not certain. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<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 Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Patents, Trademarks and
Proprietary Rights </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
February 18, 2004, the Company, together with Creative Integration & Design, Inc.,
sued Silver Eagle Labs, Inc. in the United States District Court for the District of
Minnesota for infringement of two nasal dilator patents owned by Creative Integration
& Design, Inc. and exclusively licensed to the Company. The matter, which
will now proceed to trial, is in the discovery stage. See “Item 3. Legal
Proceedings.” </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employees </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At
June 11, 2004, the Company had 54 full-time employees and 3 part-time employees, of whom
15 were engaged in operations, 21 in general administration, and 21 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>
<BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXECUTIVE OFFICERS OF THE COMPANY </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=1 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name and Age </FONT><HR WIDTH=40% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Office </FONT><HR WIDTH=25% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Daniel E. Cohen (51)</FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=48% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board and Director</FONT></TD>
<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<tr>
<td> </td></tr>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt (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>President, Chief Executive Officer and Director</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Top>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel Reinkensmeyer (43)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Finance and Chief Financial Officer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John J. Keppeler (42)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Worldwide Sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Linda Kollofski (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>Vice President of Marketing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Larry R. Muma (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>Vice President of Operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Carol J. Watzke (56)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Consumer Strategy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
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<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 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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Marti
Morfitt </I>has served as the Company’s President and Chief Executive
Officer since June 2001 and 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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Samuel
Reinkensmeyer</I> has served as the Company’s Chief Financial Officer since
October 14, 2003. From March 2000 until joining the Company,
Mr. Reinkensmeyer was employed by ValueVision Media Inc., a television and
Internet retailer which owns and operates ShopNBC and ShopNBC.com serving most
recently as its Senior Vice President of Finance and Investor Relations. From
August 1988 to February 2000, he served in various financial positions at The
Pillsbury Company, most recently as Finance Director, Pillsbury North America.
Previously, Mr. Reinkensmeyer worked for Citicorp and PriceWaterhouse.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 customer 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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <I>Linda
Kollofski </I>has served as the Company’s Vice President of Domestic
Marketing since February of 2004 and as Vice President of New Business
Development from November of 2002 to January of 2004. 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 Haagen-Daz,
Totino’s and Green Giant as well as to Telex Communications, Hazeldon
Foundation publishing business and the Company’s FiberChoice brand.
Previously, Ms. Kollofski served in senior marketing and new business
development positions with the Hazeldon Foundation, Dow Brands, Pillsbury and
Munsingwear. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<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 Indent" FSL="Default" -->
<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>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_2_properties">Item 2. PROPERTIES</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company leases approximately 73,000 square feet of office 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>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_3_legal_proceedings">Item 3. LEGAL PROCEEDINGS</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
February 18, 2004, the Company, together with Creative Integration & Design, Inc.,
sued Silver Eagle Labs, Inc. in the United States District Court for the District of
Minnesota for infringement of two nasal dilator patents owned by Creative Integration
& Design, Inc. and exclusively licensed to the Company. The suit seeks
injunctive relief, damages, enhanced damages for willful infringement, attorneys’
fees and costs. Silver Eagle has counterclaimed for a declaration that the asserted
patents are invalid and not infringed and asks for its attorneys’ fees and
costs. CNS quickly sought a preliminary injunction forbidding Silver
Eagle from making, using or selling or offering the infringing dilator for sale,
which the Court denied. The matter, which will now proceed to trial, is in the
discovery stage. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Additionally,
from time to time, the Company may become a party to litigation and subject to claims
incident to the ordinary course of business. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_4_submission_of_matters_to_a_vote_of_security_holders">Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Head Sub 2 Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I> None.</I> </FONT></P>
<BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_5">Item 5.</A> MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</U> </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market Information </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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, 2004 and 2003. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=66% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Fiscal Year Ended March 31, 2004</B> </FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>High</B></U> </FONT> </TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Low</B></U> </FONT> </TD>
<TD WIDTH=2% 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>Quarter Ended March 31, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.49</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.91</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>Quarter Ended December 31, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.70</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.02</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>Quarter Ended September 30, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.72</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.52</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>Quarter Ended June 30, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.92</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.25</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"><BR><B>Fiscal Year Ended March 31, 2003</B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT> </TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>High</B></U> </FONT> </TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Low</B></U> </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>Quarter Ended March 31, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.19</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.87</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>Quarter Ended December 31, 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>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>
<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>Quarter Ended September 30, 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>6.15</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>5.00</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>Quarter Ended June 30, 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>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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
June 4, 2004, the last sale price of the Common Stock was $10.20 per share. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of
June 4, 2004, there were approximately 600 owners of record of the Company’s Common
Stock. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company paid three quarterly dividends of $.04 per share of Common Stock during fiscal
2004. No dividends were paid during fiscal 2003. The payment of future dividends, if any,
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="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information Regarding Equity Compensation Plans </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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, 2004. 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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities Authorized
for Issuance under Equity Compensation Plans </FONT></H1>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=700>
<TR VALIGN=Bottom>
<TH COLSPAN=1 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Plan Category </FONT><HR WIDTH=35% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average exercise price of outstanding options, warrants and rights </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number of shares of common stock remaining available for future issuance under equity compensation plans </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equity compensation plans </FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=18% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,887,560</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=18% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$5.87</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=19% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>451,590</FONT></TD>
<TD WIDTH=2% 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> approved by stockholders:</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><BR>Equity compensation plans not</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><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=CENTER><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=CENTER><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> approved by shareholders:</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><BR>Totals</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,887,560</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$5.87</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>451,590</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
equity compensation plans approved by CNS, Inc. shareholders are the 2000 Amended 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
1990 or 1987 Plans. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 participation 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>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_6_selected_financial_data">Item 6. SELECTED FINANCIAL DATA</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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, 1999 through March 31, 2004 have been derived from the Company’s
Consolidated Financial Statements included elsewhere in this Report or previously filed
with the Securities and Exchange Commission on Form 10-K, which have been audited by KPMG
LLP, independent certified public accountants. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<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>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Years ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 31<BR>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 31<BR>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31<BR>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31<BR>2000 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31<BR>1999 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,242</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 61,777</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 38,409</FONT></TD>
<TD WIDTH=2% 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=LEFT><FONT FACE="Times 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>12,748</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>9,639</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(17,843</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(18,696</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>Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(15,660</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(13,756</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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.59</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.46</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.89</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Working capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 54,900</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 45,266</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32,507</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></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=LEFT><FONT FACE="Times 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>73,534</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>65,375</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>50,618</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>56,344</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>65,337</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=LEFT><FONT FACE="Times 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>58,644</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>49,054</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>36,612</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>36,937</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>53,584</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_7">Item 7.</A> MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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. In this discussion, our fiscal years
ended March 31, 2004 and 2003 and December 31, 2001 are referred to as fiscal year 2004,
2003 and 2001, respectively. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>History </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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. Other
claims that were not subject to reexamination remain in effect. 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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 category 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 Indent" FSL="Default" -->
<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 its core product lines. The Company recorded
a special charge related to costs associated with this plan. Approximately 25% of the
workforce, from throughout the organization, was eliminated. The cost savings relating to
this plan were realized beginning in July of 2001. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 cold/flu season within the
same fiscal year. The first period to be reported in 2002 was a three-month stub period
ending March 31, 2002. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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<SUP>TM</SUP> 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="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Breathe
Right VaporShot! personal vaporizer was introduced during fiscal 2004. This product builds
on the Company’s existing line of Breathe Right mentholated vapor strips for colds.
Breathe Right VaporShot! personal vaporizer is a styrofoam cup with a fitted, vapor
concentrating lid. It works by dropping an effervescent tablet into hot water in the
VaporShot! cup which then delivers an intense shot of mentholated vapors that instantly
provides soothing comfort for your nose. 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="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Growth Strategy and
Financial Focus </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS
designs and markets consumer health care products, including Breathe Right nasal strips,
Breathe Right Snore Relief throat spray, Breathe Right Vapor Shot! Personal vaporizer and
FiberChoice chewable fiber tablets. The Company’s products address consumer needs
within the “better breathing” and “digestive health” segments of the
consumer healthcare products market. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> For
the year ended March 31, 2004, a breakdown of the Company’s net sales is as follows: </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>% of<BR>Net sales </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=85% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic Breathe Right products</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>73.7</FONT></TD>
<TD WIDTH=2% 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>Domestic FiberChoice products</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.7</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 (primarily Breathe Right products)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.9</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>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>.7</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=2></TD>
<TD ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total 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>100.0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=2></TD>
<TD ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company’s core competency is consumer marketing and sales within the mass
merchandise, drug, and food channels of retail distribution. The Company
considers its product lines to be unique and differentiated relative to competing
products. CNS generates strong consumer demand for its products through substantial
investments in advertising and promotional campaigns, which stimulate brand and product
awareness, as well as consumer trial and repeat purchases. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company’s financial focus is to achieve sustainable long-term growth in revenues,
operating profit and operating cash flow. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Revenue.</I> CNS
is concentrating its revenue growth efforts in three areas. The first priority
is the growth of the high margin Breathe Right brand, both domestically and
internationally, in order to leverage the Company’s most valuable brand
equity. The second priority for revenue growth is the continued development of
the “digestive health” platform, anchored by the successful
FiberChoice brand. The final growth priority is the acquisition or internal
development of a third brand platform that will further leverage the
Company’s existing core competencies in the United States market.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Operating
Profit.</I> During the past three fiscal years, the Company has
increased its operating profit at a rate which exceeds the growth rate of net
sales. This has been achieved primarily through a combination of targeting
growth in higher margin products, by lowering product cost of goods sold, and
improving the efficiency of the Company’s advertising and promotion
campaigns. The Company intends to continue its focus on improving operating
profit margins over the long term. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Operating
Cash Flow.</I> The Company is also focused on growing its
operating cash flow primarily through sustainable growth in revenue and net
income, as well as continued focus on maintaining an efficient level of working
capital. The Company’s operating model is to contract with third parties to
manufacture its products, thereby avoiding the capital investment associated
with manufacturing plants and equipment, and also retaining flexibility to
partner with industry-leading manufacturers who can supply the Company’s
various product lines. The Company also focuses on maintaining an efficient
level of working capital by closely managing days sales outstanding of accounts
receivable, inventory levels and payment terms with suppliers. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounting Policies </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 judgments,
estimates and 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 Indent" FSL="Default" -->
<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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Revenue
Recognition, Sales Returns and Other Allowances, and Allowance for Doubtful
Accounts.</I> Revenue from sales is recognized when all of the
following criteria have been met: a valid customer order with a fixed price has
been received; title and risk of loss transfer to the customer; there is no
further significant obligation to assist in the resale of the product; and
collectibility is reasonably assured. Revenue is reduced for provisions for
trade promotions, estimated sales returns, certain promotional costs and other
allowances in the same period as the related sales are recorded. 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 $1.3 million for future sales returns and other allowances as of March 31,
2004. 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 $11.4
million, net of the allowance for doubtful accounts of $380,000 as of March 31,
2004. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 0; page: 0" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 for excess
or obsolete inventory of $551,000 as of March 31, 2004. Management believes
that the inventory valuation results in carrying inventory at the lower of cost
or market. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 eliminated the valuation
allowance of $9.1 million related to the net deferred tax assets as of March 31,
2002. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Trade
and Consumer Promotions</I>. Management judgment is involved in
recognizing the amount and timing of trade and consumer promotion activities.
Management regularly reviews current period and prior period promotional
liabilities and assesses customers’ and consumers’ participation and
performance levels related to various promotional activities. The vast majority
of year end liabilities associated with these activities are resolved within the
following fiscal year and therefore, do not require highly uncertain long-term
estimates. The Company has established a liability for trade and consumer
promotions of $1.6 million as of March 31, 2004. </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 0; page: 0" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating Results </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 cold/flu
season within the same fiscal year. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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. For fiscal 2001, certain amounts have
been reclassified to conform to the current period’s presentation. These
reclassifications had no impact on the operating net (loss) or net income. Amounts are in thousands,
except per share amounts.</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the<BR>Three Months<BR>Ended </FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=36% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,242</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,135</FONT></TD>
<TD WIDTH=2% 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=LEFT><FONT FACE="Times 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>26,904</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>25,992</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>27,698</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,390</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>60,076</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>53,083</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>48,544</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,745</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=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=LEFT><FONT FACE="Times 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>33,101</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>30,930</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>34,256</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8,796</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> Selling, general and administrative</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>14,227</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,514</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,583</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,213</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=LEFT><FONT FACE="Times 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>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>930</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>47,328</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>43,444</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>49,769</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,009</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>12,748</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>9,639</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>736</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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>725</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>821</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,242</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>236</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 on sales of marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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> </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=RIGHT><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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>13,473</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>10,478</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,008</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=LEFT><FONT FACE="Times 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>4,926</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,962</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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> 8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,134</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .63</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .48</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .74</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .59</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .46</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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> .71</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating results shown as a percent
of net sales: </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three<BR>Months Ended </FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100.0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100.0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100.0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100.0</FONT></TD>
<TD WIDTH=2% 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=LEFT><FONT FACE="Times 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>30.9</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> </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>
<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>36.3</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> </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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>69.1</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> </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>
<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>63.7</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> </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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=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=LEFT><FONT FACE="Times 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>38.0</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>39.1</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> </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> </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></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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>16.4</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> </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>
<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>19.1</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> </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></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=LEFT><FONT FACE="Times 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>0.0</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>0.0</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>1.2</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>54.4</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> </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>
<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>65.3</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> </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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>14.7</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> </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>
<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>(1.6</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> </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></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=LEFT><FONT FACE="Times 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>0.8</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0</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>1.6</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> </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=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gain on sales of marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>0.0</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>0.0</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>0.0</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>.2</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>15.5</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> </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> </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> </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></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=LEFT><FONT FACE="Times 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>5.7</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> </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>
<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>0.0</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>(47.7</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>9.8</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>0.0</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>52.9</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following
is a breakdown of net sales by brand and geographic area: </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended </FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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> Breathe Right</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 64,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 57,855</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 53,816</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,591</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,551</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> FiberChoice</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>9,290</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>7,084</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,373</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,536</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,137</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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>588</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>319</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>39</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Total domestic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>74,004</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>65,258</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>60,225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,195</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>18,727</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><BR>International</FONT></TD><TD ALIGN=LEFT><FONT 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> Japan</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4,430</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,360</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>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> UK</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,349</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,275</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,378</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>426</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>665</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> Italy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,899</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,020</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>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> Canada</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,372</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,161</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>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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,926</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,001</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,170</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>912</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>515</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR>
<TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total international</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>12,976</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>13,817</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>16,017</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Net sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,242</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,135</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 23,468</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net
sales for fiscal 2004 of $87.0 million increased 10.0% over fiscal 2003 sales of $79.1
million and an increase of 14.1% compared to fiscal 2001 sales. Domestic sales of Breathe
Right® branded products grew to $64.1 million, representing an increase of 10.8 % over
fiscal 2003 and 19.2% over fiscal 2001. The growth in the Breathe Right brand was the
result of successful promotions of the Company’s nasal strip product line, as well as
the launch of Breathe Right Snore Relief throat spray in fiscal 2003 and Breathe Right
Vapor Shot! personal vaporizer in fiscal 2004. Domestic FiberChoice® sales for fiscal
2004 grew to $9.3 million, representing an increase of 31.1% over fiscal 2003 and 45.8%
over fiscal 2001. Growth in domestic FiberChoice sales resulted from increased advertising
and promotional campaigns, supporting the “fiber for health” consumer
positioning. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> International
sales decreased to $13.0 million dollars, down 6.1% versus fiscal 2003 and down 19.0%
versus fiscal 2001. This decrease resulted primarily from lower shipments to the
Company’s distributor in Japan, caused by high distributor inventory levels in that
market. The Company expects to further lower distributor inventory levels in Japan during
fiscal 2005 and thereby better align future shipments with consumer demand. As a result,
the Company expects its net sales to its Japan distributor to decline in fiscal 2005;
however, sales growth is expected in subsequent years. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During
fiscal 2004, CNS decided to exit its line of Flair equine products which are included in
“other” on the net sales breakdown, shown on the prior page. The Company has
terminated its agreements with its distributor of Flair products and the licensor of
technology related to this business, effective April 30, 2004. Net sales of Flair products
totaled $375,000 for fiscal 2004 and $268,000 for fiscal 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit rate </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company’s gross margin rate is dependent on a number of factors and may fluctuate
from quarter to quarter as well as year to year. These factors include the mix of products
sold, the level at which promotional programs are executed, and the cost of materials and
manufacturing. Gross margins continued to improve in fiscal 2004 to 69.1% compared to
67.1% and 63.7% in fiscal 2003 and 2001 respectively. The improving gross margin rates in
2004 and 2003 resulted primarily from lower product cost and increasing efficiency in
procuring and distributing the Company’s product lines. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Advertising and promotion expense </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Advertising and
promotion expenses were $33.1 million for fiscal 2004 compared to
$30.9 million and $34.3 million for fiscal 2003 and fiscal 2001,
respectively. For fiscal 2004, advertising and promotional expenses as a
percentage of net sales of 38.0% continued to decrease compared to 39.1% and
45.0% for fiscal 2003 and fiscal 2001, respectively. This reduction is the
result of economies of scale driven by growth of the Company’s product
lines, as well as continuing efforts to develop more efficient and effective
methods of stimulating consumer demand. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling, general and administrative expense </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Selling, general
and administrative expenses were $14.2 million for 2004 compared to $12.5 million for 2003
and $14.6 million for 2001. Selling, general and administrative expense declined in fiscal
2003 as a result of the reduction and realignment of the Company’s workforce to
better match its strategic direction and to focus on building the core Breathe Right and
FiberChoice product lines. Selling, general and administrative expense increased in fiscal
2004 due to severance and recruitment costs associated with several changes on the
Company’s management team. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<!-- MARKER PAGE="sheet: 0; page: 0" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Special charges </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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. As of March 31, 2004, the
Company made all of the payments relating to this plan and therefore the balance of the
accrued liability was $0. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment income </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Investment income
was $725,000 for 2004 compared to $839,000 and $1.3 million for 2003 and 2001,
respectively. The benefit of higher levels of marketable securities was more than offset
by a decrease in market interest rates and a shift in the investment portfolio to lower
yield, tax exempt securities, resulting in lower levels of investment income. The
following table compares the average bond equivalent yield of various marketable
securities held by the Company as of March 31, 2004 and March 31, 2003 (dollar amounts in
thousands): </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=11><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Ave. Yield </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Ave. Yield </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commercial paper</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>n/a</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,415</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.28</FONT></TD>
<TD WIDTH=2% 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>Municipal obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>15,157</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1.96</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>n/a</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>Corporate bonds</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>9,471</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2.52</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>7,361</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>4.23</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>U.S. Government obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>15,922</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2.28</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2.68</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 40,550</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2.23</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 25,061</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2.83</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
average remaining days to effective maturity of the Company’s portfolio of
marketable securities has decreased to 403 days as of March 31, 2004
compared to 417 days as of March 31, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income tax expense (benefit) </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income tax
expense was $4.9 million for 2004 compared to $4.0 million and $0 for 2003 and 2001,
respectively. The effective tax rate for 2004 was 36.6% compared to an effective tax rate
in 2003 of 37.8%. The reduction in the effective tax rate is the result of utilizing
foreign export incentives and a change in investment strategy from taxable corporate and
U.S. Government obligations to tax exempt municipal obligations. Refer to the following
effective tax rate reconciliation table: </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended<BR>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Federal Statutory rate</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35.0</FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35.0</FONT></TD>
<TD WIDTH=2% 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>State rate, net of federal benefit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2.3 </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> </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></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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>(0.7</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> </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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective tax rate</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37.8</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company did not recognize an income tax expense in 2001. Income before tax was offset by
changes in deferred tax assets, including utilization of net operating loss and credit
carryforwards for which a full valuation allowance had been previously established. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 0; page: 0" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company recognized a tax benefit of $9.1 million during the three month
period ending March 31, 2002 as a result of reinstating net deferred tax
assets, including the benefit of net operating loss carryforwards. Management
believed at this time, based on the level of historical taxable income and
projections of future taxable income for the periods in which the deferred tax
assets were deductible, that it was more likely than not the Company would
realize the benefits of the deductible differences. As of March 31, 2004,
the Company has a deferred tax asset of $158,000 relating to state net operating
loss and credit carryforwards. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating and Net Income </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Increases
in sales, as well as improved gross margin rates and efficiencies in advertising and
promotions, have provided significant improvement in operating income as well as net
income. Operating income for fiscal 2004 was $12.7 million, up 32.3% compared to fiscal
2003 operating income of $9.6 million and up strongly from a net operating loss of $1.2
million for fiscal 2001. Diluted net income per share increased from $.01 in fiscal 2001,
to $.46 per share for fiscal 2003 and $.59 per share for fiscal 2004. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Seasonality </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 well
as increases and decreases in purchases by distributors and retailers in anticipation of
future demand by consumers. The Company believes that significant portions of Breathe
Right® product line are used for the temporary relief of nasal congestion and
congestion-related snoring. Sales of nasal congestion remedies are higher during the fall
and winter seasons, corresponding with the Company’s third and fourth quarters. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity and Capital Resources </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At
March 31, 2004, the Company had cash, cash equivalents and marketable securities of $49.4
million, an increase of 18.8% or $7.8 million from $41.6 million as of March 31, 2003. The
Company has no long term debt. The Company believes that its existing funds will be
sufficient to support its planned operations for the foreseeable future. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the<BR>Three<BR>Months Ended </FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating activities:</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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> Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 10,134</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> Adjustments to reconcile net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT 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> to net cash provided by (used in)</FONT></TD><TD ALIGN=LEFT><FONT 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 activities:</FONT></TD><TD ALIGN=LEFT><FONT 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> Depreciation and amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>958</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,251</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,244</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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> Deferred income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,468</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,489</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(9,126</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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>60</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>90</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><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=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 receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(383</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>671</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>275</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>626</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=LEFT><FONT FACE="Times 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>(866</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,199</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,070</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,357</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 expense and other current assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(1,801</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(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> </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=RIGHT><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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><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=LEFT><FONT FACE="Times 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>(428</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,057</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(5,401</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(3,742</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net 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=LEFT><FONT FACE="Times 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>8,555</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>19,163</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(2,817</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(53</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Operating
Activities</I>. The Company generated cash from operating
activities of $8.6 million during fiscal 2004 compared to
$19.2 million during fiscal 2003. For fiscal 2001, the Company used cash in
operating activities of $2.8 million. The improvement in net income from
$81,000 in fiscal 2001 to $6.5 million and $8.5 million in fiscal 2003
and 2004, respectively, contributed significantly to the improvement in cash
flow. During fiscal years 2004 and 2003, the Company utilized deferred tax
assets of $2.5 million and $3.5 million, respectively, having a
positive impact on cash flow. For fiscal 2004, cash flow from operating
activities was reduced by an increase in inventory of $866,000 and an increase
in prepaid expenses and other current assets of $1.8 million. The increase
in inventory was caused by higher finished goods inventory levels associated
with the early end to the fiscal 2004 cold/flu season. The increase in prepaid
expenses resulted primarily from overpayments of the Company’s estimated
income tax liability. In fiscal 2003, the Company recorded a significant
increase in accounts payable and accrued expenses of $6.1 million,
resulting from trade promotions and advertising campaigns that were executed in
the latter part of fiscal 2003 and not paid until fiscal 2004. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Investing
Activities</I>. Purchases of marketable securities exceeded sales and maturities by $15.6
million and $5.9 million in 2004 and 2003, respectively. For 2004, marketable securities
purchased consisted primarily of U.S. Government obligations and tax exempt municipal
securities. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company purchased $478,000 and $60,000 of property and equipment in 2004 and 2003,
respectively, primarily associated with upgrading its network of personal computers and
software. The Company purchased $310,000; $510,000 and $357,000 of product rights during
the 2004, 2003 and 2001, respectively. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Financing
Activities</I>. The Company paid cash dividends during 2004 of $1.6 million. No dividends
had been paid during prior periods. In making the decision to initiate a cash dividend,
the Company’s Board of Directors considered, among other things, the recent revisions
to the U.S. income tax code that provides for favorable tax treatment of corporate
dividends. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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 did not repurchase any
shares of its common stock in 2004. 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 is authorized to repurchase an
additional 531,000 shares as of March 31, 2004. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company received $1.8 million in 2004 and $949,000 in 2003 from the exercise of stock
options and issuance of stock under the employee stock purchase plan. </FONT></P>
<BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Significant
Agreements and Lease Obligations. </I>The Company has entered into certain agreements and
operating leases in order to secure product rights and office space. The following is a
summary of significant agreements and lease obligations (in thousands): </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
<TR VALIGN=Bottom>
<TH COLSPAN=1 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ending March 31, </FONT><HR WIDTH=75% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Minimum<BR>Royalties </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Operating<BR>Leases </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2005</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 795</FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 780</FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,575</FONT></TD>
<TD WIDTH=2% 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> 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> </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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>780</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,575</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> 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> </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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>762</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,557</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> 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> </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=RIGHT><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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,536</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> 2009</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>795</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>741</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,536</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>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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,236</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,040</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
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<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 of related product lines. 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. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company has entered into operating leases for office space and office equipment. Leases
expire at various dates beginning in 2007 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="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Recent Accounting Pronouncements </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
November 2002, the Emerging Issues Task Force finalized its tentative consensus on EITF
Issue 00-21, “Revenue Arrangements with Multiple Deliverables”, which provides
guidance on the timing of revenue recognition for sales undertakings to deliver more than
one product or service. The Company will adopt EITF 00-21 on transactions beginning fiscal
2005, as required. The Company does not anticipate that the adoption of this pronouncement
will have a material impact on the Company’s consolidated financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
December 2003, the Financial Accounting Standards Board (“FASB”) published a
revision to FASB Interpretation 46 (“FIN 46”) to clarify some of the provisions
of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”,
and to exempt certain entities from its requirements. The FASB issued, FIN 46, an
interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial
Statements,” to improve financial reporting of special purpose and other entities. In
accordance with FIN 46, business enterprises that represent the primary beneficiary of
another entity by retaining a controlling financial interest in that entity’s assets,
liabilities and results of operating activities must consolidate the entity in its
financial statements. Prior to the issuance of FIN 46, consolidation generally occurred
when an enterprise controlled another entity through voting interests. As of March 31,
2004, the Company is not involved in any variable interest entities. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forward-Looking Statements </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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
cold/flu 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 substantially all of its products;
and (viii) the Company currently purchases most of its nasal strip products from
different contract manufacturers that obtain the raw materials from a single
supplier. </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_7a">Item 7A.</A> QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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 an investment policy which limits
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. The average life of the investment portfolio as of March 31,
2004 was 403 days. </FONT></P>
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<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, 2004: </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair<BR>Value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(in thousands)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due within one year</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 28,677</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 28,755</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due after one year through three years</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,559</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,666</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 49,236</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 49,421</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_8_financial_statements_and_supplementary_data">Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Consolidated Balance Sheets of the Company as of March 31, 2004 and 2003,
and the related Consolidated Statements of Operations, Stockholders’ Equity
and Comprehensive Income (Loss), and Cash Flows for each of the years ended
March 31, 2004 and 2003 and December 31, 2001 and for the three months
ended March 31, 2002 and 2001 (unaudited), the Notes to the Consolidated
Financial Statements and the Report of Independent Registered Public Accounting
Firm, are listed under Item 15 of this Report. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_9">Item 9.</A> CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</U> </FONT> </H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_9a_controls_and_procedures">Item 9A. CONTROLS AND PROCEDURES</A></U> </FONT> </H1>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) Evaluation of Disclosure Controls and Procedures. </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company’s Chief Executive Officer, Marti Morfitt, and Chief Financial Officer, Samuel
E. Reinkensmeyer, have evaluated the Company’s disclosure controls and procedures as
of the end of the period covered by this report. Based upon that review, they have
concluded that these controls and procedures are effective in ensuring that material
information related to the Company is made known to them by others within the Company. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) Changes in Internal Control Over Financial Reporting. </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There
have been no significant changes in internal control over financial reporting that
occurred during the fourth fiscal quarter covered by this report that have materially
affected, or are reasonably likely to materially affect, the registrant’s internal
control over financial reporting. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III </FONT></H1>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_10_directors_and_executive_officers_of_the_registrant">Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</A></U> </FONT> </H1>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Directors </FONT></H1>
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<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>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Daniel E.
Cohen,</I> 51, 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>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Patrick
Delaney</I>, 61, has served as a director of the Company since 1983 and as the
Company’s Secretary since 1995. A practicing attorney since 1967,
Mr. Delaney retired as a partner in the Minneapolis-based law firm of
Lindquist & Vennum P.L.L.P., counsel to the Company in December 2002.
Mr. Delaney is a professional writer and serves on the board of a number
of privately-held companies. In addition, he is a director of Community
First Bankshares, Inc., a publicly-held multi-bank holding company. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>R. Hunt
Greene,</I> 53, 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>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Andrew J.
Greenshields</I>, 66, 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>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>H. Robert
Hawthorne</I>, 59, has served as a director of the Company since 1999.
Mr. Hawthorne was 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="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Marti
Morfitt</I>, 46, has served as the Company’s President and Chief Executive
Officer since June 2001 and 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 Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Richard W.
Perkins</I>, 73, 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; 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; Teledigital, Inc., a provider of software to the
cellular phone industry; and Two Way TV (U.S.), Inc., a provider of software to
the television game industry. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Morris J.
Siegel</I>, 54, 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 currently serves as a director of Whole
Foods Market, Inc., a North American natural foods grocer. Mr. Siegel is
also a director Annie’s HomeGrown Foods, Inc., which manufactures, markets
and sells premium all natural and organic foods, and is a subsidiary of Solera
Capital LLC. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Karen T. Beckwith</I>, 43, has
served as a director of the Company since October 1, 2003. Since January 2003,
Ms. Beckwith has served as the President and Chief Executive Officer of
Gelco Information Network, a leading provider of expense and trade management
solutions. From 1999 to January 2003, Ms. Beckwith served in various
executive positions of Gelco Information Network, most recently as its Chief
Financial Officer. Prior to that, she held a number of finance positions at
Ceridian Corporation from 1995 to 1999, including Senior Vice President of
Finance and Business Development and Integration. </FONT></P>
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<P ALIGN=CENTER>_________________ </P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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 25, 2004 (the “2004 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>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Officers </FONT></H1>
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<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>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_11_executive_compensation">Item 11. EXECUTIVE COMPENSATION</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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 2004 Proxy Statement and is incorporated herein
by reference. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_12">Item 12</A>. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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 2004 Proxy Statement and
is incorporated herein by reference. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_13_certain_relationships_and_related_transactions">Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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 2004 Proxy Statement and is
incorporated herein by reference. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_14_principal_accountant_fees_and_services">Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES</A></U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Information
required under this item is contained in the section entitled “Relationship with
Independent Accountants” in the Company’s 2004 Proxy Statement and is
incorporated herein by reference. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART IV </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_15">Item 15</A>. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K</U> </FONT> </H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) Documents filed as part of this Report: </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial
Statements. </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Form 10-K<BR><U>Page Reference</U> </FONT></TH></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=90% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent Registered Public Accounting Firm</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=4% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Operations for the Years Ended</FONT></TD><TD ALIGN=LEFT><FONT 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> March 31, 2004, March 31, 2003 and December 31, 2001 and</FONT></TD><TD ALIGN=LEFT><FONT 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> for the three months ended March 31, 2002 and March 31, 2001 (unaudited)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-2</FONT></TD><TD ALIGN=LEFT><FONT 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> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Balance Sheets as of March 31, 2004 and 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-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> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Stockholders' Equity and Comprehensive</FONT></TD><TD ALIGN=LEFT><FONT 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 for the Years Ended March 31, 2004, March 31, 2003 and</FONT></TD><TD ALIGN=LEFT><FONT 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> December 31, 2001 and for the three months ended March 31, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-4</FONT></TD><TD ALIGN=LEFT><FONT 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> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Cash Flows for the Years Ended</FONT></TD><TD ALIGN=LEFT><FONT 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> March 31, 2004, March 31, 2003 and December 31, 2001 and</FONT></TD><TD ALIGN=LEFT><FONT 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> for the three months ended March 31, 2002 and March 31, 2001 (unaudited)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-5</FONT></TD><TD ALIGN=LEFT><FONT 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> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes to Consolidated Financial Statements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-6</FONT></TD><TD ALIGN=LEFT><FONT 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>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statement Schedules. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>None. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits. </FONT></TD>
</TR>
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<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See “Exhibit Index” on the page following the Signature Page. </FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) Reports on Form 8-K. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During
the fourth quarter covered by this report, the Company filed Current Reports on
Form 8-K (a) dated January 22, 2004 reporting under Items 5
a quarterly dividend and attaching at Item 7 a related press release and
(b) dated March 8, 2004 reporting under Items 5, 9 and 7 a
press release announcing revised guidance for the fourth quarter ending
March 31, 2004 and its product plans for fiscal year 2005 and attaching
certain remarks of Marti Morfitt, the Company’s Chief Executive Officer,
made at a March 8, 2004 telephone conference. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During
the fourth quarter covered by this report, the Company also furnished a Current
Report on Form 8-K dated January 22, 2004 reporting under Items 7
and 12 a press release disclosing material non-public information regarding
its results of operations for the quarter ended December 31, 2003.
</FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="signatures">SIGNATURES</A> </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>
<TR VALIGN=Top>
<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></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=left colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, INC.<BR>(“Registrant”)</FONT></TD></TR>
<TR VALIGN=Top>
<TD align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>Dated: June 11, 2004</font></td><TD></TD>
<TD align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>By: </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>/s/ Marti Morfitt</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3> </td><td colspan=2 align=left><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD colspan=3></TD><TD colspan=2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt<BR>Chief Executive Officer and Director</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
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<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 11, 2004 on behalf of the Registrant in the capacities
indicated. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Power of Attorney and Signatures) </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti Morfitt </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt
<BR>Chief Executive Officer and Director
<BR>(Principal Executive Officer) </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Samuel Reinkensmeyer </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel Reinkensmeyer
<BR>Vice President of Finance and Chief Financial Officer
<BR>(Principal Financial and Accounting Officer) </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Karen T. Beckwith </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Karen T. Beckwith
<BR>Director </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Daniel E. Cohen </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Daniel E. Cohen
<BR>Chairman of the Board and Director </FONT><BR><BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Patrick Delaney </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Patrick Delaney
<BR>Director </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ H. Robert Hawthorne </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>H. Robert Hawthorne
<BR>Director </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ R. Hunt Greene </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>R. Hunt Greene
<BR>Director </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Andrew J. Greenshields </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Andrew J. Greenshields
<BR>Director </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Richard W. Perkins </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Richard W. Perkins
<BR>Director </FONT><BR><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Morris J. Siegel </font>
<BR><HR ALIGN=LEFT WIDTH=30% SIZE=1 NOSHADE Color=BLACK>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Morris J. Siegel
<BR>Director </FONT><BR><BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">CNS, INC.
<BR><U><A NAME="exhibit_index">EXHIBIT INDEX</A></U> </FONT> </P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U><B>Exhibit No.</B></U> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U><B>Description</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.2 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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
Quarterly Report on Form 10-Q for the quarter ended June 30, 2003). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.1* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.2* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.3* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.4* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.5* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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. 333-109110)).
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.6** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.7** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.8** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.9** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.10** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.11** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.12** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.13** </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.14* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.15* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.16* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.19* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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<BR>10-K).
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.20* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.21* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.22* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agreement
between the Company and Teri P. Osgood dated February 14, 2002 (incorporated by
reference to Exhibit 10.26 to the Annual Report on Form 10-K for March 31, 2003
(the "2003 Form 10-K"). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.23* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and Linda Kollofski dated October 29, 2002
(incorporated by reference to Exhibit 10.27 to the 2003 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.24* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement between the Company and John Kundtz dated July 22, 2002 (incorporated
by reference to Exhibit 10.28 to the 2003 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.25* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Second Amendment
to Executive Employment Agreement between the Company and Daniel E. Cohen dated
June 29, 2003. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.26* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter Agreement between the Company and Samuel E. Reinkensmeyer dated September 18, 2003. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.27* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment Agreement between the Company and Samuel E. Reinkensmeyer dated October 15, 2003. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.28* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agreement between the Company and Milton W. (Andy) Anderson dated October 10, 2003. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.29* </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agreement between the Company and John Kundtz dated January 26, 2004. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.30 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lease Agreement between the Company and Liberty Property Limited Partnership dated December 21, 1999. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 21.1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of
Independent Registered Public Accounting Firm </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24.1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Powers of
Attorney (included on signature page hereof). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 31.1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certificate of
Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 31.2 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certificate of
Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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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<P>_________________
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2> *Indicates Compensatory Agreement </font>
<BR>
<BR><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></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="index_to_financial_statements">Report of Independent Registered Public Accounting Firm</A> </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of
Directors and Stockholders
<BR>CNS, Inc.: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<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, 2004 and 2003 and the related consolidated statements of operations,
stockholders’ equity and comprehensive income, and cash flows for the years
ended March 31, 2004 and 2003 and December 31, 2001 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" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). 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" FSL="Default" -->
<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, 2004 and 2003 and the results of their operations and their cash flows
for the years ended March 31, 2004 and 2003 and December 31, 2001 and the three
months ended March 31, 2002 in conformity with U.S. generally accepted
accounting principles. </FONT></P>
<BR><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP </FONT></P>
<BR><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota
<BR>April 26, 2004 </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<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>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=760>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></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 WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,242</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,135</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23,468</FONT></TD>
<TD WIDTH=2% 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=LEFT><FONT FACE="Times 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>26,904</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>25,992</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>27,698</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,390</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8,706</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>60,076</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>53,083</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>48,544</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,745</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,762</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Operating expenses:</FONT></TD><TD ALIGN=LEFT><FONT 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=LEFT><FONT FACE="Times 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>33,101</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>30,930</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>34,256</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8,796</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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=LEFT><FONT FACE="Times 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>14,227</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,514</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,583</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,213</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>4,766</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=LEFT><FONT FACE="Times 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>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>930</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Total operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>47,328</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>43,444</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>49,769</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,009</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>18,701</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Operating income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>12,748</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>9,639</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>736</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(3,939</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><BR>Investment income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>725</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>821</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,242</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>236</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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 on sales of marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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> </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=RIGHT><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=RIGHT><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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Income (loss) before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>13,473</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>10,478</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,008</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(3,577</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Income tax expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4,926</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,962</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,134</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,577</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Basic net income (loss) per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.63</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .48</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .74</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Weighted average number of common shares outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>13,576</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>13,467</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,131</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>13,711</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,123</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Diluted net income (loss) per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.59</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .01</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT colspan=16><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=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 potential common shares outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>14,488</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,044</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,431</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,198</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,123</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an integral part of the consolidated financial statements. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-2 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<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>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Assets</B> </FONT></TH><TH></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=79% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current assets:</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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="LEFT"><FONT FACE="Times 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> 8,871</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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> 16,554</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="LEFT"><FONT FACE="Times 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>40,550</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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>25,061</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 colspan=7><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts receivable, net of allowance for doubtful accounts</FONT></TD><TD ALIGN=LEFT><FONT 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> of $380 in 2004 and $330 in 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>11,394</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>11,011</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="LEFT"><FONT FACE="Times 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>4,132</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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>3,266</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=LEFT><FONT FACE="Times 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>2,008</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>4,660</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="LEFT"><FONT FACE="Times 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>2,835</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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>1,035</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Total current assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>69,790</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>61,587</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><BR>Property and equipment, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times 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>1,562</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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>1,605</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=LEFT><FONT FACE="Times 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>1,107</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,293</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="LEFT"><FONT FACE="Times 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>1,075</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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>890</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 73,534</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 65,375</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liabilities and Stockholders’ Equity</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>Current liabilities: </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,970</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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> 7,615</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=LEFT><FONT FACE="Times 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>7,055</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>7,948</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="LEFT"><FONT FACE="Times 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>865</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times 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>758</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Total current liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>14,890</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>16,321</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD COLSPAN=8 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Stockholders’ equity:</FONT></TD><TD ALIGN="LEFT"><FONT 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 colspan=7><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=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=LEFT><FONT FACE="Times 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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD COLSPAN=8 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="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 2004 and 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>193</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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=LEFT><FONT FACE="Times 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>59,835</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>59,879</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> Treasury shares – at cost; 5,512 shares in 2004 and 5,989 shares in 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(23,878</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(26,694</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=LEFT><FONT FACE="Times 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>22,379</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,472</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=LEFT><FONT FACE="Times 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>115</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>204</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Total stockholders’ equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>58,644</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>49,054</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><BR>Commitments and contingencies (notes 9, 10 and 11)</FONT></TD><TD ALIGN=LEFT><FONT 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 COLSPAN="3"></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 73,534</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 65,375</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD></TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are
an integral part of the consolidated financial statements. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-3 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<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>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=790>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating activities:</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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=LEFT><FONT FACE="Times 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> 8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,134</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,577</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> Adjustments to reconcile net income (loss) to net cash</FONT></TD><TD ALIGN=LEFT><FONT 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> provided by (used in) operating activities:</FONT></TD><TD ALIGN=LEFT><FONT 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> Depreciation and amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>958</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,251</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,244</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>330</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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><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=LEFT><FONT FACE="Times 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>2,468</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,489</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>60</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>90</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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> Changes in operating assets and liabilities:</FONT></TD><TD ALIGN=LEFT><FONT 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> Accounts receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(383</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>671</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>275</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>626</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,182</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=LEFT><FONT FACE="Times 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>(866</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,199</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,070</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,357</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,767</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><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=LEFT><FONT FACE="Times 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>(1,801</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(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> </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=RIGHT><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=RIGHT><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><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=LEFT><FONT FACE="Times 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>(428</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,057</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(5,401</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(3,742</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(5,544</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Net 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=LEFT><FONT FACE="Times 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>8,555</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>19,163</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(2,817</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(53</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(11,437</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Investing activities:</FONT></TD><TD ALIGN=LEFT><FONT 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> Purchases of marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(90,325</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>(36,255</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(44,911</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(11,218</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(6,970</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><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=LEFT><FONT FACE="Times 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>74,749</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>30,389</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>55,550</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>10,846</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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><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=LEFT><FONT FACE="Times 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>(478</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(60</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(394</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(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><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=LEFT><FONT FACE="Times 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>(310</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(510</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(357</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(148</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Net cash provided by (used in) investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(16,364</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(6,436</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>9,888</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(380</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>10,052</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Financing activities:</FONT></TD><TD ALIGN=LEFT><FONT 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 colspan=16><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=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> under Employee Stock Purchase Plan</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>150</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>94</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>114</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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> 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=LEFT><FONT FACE="Times 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>1,616</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>855</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>174</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>72</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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><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=LEFT><FONT FACE="Times 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>(2,755</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,010</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(2,438</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(51</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> Dividends paid</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(1,640</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Net cash provided by (used in) financing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,806</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(722</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(2,366</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>37</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Net increase (decrease) in cash and cash equivalents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(7,683</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>10,921</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,349</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(2,799</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(1,348</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><BR>Cash and cash equivalents:</FONT></TD><TD ALIGN=LEFT><FONT 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> Beginning of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>16,554</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,633</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8,432</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> End of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8,871</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,554</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8,432</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,633</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 735</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Supplemental disclosure of cash flow information:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Cash paid during the year for interest</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 132</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 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> 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> 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=LEFT><FONT FACE="Times 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>2,994</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>237</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>35</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an integral part of the consolidated financial statements. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-4 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
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<BR>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<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
<BR>(in thousands) </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=760>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Common stock </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional </FONT></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Treasury shares </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Retained </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>other </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>of shares </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Par<BR>value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>paid-in<BR>capital </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>of shares </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>earnings<BR>(deficit) </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>comprehensive<BR>income (loss) </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>stockholders’<BR>equity </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at December 31, 2000</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>19,295</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 193</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 61,182</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,179</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> (23,279</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> (1,259</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 100</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 36,937</FONT></TD>
<TD WIDTH=1% 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=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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 BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Stock options exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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> </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> </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 BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Treasury shares purchased</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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=RIGHT><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> </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=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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> </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> </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>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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>343</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>19,295</FONT></TD>
<TD ALIGN=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>193</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>60,785</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,294</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,178</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</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=RIGHT><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 BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Stock options exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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> </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> </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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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=LEFT><FONT 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 period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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=RIGHT><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> </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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Unrealized losses on marketable securities</FONT></TD><TD ALIGN=LEFT><FONT 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 $58</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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> </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=RIGHT><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>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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>9,870</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at March 31, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>19,295</FONT></TD>
<TD ALIGN=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>193</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>60,796</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,756</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,956</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</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=RIGHT><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 BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT colspan=25><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Stock issued in connection with</FONT></TD><TD ALIGN=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Stock options exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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 BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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=RIGHT><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> </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> </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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Treasury shares purchased</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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=RIGHT><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=RIGHT><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> </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> </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=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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=RIGHT><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> </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=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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> </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> </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>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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>6,622</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>19,295</FONT></TD>
<TD ALIGN=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> 193</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>59,879</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,989</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</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=RIGHT><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=RIGHT><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 VALIGN=Bottom BGCOLOR="#C0C0C0">
<TD ALIGN=LEFT colspan=25><FONT FACE="Times New Roman, Times, Serif" SIZE=1> Stock issued in connection with</FONT></TD><TD ALIGN=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(24</FONT></TD>
<TD ALIGN=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>148</FONT></TD>
<TD ALIGN=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>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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>150</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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,051</FONT></TD>
<TD ALIGN=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>(453</FONT></TD>
<TD ALIGN=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>2,668</FONT></TD>
<TD ALIGN=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>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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,617</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> Tax benefit of options exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,005</FONT></TD>
<TD ALIGN=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>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> </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> </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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,005</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> Dividends ($.12 per share )</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,640</FONT></TD>
<TD ALIGN=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>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,640</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=LEFT><FONT 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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,547</FONT></TD>
<TD ALIGN=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>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,547</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 losses on marketable securities</FONT></TD><TD ALIGN=LEFT><FONT 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 $52</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>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> </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> </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> </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> </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> </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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(89</FONT></TD>
<TD ALIGN=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>(89</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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> </FONT></TD>
<TD ALIGN=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>8,458</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at March 31, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=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>19,295</FONT></TD>
<TD ALIGN=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> 193</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 59,835</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,512</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> (23,878</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 22,379</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 115</FONT></TD>
<TD ALIGN=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> 58,644</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an integral part of the consolidated financial statements. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-5 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, INC. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes to Consolidated Financial Statements<BR>March 31, 2004 and 2003 and December 31, 2001</FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(1)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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, Breathe
Right Vapor Shot™ personal vaporizer and FiberChoice® chewable fiber
supplement. 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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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, settlement of trade and consumer promotion liabilities, the
uncollectibility of accounts receivable and inventory obsolescence. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Revenue
Recognition</B> The Company records sales when all of the
following criteria have been met: a valid customer order with a fixed price has
been received; title and risk of loss transfer to the customer; there is no
further significant obligation to assist in the resale of the product; and
collectibility is reasonably assured. Provisions for trade promotions, returns
and customer discounts are provided for as a reduction in determining net sales
in the same period that the related sales are recorded. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Fair Value of
Financial Instruments</B> Cash, cash equivalents and accounts
receivable are carried at amounts that approximate fair value. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cash
Equivalents</B> Cash equivalents consist primarily of money
market funds with original maturities of three months or less. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-6 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Property and Equipment</B> Property and equipment are stated
at cost, net of accumulated depreciation. 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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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, net of accumulated
amortization and are amortized over three to seven years using the straight-line
method. The Company reviews its product rights for impairment whenever events or
changes in circumstances indicate that the carrying amount of a product right
may not be recoverable. If such product rights are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the product right exceeds the fair value of that product right.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 123, “Accounting for Stock-Based
Compensation” as amended by 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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The fair value
of each stock option grant issued under various stock option plans 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 weighted average assumptions were made in estimating fair value:
</FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months<BR>Ended </FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited) </FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=39% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Expected lives (Years) </FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.7 </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></TD>
<TD WIDTH=2% 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>Dividend Yield </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.27 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>% </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.00 </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>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>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>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>Expected volatility </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62.00 </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>60.00 </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>60.00 </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>60.00 </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>60.00 </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>Risk-Free Interest Rate </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.06 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>% </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.00 </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>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>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>5.00 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>% </FONT></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-7 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Had compensation
cost for the Company’s stock option plans and Employee Stock Purchase Plan
been determined based on the fair value of options at the grant date, net income
and earnings per share would have been as follows: </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months<BR>Ended </FONT> </TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE> </TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited) </FONT></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss),</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=1% 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> As reported</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 81</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,134</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,577</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>Deduct: Total stock-based</FONT></TD><TD ALIGN=LEFT><FONT 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> compensation expense</FONT></TD><TD ALIGN=LEFT><FONT 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> determined under the fair</FONT></TD><TD ALIGN=LEFT><FONT 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> value based method for all</FONT></TD><TD ALIGN=LEFT><FONT 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> awards, net of related tax</FONT></TD><TD ALIGN=LEFT><FONT 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> effects</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>603</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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>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>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Proforma net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,944</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,060</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (442</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,010</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,666</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Earnings (loss) per share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic – as reported</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .63</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .48</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .74</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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><BR> Basic – proforma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .59</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .45</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (.03</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .73</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (.26</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Diluted – as reported</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .59</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .46</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .71</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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><BR> Diluted – proforma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .56</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (.03</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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> (.26</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Foreign Currency Transactions</B> Most foreign transactions
are denominated in U.S. dollars, although some are conducted in functional local
currencies. 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=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Advertising</B> The Company capitalizes the production costs
of advertising and expenses these costs in the period in which the advertising
first runs. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Income Taxes</B> Income tax expense (benefit) includes
federal and state income taxes. The provision for income taxes is composed of
current income tax expense (benefit) and change in the balance of the deferred
tax assets and liabilities. 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>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Net Income (Loss) Per Share</B> Basic net income (loss) per
share is computed using the weighted-average number of common shares outstanding
during the period. Diluted net income per share is computed using the
weighted-average number of common and potential common shares outstanding during
the period. Diluted net loss per share is computed using the weighted-average
number of common shares and excludes potential common shares outstanding, as
their effect is antidilutive to the calculation of net loss per share.
</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-8 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Recent Accounting Pronouncements</B> In November
2002, the Emerging Issues Task Force finalized its tentative consensus on EITF
Issue 00-21, “Revenue Arrangements with Multiple Deliverables”, which
provides guidance on the timing of revenue recognition for sales undertakings to
deliver more than one product or service. The Company will adopt EITF 00-21 on
transactions beginning fiscal 2005, as required. The Company does not anticipate
that the adoption of this pronouncement will have a material impact on the
Company’s consolidated financial statements. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December
2003, the Financial Accouning Standards Board (“FASB”) published a
revision to FASB Interpretation 46 (“FIN 46”) to clarify some of the
provisions of FASB Interpretation No. 46, “Consolidation of Variable
Interest Entities”, and to exempt certain entities from its requirements.
The FASB issued, FIN 46, an interpretation of Accounting Research Bulletin
No. 51, “Consolidated Financial Statements,” to improve financial
reporting of special purpose and other entities. In accordance with FIN 46,
business enterprises that represent the primary beneficiary of another entity by
retaining a controlling financial interest in that entity’s assets,
liabilities and results of operating activities must consolidate the entity in
its financial statements. Prior to the issuance of FIN 46, consolidation
generally occurred when an enterprise controlled another entity through voting
interests. As of March 31, 2004, the Company is not involved in any
variable interest entities. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(2)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Marketable
Securities</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=11><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commercial paper</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,415</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,415</FONT></TD>
<TD WIDTH=2% 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>Municipal obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>15,172</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,157</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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>Corporate bonds</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>9,404</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>9,471</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>7,225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>7,361</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>U.S. Government obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>15,789</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,922</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,099</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></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 40,365</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,550</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24,739</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 25,061</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Maturities of
marketable securities at March 31, 2004 are as follows (in thousands):
</FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due within one year</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,806</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,884</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due after one year through three years</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,559</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,666</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,365</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 40,550</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-9 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross unrealized
gains on marketable securities available for sale totaled $201,000 and $324,000
at March 31, 2004 and 2003, respectively. Gross unrealized losses on
marketable securities available for sale totaled $18,000 and $2,000 at
March 31, 2004 and 2003, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Realized gains
on sales of marketable securities were $0, $18,000 and $64,000 for the years
ended March 31, 2004 and 2003 and December 31, 2001, 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. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(3)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Advertising</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At March 31,
2004 and 2003, the Company reported $409,000 and $668,000, respectively, of
advertising costs as prepaid assets. Advertising expense was $25,211,000,
$22,657,000 and $19,486,000 for the years ended March 31, 2004 and 2003 and
December 31, 2001, 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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(4)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 ALIGN=CENTER WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>
<TR>
<TD COLSPAN=9></TD>
<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=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> Balance beginning of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 330</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 500</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> Plus provision for doubtful accounts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 110</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 55</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> Less charge offs, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>60</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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> 380</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 330</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Finished goods</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,014</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> 2,225</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> Raw materials and component parts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,118</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,041</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total inventories</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 4,132</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,266</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Warehouse and production equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 770</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 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> Office equipment and information systems</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4,111</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,680</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> Leasehold improvements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,087</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,050</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Less accumulated depreciation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(4,406</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(3,885</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></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=LEFT><FONT FACE="Times 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> 1,562</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,605</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product rights:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Product rights</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,614</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 3,416</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> Less accumulated amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(2,507</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(2,123</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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> 1,107</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,293</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accrued expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Promotions and allowances</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,021</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 4,703</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> Royalties and commissions</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>791</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>778</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> Salaries, incentives and paid time off</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,466</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,829</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> Restructuring costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>777</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>612</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total accrued expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 7,055</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> 7,948</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-10 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(5)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Stockholders’ Equity</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 4,300,000 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, 2004. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 ALIGN=CENTER WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average<BR>
Exercise Price<BR>
Per Option</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options<BR>
Outstanding</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options<BR>
Available<BR>
For Grant</FONT></TH></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=42% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2000</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.33</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,892,000</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>574,450</FONT></TD>
<TD WIDTH=2% 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> Granted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.26</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>345,960</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(345,960</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> Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>3.36</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> </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> </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> Canceled</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.47</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(102,970</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>102,970</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> Expired</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>(7,280</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 4.33</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,083,190</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>324,180</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> Granted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>5.98</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> </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> </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> Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>3.63</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(19,696</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> Canceled</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.09</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>(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> </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> Expired</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>(3,000</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 4.43</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> </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> </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> Granted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>6.01</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>175,460</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(175,460</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> Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.15</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> </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> </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> Canceled</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.68</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(61,090</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>61,090</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> Expired</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>(7,560</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 4.58</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,084,504</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>86,710</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> Amendment of 2000 Plan</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>650,000</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> Granted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>11.00</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>362,020</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>(362,020</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> Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.09</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>(481,464</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> Canceled</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>6.20</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(77,500</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>77,500</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> Expired</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>(600</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5.87</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,887,560</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>451,590</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-11 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information on
outstanding and currently exercisable options by price range as of March 31,
2004, is summarized as follows: </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=700>
<TR VALIGN=Bottom>
<TH COLSPAN=2 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Price Range Per<BR>Option</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total<BR>Number of<BR>Options</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average<BR>Remaining Life<BR>(Years)</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average<BR>Exercise<BR>Price</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercisable<BR>Number of<BR>Options</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average<BR>Exercise<BR>Price</FONT></TH></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 2.81</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>142,500</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.0</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 2.81</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>142,500</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 2.81</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.10 - 3.94</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>147,000</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>4.3</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.50</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>124,600</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3.49</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.00 - 4.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>544,500</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6.1</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.24</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>537,900</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.24</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5.00 - 5.94</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>513,600</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3.3</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.40</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>467,600</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5.40</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6.05 - 6.85</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>186,440</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8.1</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.42</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>81,900</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.30</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.25</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>30,000</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>3.3</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.25</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>30,000</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>7.25</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.01 - 11.37</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>322,520</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>9.1</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.34</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>.00</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.04</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>9.6</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.04</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>.00</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN="3" ALIGN="CENTER"></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=3></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,887,560</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.8</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,384,500</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>4.60</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3 ALIGN="CENTER"></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=3></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At
March 31, 2004, the weighted-average remaining contractual life of
outstanding options was 5.8 years. At March 31, 2004 and 2003 and
December 31, 2001, currently exercisable options aggregated 1,384,500,
1,630,456, and 1,409,570 shares of common stock, respectively and the
weighted-average exercise price of those options was $4.60, $4.43 and $4.46,
respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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, 2004 and 2003 and December 31, 2001 is estimated as $5.71,
$3.54 and $2.55, respectively on the date of grant using the Black-Scholes
option pricing model with the following weight average assumptions: volatility
of 62% in 2004, 60% in 2003 and 2001; risk-free interest rate of 3.19% in 2004,
5.00% in 2003 and 2001, and an expected life of 5.8 years in 2004 and
6 years in 2003 and 2001.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 have purchased 267,297 shares as of
March 31, 2004. Common shares sold to employees under the Purchase Plan in
fiscal 2004, 2003 and 2001 were 23,413, 19,517 and 35,860, respectively. There
was no common stock sold to employees during the three month periods ended
March 31, 2002 and 2001. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
weighted-average fair value of each purchase right granted in fiscal 2004, 2003
and 2001 was $5.02, $2.26 and $2.25, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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. These
warrants vested over a 3 year period and are exercisable as of March 31, 2004.
The warrants have a term of ten years, but will earlier terminate within 90 days
of the termination of the license agreement. Warrants were issued during
1997 to purchase 25,000 shares at a price of $8.00 per share vesting in 2000 and
with a life of 5 years. During 2004, these warrants to purchase 25,000 shares
expired and were not exercised. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-12 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Preferred
Stock</B> At March 31, 2004, 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 as well
as an additional 7,483,589 shares of undesignated preferred stock. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(6)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Income Taxes</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income tax
expense (benefit) for the years ended March 31, 2004 and 2003 and
December 31, 2001 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 ALIGN=CENTER WIDTH=700>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31,</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=31% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current income tax</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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> expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT 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> Federal</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 2,349</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 224</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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>58</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>115</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,407</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>339</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=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> expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT 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> Federal</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,104</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,366</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(8,388</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> State</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>415</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>257</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(738</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,519</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,623</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total income tax</FONT></TD><TD ALIGN=LEFT><FONT 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> expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,926</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,962</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> (9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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,
2004 and 2003; December 31, 2001 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 ALIGN=CENTER WIDTH=700>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31,</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=32% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Computed tax</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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> expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 4,715</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,667</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 28</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 353</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,252</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>State taxes, net of</FONT></TD><TD ALIGN=LEFT><FONT 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> federal benefit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>308</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>242</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(480</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>Change in deferred tax</FONT></TD><TD ALIGN=LEFT><FONT 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> valuation allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>(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>(9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,252</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>Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(97</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>53</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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> </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=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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Actual tax</FONT></TD><TD ALIGN=LEFT><FONT 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> expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,926</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,962</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> (9,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-13 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company
recognized a tax benefit of $9.1 million during the three months ended March 31, 2002
as a result of reinstating net deferred tax assets, including the benefit of net
operating loss carryforwards. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 2004 and 2003 are presented below
(in thousands): </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=69% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred tax assets:</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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> Inventory items</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 337</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 383</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 receivable allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>141</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>122</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> Product rights</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>437</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>304</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 expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,443</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,108</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> Contract termination</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>647</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>770</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> Net operating loss and credit carryforwards</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>158</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,166</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,163</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,853</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=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> Unrealized gains on marketable securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(68</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(119</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</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(184</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(80</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(303</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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> 3,083</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> 5,550</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of
March 31, 2004, the Company has reported state operating loss carryforwards
of $1.6 million and credits of $80,000. These state operating loss
carryforwards begin to expire in 2014. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(7)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Sales</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company had
one significant customer who accounted for 26%, 25% and 22% of net sales in the
years ended March 31, 2004 and 2003 and December 31, 2001,
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, 2004 and 2003 were $2,995,000 and $2,611,000,
respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-14 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales by
brand and geographic area are as follows (in thousands): </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=700>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31,</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% 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> Breathe Right</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 64,126</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 57,855</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 53,816</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,591</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,551</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> FiberChoice</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>9,290</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>7,084</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,373</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,536</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,137</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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>588</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>319</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>39</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total domestic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>74,004</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>65,258</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>60,225</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,195</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>18,727</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>International</FONT></TD><TD ALIGN=LEFT><FONT 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> Japan</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4,430</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,360</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>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> UK</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,349</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,275</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,378</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>426</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>665</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> Italy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,899</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,020</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>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> Canada</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,372</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,161</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>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> Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,926</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,001</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,170</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>912</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>515</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total international</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>12,976</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>13,817</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>16,017</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,242</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,135</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 23,468</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(8)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Employee
Benefit Plan</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 certain annual limits. The Company matches 25% of employee
contributions up to 5% of base compensation each year, with certain limitations.
The Company may also make additional discretionary contributions. Contribution expense
related to the defined contribution plan was $251,000, $204,000 and $269,000 for
the years ended March 31, 2004 and 2003 and December 31, 2001,
respectively. Contribution expense related to the defined contribution plan was $46,000 and
$120,000 (unaudited) for the three months ended March 31, 2002 and 2001,
respectively.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(9)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Special
Charges</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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. As of
March 31, 2004, the Company made all of the payments relating to this plan
and therefore the balance of the accrued liability was $0. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(10)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>License
Agreements</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 $2,612,000, $2,652,000 and $3,524,000 for the years ended
March 31, 2004 and 2003 and December 31, 2001, respectively. Royalty
expense was approximately $724,000 and $1,040,000 (unaudited) for the three
months ended March 31, 2002 and 2001, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-15 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(11)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Operating
Leases</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company
leases equipment and office space under noncancelable operating leases that have
initial or noncancelable lease terms in excess of one year. Future minimum lease
payments due in accordance with these leases as of March 31, 2004 are as
follows (in thousands): </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=500>
<TR VALIGN=Bottom>
<TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ending March 31,</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT></TH></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=80% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 780</FONT></TD>
<TD WIDTH=2% 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>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>780</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>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>762</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>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> </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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,236</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Future minimum lease payments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> 5,040</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total rental
expense for operating leases was $780,000, $781,000 and $789,000 for the years
ended March 31, 2004 and 2003 and December 31, 2001, 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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(12)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><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 ALIGN=CENTER WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Three Months Ended</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31,</FONT></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT></TH></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=15><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(unaudited)</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common<BR> shares outstanding</FONT></TD>
<TD WIDTH=1% 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> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,576</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,467</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,131</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,711</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,123</FONT></TD>
<TD WIDTH=2% 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>Potential common shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>912</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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>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>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR>
<TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common and<BR> potential common shares outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>14,488</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,044</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,431</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,198</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,123</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of March 31,
2004, a total of 324,000 options to purchase shares of common stock with a range
of exercise prices from $11.01 to $12.04 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. These
options expire during the period of 2004 to 2013. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-16 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(13)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Summary of Quarterly Financial Data (Unaudited)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following is
a condensed summary of actual quarterly operating results for fiscal 2004 and
2003 (in thousands, except per share amounts): </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Jun 30,<BR>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sep 30,<BR>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31,<BR>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 31,<BR>2004 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,497</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,621</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,395</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,467</FONT></TD>
<TD WIDTH=2% 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=LEFT><FONT FACE="Times 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>5,470</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,454</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8,396</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,584</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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>12,027</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,167</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>17,999</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,883</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=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=LEFT><FONT FACE="Times 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>4,465</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>4,207</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>12,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>11,913</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> Selling, general and administrative</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>3,341</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,422</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,737</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,727</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>7,806</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>7,629</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>16,253</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>15,640</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>4,221</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,538</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,746</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>243</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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>194</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>183</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>160</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>188</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4,415</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,721</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,906</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>431</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</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>1,634</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,486</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>716</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>90</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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> 2,781</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,235</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,190</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 341</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .21</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .31</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .02</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .20</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .29</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .02</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Jun 30,<BR>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sep 30,<BR>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31,<BR>2002 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 31,<BR>2003 </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 14,523</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,386</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 25,914</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> 21,253</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=LEFT><FONT FACE="Times 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>5,319</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,912</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>8,119</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>6,640</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<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=LEFT><FONT FACE="Times 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>9,204</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>11,474</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>17,795</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,613</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=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=LEFT><FONT FACE="Times 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>4,115</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,881</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>13,407</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>10,527</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> Selling, general and administrative</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,763</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,015</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,204</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>3,535</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>6,878</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,896</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>16,611</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>14,062</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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>2,326</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,578</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,184</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>551</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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>229</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>240</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>240</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>130</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>2,555</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>5,818</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,424</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>681</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</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>550</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>112</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></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=LEFT><FONT FACE="Times 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> 1,555</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,518</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 874</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 569</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .26</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .07</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .04</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .25</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .06</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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> .04</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>
<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the
quarter ended December 31, 2003, the Company recognized $.03 per diluted share
of net income that should have been recognized for the quarter ended
March 31, 2004, related to a revenue recognition timing issue. This would
have reduced the reported $.08 per diluted share of net income to $.05 per
diluted share for the quarter ended December 31, 2003 and increased the reported
$.02 per diluted share of net income to $.05 per diluted share for the quarter
ended March 31, 2004. There was no impact on net income or diluted net
income per share for the twelve months ended March 31, 2004. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-17 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TYPE>EX-10.25
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<FILENAME>cns042906_ex10-25.htm
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<HTML>
<HEAD><TITLE>Exhibit 10.25 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.25 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> THIS
AMENDMENT to the Executive Employment Agreement dated February 12, 1999 (the
“Agreement”) between CNS, Inc. (the “Company”) and Daniel Cohen (the
“Employee”), as amended June 29, 2001 (“First Amendment”), is made and
entered into as of the 29th day of June 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The purpose of this Amendment is to extend the employment of the Employee after
June 30, 2003 in connection with the Employee’s position and duties as
Chairman of the Board of CNS under the terms of the Agreement, as amended by the
First Amendment. This Amendment is intended to modify the Agreement and First
Amendment to the extent set forth herein. </FONT></P></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Pursuant to Paragraph 3 of the First Amendment, the Agreement, as amended, and
Employee’s employment is extended until June 30, 2004 and each of the dates
set forth in Paragraph 3 of the First Amendment shall be modified to read
“June 30, 2004.” </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The parties acknowledge that the Company has satisfied its obligations to
Employee with respect to the severance payments set forth in Paragraph 5 of the
First Amendment and that such paragraph shall be null and void and of no further
force and effect after June 30, 2003. </FONT></P></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Paragraph 8 of the First Amendment shall be modified to read as follows: </FONT></P></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
“In the event that the Company terminates the Employee’s employment
during the term of the Agreement other than for Good Cause (as defined in
Section 7(b) of the Agreement) or in the event the Employee resigns for
Good Reason (as defined in Section 8(b)(i) of the Agreement), whether prior
to or following a Change in Control of the Company, in consideration for the
Employee executing a standard release agreement covering all claims against the
Company as defined in the Agreement, the Company will: (a) pay to the
Employee Eleven Thousand Seven Hundred Dollars ($11,700) per month, payable in
semi-monthly installments and subject to tax withholding as required by law,
until June 30, 2004; and (b) pay the COBRA premium on the
Company’s health plan on behalf of the Employee until the earliest of:
(i) June 30, 2004; or (ii) the date Employee otherwise ceases to
be eligible for COBRA continuation coverage. Such payments shall be in lieu of
any salary continuation, severance or other similar payment due upon termination
of employment by the Company under the Agreement (including after a Change in
Control of the Company), any policy, practice or arrangement of the Company.
Employee shall be entitled to any benefits thereafter under any of the
Company’s benefit plans to which terminated employees are entitled in
accordance with law.” </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The provisions of Section 8 of the Agreement, as modified by Paragraph 9 of the
First Amendment (other than the definition in Section 8(b)(i) referred to in
Paragraph 4 above), shall be void and of no further force and effect from and
after the date of this Second Amendment. </FONT></P></TD>
</TR>
</TABLE>
<BR>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 1; page: 1" -->
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The date in Paragraph 10 of the First Amendment is modified to read “July
1, 2004.” </FONT></P></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Except as specifically modified herein, all of the terms and conditions set
forth in the Agreement and the First Amendment shall continue in full force and
effect. </FONT></P></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> IN
WITNESS WHEREOF, this Second Amendment is executed on behalf of the Company by an
Executive Officer who has the authority and approval of the Board and by the Employee as
of the day and date set forth above. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></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=left colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, INC.</FONT></TD></TR>
<TR VALIGN=Top>
<TD align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>/s/ Daniel Cohen</font></td><TD></TD>
<TD align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>By: </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>/s/ Marti Morfitt </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD><HR NOSHADE COLOR=Black SIZE=1></td><TD colspan=3> </TD><td align=left><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Daniel Cohen </FONT></TD><TD></TD></TR>
<TR VALIGN=Top>
<TD align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> </font></td><TD></TD>
<TD align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Its: </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>President and Chief Executive Officer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>4
<FILENAME>cns042906_ex10-26.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 10.26 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.26 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CNS, Inc.</B>
<BR>7515 Smetana Lane
<BR>Eden Prairie, Minnesota 55345
<BR>Phone: (952) 229-1500 Fax (952) 229-1700
<BR>www.cns.com </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 18, 2003 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel E. Reinkensmeyer
<BR>4506 Drexel Avenue
<BR>Edina, MN 55424 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Sam: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I am pleased to confirm my offer of
employment to you as Vice President of Finance and Chief Financial Officer reporting to
me. If you accept this offer, your start date will be as mutually agreed between us, but
not later than October 15, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Your compensation package will
include the following components: </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Your
base salary will be $190,000 annualized, paid over our regular semi-monthly pay periods. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
will be eligible for annual revenue and profit based incentive bonus of up to 60% (15% at
threshold, 30% at plan and 60% maximum) of your base salary. The parameters of the
incentive bonus plan for senior management is presented by management for approval by the
Board of Directors each year. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject
to the approval of the CNS, Inc. Compensation Committee, we will grant you an option to
purchase 53,500 shares of CNS common stock at a price per share determined on your first
day of employment (date of grant). These shares will vest in equal amounts over a
five-year period beginning on your first anniversary date. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Periodically,
at the discretion of the Compensation Committee, you will be eligible to receive annual
stock options that will vest over a three-year period. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel E. Reinkensmeyer Offer Letter
<BR>Page Two </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS
will pay you a one time hiring bonus of $65,000 less required withholding, to be paid
with your first paycheck. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You
will be eligible to receive a monthly car allowance of $450.00. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> You
will be eligible to participate in CNS, Inc.‘s benefit plans. A packet of benefit
information will be sent to you under separate cover following your acceptance of this
offer. CNS’ benefit plan includes 25 days of Paid Time Off (PTO) during the first
year of employment. Eight of the 25 days will be added to your PTO bank immediately upon
date of hire. The remaining 17 days accrue at a rate of 5.67 hours per pay period over
the first twelve months. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
the event your employment is terminated by CNS without Cause (as defined on Exhibit A)
prior to a change in control of CNS, in exchange for a written release of all claims by
you, CNS will pay you severance equal to your annual base salary payable over a period of
twelve months from your termination date, subject to required withholding plus pay your
COBRA premium over the same period. In the event your employment is terminated by CNS
without Cause or you resign your employment with CNS for Good Reason (as defined on
Exhibit A) within 24 months after a change in control of CNS, in exchange for a written
release of all claims by you, CNS will pay you severance equal to two times your annual
base salary payable over a period of twenty-four months from your termination date,
subject to required withholding plus your COBRA premium over a period of 18 months from
your termination date. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will schedule a pre-employment
druge and alcohol screen tests for you at the Airport Clinic. This employment offer is
contingent upon successfully completing these tests. As a condition of your employment and
as consideration for the compensation and benefits to be provided, you will, prior to your
first day of employment, execute the Employment Agreement attached as Exhibit B,
containing confidentiality, invention assignment and noncompetition provisions required of
all new employees. </FONT></P>
<BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel E. Reinkensmeyer Offer Letter
<BR>Page Three </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sam, we are very excited about the
prospect of you joining CNS and ask that you confirm your acceptance of this offer by
signing the enclosed copy of this letter and returning it to me at your earliest
convenience. If you have any questions at all about the terms of the offer, please call me
or Michelle Beuning so that we can discuss and resolve them as soon as possible. I know
that you will find this position a challenging and rewarding opportunity and that you will
be an important part of delivering the CNS vision! </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely, </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti Morfitt </FONT>
<HR ALIGN=left WIDTH=25% SIZE=1 NOSHADE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt
<BR>President & CEO </FONT><BR>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accepted and agreed to this offer on the
<BR>23rd day of September, 2003. </FONT></P>
<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Samuel E. Reinkensmeyer </FONT>
<HR ALIGN=left WIDTH=25% SIZE=1 NOSHADE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel E. Reinkensmeyer </FONT><BR>
<BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXHIBIT A </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“Cause”
shall mean one or more of the following: (i) your willful failure or
refusal to perform your expected services to CNS consistent with your position;
(ii) your commission of an intentional breach of fiduciary duty against CNS
or a substantial act of fraud against or affecting CNS or any customer,
supplier, client, agent, or executive thereof; (iii) your commission of any
other willful or reckless act which is deemed by CNS’s Board to have a
material adverse effect on CNS (it being understood that mere negligence in
performance of duties is not Cause under this Agreement); (iv) your willful
breach of any provision of this Agreement or any policy or directive of the
Board or the CEO, including the CNS Code of Conduct; or (v) your commission
of any act involving moral turpitude which is deemed by CNS’s Board to have
a material adverse effect on CNS or your position with CNS; or (vi) your
unsatisfactory performance after specific notice of performance deficiencies,
description of expectations and opportunity to cure. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“Good
Reason” shall mean: (i) CNS has materially breached any of the terms
of this Agreement; (ii) you are assigned duties which are materially
inconsistent with your position, duties, responsibilities and status as Chief
Financial Officer; (iii) your base salary or bonus opportunity, is reduced;
or (iv) as a result of the relocation of CNS’ principal offices, you
would be required to relocate your principal residence outside reasonable
commuting distance of the Twin Cities Metropolitan area. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<BR>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>5
<FILENAME>cns042906_ex10-27.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 10.27 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.27 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EMPLOYMENT AGREEMENT
<BR>BETWEEN
<BR>CNS, INC. AND
<BR>SAM REINKENSMEYER </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THIS AGREEMENT
(“Agreement”), made and entered into in the City of Eden Prairie,
State of Minnesota, this 15<SUP>th</SUP> day of October, 2003, by and
between CNS, Inc., a Delaware corporation (“the Corporation”) and Sam
Reinkensmeyer (“Employee”); </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 1
<BR>EMPLOYMENT </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0) The
Corporation hereby employs Employee, and Employee agrees to work for Corporation
at such duties as are assigned to him/her from time to time by the directors and
officers of the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 2
<BR>TERM </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.0) The
Agreement shall be in effect hereinafter unless and until altered or terminated
as hereinafter provided. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 3
<BR>DUTIES </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.0) Employee
agrees, unless otherwise specifically authorized by the Corporation, to devote
his full time and effort to his duties for the profit, benefit and advantage of
the business of the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 4
<BR>NON-COMPETITION </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.0) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Corporation and the Employee acknowledge that: </FONT></TD>
</TR>
</TABLE>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>01) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Corporation’s business is highly competitive; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>02) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The essence of
such business consists of confidential information and trade secrets as
described in Article 5, all of which are zealously protected and kept secret by
the Corporation; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>03) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the course of
his/her employment, Employee will acquire the information described in Article 5
and that the Corporation would be adversely affected if such information
subsequently, and in the event of the termination of the Employee’s
employment, is used for the purposes of competing with the Corporation.
</FONT></TD>
</TR>
</TABLE>
<BR>
<BR><BR><BR><BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page 1 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>04) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For these
reasons, both the Corporation and the Employee further acknowledge and agree
that the restrictions contained herein are reasonable and necessary for the
protection of their respective, legitimate interests. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1) Employee
agrees that from and after the date hereof during his/her employment with the
Corporation for one (1) year thereafter, he/she will not, without the
express written permission of the Corporation, directly or indirectly
(a) own, manage, operate, control, lend money to, endorse the obligations
of, or participate or be connected as an officer, consultant, director, 5% or
more stockholder of a publicly held company, employee, partner, member, or
otherwise, with any enterprise or individual engaged in the business of
developing, manufacturing or marketing products to persons or companies that
were customers of the Corporation during the term of this Agreement, or with any
enterprise or individuals engaged in the business of developing, manufacturing
or marketing products that have been, or are known by Employee as being planned
to be developed by the Corporation and will not in any manner either directly or
indirectly compete with the Corporation in such business (b) solicit or do
business with (1) any persons or entities who are customers or clients of
the Corporation at the time of the Employee’s termination of employment, or
(2) any prospective or former customers of the Corporation with whom the
Employee had contact during the [two years] preceding his/her termination of
employment (c) individually or collectively or in conjunction with others,
solicit, on his/her own behalf or on behalf of any other person, the services of
any person who is an employee or agent of the Corporation, or directly or
indirectly solicit any of the Corporation’s employees or agents to
terminate their employment or agency with the Corporation. It is understood and
acknowledged by both parties that, inasmuch as the Corporation’s products
are marketed nationwide, that this covenant not to compete shall be enforced
throughout the United States, in any other country for which the Corporation has
developed or is in the process of developing a marketing plan for its products,
even if such plan is not yet in effect, </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2) Employee
further agrees that during and following the termination of his/her employment,
he/she will do nothing to interfere with any of the Corporation’s business
relationships or its goodwill or reputation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.3) Employee,
during the term of his/her employment by the Corporation, shall at all times
keep the Corporation informed of any business activity and outside employment.
The Employee shall not engage in any activity or employment which may be in
conflict with the Corporation’s interests, as determined by the Corporation
in its sole discretion. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 5
<BR>CONFIDENTIAL INFORMATION AND TRADE SECRETS </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.0) Employee
has acquired and will acquire information and knowledge respecting the intimate
and confidential affairs of the Corporation including, without limitation,
confidential information with respect to the Corporation’s products,
packages, improvements, designs. practices, sales or distribution methods and
other confidential information pertaining to the Corporation’s business or
financial affairs, which may or may not be patentable, which are developed by
the Corporation at considerable time and expense, and which could be unfairly
utilized in competition with the Corporation. Confidential information includes
information </font></P>
<BR><BR><BR><BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page 2 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<!-- MARKER PAGE="sheet: 7; page: 7" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>relating to the
Corporation, which is provided or disclosed to the Employee, which he/she
develops in the course of performing his/her duties for the Corporation. The
term “trade secret” shall be defined as follows: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A trade secret
may consist of any formula, pattern, device or compilation of information which
is used in one’s business, and which gives him an opportunity to obtain an
advantage over competitors who do not know or use it. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accordingly, Employee agrees that
he/she shall not, during the period of his/her employment hereunder or thereafter, use for
his/her own benefits confidential information or trade secrets, whether written or
otherwise, and whether expressly labeled as “confidential” or “trade
secret” or not, acquired during the term of his/her employment by the Corporation.
Further, during the period of his/her employment hereunder and thereafter, the Employee
shall not, without the written consent of the Board of Directors of the Corporation or a
person duly authorized thereby, disclose to any person, other than an employee of the
Corporation or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Employee of his/her duties, any confidential
information or trade secrets obtained by him/her while in the employ of the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1) Upon
termination of employment, Employee agrees to deliver to the Corporation all
materials that include confidential information or trade secrets, such as
customer lists (Customer Account Master), product formulations, instruction
sheets drawings, manuals, letters, notes, notebooks, books, reports and copies
thereof, and all of the materials of a confidential nature which belong to or
related to the business of the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.2) Employee
agrees and acknowledges that confidential information and trade secrets are the
sole and exclusive property of the Corporation, absolutely and forever.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 6
<BR>IMPROVEMENTS AND INVENTIONS </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.0) Employee
shall promptly and fully disclose to the Corporation, any and all ideas,
improvements, discoveries, and inventions, whether or not they are believed to
be patentable (including those which may be subject to copyright protection)
(all of which are hereinafter referred to as “Inventions”), which
Employee conceives or first actually reduces to practice, either solely or
jointly with others, during the period of Employee’s employment or within
two years after termination of employment, and which relate to the business now
or hereafter carried on or contemplated by the Corporation or which results from
any work performed by Employee for the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.1) All
such inventions shall be the sole and exclusive property of the Corporation, and
during the term of his/her employment and thereafter, whenever requested to do
so by the Corporation, Employee shall execute and assign any and all
applications, assignments and other instruments which the Corporation shall deem
necessary or convenient in order to apply for and obtain Letters Patent of the
United States and/or of any foreign counties for such inventions and in order to
assign and convey to the Corporation or its nominee the sole and exclusive
right, title </FONT></P>
<BR><BR><BR><BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page 3 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>and interest in and to such
inventions, and Employee will render aid and assistance in any interference or
litigation pertaining thereto, all expenses reasonably incurred by employee at
the request of the Corporation shall be borne by the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.2) To
the extent, if any, that Minnesota law is determined to apply to the
enforceability of this Agreement, Minnesota Statue Section 181.78 provides
that the Agreement does not apply, and written notification is hereby given to
the Employee that this Agreement does not apply, to an invention for which no
equipment, supplies, facility, or trade secret information of the Corporation
was used and which was developed entirely on he Employee’s own time, and
(1) which does not relate (a) directly to the business of the
Corporation, or (b) to the Corporation’s actual or demonstrably
anticipated research or development, or (2) which does not result from any
work performed by the Employee for the Corporation. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 7
<BR>JUDICIAL CONSTRUCTION </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0) The
Employee believes and acknowledges that the provisions contained in this
Agreement, including the covenants contained in Article 4 and 5 of this
Agreement, are fair and reasonable. Nonetheless, it is agreed that if a court
finds any of these provisions to be invalid in whole or in part under the laws
of any state, such finding shall not invalidate the covenants, nor the Agreement
in its entirety but rather the covenants shall be construed and/or bluelined,
reformed or rewritten by the court as if the most restrictive covenants
permissible under applicable law were contained herein. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 8
<BR>RIGHT TO INJUNCTIVE RELIEF </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.0) Employee
acknowledges that a breach by the Employee of any of the terms of
Articles 4 or 5 of this Agreement will render irreparable harm to the
Corporation; and that the Corporation shall therefore be entitled to any and all
equitable relief, including, but not limited to, injunctive relief, and to any
other remedy that may be available under any applicable law or agreement between
the parties, and to recover from the Employee all costs of litigation including,
but not limited to, attorneys fees and court costs. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1) The
Corporation’s action in not enforcing a breach of any part of the Agreement
shall not prevent it from enforcing it as to any other breach of the Agreement
that it discovers. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 9
<BR>TERMINATION </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.0) Either
party shall have the right to terminate this Agreement with or without cause
upon fifteen (15) days notice to the other, and the Corporation shall pay
Employee until the date of termination, unless the Corporation terminates the
Agreement because the Employee has violated either Article 4 or 5, in
which ease no additional compensation shall be payable to Employee. Employee
acknowledges that any employment and compensation can be terminated with or
without cause at any time by the Company. </FONT></P>
<BR><BR><BR><BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page 4 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 10
<BR>ASSIGNMENT </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.0) The
Corporation shall have the right to assign this Agreement to its successors or
assigns, and all covenants or agreements hereunder shall inure to the benefit of
and be enforceable by or against its successors or assigns. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1) The
terms “successors” and “assigns” shall include any
Corporation which buys all or substantially all of the Corporation’s
assets, or a controlling portion of its stock, or with which it merges or
consolidates. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 11
<BR>LICENSES </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.0) This
Agreement does not grant the Employee any rights or licenses, express or
implied, under any patents, copyrights or trade secrets. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 12
<BR>GOVERNING LAW </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.0) This
Agreement shall be construed and interpreted according to the laws of the State
of Minnesota. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE 13
<BR>ENTIRE AGREEMENT </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.0) The
Corporation and the Employee acknowledge that this Agreement contains the full
and complete employment agreement between and among the parties, that there are
no implied or express modifications of this employment agreement in an oral
discussion or any writing, including without limitation in any employee handbook
policy statement or other document of the Corporation. This Agreement supersedes
any prior agreements or understandings, if any, between the Corporation and the
Employee, whether written or oral. The parties further agree that no
modifications of this Agreement may be made except by means of a written
agreement of memorandum signed by the parties. </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page 5 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN WITNESS WHEREOF, the Corporation
has hereunto signed its name and the Employee hereunder has signed his/her name, all as of
the day and year first above written. </FONT></P>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=80%>
<TR VALIGN=Top>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=28% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Samuel E. Reinkensmeyer </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=39% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=2> </td><td align=left><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(employee) </FONT></TD></TR>
<TR VALIGN=Top>
<TD colspan=6> </TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, Inc.</FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Top>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Michelle Beuning </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=6> </td><td colspan=2 align=left><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD colspan=6> </TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(witness) </FONT></TD></TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page 6 </FONT></P>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>6
<FILENAME>cns042906_ex10-28.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 10.28 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<BR>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.28 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CNS, Inc.</B>
<BR>7515 Smetana Lane
<BR>Eden Prairie, Minnesota 55345
<BR>Phone: (952) 229-1500 Fax (952) 229-1700 </font>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>www.cns.com</U> </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>October 10, 2003 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson
<BR>1460 Southridge
<BR>Eagan, MN 55121 </FONT></P>
<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Andy: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This letter describes our agreement
regarding your resignation as Vice-President, Product Development & Regulatory officer
of CNS, Inc. (“CNS”) effective December 31, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will provide you with the
following benefits in connection with your departure from CNS: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We will pay you Salary Continuation pursuant to the terms of Paragraph 7 of the
Employment Agreement as follows: 24 semi-monthly paychecks of $5,482.92, subject
to applicable withholding, beginning with the later of (a) our January 15, 2004
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. As an employee of CNS until December 31, 2003, you will continue
to accrue, and may continue to use, paid time off; as part of your final
paycheck after December 31, we will pay you any unused paid time off as of that
date. As of September 30, 2003, your accrued unused paid time off was $19,737.12
or 312.0 hours. </FONT></P></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Although not
required under the terms of your Executive Employment Agreement, you will be
eligible to receive a pro-rated bonus consistent with CNS business performance
under the CNS Management Incentive Plan for 2004 based on your December 31, 2003
Resignation Date, the terms of the Plan and provided that the Plan objectives
have been </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson Separation Letter
<BR>Page 2 </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 2004. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As a condition of your severance, you agree to make yourself available to CNS on
an as needed basis to provide consulting services not to exceed approximately
120 hours between January 1 and April 30, 2004 solely in connection with the
development of the special project you are currently working on with Dan Cohen.
CNS is not required to provide you with any minimum number of hours in
connection with the special project. You will report to and be subject to the
direction of Dan Cohen. For your consulting services in connection with the
special project, CNS will pay you at a rate of $100.00 per hour, subject to
verification of your hours, which payment shall be in addition to the payment of
severance described in paragraph 1 above. CNS will also reimburse you or pay
directly any pre-approved business expenses you incur in connection with your
consulting services on the special project, subject to its existing policies on
such expenses. For convenience, such payment will be considered as severance,
subject to any required tax withholding, but you agree that such services will
be rendered following your termination of employment, and you will not be
entitled to any pension, welfare or other fringe benefits provided to active
employees, but only to those benefits described in paragraph 3 below or to which
you are otherwise entitled as a terminated employee. CNS may, but is not
required to, engage you for additional consulting services not related to the
special project described above in its sole discretion, and in that event, you
will be compensated at a rate mutually agreeable to you and CNS. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
You will be eligible for COBRA continuation coverage under the CNS group health
and dental plan beginning January 1, 2003, for which you would otherwise be
responsible for 100% of the premium cost. As part of your severance, CNS 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 December 31, 2004 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
December 31, 2004, 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. During the period
you are providing consulting services to CNS as described in paragraph 2, you
will not be </font></P></td>
</TR>
</TABLE>
<BR>
<BR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson Separation Letter
<BR>Page 3 </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>considered as an
employee for benefit plan purposes, but will only be entitled to your rights, if
any, under all CNS benefit plans as a terminated employee in accordance with the
terms of each such plan. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We will provide an executive outplacement package that we have selected with
Right Management Consultants at our expense. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 that
arises out of your CNS employment responsibilities prior to your resignation on
December 31, 2003. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As of the date of this letter, you have 86,800 vested shares under your stock
options that are exercisable according to the terms of the applicable Stock
Option Plan and applicable Stock Option Agreement which will remain exercisable
for the period described in each option agreement. Your stock options are set
forth on Exhibit B. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CNS will use its best efforts to see that its management will speak positively
and with respect about you as we have in the past. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CNS will maintain the confidentiality of the terms of this agreement, except to
the extent persons responsible for the administration of the terms hereunder or
the provision of any compensation and benefits hereunder need to know, for
financial and securities compliance or as otherwise required by applicable law
or regulation. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In consideration of the benefits to
be afforded to you as outlined above, you agree to do the following things: </FONT></P>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson Separation Letter
<BR>Page 4 </FONT></P>
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<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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, to any benefits to which you are otherwise entitled
under any CNS benefit plan, or to the right to indemnification under CNS bylaws
or insurance. 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. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=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
without additional compensation with respect to a limited amount of transitional
CNS business matters that are unrelated to the special project described in
paragraph 2 above or to any additional specific consulting assignments
otherwise agreed upon between you and CNS </font></TD>
</TR>
</TABLE>
<BR>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson Separation Letter
<BR>Page 5 </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>as described in
paragraph 2 above. 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, and CNS will pay or reimburse you for any pre-approved travel or similar
expenses related to any such litigation and for such other expenses as agreed to
by CNS. 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. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
You agree that you will continue to speak positively and with respect towards
CNS as you have in the past. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 that (a) is or becomes known to the
general public under 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. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 </font></P></TD>
</TR>
</TABLE>
<BR>
<BR>
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<BR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson Separation Letter
<BR>Page 6 </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 twelve (12) month period 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. </FONT></P></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
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<BR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson Separation Letter
<BR>Page 7 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You understand that if you violate
any obligation that you have to CNS under this agreement, all payments and benefits to you
hereunder will immediately cease. In such event, your release of your claims shall remain
fully in effect in consideration of the payments and benefits that you received prior to
any such breach. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 19½ years and
wish you success in your future career. </FONT></P>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely, </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, Inc. </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Larry Muma </FONT>
<HR ALIGN=LEFT WIDTH=28% SIZE=1 NOSHADE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Larry Muma
<BR>VP, Operations & Technical </FONT><BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acknowledged and agreed to, with declarations
<BR>confirmed, this 24 day of October, 2003. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Milton W. (Andy) Anderson </font>
<HR ALIGN=LEFT WIDTH=28% SIZE=1 NOSHADE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milton W. (Andy) Anderson </FONT><BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
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<TYPE>EX-10.29
<SEQUENCE>7
<FILENAME>cns042906_ex10-29.htm
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<HEAD><TITLE>Exhibit 10.29 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.29 </FONT></P>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CNS, Inc.
</B><BR>7515 Smetana Lane
<BR>Eden Prairie, Minnesota 55345
<BR>Phone: (952) 229-1500 Fax (952) 229-1700 </FONT>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>www.cns.com</U> </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 26, 2004 </FONT></P>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Kundtz
<BR>3932 Thomas Avenue So.
<BR>Minneapolis, MN 55410 </FONT></P>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear John: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This letter describes our agreement
regarding your resignation as Vice-President, Marketing, Breathe Right Brand offficer of
CNS, Inc. (“CNS”) effective February 27, 2004. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will provide you with the
following benefits in connection with your departure from CNS: </FONT></P>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We will pay you Salary Continuation pursuant to the terms of Paragraph 7 of your
Employment Agreement as follows: 24 semi-monthly paychecks of $7,500.00, subject
to applicable withholding, beginning with the later of (a) our March 15, 2004
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 July 22, 2002, the above-
referenced semimonthly paychecks will be accelerated and payable, in full, on
demand by you. As an employee of CNS until February 27, 2004, you will continue
to accrue, and may continue to use, paid time off; as part of your final
paycheck after February 27, 2004, we will pay you any unused paid time off as of
that date. As of January 15, 2004, your accrued unused paid time off was
$7,279.61 or 84.12 hours. </FONT></P></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Although not required under the terms of your Executive Employment Agreement,
you will be eligible to receive a pro-rated bonus consistent with CNS business
performance under the CNS Management Incentive Plan for 2004 based on your
February 27, 2004 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 2004. </font></TD>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Kundtz Separation Letter
<BR>Page 2 </FONT></P>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
You will be eligible for COBRA continuation coverage under the CNS group health
and dental plan beginning March 1, 2004, for which you would otherwise be
responsible for 100% of the premium cost. As part of your severance, CNS 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 February 28, 2005 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. 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
February 28, 2005, 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. </FONT></P></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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. </FONT></P></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We will provide an executive outplacement package that we have selected with
Right Management Consultants at our expense. </FONT></P></TD>
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</TABLE>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 that
arises out of your CNS employment responsibilities prior to your resignation on
February 28, 2004. </FONT></P></TD>
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</TABLE>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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. </FONT></P></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As of the date of this letter, you have 10,000 vested shares under your stock
options that are exercisable according to the terms of the applicable Stock
Option Plan and applicable Stock Option Agreement which will remain exercisable
for the period described in each option agreement. Your stock options are set
forth on Exhibit B. </FONT></P></TD>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Kundtz Separation Letter
<BR>Page 3 </FONT></P>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CNS will use its best efforts to see that its management will speak positively
and with respect about you as we have in the past. </FONT></P></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CNS will maintain the confidentiality of the terms of this agreement, except to
the extent persons responsible for the administration of the terms hereunder or
the provision of any compensation and benefits hereunder need to know, for
financial and securities compliance or as otherwise required by applicable law
or regulation. </FONT></P></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In consideration of the benefits to
be afforded to you as outlined above, you agree to do the following things: </FONT></P>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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, to any benefits to which you are otherwise entitled
under any CNS benefit plan, or to the right to indemnification under CNS bylaws
or insurance. 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. </FONT></P></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 </font></TD>
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</TABLE>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Kundtz Separation Letter
<BR>Page 4 </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></TD>
</TR>
</TABLE>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=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
without additional compensation with respect to a limited amount of 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, and CNS will pay or reimburse you for any pre-approved travel
or similar expenses related to any such litigation and for such other expenses
as agreed to by CNS. 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. </FONT></P></TD>
</TR>
</TABLE>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
You agree that you will continue to speak positively and with respect towards
CNS as you have in the past. </FONT></P></TD>
</TR>
</TABLE>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 that (a) is or becomes known to the
general public under 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. </FONT></P></TD>
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</TABLE>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Kundtz Separation Letter
<BR>Page 5 </FONT></P>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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. </FONT></P></TD>
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</TABLE>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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 twelve (12) month period 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 </font></P></TD>
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<BR>Page 6 </FONT></P>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>employee to
terminate his or her employment with CNS. This employee nonsolicitation
obligation shall apply to employees of CNS as of your resignation date.
</FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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.
</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You understand that if you violate
any obligation that you have to CNS under this agreement, all payments and benefits to you
hereunder will immediately cease. In such event, your release of your claims shall remain
fully in effect in consideration of the payments and benefits that you received prior to
any such breach. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>
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<BR>Page 7 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 year and a half and
wish you success in your future career. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely, </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, Inc. </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti Morfitt </FONT>
<HR ALIGN=LEFT WIDTH=28% SIZE=1 NOSHADE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt
<BR>President & CEO </FONT><BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acknowledged and agreed to, with declarations
<BR>confirmed, this 27th day of January, 2004. </FONT></P>
<BR><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ John Kundtz </FONT>
<HR ALIGN=LEFT WIDTH=28% SIZE=1 NOSHADE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Kundtz </FONT><BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.30
<SEQUENCE>8
<FILENAME>cns042906_ex10-30.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 10.30 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.30 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>THIS
LEASE AGREEMENT </B>is made by and between <B>LIBERTY PROPERTY LIMITED
PARTNERSHIP</B>, a Pennsylvania limited partnership
(“<B>LANDLORD</B>”) with its address at 10400 Viking Drive,
Suite 130, Eden Prairie, Minnesota 55344, and <B>CNS, INC.</B>, a
corporation organized under the laws of __________________
(“<B>TENANT</B>”) with its address at 4400 West 78th Street,
Bloomington, Minnesota 55435, and is dated as of the date on which this
lease has been fully executed by Landlord and Tenant. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Summary
of Terms and Certain Definitions</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(a)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>PREMISES</B>”:
Approximate rentable square feet: 73,000 (Section 2) </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(b)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>BUILDING</B>”: (§2)
Approximate rentable square feet: 93,000<BR> Address: </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(c)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>TERM</B>”: (§5 One
hundred twenty (120)) months plus any partial month from the Commencement Date
<BR> until the first day of the first full calendar month during the Term
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(i)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">“<B>COMMENCEMENT
DATE</B>”: See Rider </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(ii)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">“<B>EXPIRATION
DATE</B>”: See Section 5 </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(d)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Minimum
Rent </B>(§6) <B>& Operating Expenses </B>(§7) </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(i)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>MINIMUM
ANNUAL RENT</B>”: $682,550.04 (Six hundred eighty-two
thousand five hundred fifty and 04/100 Dollars), payable in monthly installments
of $56,879.17 (Fifty-six thousand eight hundred seventy-nine and 17/100
Dollars), increased as follows: </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Lease Year </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Annual </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Monthly </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Lease Year </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Annual </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Monthly </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=5% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 696,201.00</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 58,016.75</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=5% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 753,590.40</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 62,799.20</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>710,125.08</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59,177.09</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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>768,662.16</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>64,055.18</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>724,327.56</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>60,360.63</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>784,035.36</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>65,336.28</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>738,814.08</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61,567.84</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>799,716.12</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>66,643.01</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>815,710.44</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>67,975.87</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(ii)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Estimated</B> “<B>ANNUAL
OPERATING EXPENSES</B>”: $173,010.00 (One Hundred
Seventy-three Thousand Ten and no/l00 Dollars), payable in monthly installments
of $14,417.50 (Fourteen Thousand Four Hundred Seventeen and 50/100 Dollars),
based on estimated annual operating expenses of S2.37 per rentable square feet
for calendar year 2000, subject to adjustment (§7(a)) </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(e)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>PROPORTIONATE
SHARE</B>” (§7(a)): 78.5% (Ratio of approximate rentable square feet
in the Premises to approximate rentable square feet in the Building)
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(f)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>USE</B>” (§4): general office, warehouse and assembly </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(g)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“<B>SECURITY DEPOSIT</B>” (§28): None </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(h)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CONTENTS</B>: This lease consists of the Index, pages 1 through 11 containing Sections 1 through 37
<BR> and the following, all of which are attached hereto and made a part of this lease: </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits:</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=44% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% 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>“A” – Plan showing Premises</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“E” – Drawings</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>“B” – Commencement Certificate Form</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“F” – Exclusions from Operating</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>“C” – Building Rules Expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>“G” – TI Plans</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>“D” – Estoppel Certificate Form</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2.</B> <B><U>Premises</U>.</B> Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the Premises as
shown on preliminary floor plan attached hereto as Exhibit “A” within
the Building to be constructed pursuant to the provisions of <B>Section 29</B>
hereof (the Building and the lot on which it is located, the
“<B>PROPERTY</B>”), together with the nonexclusive right with Landlord
and other occupants of the Building to use all areas and facilities provided by
Landlord for the use of all tenants in the Property including any driveways,
sidewalks and parking, loading and landscaped areas (the “<B>COMMON
AREAS</B>”). The Premises will consist of approximately 73,000 rentable
square feet (29,340 rentable square feet devoted to office use and 43,660
rentable square feet devoted to warehouse use). Upon substantial completion of
the Premises and Building, (i) at the request of either party, Landlord and
Tenant shall enter into an amendment to this Lease replacing Exhibit
“A” with a drawing outlining the Premises as constructed, and
(ii) Landlord shall cause Landlord’s architect to determine the
as-built square footage of the Premises and Building, and, if the square
footages, as measured, vary from the square footages set forth in
<B>Section 1</B> of this Lease, the parties shall enter into an appropriate
amendment to this lease incorporating the actual square footage, with a
corresponding pro rata adjustment to Minimum Annual Rent and Tenant’s
Proportionate Share. </FONT></P>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>3.</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Acceptance
of Premises</U>.</B> See the provisions of
<B>Section 32</B> below. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>4.</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Use; Compliance</U>.</B> </FONT></TD>
</TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <B>(a)</B> <B>Permitted
Use.</B> Tenant shall occupy and use the Premises for and only
for the Use specified in Section 1(f) above and in such a manner as is
lawful and will not create any nuisance or otherwise interfere with any other
tenant’s normal operations or the management of the Building. Landlord
represents that, as of the Commencement Date, the Property will be zoned to
permit the Use specified in Section 1(f) above. All Common Areas shall be
subject to Landlord’s exclusive control and management at all times. Tenant
shall not use or permit the use of any portion of the Property for outdoor
storage or installations outside of the Premises nor for </FONT> </P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any use that
would interfere with any other person’s use of any portion of the Property
outside of the Premises. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> <B>Compliance.</B> Landlord
represents that, as of the date of this lease, there is no action required with
respect to the Premises or Common Areas under any laws (including Title III
of the ADA), ordinances, notices, orders, rules, regulations and requirements
applicable to the Premises or to the Common Areas. From and after the
Commencement Date, Tenant shall comply promptly, at its sole expense, (including
making any alterations or improvements) with all laws (including the ADA),
ordinances, notices, orders, rules, regulations and requirements regulating the
Property during the Term which impose any duty upon Landlord or Tenant
specifically with respect to Tenant’s use, occupancy or alteration of, or
Tenant’s installations in or upon, the Property including the Premises, (as
the same may be amended, the “<B>LAWS AND REQUIREMENTS</B>”) and the
building rules attached as Exhibit “<B>C</B>”, as amended by
Landlord from time to time (the “<B>BUILDING RULES</B>”).
Notwithstanding the foregoing, Tenant shall not be required to comply with the
Laws and Requirements with respect to the footings, foundations, structural
steel columns and girders forming a part of the Property unless the need for
such compliance arises out of Tenant’s specific use, occupancy or
alteration of the Property, or by any act or omission of Tenant or any
employees, agents, contractors, licensees or invitees
(“<B>AGENTS</B>”) of Tenant. With respect to Tenant’s obligations
as to the Property, other than the Premises, at Landlord’s option and at
Tenant’s expense, Landlord may comply with any repair, replacement or other
construction requirements of the Laws and Requirements and Tenant shall pay to
Landlord all costs thereof as additional rent. Landlord agrees to enforce the
Building Rules in a uniform and nondiscriminatory manner. No amendment to the
Building Rules shall be effective until the date that is 30 days after the
date that Landlord notifies Tenant of the amendment. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> <B>Environmental.</B> Tenant
shall comply, at its sole expense, with all Laws and Requirements as set forth
above, all manufacturers’ instructions and all requirements of insurers
relating to the treatment, production, storage, handling, transfer, processing,
transporting, use, disposal and release of hazardous substances, hazardous
mixtures, chemicals, pollutants, petroleum products, toxic or radioactive matter
(the “<B>RESTRICTED ACTIVITIES</B>”). Tenant shall deliver to Landlord
copies of all notices, filings, permits and any other material written
communications relating to Tenant’s operations from or to Tenant and any
entity regulating any Restricted Activities. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(d)</B> <B>Notice.</B> If
at any time during or after the Term, Tenant becomes aware of any inquiry,
investigation or proceeding regarding the Restricted Activities or becomes aware
of any material claims, actions or investigations regarding the ADA, Tenant
shall give Landlord written notice, within 5 days after first learning thereof,
providing all available information and copies of any notices. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>5.</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Term</U>.</B> See <B>Section 33</B> below. </FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>6.</B> <B><U>Minimum
Annual Rent</U>.</B> Tenant agrees to pay to Landlord the
Minimum Annual Rent in equal monthly installments in the amount set forth in
Section 1(d) (as increased at the beginning of each lease year as set forth
in Section 1(d)), in advance, on the first day of each </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">calendar month during the Term,
without notice, demand or setoff except as expressly provided for in this lease, at
Landlord’s address designated at the beginning of this lease unless Landlord
designates otherwise; provided that rent for the first full month shall be paid at the
signing of this lease. If the Commencement Date falls on a day other than the first day of
a calendar month, the rent shall be apportioned pro rata on a per diem basis for the
period from the Commencement Date until the first day of the following calendar month and
shall be paid on or before the Commencement Date. As used in this lease, the term
“<B>lease year</B>” means the period from the Commencement Date through the succeeding
12 full calendar months (including for the first lease year any partial month from the
Commencement Date until the first day of the first full calendar month) and each
successive 12 month period thereafter during the Term. </FONT> </P>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>7.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Operation
of Property; Payment of Expenses</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> <B>Payment
of Operating Expenses.</B> Tenant shall pay to Landlord the
Annual Operating Expenses in equal monthly installments in the amount set forth
in Section 1(d) (prorated for any partial month), from the Commencement
Date and continuing throughout the Term on the first day of each calendar month
during the Term, as additional rent, without notice, demand or setoff except as
expressly provided for in this lease; provided that the monthly installment for
the first full month shall be paid at the signing of this lease. Landlord shall
apply such payments to the Operating Expenses owed to Landlord by Tenant
pursuant to the following Sections 7(b)-(f). The amount of the Annual
Operating Expenses set forth in Section 1(d) represents Tenant’s
Proportionate Share of the estimated Operating Expenses during the first
calendar year of the Term on an annualized basis; from time to time Landlord may
adjust such estimated amount if the estimated Operating Expenses increase. By
April 30th of each year (and as soon as practical after the expiration or
termination of this lease or at any time in the event of a sale of the
Property), Landlord shall provide Tenant with a statement of the actual amount
of such expenses for the preceding calendar year or part thereof Landlord or
Tenant shall pay to the other the amount of any deficiency or overpayment then
due from one to the other or, at Tenant’s option, Landlord will credit
Tenant’s account for any overpayment. Tenant’s obligation to pay the
Annual Operating Expenses pursuant to this Section 7 shall survive the
expiration or termination of this lease. The term “Operating Expenses”
in this lease means all amounts owed to Landlord by Tenant pursuant to the
following Sections 7(b)-(f). Any provision to the contrary in this lease
notwithstanding, Operating Expenses shall not include any of the items listed on
attached <B>Exhibit “F”</B>. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> <B>Taxes
and Other Impositions.</B> Tenant shall pay prior to
delinquency all levies, taxes (including sales taxes and gross receipt taxes),
assessments, liens, license and permit fees, which are applicable to the Term,
and which are imposed by any authority or under any law, ordinance or regulation
thereof, or pursuant to any recorded covenants or agreements, and the reasonable
cost of contesting any of the foregoing (the “<B>IMPOSITIONS</B>”)
upon or with respect to the Premises, or any improvements thereto, or directly
upon this lease or the Rent (defined in Section 7(f)) or amounts payable by
any subtenants or other occupants of the Premises, or against Landlord because
of Landlord’s estate or interest herein. Additionally, Tenant shall pay as
aforesaid its Proportionate Share of any Imposition which is not imposed upon
the Premises as a separate entity but which is imposed upon all or part of the
Property or upon the leases or rents relating to the Property. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> Nothing
herein contained shall be interpreted as requiring Tenant to pay any income,
excess profits or corporate capital stock tax imposed or assessed upon Landlord,
unless such tax or any similar tax is levied or assessed in lieu of all or any
part of any Imposition or an increase in any Imposition. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> If
it shall not be lawful for Tenant to reimburse Landlord for any of the
Impositions, the Minimum Annual Rent shall be increased by the amount of the
portion of such Imposition allocable to Tenant, unless prohibited by law.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> If
Landlord receives any rebate, refund or similar payment relating to any
Impositions paid by or charged back to Tenant, Landlord shall promptly pay to
Tenant Tenant’s Proportionate Share of such rebate or refund, net of any
expenses incurred by Landlord in obtaining the same. Tenant may request that
Landlord initiate an action to contest or challenge an Imposition, and Landlord
agrees to consult with Tenant regarding such contest or challenge and to take
such action as Landlord deems reasonable and appropriate under the circumstances
as a result of such consultation. Tenant shall not initiate any action to
contest any Impositions without Landlord’s prior written consent.
</FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(c)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Insurance.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> <B>Property.</B> Landlord
shall keep in effect, and Tenant shall pay to Landlord its Proportionate Share
of the cost of, insurance against loss or damage to the Building or the Property
by fire and such other casualties as may be included within fire, extended
coverage and special form insurance covering the full replacement cost of the
Building (but excluding coverage of Tenant’s personal property in, and any
alterations by Tenant to, the Premises), and such other insurance as Landlord
may reasonably deem appropriate or as may be required from time-to-time by any
mortgagee. Landlord shall deliver to Tenant on or before the Commencement Date,
a certificate of insurance evidencing such coverage and the waiver of
subrogation described below. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> <B>Liability.</B> Tenant, at its own expense, shall keep in effect comprehensive
general public liability insurance with respect to the Premises and the
Property, including contractual liability insurance, with such limits of
liability for bodily injury (including death) and property damage as reasonably
may be required by Landlord from time-to-time, but not less than a combined
single limit of $1,000,000 per occurrence and a general aggregate limit of not
less than $3,000,000 (which aggregate limit shall apply separately to each of
Tenant’s locations if more than the Premises); however, such limits shall
not limit the liability of Tenant hereunder. The policy of comprehensive general
public liability insurance also shall name Landlord and Landlord’s agent as
insured parties with respect to the Premises, shall provide that it is primary
with respect to any policies carried by Landlord and that any coverage carried
by Landlord shall be excess insurance, shall provide that it shall not be
cancelable or reduced without at least 30 days prior written notice to
Landlord and shall be issued in form satisfactory to Landlord. The insurer shall
be a responsible insurance carrier which is authorized to issue such insurance
and licensed to do business in the state in which the Property is located and
which has at all times during the Term a rating of no less than A VII in
the most current edition of <I>Best’s Insurance</I> </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Reports.</I> Tenant
shall deliver to Landlord on or before the Commencement Date, and subsequently
renewals of, a certificate of insurance evidencing such coverage and the waiver
of subrogation described below. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> <B>Waiver
of Subrogation.</B> Landlord and Tenant shall have included in
their respective property insurance policies waivers of their respective
insurers’ right of subrogation against the other party. If such a waiver
should be unobtainable or unenforceable, then such policies of insurance shall
state expressly that such policies shall not be invalidated if, before a
casualty, the insured waives the right of recovery against any party responsible
for a casualty covered by the policy. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iv)</B> <B>Increase
of Premiums.</B> Tenant agrees not to do anything or fail to do
anything which will increase the cost of Landlord’s insurance or which will
prevent Landlord from procuring policies (including public liability) from
companies and in a form satisfactory to Landlord. If any breach of the preceding
sentence by Tenant causes the rate of fire or other insurance to be increased,
Tenant shall pay the amount of such increase as additional rent promptly upon
being billed. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(d)</B> <B>Repairs
and Maintenance; Common Areas; Building Management.</B> Except as specifically
otherwise provided in this Section (d), Tenant at its sole expense shall
maintain the Premises in good order and condition, promptly make all repairs
necessary to maintain such condition, and repair any damage to the Premises
caused by Tenant or its Agents. All repairs made by Tenant shall utilize
materials and equipment which are comparable to those originally used in
constructing the Building and Premises. When used in this Section (d), the
term “repairs” shall include replacements and renewals when necessary.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> Landlord,
at its sole expense, shall make all necessary repairs to the footings,
foundations, structural steel columns and girders forming a part of the
Premises. If Tenant becomes aware of the need for such repair, Tenant shall
promptly notify Landlord thereof. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> Landlord,
at Tenant’s sole expense, shall maintain and repair the HVAC systems
exclusively serving the Premises. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> Landlord
shall make all necessary repairs to the roof, exterior portions of the Premises
and the Building, utility and communications lines, equipment and facilities in
the Building, which serve more than one tenant, and to the Common Areas, the
cost of which shall be an Operating Expense of which Tenant shall pay its
Proportionate Share. If Tenant becomes aware of the need for such repair, Tenant
shall promptly notify Landlord thereof Landlord shall operate and manage the
Property and shall maintain all Common Areas and any paved areas appurtenant to
the Property in a clean and orderly condition. Landlord reserves the right to
make alterations to the Common Areas from time to time provided that
(A) absent Tenant’s prior written consent, there shall be no material
change in the nature and extent of the Common Areas and the benefits extended to
the Premises by the Common Areas, and (B) any such alterations must be
completed in a manner so as not to unreasonably interfere with Tenant’s use
of the Common Areas or Tenant’s business activities within the Premises.
Operating Expenses also </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>shall include (A) all
sums expended by Landlord for the supervision, maintenance, repair, replacement
and operation of the Common Areas (including the costs of utility services),
(B) any costs of building improvements made by Landlord to the Property
that are required by any governmental authority or for the purpose of reducing
Operating Expenses and (C) a management and administrative fee (not to
exceed 4% of gross rents) applicable to the overall operation of the Property.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iv)</B> Notwithstanding
anything herein to the contrary, repairs and replacements to the Property
including the Premises made necessary by Tenant’s use, occupancy or
alteration of, or Tenant’s installation in or upon the Property or by any
act or omission of Tenant or its Agents shall be made at the sole expense of
Tenant to the extent not covered by any applicable insurance proceeds paid to
Landlord. Tenant shall not bear the expense of any repairs or replacements to
the Property arising out of or caused by any other tenant’s use, occupancy
or alteration of, or any other tenant’s installation in or upon, the
Property or by any act or omission of any other tenant or any other
tenant’s Agents. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(e)</B> <B>Utility
Charges.</B> Tenant shall pay for water, sewer, gas,
electricity, heat, power, telephone and other communication services and any
other utilities supplied to or consumed in or on the Premises. Landlord shall
not be responsible or liable for any interruption in utility service, nor shall
such interruption affect the continuation or validity of this lease.
Notwithstanding the foregoing, if any interruption in utility service is the
result of Landlord’s negligence or willful misconduct, and such
interruption prevents Tenant from conducting its business in and from the
Premises, then all Rent hereunder shall abate from the date of such interruption
until such utility service is restored. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(f)</B> <B>Net
lease.</B> Except for the obligations of Landlord expressly set
forth herein, this lease is a “triple net lease” and Landlord shall
receive the Minimum Annual Rent as net income from the Premises, not diminished
any expenses other than payments under any mortgages, and Landlord is not and
shall not be required to render any services of any kind to Tenant. The term
“<B>RENT</B>” as used in this lease means the Minimum Annual Rent,
Annual Operating Expenses and any other additional rent or sums payable by
Tenant to Landlord pursuant to this lease, all of which shall be deemed rent for
purposes of Landlord’s rights and remedies with respect thereto. Tenant
shall pay all Rent to Landlord within 30 days after Tenant is billed, unless
otherwise provided in this lease, and interest shall accrue on all sums due but
unpaid. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(g)</B> <B>Access
to Books and Records.</B> Tenant shall be entitled at any
reasonable time during regular business hours, but no more than once in each
calendar year, after giving to Landlord at least five (5) business days
prior written notice, to inspect in Landlord’s business office all
Landlord’s records regarding Operating Expenses for the Building (which
records shall be retained or made available in the Minneapolis/St. Paul
metropolitan area) necessary to satisfy itself that all Operating Expenses have
been correctly allocated to Tenant, for either or both of the two
(2) calendar years immediately preceding the year during which such notice
is given, and to obtain an audit thereof by an independent certified public
accountant (selected by Tenant with Landlord’s written consent, which shall
not be withheld unreasonably) to determine the accuracy of Landlord’s
certification of the amount of additional rent charged Tenant. If it is
determined that Tenant’s liability for additional rent for either such
calendar year is less than ninety-five </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>percent (95%) of that
amount which Landlord previously certified to Tenant for such calendar year,
Landlord shall pay to Tenant the cost of such audit (provided, however, that
Landlord shall not be required to pay the cost of any audit based on a
contingency fee or percentage of the amount recovered for Tenant) and regardless
of such percentage Landlord shall refund promptly to Tenant the amount of the
additional rent paid by Tenant for such calendar year which exceeds the amount
for which Tenant actually is liable, as determined following such audit. If it
is determined that Tenant’s liability for additional rent for either such
calendar year is more than the amount which Landlord previously certified to
Tenant for such calendar year, Tenant shall promptly pay to Landlord (net of the
cost to Tenant of the audit) the amount of the additional rent underpaid by
Tenant, as determined following such audit. Except as provided above, Tenant
shall bear the total cost of any such audit. Tenant shall keep, and shall cause
Tenant’s auditor to keep, the results of such audit confidential.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>8.</B> <B><U>Signs</U>.</B> Except
for signs which are located wholly within the interior of the Premises and not
visible from the exterior of the Premises, no signs shall be placed on the
Property without the prior written consent of Landlord. All signs installed by
Tenant shall be maintained by Tenant in good condition and Tenant shall remove
all such signs at the termination of this lease and shall repair any damage
caused by such installation, existence or removal. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
foregoing notwithstanding, Tenant shall have the right to procure, install and maintain,
at Tenant’s sole cost and expense, the following identification signage on or about
the Building: </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(a)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>One
building-mounted identification sign on the south face of the Building;
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(b)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Signage on one
monument sign serving the Building; and </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(c)</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loading dock
signage, signage identifying Tenant’s employee entrance and signage
identifying Tenant on Tenant’s entrance door(s). </FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
design, size and location of all Tenant signage shall be consistent with Landlord’s
sign criteria and otherwise subject to Landlord’s approval, which approval shall not
be unreasonably withheld. Tenant shall cause all Tenant signage to comply with all Laws
and Requirements applicable thereto. Upon the expiration or termination of this Lease,
Tenant shall remove the signage and shall repair any damage occasioned by such removal. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Alterations and Fixtures</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> Subject
to Section 10, Tenant shall have the right to install its trade fixtures in
the Premises, provided that no such installation or removal thereof shall
materially and adversely affect any structural portion of the Property nor any
utility lines, communications lines, equipment or facilities in the Building
serving any tenant other than Tenant. At the expiration or termination of this
lease and at the option of Landlord or Tenant, Tenant shall remove such
installation(s) and, in the event of such removal, Tenant shall repair any
damage caused by such installation or removal; if Tenant, with Landlord’s
written consent, elects not to remove such </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>installation(s) at the
expiration or termination of this lease, all such installations shall remain on
the Property and become the property of Landlord without payment by Landlord.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> Except
for alterations that are non-structural, that do not materially and adversely
affect any of the electrical, mechanical, HVAC, life-safety, plumbing, security
or other systems serving the Building, and that do not exceed $25,000 in the
aggregate with respect to any project, Tenant shall not make or permit to be
made any alterations to the Premises without Landlord’s prior written
consent, which consent shall not be unreasonably withheld or delayed. Tenant
shall pay the costs of any required architectural/engineering reviews. In making
any alterations, (i) Tenant shall deliver to Landlord the plans,
specifications and necessary permits, together with certificates evidencing that
Tenant’s contractors and subcontractors have adequate insurance coverage
naming Landlord and Landlord’s agent as additional insureds, at least
10 days prior to commencement thereof, (ii) such alterations shall not
impair the structural strength of the Building or any other improvements or
reduce the value of the Property or affect any utility lines, communications
lines, equipment or facilities in the Building serving any tenant other than
Tenant, (iii) Tenant shall comply with Section 10 and (iv) the
occupants of the Building and of any adjoining property shall not be materially
disturbed thereby. All alterations to the Premises by Tenant shall be the
property of Tenant until the expiration or termination of this lease; at that
time all such alterations shall remain on the Property and become the property
of Landlord without payment by Landlord unless Landlord gives written notice to
Tenant to remove the same, in which event Tenant will remove such alterations
and repair any resulting damage. At Tenant’s request prior to Tenant making
any alterations, Landlord shall notify Tenant in writing, whether Tenant is
required to remove such alterations at the expiration or termination of this
lease. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>10.</B> <B><U>Mechanics’ Liens</U>.</B> Tenant
shall pay promptly any contractors and materialmen who supply labor, work or
materials to Tenant at the Property and shall take all steps permitted by law in
order to avoid the imposition of any mechanic’s lien upon all or any
portion of the Property. Should any such lien or notice of lien be filed for
work performed for Tenant other than by Landlord, Tenant shall bond against or
discharge the same within 10 days after Tenant has notice that the lien or
claim is filed regardless of the validity of such lien or claim. Nothing in this
lease is intended to authorize Tenant to do or cause any work to be done or
materials to be supplied for the account of Landlord, all of the same to be
solely for Tenant’s account and at Tenant’s risk and expense.
Throughout this lease the term “<B>mechanic’s lien</B>” is used
to include any lien, encumbrance or charge levied or imposed upon all or any
portion of, interest in or income from the Property on account of any
mechanic’s, laborer’s, materialman’s or construction lien or
arising out of any debt or liability to or any claim of any contractor,
mechanic, supplier, materialman or laborer and shall include any mechanic’s
notice of intention to file a lien given to Landlord or Tenant, any stop order
given to Landlord or Tenant, any notice of refusal to pay naming Landlord or
Tenant and any injunctive or equitable action brought by any person claiming to
be entitled to any mechanic’s lien. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>11.</B> <B><U>Landlord’s Right of Entry</U>.</B> Tenant
shall permit Landlord and its Agents to enter the Premises at all reasonable
times following reasonable notice (except in the event of an emergency), for the
purpose of inspection, maintenance or making repairs, alterations or additions
as well as to exhibit the Premises for the purpose of sale or mortgage and,
during the </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>last 12 months of the
Term, to exhibit the Premises to any prospective tenant. Landlord will make
reasonable efforts not to inconvenience Tenant in exercising the foregoing
rights, but shall not be liable for any loss of occupation or quiet enjoyment
thereby occasioned. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>12.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Damage
by Fire or Other Casualty</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> If
the Premises or Building shall be damaged or destroyed by fire or other
casualty, Tenant promptly shall notify Landlord and Landlord, subject to the
conditions set forth in this Section 12, shall repair such damage and
restore the Premises to substantially the same condition in which they were
immediately prior to such damage or destruction, but not including the repair,
restoration or replacement of the fixtures or alterations installed by Tenant.
Landlord shall notify Tenant in writing, within 30 days after the date of the
casualty, if Landlord anticipates that the restoration will take more than 180
days from the date of the casualty to complete; in such event, either Landlord
or Tenant may terminate this lease effective as of the date of casualty by
giving written notice to the other within 10 days after Landlord’s notice.
Further, if a casualty occurs during the last 12 months of the Term or any
extension thereof, Landlord may cancel this lease unless Tenant has the right to
extend the Term for at least 3 more years and does so within 30 days
after the date of the casualty. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> Landlord
shall maintain a 12 month rental coverage endorsement or other comparable
form of coverage as part of its fire, extended coverage and special form
insurance. Tenant will receive an abatement of its Minimum Annual Rent and
Annual Operating Expenses to the extent the Premises are rendered untenantable.
</FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>13.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Condemnation</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> <B>Termination.</B> If (i) all
of the Premises are taken by a condemnation or otherwise for any public or
quasi-public use, (ii) any part of the Premises is so taken and the
remainder thereof is insufficient for the reasonable operation of Tenant’s
business or (iii) any of the Property is so taken, and, in Landlord’s
opinion, it would be impractical or the condemnation proceeds are insufficient
to restore the remainder of the Property, then this lease shall terminate and
all unaccrued obligations hereunder shall cease as of the day before possession
is taken by the condemnor. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> <B>Partial
Taking.</B> If there is a condemnation and this lease has not
been terminated pursuant to this Section, (i) Landlord shall restore the
Building and the improvements which are a part of the Premises to a condition
and size as nearly comparable as reasonably possible to the condition and size
thereof immediately prior to the date upon which the condemnor took possession
and (ii) the obligations of Landlord and Tenant shall be unaffected by such
condemnation except that there shall be an equitable abatement of the Minimum
Annual Rent according to the rental value of the Premises before and after the
date upon which the condemnor took possession and/or the date Landlord completes
such restoration. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> <B>Award.</B> In
the event of a condemnation affecting Tenant, Tenant shall have the right to
make a claim against the condemnor for moving expenses and business dislocation
damages to the extent that such claim does not reduce the sums otherwise payable
by the </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>condemnor to Landlord.
Except as aforesaid and except as set forth in (d) below, Tenant hereby assigns
all claims against the condemnor to Landlord. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(d)</B> <B>Temporary
Taking.</B> No temporary taking of the Premises shall terminate
this lease or give Tenant any right to any rental abatement. Such a temporary
taking will be treated as if Tenant had sublet the Premises to the condemnor and
had assigned the proceeds of the subletting to Landlord to be applied on account
of Tenant’s obligations hereunder. Any award for such a temporary taking
during the Term shall be applied first, to Landlord’s costs of collection
and, second, on account of sums owing by Tenant hereunder, and if such amounts
applied on account of sums owing by Tenant hereunder should exceed the entire
amount owing by Tenant for the remainder of the Term, the excess will be paid to
Tenant. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>14.</B> <B><U>Non-Abatement of Rent</U>.</B> Except
as otherwise expressly provided as to damage by fire or other casualty in
Section 12(b) and as to condemnation in Section 13(b) and except as
otherwise specifically provided in this lease, there shall be no abatement or
reduction of the Rent for any cause whatsoever, and this lease shall not
terminate, and Tenant shall not be entitled to surrender the Premises. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>15.</B> <B><U>Indemnification</U>.</B> Subject
to Sections 7(c)(iii) and 16, Tenant will protect, indemnify and hold
harmless Landlord and its Agents from and against any and all claims, actions,
damages, liability and expense (including fees of attorneys, investigators and
experts) in connection with loss of life, personal injury or damage to property
in or about the Premises or arising out of the occupancy or use of the Premises
by Tenant or its Agents or occasioned wholly or in part by any act or omission
of Tenant or its Agents, whether prior to, during or after the Term, except to
the extent such loss, injury or damage was caused by the negligence of Landlord
or its Agents. In case any action or proceeding is brought against Landlord
and/or its Agents by reason of the foregoing, Tenant, at its expense, shall
resist and defend such action or proceeding, or cause the same to be resisted
and defended by counsel (reasonably acceptable to Landlord and its Agents)
designated by the insurer whose policy covers such occurrence or by counsel
designated by Tenant and approved by Landlord and its Agents. Tenant’s
obligations pursuant to this Section 15 shall survive the expiration or
termination of this lease. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Subject
to Sections 7(c)(iii) and 16, Landlord will protect, indemnify and hold harmless Tenant
and its Agents from and against any and all claims, actions, damages, liability and
expense (including fees of attorneys, investigators and experts) in connection with loss
of life, personal injury or damage to property caused to any person in or about the
Premises occasioned wholly or in part by the negligence of Landlord or its Agents, except
to the extent such loss, injury or damage was caused by the negligence of Tenant or its
Agents. In case any action or proceeding is brought against Tenant and/or its Agents by
reason of the foregoing, Landlord, at its expense, shall resist and defend such action or
proceeding, or cause the same to be resisted and defended by counsel (reasonably
acceptable to Tenant and its Agents) designated by the insurer whose policy covers such
occurrence or by counsel designated by Landlord and approved by Tenant and its Agents.
Landlord’s obligations pursuant to this Section shall survive the expiration or
termination of this lease. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>16.</B> <B><U>Waiver of Claims</U>.</B> Landlord
and Tenant each hereby waives all claims for recovery against the other for any
loss or damage which may be inflicted upon the property of such party even if
such loss or damage shall be brought about by the fault or negligence of the
other party or its Agents; provided, however, that such waiver by Landlord shall
not be effective with respect to any liability of Tenant described in
Sections 4(c) and 7(d)(iv). </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>17.</B> <B><U>Quiet Enjoyment</U>.</B> Landlord
covenants that Tenant, upon performing all of its covenants, agreements and
conditions of this lease, shall have quiet and peaceful possession of the
Premises as against anyone claiming by or through Landlord, subject, however, to
the exceptions, reservations and conditions of this lease. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>18.</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Assignment and Subletting</U>.</B> </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> <B>Limitation.</B> Tenant
shall not transfer this lease, voluntarily or by operation of law, without the
prior written consent of Landlord which shall not be withheld unreasonably.
However, Landlord’s consent shall not be required in the event of any
transfer by Tenant to an affiliate of Tenant which is at least as creditworthy
as Tenant as of the date of this lease and provided Tenant delivers to Landlord
the instrument described in Section (c)(iii) below, together with a
certification of such creditworthiness by Tenant and such affiliate. Any
transfer not in conformity with this Section 18 shall be void at the option of
Landlord, and Landlord may exercise any or all of its rights under
Section 23. A consent to one transfer shall not be deemed to be a consent
to any subsequent transfer. “Transfer” shall include any sublease,
assignment, license or concession agreement, change in ownership or control of
Tenant, mortgage or hypothecation of this lease or Tenant’s interest
therein or in all or a portion of the Premises. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> <B>Offer
to Landlord.</B> Tenant acknowledges that the terms of this
lease, including the Minimum Annual Rent, have been based on the understanding
that Tenant physically shall occupy the Premises for the entire Term. Therefore,
upon Tenant’s request to transfer all or a portion of the Premises, at the
option of Landlord, Tenant and Landlord shall execute an amendment to this lease
removing such space from the Premises, Tenant shall be relieved of any liability
with respect to such space and Landlord shall have the right to lease such space
to any party, including Tenant’s proposed transferee. The provisions of
this subsection 18(b) notwithstanding, if Landlord so elects to recapture
all or a portion of the Premises, Tenant shall have the right to withdraw
Tenant’s request for Landlord’s consent to the transfer, provided that
Tenant withdraw such request in a written notice to Landlord given not less than
5 business days following Landlord’s election. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> <B>Conditions.</B> Notwithstanding
the above, the following shall apply to any transfer, with or without
Landlord’s consent: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> As
of the date of any transfer, Tenant shall not be in default under this lease nor
shall any act or omission have occurred which would constitute a default with
the giving of notice and/or the passage of time. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> No
transfer shall relieve Tenant of its obligation to pay the Rent and to perform
all its other obligations hereunder. The acceptance of Rent by Landlord from any
person </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>shall not be deemed to be a
waiver by Landlord of any provision of this lease or to be a consent to any
transfer. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> Each
transfer shall be by a written instrument in form and substance satisfactory to
Landlord which shall (A) include an assumption of liability by any
transferee of all Tenant’s obligations and the transferee’s
ratification of and agreement to be bound by all the provisions of this tease,
(B) afford Landlord the right of direct action against the transferee
pursuant to the same remedies as are available to Landlord against Tenant and
(C) be executed by Tenant and the transferee. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iv)</B> Tenant
shall pay, within 10 days of receipt of an invoice, Landlord’s reasonable
attorneys’ fees and costs in connection with the review, processing and
documentation of any transfer for which Landlord’s consent is requested.
</FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>19.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Subordination;
Mortgagee’s Rights</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> This
lease shall be subordinate to any first mortgage or other primary encumbrance
hereafter affecting the Premises. Although the subordination is self-operative,
within 10 days after written request, Tenant shall execute and deliver any
further commercially reasonable and customary instruments of attornment and
nondisturbance that may be desired by any such mortgagee or Landlord. The
foregoing notwithstanding, so long as Tenant is not in default under this lease,
this lease shall remain in full force and effect and the mortgagee and any
purchaser at a foreclosure sale thereof shall not disturb Tenant’s
possession hereunder. However, any mortgagee may at any time subordinate its
mortgage to this lease, without Tenant’s consent, by giving written notice
to Tenant, and thereupon this lease shall be deemed prior to such mortgage
without regard to their respective dates of execution and delivery; provided,
however, that such subordination shall not affect any mortgagee’s right to
condemnation awards, casualty insurance proceeds, intervening liens or any right
which shall arise between the recording of such mortgage and the execution of
this lease. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> It
is understood and agreed that any mortgagee shall not be liable to Tenant for
any funds paid by Tenant to Landlord unless such funds actually have been
transferred to such mortgagee by Landlord. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> Notwithstanding
the provisions of Sections 12 and 13 above, Landlord’s obligation
to restore the Premises after a casualty or condemnation shall be subject to
such commercially reasonable procedures and controls as may be imposed by
Landlord’s mortgagee, including, but not limited to, such mortgagee’s
rights, if any, to approve restoration plans and such mortgagee’s rights,
if any, to require that casualty or condemnation proceeds be disbursed pursuant
to standard construction loan disbursing procedures. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>20.</B> <B><U>Recording; Tenant’s Certificate</U>.</B> Tenant
shall not record this lease or a memorandum thereof without Landlord’s
prior written consent. Within 10 days after Landlord’s written request from
time to time: </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> Tenant
shall execute, acknowledge and deliver to Landlord a written statement
certifying the Commencement Date and Expiration Date of this lease, that this
lease is in full force and effect and has not been modified and otherwise as set
forth in the form of estoppel certificate attached as
Exhibit “<B>D</B>” or with such modifications as may be necessary
to reflect accurately the stated facts and/or such other certifications as may
be requested by a mortgagee or purchaser. Tenant understands that its failure to
execute such documents may cause Landlord serious financial damage by causing
the failure of a financing or sale transaction. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> Tenant
shall furnish to Landlord, Landlord’s mortgagee, prospective mortgagee or
purchaser reasonably requested financial information. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>21.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Surrender;
Abandoned Property</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> Subject
to the terms of Sections 9(b), 12(a) and 13(b), at the expiration or
termination of this lease, Tenant promptly shall yield up in the same condition,
order and repair in which they are required to be kept throughout the Term, the
Premises and all improvements thereto, and all fixtures and equipment servicing
the Building, ordinary wear and tear excepted. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> Upon
or prior to the expiration or termination of this lease, Tenant shall remove any
personal property from the Property. Any personal property remaining thereafter
shall be deemed conclusively to have been abandoned, and Landlord, at
Tenant’s expense, may remove, store, and, unless Tenant retrieves such
Property from Landlord (and reimburses Landlord for Landlord’s cost of
removal and storage) within 10 days following the expiration or termination
of this lease, sell or otherwise dispose of such property in such manner as
Landlord may see fit and/or Landlord may retain such property as its property.
If any part thereof shall be sold, then Landlord may receive and retain the
proceeds of such sale and apply the same, at its option, against the expenses of
the sale, the cost of moving and storage and any Rent due under this lease.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> If
Tenant, or any person claiming through Tenant, shall continue to occupy the
Premises after the expiration or termination of this lease or any renewal
thereof, such occupancy shall be deemed to be under a month-to- month tenancy
under the same terms and conditions set forth in this lease, except that the
monthly installment of the Minimum Annual Rent during such continued occupancy
shall be 150% of the amount applicable to the last month of the Term. Anything
to the contrary notwithstanding, any holding over by Tenant without
Landlord’s prior written consent shall constitute a default hereunder and
shall be subject to all the remedies available to Landlord. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>22. </B><B><U>Curing Tenant’s Defaults</U>.</B> If
Tenant shall be in default in the performance of any of its obligations
hereunder, Landlord, without any obligation to do so, in addition to any other
rights it may have in law or equity, may elect to cure such default on behalf of
Tenant after 30 days’ written notice (except in the case of emergency) to
Tenant. Tenant shall reimburse Landlord upon demand for any sums paid or costs
incurred by Landlord in curing such default, including interest thereon from the
respective dates of Landlord’s incurring such costs, which sums and costs
together with interest shall be deemed additional rent. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>23.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Defaults — Remedies</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> <B>Defaults.</B> It
shall be an event of default: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> If
Tenant does not pay in full when due any and all Rent; </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> If
Tenant fails to observe and perform or otherwise breaches any other provision of
this lease; </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> [Intentionally Deleted]; </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iv)</B> If
Tenant becomes insolvent or bankrupt in any sense or makes a general assignment
for the benefit of creditors or offers a settlement to creditors, or if a
petition in bankruptcy or for reorganization or for an arrangement with
creditors under any federal or state law is filed by or against Tenant, or a
bill in equity or other proceeding for the appointment of a receiver for any of
Tenant’s assets is commenced, or if any of the real or personal property of
Tenant shall be levied upon; provided, however, that any proceeding brought by
anyone other than Landlord or Tenant under any bankruptcy, insolvency,
receivership or similar law shall not constitute a default until such proceeding
has continued unstayed for more than 60 consecutive days. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> <B>Remedies.</B> Then,
and in any such event, Landlord shall have the following rights: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> To
charge a late payment fee equal to the greater of $100 or 5% of any amount owed
to Landlord pursuant to this lease which is not paid within 5 days after the due
date. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> To
enter and repossess the Premises, by breaking open locked doors if necessary,
and remove all persons and all or any property therefrom, by action at law or
otherwise, without being liable for prosecution or damages therefor, and
Landlord may, at Landlord’s option, make alterations and repairs in order
to relet the Premises and relet all or any part(s) of the Premises for
Tenant’s account. Tenant agrees to pay to Landlord on demand any deficiency
that may arise by reason of such reletting. In the event of reletting without
termination of this lease, Landlord may at any time thereafter elect to
terminate this lease for such previous breach. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> To
accelerate the whole or any part of the Rent for the balance of the Term, and
declare the same to be immediately due and payable. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iv)</B> To
terminate this lease and the Term without any right on the part of Tenant to
save the forfeiture by payment of any sum due or by other performance of any
condition, term or covenant broken. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> <B>Grace
Period.</B> Notwithstanding anything hereinabove stated,
neither party will exercise any available right because of any default of the
other, except those remedies contained in subsection (b)(i) of this
Section, unless such party shall have first given 10 days written notice </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>thereof to the defaulting
party, and the defaulting party shall have failed to cure the default within
such period; provided, however, that: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(i)</B> No
such notice shall be required if Tenant fails to comply with the provisions of
Sections 10 or 20(a), in the case of emergency as set forth in
Section 22 or in the event of any default enumerated in
subsections (a)(iii) and (iv) of this Section. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(ii)</B> Landlord
shall not be required to give such 10 days notice more than 2 times during
any 12 month period. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iii)</B> If
the default consists of something other than the failure to pay money which
cannot reasonably be cured within 30 days, neither party will exercise any
right if the defaulting party begins to cure the default within the 30 days
and continues actively and diligently in good faith to completely cure said
default. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(iv)</B> Tenant
agrees that any notice given by Landlord pursuant to this Section which is
served in compliance with Section 27 shall be adequate notice for the
purpose of Landlord’s exercise of any available remedies. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(d)</B> <B>Non-Waiver;
Non-Exclusive.</B> No waiver by Landlord of any breach by
Tenant shall be a waiver of any subsequent breach, nor shall any forbearance by
Landlord to seek a remedy for any breach by Tenant be a waiver by Landlord of
any rights and remedies with respect to such or any subsequent breach. Efforts
by Landlord to mitigate the damages caused by Tenant’s default shall not
constitute a waiver of Landlord’s right to recover damages hereunder. No
right or remedy herein conferred upon or reserved to Landlord is intended to be
exclusive of any other right or remedy provided herein or by law, but each shall
be cumulative and in addition to every other right or remedy given herein or now
or hereafter existing at law or in equity. No payment by Tenant or receipt or
acceptance by Landlord of a lesser amount than the total amount due Landlord
under this lease shall be deemed to be other than on account, nor shall any
endorsement or statement on any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord’s right to recover the balance of Rent due, or Landlord’s
right to pursue any other available remedy. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(e)</B> <B>Costs
and Attorneys’ Fees.</B> If either party commences an
action against the other party arising out of or in connection with this lease,
the prevailing party shall be entitled to have and recover from the losing party
attorneys’ fees, costs of suit, investigation expenses and discovery costs,
including costs of appeal. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(f)</B> <B>Curing
Landlord’s Defaults.</B> If (i) Landlord shall
be in default of any of its maintenance and repair obligations under the Lease
or shall fail to provide any of the services to be provided by Landlord under
this Lease, and (ii) such default materially interferes with Tenant’s
use and occupancy of the Premises for the conduct of Tenant’s business
therein, and (iii) Tenant gives Landlord written notice specifying the
nature of the default and specifying that Tenant intends to exercise its
self-help rights under this subsection, and (iv) Landlord fails to cure
such default within 30 days (or within a period of 72 hours if an
emergency or shorter reasonable period if Landlord fails to timely remove snow)
after Landlord receives Tenant’s </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>notice (or within such
reasonable additional time as may be necessary to cure such default provided
Landlord commences such cure within said period and thereafter diligently
prosecutes such cure to completion), then Tenant may, without any obligation to
do so, cure such default on behalf of Landlord. Landlord shall reimburse Tenant
within 30 days of demand for any reasonable out-of-pocket sums paid or costs
incurred by Tenant in curing such default (“<U>Tenant’s Cost of
Cure</U>”), which demand shall be accompanied by invoices or other
reasonable documentation evidencing amounts incurred by Tenant. To the extent
Tenant’s Cost of Cure include items properly includable in Operating
Expenses, Landlord may include in Operating Expenses such amounts reimbursed by
Landlord. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>24.</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Representations
of Tenant</U>.</B> Tenant represents to Landlord and agrees that: </FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> The
word “<B>Tenant</B>” as used herein includes the Tenant named above as
well as its successors and assigns, each of which shall be under the same
obligations and liabilities and each of which shall have the same rights,
privileges and powers as it would have possessed had it originally signed this
lease as Tenant. Each and every of the persons named above as Tenant shall be
bound jointly and severally by the terms, covenants and agreements contained
herein. However, no such rights, privileges or powers shall inure to the benefit
of any assignee of Tenant immediate or remote, unless Tenant has complied with
the terms of Section 18 and the assignment to such assignee is permitted or has
been approved in writing by Landlord. Any notice required or permitted by the
terms of this lease may be given by or to any one of the persons named above as
Tenant, and shall have the same force and effect as if given by or to all
thereof. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> If
Tenant is a corporation, partnership or any other form of business association
or entity, Tenant is duly formed and in good standing, and has full corporate or
partnership power and authority, as the case may be, to enter into this lease
and has taken all corporate or partnership action, as the case may be, necessary
to carry out the transaction contemplated herein, so that when executed, this
lease constitutes a valid and binding obligation enforceable in accordance with
its terms. Tenant shall provide Landlord with corporate resolutions or other
proof in a form acceptable to Landlord, authorizing the execution of this lease
at the time of such execution. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>25.</B> <B><U>Liability of Landlord</U>.</B> The
word “<B>Landlord</B>” as used herein includes the Landlord named
above as well as its successors and assigns, each of which shall have the same
rights, remedies, powers, authorities and privileges as it would have had it
originally signed this lease as Landlord. Any such person or entity, whether or
not named herein, shall have no liability hereunder after it ceases to hold
title to the Premises except for obligations already accrued (and, as to any
unapplied portion of Tenant’s Security Deposit, Landlord shall be relieved
of all liability therefor upon transfer of such portion to its successor in
interest) and Tenant shall look solely to Landlord’s successor in interest
for the performance of the covenants and obligations of the Landlord hereunder
which thereafter shall accrue. Neither Landlord nor any principal of Landlord
nor any owner of the Property, whether disclosed or undisclosed, shall have any
personal liability with respect to any of the provisions of this lease or the
Premises, and if Landlord is in breach or default with respect to
Landlord’s obligations under this lease or otherwise, Tenant shall look
solely to the equity of Landlord in the Property for the satisfaction </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>of Tenant’s claims.
Notwithstanding the foregoing, no mortgagee or ground lessor succeeding to the
interest of Landlord hereunder (either in terms of ownership or possessory
rights) shall be (a) liable for any previous act or omission of a prior
landlord, (b) subject to any rental offsets or defenses against a prior landlord
or (c) bound by any amendment of this lease made without its written consent, or
by payment by Tenant of Minimum Annual Rent in advance in excess of one monthly
installment. </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>26.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Interpretation; Definitions</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> <B>Captions.</B> The
captions in this lease are for convenience only and are not a part of this lease
and do not in any way define, limit, describe or amplify the terms and
provisions of this lease or the scope or intent thereof. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> <B>Entire
Agreement.</B> This lease represents the entire agreement
between the parties hereto and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the Premises or the
Property. No rights, easements or licenses are acquired in the Property or any
land adjacent to the Property by Tenant by implication or otherwise except as
expressly set forth in the provisions of this lease. This lease shall not be
modified in any manner except by an instrument in writing executed by the
parties. The masculine (or neuter) pronoun and the singular number shall include
the masculine, feminine and neuter genders and the singular and plural number.
The word “<B>including</B>” followed by any specific item(s) is deemed
to refer to examples rather than to be words of limitation. Both parties having
participated fully and equally in the negotiation and preparation of this lease,
this lease shall not be more strictly construed, nor any ambiguities in this
lease resolved, against either Landlord or Tenant. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> <B>Covenants.</B> Each
covenant, agreement, obligation, term, condition or other provision herein
contained shall be deemed and construed as a separate and independent covenant
of the party bound by, undertaking or making the same, not dependent on any
other provision of this lease unless otherwise expressly provided. All of the
terms and conditions set forth in this lease shall apply throughout the Term
unless otherwise expressly set forth herein. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(d)</B> <B>Interest.</B> Wherever
interest is required to be paid hereunder, such interest shall be at the highest
rate permitted under law but not in excess of 15% per annum. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(e)</B> <B>Severability;
Governing Law.</B> If any provisions of this lease shall be
declared unenforceable in any respect, such unenforceability shall not affect
any other provision of this lease, and each such provision shall be deemed to be
modified, if possible, in such a manner as to render it enforceable and to
preserve to the extent possible the intent of the parties as set forth herein.
This lease shall be construed and enforced in accordance with the laws of the
state in which the Property is located. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(f)</B> <B>“Mortgage”
and “Mortgagee.”</B> The word “mortgage” as
used herein includes any lien or encumbrance on the Premises or the Property or
on any part of or interest in or appurtenance to any of the foregoing, including
without limitation any ground rent or ground lease if Landlord’s interest
is or becomes a leasehold estate. The word “mortgagee” as used </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>herein includes the holder
of any mortgage, including any ground lessor if Landlord’s interest is or
becomes a leasehold estate. Wherever any right is given to a mortgagee, that
right may be exercised on behalf of such mortgagee by any representative or
servicing agent of such mortgagee. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(g)</B> <B>“Person.”</B> The
word “person” is used herein to include a natural person, a
partnership, a corporation, an association and any other form of business
association or entity. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(h)</B> <B>Proportionate
Share.</B> At any time or times, upon request of Landlord or of
any tenant of the Building, the method for allocating Tenant’s
Proportionate Share of any Impositions, cost, charge, rent, expense or payment
then or thereafter payable shall be redetermined by an independent qualified
expert. The cost of such redetermination shall be borne by the tenants of the
Building in the same proportion as that determined by such expert for
reallocation of said relevant sum; except that if such redetermination is
requested by a tenant, the cost thereof shall be borne entirely by such tenant
if the proportionate share of said relevant sum allocable to such tenant as the
result of such redetermination shall not vary by at least 5% from the amount
which would have been allocable to such tenant in accordance with the percentage
based on square foot area. Except as otherwise expressly provided in this lease,
Landlord shall not increase or decrease the physical size of the Building
without Tenant’s prior written consent. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>27.</B> <B><U>Notices</U>.</B> Any
notice or other communication under this lease shall be in writing and addressed
to Landlord or Tenant at their respective addresses specified at the beginning
of this lease, except that after the Commencement Date Tenant’s address
shall be at the Premises, (or to such other address as either may designate by
notice to the other) with a copy to any mortgagee or other party designated by
Landlord. Each notice or other communication shall be deemed given if sent by
prepaid overnight delivery service or by certified mail, return receipt
requested, postage prepaid or in any other manner, with delivery in any case
evidenced by a receipt, and shall be deemed received on the day of actual
receipt by the intended recipient or on the business day delivery is refused.
The giving of notice by Landlord’s attorneys, representatives and agents
under this Section shall be deemed to be the acts of Landlord; however, the
foregoing provisions governing the date on which a notice is deemed to have been
received shall mean and refer to the date on which a party to this lease, and
not its counsel or other recipient to which a copy of the notice may be sent, is
deemed to have received the notice. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>28.</B> <B><U>Security Deposit</U>. </B>[Intentionally Deleted]. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>29.</B> <B><U>Premises</U>.</B> The
Premises will consist of 73,000 rentable square feet (29,340 rentable square
feet devoted to office use and 43,660 rentable square feet devoted to warehouse
use) in the single story Building to be constructed by Landlord as provided in
<B>Section 30</B> below, as depicted on the floor plan attached to this
lease as <B>Exhibit “A”</B>. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>30.</B> <B><U>Building Construction</U>.</B> The
base Building shell shall be completed by Landlord substantially in accordance
with the drawings attached hereto as <B>Exhibit “E”</B>. All
construction shall be done in a good and workmanlike manner and shall comply in
all material respects with all applicable laws codes, regulations, rules and
requirements of the governmental authorities having jurisdiction, as applied,
enforced and interpreted as of the date the building permit is </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>issued, including, but not
limited to, all requirements of Title III of the ADA as applicable to commercial
facilities. This lease, and the obligations of Landlord and Tenant hereunder, is
contingent upon Landlord obtaining all necessary municipal and other
governmental approvals and permits for the development and construction of the
base Building for the uses contemplated herein and of the planned development of
which the base Building is a part. Landlord will use all reasonable efforts to
obtain such approvals. If Landlord has not obtained the building permit for the
construction of the base Building on or before <B>April 20, 2000</B>, either
Landlord or Tenant can terminate this lease by giving written notice of
termination to the other on or before <B>April 30, 2000</B>. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>31.</B> <B><U>Tenant Improvements; Tenant Improvement Allowance</U>.</B> </FONT></P>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>31.1</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Initial Tenant Improvements</U>. The
initial tenant improvements (the “Initial Tenant Improvements”) shall
be constructed either by Landlord or Tenant, based on Tenant’s election
described in <B>Section</B> <B>31.3</B> below, in accordance with the Tenant
Improvement Plans, as defined in <B>Section 31.2</B> below. Regardless of
whether constructed under contract with Landlord or with Tenant, the contracting
party shall cause the construction to be done in a good and workmanlike manner
in compliance with all applicable Laws and Requirements. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>31.2</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Tenant Improvement Plans</U>. Landlord and Tenant have
approved the space plans for the Initial Tenant Improvements attached hereto as,
or listed on attached, <B>Exhibit G</B> (the “Preliminary Plans”).
Tenant will provide Landlord, on or before the date that is 120 days after the
date of this Lease, complete construction drawings and specifications for the
Initial Tenant Improvements. The construction drawings and specifications shall
be consistent with the Preliminary Plans. Within 10 business days after its
receipt of the construction drawings and specifications, Landlord shall notify
Tenant of its approval or disapproval thereof (which approval shall not be
unreasonably withheld), and if Landlord disapproves thereof, the revisions that
Landlord requires in order to obtain such approval. It is agreed that Landlord
will not object to construction drawings and specifications to the extent that
they conform to the Preliminary Plans. As promptly as reasonably possible
thereafter, but no later than 10 business days after Landlord’s response,
Tenant shall submit to Landlord modified construction drawings incorporating
appropriate revisions. Upon approval of the final construction drawings and
specifications, Landlord’s and Tenant’s authorized representatives
shall each evidence such approval by initialing the top of each sheet of the
approved construction drawings and specifications. The approved construction
drawings and specifications are herein termed the “Tenant Improvement
Plans”. Once approved, neither party will change any of the Tenant
Improvement Plans without Tenant’s consent, which consent shall not be
unreasonably withheld, conditioned or delayed. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>31.3</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Construction</U>. On or before April 15, 2000, time
being of the essence, Tenant may elect by written notice to Landlord, to perform
through a general contractor selected by Tenant the construction of the Initial
Tenant Improvements. If Tenant </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>timely elects to
construct the Initial Tenant Improvements, the Initial Tenant Improvements shall
be constructed pursuant to the approved Tenant Improvement Plans, shall be
constructed by a general contractor approved by Landlord, which approval shall
not be unreasonably withheld, and shall otherwise be constructed in accordance
with the provisions of Sections 9 and 10 of this lease. Tenant shall deliver to
Landlord copies of all certificates of occupancy, permits and licenses required
to be issued by any authority in connection with Tenant’s construction. If
Tenant fails to timely make such election, Landlord, through a general
contractor selected by Landlord, shall perform the construction of the Initial
Tenant Improvements in accordance with the provisions of this
<B>Section 31</B>.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>31.4</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Tenant
Improvement Allowance</U>. Landlord shall provide Tenant a
leasehold improvement allowance of up to $876,000 (based on $12.00 per rentable
square foot) (the “<B>Allowance</B>”) toward the cost of the Initial
Tenant Improvements (including the cost of architectural, engineering and
construction drawings, of obtaining necessary permits and of constructing the
interior improvements other than trade fixtures, equipment, furniture or other
removable personal property of Tenant). If Tenant contracts for the construction
of the Initial Tenant Improvements, the Allowance shall be disbursed to Tenant
by Landlord promptly after submission by Tenant to Landlord of evidence of the
costs and expenses of the Initial Tenant Improvements, evidence of payment
thereof by Tenant, lien waivers from all persons supplying labor or materials to
the initial leasehold improvements, and any other information or documentation
that Landlord may reasonably request. If the costs and expenses of the Initial
Tenant Improvements, whether constructed by Landlord or by Tenant, exceed the
Allowance (as the same may have been increased pursuant to the following
paragraph), Tenant shall be solely responsible for payment of any excess.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At Tenant’s
request (which request must be made on or prior to April 1, 2000), Landlord will
increase the Allowance by an amount not to exceed $146,000 (based on $2.00 per
rentable square foot) (the “<B>Increase</B>”). In such event, the
Minimum Annual Rent will be increased by an amount equal to the Increase
multiplied by .1654. For example, if the Increase is the full $146,000, the
Minimum Annual Rent will increase by $24,148.40 (or $.3308 per rentable square
foot). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>32.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Completion Dates: Access; Acceptance</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>32.1</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>If Tenant
Constructs Initial Tenant Improvements</U>.</B> If Tenant
elects to construct the Initial Tenant Improvements, Landlord shall cause the
base Building to be Substantially Completed (as defined below) on or before
September 1, 2000, subject to extension for any delays caused by Tenant or
delays resulting from matters outside of Landlord’s reasonable control.
“Substantial Completion” shall be deemed to occur on the date that
(i) the base Building shell (including HVAC, plumbing, electrical and other
mechanical systems to be constructed by Landlord pursuant to
<B>Section 30.1</B> above) are sufficiently complete to allow access to the </font></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Premises by Tenant for the installation of the Initial Tenant Improvements, and
(ii) a temporary or permanent certificate of occupancy with respect to the
Base Building has been issued by the City of Eden Prairie. On or about the time
of Substantial Completion of the base building, Landlord, Tenant and
Landlord’s general contractor shall jointly inspect the Premises and agree
in writing on a final punchlist of Landlord’s work that is unfinished or
defective. Tenant’s acceptance of delivery of the Premises to Tenant for
the construction of the Initial Tenant Improvements shall constitute acceptance
of the Premises, subject only to the punchlist items. Landlord shall cause
Landlord’s general contractor to complete all items on the approved
punchlist within 30 days, subject only to delays outside of Landlord’s
reasonable control. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tenant shall at
all reasonable times following Substantial Completion of the Base Building until
the Commencement Date have access to the Premises, at Tenant’s own risk,
expense and responsibility, for purposes of installing the Initial Tenant
Improvements, furniture, trade fixtures and equipment. Moreover, Tenant shall,
upon Tenant’s request, be afforded limited access to the Premises prior to
the Substantial Completion of the Base Building for the purpose of installing
cables or other equipment, including, but not limited to, racking and a conveyor
system, that properly requires installation before the completion of the Base
Building and for the purpose of constructing the mezzanine over the office area;
Landlord shall have the right to control such access so that it does not
interfere with the timely completion of the Base Building. In connection with
all access by Tenant prior to the Commencement Date, Tenant shall abide by the
terms and conditions of this Lease including carrying the insurance specified by
the Lease, as if the term of this Lease had already commenced, except that
Tenant shall have no obligation to pay the Minimum Annual Rent or Annual
Operating Expenses until the Commencement Date. Tenant shall, however, pay the
charges for all utilities furnished to the Premises during Tenant’s
early-access period and after the substantial completion of the Base Building,
as reasonably estimated by Landlord. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>32.2</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If Landlord
Constructs Initial Tenant Improvements. If Landlord constructs the Initial
Tenant Improvements, Landlord shall cause Landlord’s Work (meaning the
construction of the base Building and the Initial Tenant Improvements) to be
Substantially Completed (as defined below) on or before October 15, 2000,
subject to extension for any delays caused by Tenant or resulting from matters
outside of Landlord’s reasonable control. “<B>Substantial
Completion</B>” shall be deemed to occur on the date that
(i) Landlord’s Work is completed but for minor unfinished items that
do not materially interfere with Tenant’s scheduled installation of its
trade fixtures, equipment or furnishings or with Tenant’s scheduled
occupancy of the Premises, and (ii) a temporary or permanent certificate of
occupancy has been issued by the City of Eden Prairie. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On or about the
time of Substantial Completion of Landlord’s Work, Landlord, Tenant and
Landlord’s general contractor shall jointly inspect the Premises and agree
in writing on a final punchlist of Landlord’s Work that is unfinished or </font></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>defective.
Tenant’s taking of possession of the Premises shall constitute acceptance
of the Premises, subject only to the punchlist items. Landlord shall cause
Landlord’s general contractor to complete all items on the approved
punchlist within 30 days, subject only to delays outside of Landlord’s
reasonable control. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tenant shall at
all reasonable times following Substantial Completion of Landlord’s Work
until the Commencement Date have access to the Premises, at Tenant’s own
risk, expense and responsibility, for purposes of installing Tenant’s
furniture, trade fixtures and equipment. Moreover, Tenant shall, upon
Tenant’s request, be afforded limited access to the Premises prior to the
Substantial Completion of Landlord’s Work for the purpose of installing
cables or other equipment that properly requires installation before the
completion of Landlord’s Work; Landlord shall have the right to control
such access so that it does not interfere with the performance of
Landlord’s Work. In connection with all access by Tenant prior to the
Commencement Date, Tenant shall abide by the terms and conditions of this Lease
including carrying the insurance specified by the Lease, as if the term of this
Lease had already commenced, except that Tenant shall have no obligation to pay
the Minimum Annual Rent or Annual Operating Expenses until the Commencement
Date. Tenant shall, however, pay the charges for all utilities furnished to the
Premises during Tenant’s early-access period and after substantial
completion of Landlord’s Work, as reasonably estimated by Landlord.
</FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>33.</B> <B><U>Term</U>.</B> The
Term of this Lease shall commence on the Commencement Date (as defined below)
and shall end at 11:59 p.m. on the last day of the Term (the
“<B>EXPIRATION DATE</B>”), without the necessity of notice from either
party, unless sooner terminated in accordance with the terms hereof. At
Landlord’s request, Tenant shall confirm the Commencement Date and
Expiration Date by executing a lease commencement certificate in the form
attached as <B>Exhibit “B”</B>. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If Tenant elects pursuant
to <B>Section 31.3</B> above to contract for the construction of the
Initial Tenant Improvements, then the Commencement Date shall be the later of
(i) the date that is 90 days following the date that the base Building
is Substantially Completed and access to the Premises is delivered by Landlord
to Tenant for Tenant’s construction of the Initial Tenant Improvements as
provided in <B>Section 32.1</B> above, and (ii) December 1, 2000.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If Landlord contracts for
the construction of the Initial Tenant Improvements, then the Commencement Date
shall be the later of (i) the date that is 45 days following the date
that Landlord’s Work (as defined in <B>Section 32.2</B> above) is
Substantially Completed and access to the Premises is delivered by Landlord to
Tenant for the installation of Tenant’s trade fixtures, furniture and
equipment, and (ii) December 1, 2000. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>34.</B> <B><U>Extension Option</U>.</B> Tenant
shall have the right and option to extend the Term of this Lease for two
(2) additional extension terms of five (5) years each. Each such
option must be exercised, if at all, by giving Landlord prior written notice, at
least one year in advance (the “<B>Exercise Deadline</B>”) of the
expiration date of the then current lease Term, of Tenant’s election </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to extend the lease Term;
it being agreed that time is of the essence and that this option is personal to
Tenant and is non-transferable to any assignee or sub lessee (regardless of
whether any such assignment or sublease was made with or without Landlord’s
consent) or other party. Except as follows, and subject to the following
conditions, each extension Term shall be under the same terms and conditions as
provided in the Lease: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(a)</B> Tenant’s
extension option shall be void at Landlord’s option if there exists any
event of default by Tenant under this Lease beyond any applicable notice and
cure period at the time Tenant exercises an extension option or as of the
commencement date of an extension term; </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(b)</B> there
shall be no further options to extend the term beyond the second extension term;
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(c)</B> Tenant
shall accept the Premises in their “as is” condition, without any
obligation on the part of Landlord to provide any tenant improvements or tenant
improvement allowance; and </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>(d)</B> The
Minimum Annual Rent for the extension term will be the “Market Rent”
for the Premises as determined and defined pursuant to the provisions of this
Section. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Market Rent shall be determined as follows: Within 10 business days after
Landlord receives timely notice from Tenant exercising Tenant’s extension
option, Landlord will give notice to Tenant of its determination of the Market
Rent of the Premises, and Landlord’s determination will constitute the
Market Rent unless Tenant objects by giving Landlord written notice of objection
within 10 business days after Tenant’s receipt of Landlord’s
determination. If Tenant so objects, and the parties are unable to agree upon
the Market Rent within 30 days after the Tenant’s objection, then by
written notice to Landlord within 2 business days thereafter Tenant may
request arbitration of the Market Rent under this paragraph. If Tenant does not
timely give such notice requesting arbitration, Tenant’s exercise of the
extension option will be deemed rescinded, and Tenant’s extension option
shall be null and void. If arbitration is timely requested by Tenant, the Market
Rent will be determined by appraisal within 90 days after Tenant’s request
by a board of appraisers consisting of three reputable real estate professionals
experienced in the leasing of commercial office/industrial space (each an
“Expert”). One Expert will be appointed by Tenant, and the second
Expert will be appointed by Landlord. Landlord and Tenant will each appoint
their respective Experts within 30 days following Tenant’s arbitration
request. The third Expert will be appointed by the first two Experts. If the
first two Experts are unable to agree on a third Expert within 10 business days
after the appointment of the second Expert, or if either party refuses or
neglects to appoint an Expert as herein provided, then the third Expert or the
second Expert, whose appointment was not made as provided above, may be
appointed by any judge of the Hennepin County District Court. Any Expert
appointed by a judge of the Hennepin County District Court shall be a reputable
real estate appraiser experienced in appraising the rental value of commercial
office space, and shall be a member of the American Institute of Real Estate
Appraisers with the designation of “MAI.” The Experts shall be
instructed to reach their respective determinations within 45 days of the
appointment of the third Expert. If determinations of at least two of the
Experts are identical in amount, that amount will be determined to be the Market
Rent. If the determinations of all three Experts are </font></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>different in amount, the
highest appraised value will be averaged with the middle value (that average
being referred to as “<B>Sum A</B>”). The lowest appraised value
will be averaged with the middle value (that average being referred to as
“<B>Sum B</B>”), and the Market Rent will be determined as
follows: (i) if neither Sum A nor Sum B differs from the middle
appraised value by more than 10% of the middle appraised value, then the Market
Rent will be the average of the three appraisals, (ii) if either Sum A
or Sum B (but not both) differs from the middle appraised value by more
than 10% of the middle appraised value, then the Market Rent will be the average
of the middle appraised value and the appraised value closer in amount to the
middle appraised value, and (iii) if both Sum A and Sum B differ
from the middle appraised value by more than 10% of the middle appraised value,
then the Market Rent will be equal to the middle appraised value. Written notice
of the Market Rent as duly determined in accordance with this Section shall be
promptly given to Landlord and Tenant and will be binding and conclusive on
them. Each party will bear its own expenses in connection with the board
proceeding (including the Expert appointed by it), and the fees of the third
Expert will be borne equally. If, for any reason, the Market Rent has not been
determined at the time of the commencement of the extension term, then the
Market Rent will be the amount set forth in Landlord’s determination, and
if the determination of the Experts as provided above indicates that a lesser or
greater amount should have been paid than that which was actually paid, a proper
adjustment will be made in a payment from Landlord to Tenant, or Tenant to
Landlord, as the case may be. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> For
purposes of this Section, “Market Rent” means the net annual rent that a willing
tenant would pay, and a willing lessor would accept, in arms-length, bona fide
negotiations, if the premises at issue were leased to a single tenant for the period in
question under a lease pursuant to which such tenant would not receive any rental
concession, such as rental abatements or “free rent” periods or rental
assumption, inducements or any leasehold improvement allowance, and otherwise taking into
account any other pertinent factors, including, but not limited to, the net effective
annual rates per rentable square foot for leases of comparable space in comparable
buildings recently or then being entered into in the southwest suburban Minneapolis area
(“Comparable Rates”). In determining the Market Rent and using Comparable Rates
in connection with such determination, the following factors (and any other factors then
known to be pertinent) shall be considered: the size of the Premises; the length of the
term; permitted use; quality of services provided; location and/or floor level; definition
of rentable area; existing leasehold improvements; leasehold improvements to be provided
by the lessor, whether directly or by allowance; the quality, age and location of the
building; financial strength of the applicable tenant; rental concessions (such as rental
abatements or “free rent” periods and rent assumptions); inducements; the
respective obligations of the lessor and the tenant, the manner in which the rents are
then subject to escalation and the time the particular rate under consideration became or
will become effective. In the event a Comparable Rate used for comparison is a
“gross” rate (i.e., the rate includes an allowance for operating expenses or
taxes), then such Comparable Rate shall be appropriately adjusted to the end that such
rate is net of operating expenses and taxes to the same extent as provided in this Lease,
and in the event a Comparable Rate is a “net” rate (i.e. the rate does not
include an allowance for operating expenses or taxes), any difference between operating
expenses and taxes payable under this Lease and under the lease as to which the Comparable
Rate applies shall be taken into account. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Upon the timely exercise of an
extension option, at the request of either party the parties hereto will enter into an
appropriate amendment to the Lease incorporating the terms of the Lease extension. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>35.</B> <B><U>Parking</U>.</B> Landlord
shall provide, and Tenant shall be entitled to the use of, not less
than 4.5 unreserved parking spaces for each 1,000 rentable square feet of
the Premises. Such parking shall be nonexelusive, undesignated and unreserved
parking provided as part of the Building’s common area parking facilities,
except that Landlord will allow Tenant to designate up to 10 of said
parking spaces for the parking of Tenant’s visitors and guests (the
location and the signage of such visitor parking being subject to
Landlord’s reasonable approval). </FONT></P>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>36.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Expansion Rights</B></U><B>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>36.1</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><U>Expansion Option</U>.</B> Tenant may elect by written
notice to Landlord given on or before <B>April 1, 2000 </B> to expand the
Premises by approximately 20,000 rentable square feet (the “Expansion
Space”) so as to include in the Premises 100% of the rentable area of the
Building. In such event, all of the terms and conditions of this lease
applicable to the original Premises (including, but not limited to, the Tenant
Improvement Allowance of $12.00 per rentable square foot (subject to increase
under the terms and conditions of the second paragraph of Section 31.4))
shall apply to the Expansion Space; and the Minimum Annual Rent for each lease
year as set forth in <B>Section 1(d)</B> shall be increased by an amount
equal to the scheduled Minimum Annual Rent per rentable square foot for the
original Premises multiplied by the rentable square feet in the Expansion Space.
If Tenant timely exercises this expansion option, at the request of either
party, the parties shall enter into an amendment to this lease adding the
Expansion Space to the Premises and incorporating into the schedule of Minimum
Annual Rent the rental increase resulting from the increase in the rentable
square footage of the Premises. The Tenant Improvement Allowance for the
Expansion Space may be used for leasehold improvements constructed in the
original Premises as well as for leasehold improvements constructed in the
Expansion Space, but it shall not be used for trade fixtures, equipment,
furniture or other removable personal property of Tenant. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>36.2</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>First
Notice</U>.</B> Tenant acknowledges that Tenant has no rights
in and to the Expansion Space other than the rights specified in
<B>Section 36.1</B> above. If, however, Tenant fails to exercise its rights
to expand into the Expansion Space as provided above, Landlord will, as a
courtesy to Tenant, endeavor to provide Tenant notice at such time Landlord
believes that Landlord is close to entering into an initial lease or commitment
to lease the Expansion Space to a third party. Such notice may be given by
telephone or other informal means. This provision is not intended to provide
Tenant any rights of first offer, first refusal or other rights with respect to
the Expansion Space, and Landlord shall have no liability to Tenant if Landlord
fails to provide the notice contemplated in this <B>Section 36.2.</B> The
provisions of this <B>Section 36.2</B> shall only apply to the initial
leasing of the </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expansion Space,
and shall not apply to any subsequent leasing or re-leasing thereof. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>37.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Landlord’s Environmental Representations</U>.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>37.1</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Landlord has
provided Tenant a copy of the following environmental assessments and reports
regarding the Property: </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Phase I
Environmental Site Assessment prepared by LAW ENGINEERING AND ENVTRONMENTAL
SERVICES, INC. Dated January 9, 1998, Project 5200-7-1363-02b-916. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Phase I
Environmental Site Assessment prepared by LAW ENGINEERING AND ENWERONMENTAL
SERVICES, INC. Dated January 9, 1998, Project 5200-7-1363-02c-916. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Landlord
represents to Tenant that the foregoing is a complete list of all studies and
reports in Landlord’s possession or under Landlord’s control with
respect to hazardous substances or Restricted Activities (as defined in
Section 4 of the lease) on or about the Property. Landlord will provide
Tenant a copy of any additional or updated environmental assessments obtained by
Landlord in connection with its acquisition or development of the Property.
Landlord has received no notice from any governmental authority regarding of any
inquiry, investigation or proceeding regarding hazardous substances or
Restricted Activities on or about the Property. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>37.2</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Landlord represents that the base Building will be constructed in compliance, in all
material respects, with all applicable environmental Laws and Requirements as applied,
enforced and interpreted as of the date the building permit is issued. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>37.3</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Landlord will protect, indemnify and hold harmless Tenant from and against any and all
claims, actions, damages, liability and expense (including fees of attorneys,
investigators and experts) arising out of the breach by Landlord of Landlord’s
representations in this <B>Section 37</B>. Landlord, at its expense, shall resist and
defend such action or proceeding, or cause the same to be resisted and defended by counsel
(reasonably acceptable to Tenant) designated by Landlord and approved by Tenant.
Landlord’s obligations pursuant to this Section shall survive the expiration or
termination of this lease. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>IN
WITNESS WHEREOF</B>, and in consideration of the mutual entry into this lease and for
other good and valuable consideration, and intending to be legally bound, Landlord and
Tenant have executed this lease. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=80%>
<TR VALIGN=Top>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date signed: December 21, 1999 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=left colspan=6><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Landlord:<BR>LIBERTY PROPERTY LIMITED PARTNERSHIP</B> </FONT></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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>
<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liberty Property Trust, Sole General Partner </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Top>
<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=24% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>
<TD WIDTH=1% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> /s/ Robert L. Kiel</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=6> </td><td colspan=2 align=left><HR NOSHADE COLOR=Black SIZE=1></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><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Its: Sr Vice President – Reg Dir </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </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=left colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tenant:</B> </FONT> </TD></TR>
<TR VALIGN=Top>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date signed: December 21, 1999 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=left colspan=6><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CNS, INC.</B> </FONT></TD></TR>
<TR><TD> </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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>
<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT colspan=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti Morfitt </FONT></TD></TR>
<TR>
<TD COLSPAN=4> </td><td colspan=4 align=left><HR NOSHADE COLOR=Black SIZE=1></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><FONT FACE="Times New 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=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Its: President and Chief Operating Officer </FONT></TD></TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28 </FONT></P>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>cns042906_ex23-1.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 23.1 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 23.1 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Independent Registered Public Accounting Firm </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors
<BR>CNS, Inc.: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-109110, 333-68310, 333-42108, 333-60017, 33-59719, 33-42971, 33-29454, 33-19043,
33-15044 and 33-14052) of CNS, Inc. of our report dated April 26, 2004, relating to the
Consolidated Balance Sheets of CNS, Inc. and subsidiaries as of March 31, 2004 and 2003,
and the related Consolidated Statements of Operations, Stockholders’ Equity and
Comprehensive Income, and Cash Flows for each of the years ended March 31, 2004 and 2003
and December 31, 2001 and for the three months ended March 31, 2002 and 2001 (unaudited),
which report is included in the March 31, 2004, annual report on Form 10-K of CNS, Inc. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP </FONT></P>
<BR><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota
<BR>June 11, 2004 </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
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<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>10
<FILENAME>cns042906_ex31-1.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 31.1 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 31.1 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATIONS </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Marti Morfitt, certify that: </FONT></P>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I have reviewed
this Form 10-K of CNS, Inc.; </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my
knowledge, this 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 report; </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my
knowledge, the financial statements, and other financial information included in
this 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 report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this report is being prepared; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant’s other certifying officer(s) and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial
information; and </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><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 control over financial
reporting. </FONT></TD>
</TR>
</TABLE>
<BR><BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date June 11, 2004 </FONT></TD>
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti Morfitt </FONT></TD>
<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD></TD><TD></TD><TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD></TD><TD></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR><BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>11
<FILENAME>cns042906_ex31-2.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 31.2 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 31.2 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATIONS </FONT></H1>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Samuel Reinkensmeyer, certify that: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I have reviewed
this Form 10-K of CNS, Inc.; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my
knowledge, this 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 report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my
knowledge, the financial statements, and other financial information included in
this 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 report; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this report is being prepared; </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosed in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial
information; and </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=92%><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 control over financial
reporting. </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date June 11, 2004 </FONT></TD>
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Samuel Reinkensmeyer </FONT></TD>
<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD></TD><TD></TD><TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD></TD><TD></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Finance and Chief Financial Officer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>12
<FILENAME>cns042906_ex32.htm
<TEXT>
<HTML>
<HEAD><TITLE>Exhibit 32 to CNS, Inc. Form 10-K dated March 31, 2004</TITLE></HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 32 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATION </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The undersigned certify
pursuant to 18 U.S.C. § 1350, that: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) The
accompanying Annual Report on Form 10-K for the period ended March 31,
2004 fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) The
information contained in the accompanying Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 11, 2004 </FONT></TD>
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Marti Morfitt</FONT></TD>
<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD></TD><TD></TD><TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD></TD><TD></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt, President & Chief Executive Officer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>Date: June 11, 2004 </FONT></TD>
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><BR>/s/ Samuel Reinkensmeyer </FONT></TD>
<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD></TD><TD></TD><TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Top>
<TD></TD><TD></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel E. Reinkensmeyer<BR>Vice President of Finance, Chief<BR>Financial Officer and Treasurer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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</DOCUMENT>
</SEC-DOCUMENT>
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