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<SEC-DOCUMENT>0000897101-05-001405.txt : 20050615
<SEC-HEADER>0000897101-05-001405.hdr.sgml : 20050615
<ACCEPTANCE-DATETIME>20050613162932
ACCESSION NUMBER: 0000897101-05-001405
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20050331
FILED AS OF DATE: 20050613
DATE AS OF CHANGE: 20050613
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: 05892665
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
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<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>cns052583_10k.htm
<TEXT>
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<TITLE>CNS, Inc. Form 10-K dated March 31, 2005</TITLE>
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<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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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the fiscal year ended March 31, 2005 </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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<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">
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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>
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<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>
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<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>
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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=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>
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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>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of March 31, 2005, the aggregate market value of the Company’s Common
Stock held by non-affiliates is $144,835,691 computed by reference to the closing sales price of the Company’s Common Stock
of $11.00 on September 30, 2004, 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 3, 2005, the Company had outstanding 14,289,874 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 30, 2005, are incorporated by reference into Part III of
this Form 10-K. </FONT></P>
<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=2>TABLE OF CONTENTS </FONT></H1>
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<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 SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>PART I</B></U> </FONT> </TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=78% 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=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><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_1">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><A HREF="#item_1">Business</A></FONT></TD><TD ALIGN="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>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_2">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><A HREF="#item_2">Properties</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_3">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><A HREF="#item_3">Legal Proceedings</A></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_4">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><A HREF="#item_4">Submission of Matters to a Vote of Security Holders</A></FONT></TD><TD ALIGN=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 </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"><U><B>PART II</B></U> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT" VALIGN="TOP"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><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><A HREF="#item_5">Market for Registrant’s Common Equity, Related Stockholder Matters<BR> and Issuer Purchases of Equity Securities</A></FONT></TD><TD ALIGN="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>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_6">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><A HREF="#item_6">Selected Financial Data</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD VALIGN="TOP" 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><A HREF="#item_7">Management’s Discussion and Analysis of Financial Condition</A><BR><A HREF="#item_7"> and Results of Operations</A></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD 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><A HREF="#item_7a">Quantitative and Qualitative Disclosures about Market Risk</A></FONT></TD><TD ALIGN=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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_8">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><A HREF="#item_8">Financial Statements and Supplementary Data</A></FONT></TD><TD ALIGN="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>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD VALIGN=TOP 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><A HREF="#item_9">Changes in and Disagreements with Accountants on Accounting and<BR> Financial Disclosure</A></FONT></TD><TD ALIGN=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>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_9a">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><A HREF="#item_9a">Controls and Procedures</A></FONT></TD><TD ALIGN="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>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_9b">Item 9B.</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><A HREF="#item_9b">Other Information</A></FONT></TD><TD ALIGN=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=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"><U><B>PART III</B></U> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_10">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><A HREF="#item_10">Directors and Executive Officers of the Registrant</A></FONT></TD><TD ALIGN="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="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_11">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><A HREF="#item_11">Executive Compensation</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD VALIGN="TOP" 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><A HREF="#item_12">Security Ownership of Certain Beneficial Owners and Management<BR> and Related Stockholder Matters</A></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_13">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><A HREF="#item_13">Certain Relationships and Related Transactions</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#item_14">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><A HREF="#item_14">Principal Accountant Fees and Services</A></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>PART IV</B></U> </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><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><A HREF="#item_15">Exhibits and Financial Statement Schedules</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#signatures">SIGNATURES</A></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36 </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD colspan=3 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#exhibit_index">EXHIBIT INDEX</A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#schedule_ii__valuation_and_qualifying_accounts">FINANCIAL STATEMENT SCHEDULE</A></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40 </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD colspan=3 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="#report_of_independent_registered_public_accounting_firm">FINANCIAL STATEMENTS </A></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD nowrap ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1 </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
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<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>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_1">Item 1.</A> BUSINESS</U> </FONT> </H1>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overview </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are in the business of
developing and marketing consumer health care products, including Breathe Right® branded products that focus on better breathing,
and FiberChoice® branded products that focus on digestive health. We operate in niche categories of the large over-the-counter
health care market with unique product offerings that are supported by strong advertising and promotion programs. Our
competitive strengths include our brands and patented technologies, well-established distribution networks domestically and
internationally, a flexible and low-cost operating model and an experienced management team. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our principal product, the
Breathe Right nasal strip, improves breathing by dilating the nasal passages. Nasal strips provide temporary relief from nasal
congestion and stuffiness resulting from a variety of health conditions, and also reduce or eliminate snoring. Breathe Right nasal
strips, and the entire Breathe Right product line, provide consumers “drug free” better breathing solutions.<B> </B>The
Breathe Right brand has been further extended by the launch of new products such as Breathe Right Snore Relief throat spray in
fiscal 2003 and the launch of Breathe Right Vapor Shot!™ personal vaporizer in fiscal 2004. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We entered the bulk fiber
category in March 2000 with the launch of the FiberChoice® brand. The original FiberChoice product is an orange-flavored chewable fiber tablet
that offers consumers an effective, convenient and good-tasting way to supplement their daily intake of dietary fiber. In March
2005, CNS extended the FiberChoice line to include sugar-free chewable fiber tablets in assorted fruit flavors and a low-sugar,
hard candy fiber drop. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In addition to further
organic development and expansion of the Breathe Right® and FiberChoice brands, we are exploring opportunities to acquire
established consumer health care brands, product lines, and new technologies that
complement our better breathing and digestive health platforms. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>History </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS was founded in 1982. From
1982 until 1995, the Company designed, manufactured and marketed computer-based diagnostic devices for sleep disorders. In 1992,
CNS obtained the exclusive license to manufacture and sell nasal strips, and in 1993, received FDA clearance to market the nasal
strip as a product that improves nasal breathing. In 1994, CNS launched the Breathe Right nasal strip in the United States and
in 1995 divested itself of the assets related to its sleep disorders business in order to focus on further developing the Breathe
Right® nasal strip product. In 1998, CNS strengthened its management team to add consumer healthcare products experience, and
since that time continued to develop the Breathe Right brand both domestically and internationally. In 2000, CNS added its second
branded product line with the launch of FiberChoice chewable fiber supplements. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Competitive Strengths </FONT></H1>
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<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><I>Development of Strong Brands within Attractive Niche
Categories.</I> Our core competency is sales and marketing of consumer healthcare products. We have strategically
chosen to focus on niche product categories with unique and high margin product offerings that address recurring consumer needs,
and support these products with ongoing advertising and promotion campaigns. Our goal is to develop strong consumer demand based
on brand awareness and product loyalty, allowing us to achieve long term growth in sales and profitability. </FONT></TD>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>
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<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><I>Proven Ability to Develop Technologies and
Products</I>. We focus our product development efforts on identifying underserved consumer needs and then
designing products that directly address those unmet needs. The Breathe Right nasal strip and the FiberChoice chewable fiber
tablet were both developed by licensing patented technologies from inventors and creating new consumer brands. Both Breathe Right
and FiberChoice brands have been expanded through new product launches. </FONT></TD>
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<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><I>Efficient Operating Model.</I> We focus our
internal resources on marketing, sales and product development. We directly manage the production planning and quality control
aspects of manufacturing, but outsource manufacturing to well-established, low-cost third-party suppliers. This approach
allows us to benefit from manufacturing expertise and economies of scale, and maintain a highly flexible and variable cost
structure, with low overhead and low capital investment. We internally manage all aspects of customer service and distribution of our
products, delivering a high standard of service to our customers. </FONT></TD>
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<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><I>Experienced Management Team.</I> We have an
experienced management team, with a proven track record of developing branded consumer healthcare products and building
shareholder value. Although we maintain a lean staff of approximately 60 employees, we believe we have the skill and experience of
larger companies in our industry. We organize our management structure into five strategic teams focused on growth: the Breathe
Right brand, both domestic and international markets, the FiberChoice brand and new product development for both the Breathe Right
and FiberChoice brands. </FONT></TD>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Growth Strategies </FONT></H1>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Investing in Advertising and Promotion.</I></B> </FONT> </TD>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Breathe Right® Brand. Our marketing efforts
for Breathe Right products are targeted against two key consumer healthcare conditions: nasal congestion and snoring. The majority
of our advertising and promotion investment is spent on television advertising, which communicates the unique Breathe Right brand
benefits of instant, drug-free relief from nasal congestion and snoring. We also use other product promotion programs, such as
sampling, coupons, in-store advertising and public relations activities. Marketing communications promote trial, as well as repeat
purchases of Breathe Right brand products by increasing consumer awareness and developing product loyalty. </FONT></TD>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FiberChoice® Brand. Our marketing efforts for FiberChoice products
are targeted toward the growing awareness of the need for more consumption of dietary fiber, and the important health benefits
associated with consuming higher levels of dietary fiber. The majority of advertising and promotion investment is spent on
television advertising, which communicates the challenge that active people face in meeting the recommended daily levels of fiber consumption.
It also highlights the unique benefits offered by FiberChoice including convenience, efficacy and good taste relative to competing products.
Marketing communications are focused on building awareness, which is still at an early stage of development, and developing strong
brand loyalty. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Developing New Products.</I></B> The
Breathe Right and FiberChoice brand names are two of our most valuable assets and we intend to continue leveraging these assets by
future introduction of new products. Our goal is to continue to develop a pipeline of potential new products under both the
Breathe Right and FiberChoice brands, linked to their respective brand equities of better breathing and digestive health.
</FONT></TD>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>
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<TD WIDTH=95%><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. We sell our products
through a dedicated direct sales force that concentrates on serving key retail accounts as well as through a national brokerage
organization which serves our smaller customers. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our customers generally merchandise our products in the
over-the-counter drug section of their stores. Breathe Right nasal strips are typically positioned in the cough, cold and allergy
sections of stores because they provide benefits similar to those obtained from other decongestant products. FiberChoice products
are positioned in the bulk fiber/laxative sections of stores. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our retail customers include national chains of
mass merchants, drug stores and grocery stores such as Wal-Mart, Target, Eckerd, Walgreen’s, RiteAid, CVS, Kroger and
Albertson’s and warehouse clubs such as Sam’s Club and Costco, as well as regional and independent stores in these
retail channels. In fiscal 2005, Wal-Mart accounted for approximately 31% of sales.</FONT></TD>
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<TD WIDTH=95%><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 and is actively developing the Breathe Right brand in selected international markets, most significantly Japan,
Europe, Canada and Mexico. We have established an international distribution system for Breathe Right nasal strips
that consists of reselling distributors, sales representatives and suppliers that repackage bulk nasal strips into final consumer
packaging. Distributors are appointed largely on an exclusive basis, with territories consisting of one or more countries, and it
is expected that this pattern of operation will continue. We retain control over the brand, packaging and advertising in all
international markets.
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Development of a Third Brand
Platform.</I></B> We are exploring opportunities to acquire or develop a third branded consumer healthcare
platform or acquire complementary products which would fit under the Breathe Right or FiberChoice brands. We expect that a
potential acquisition would expand our product line within consumer healthcare product categories, leveraging our core competency
in sales, marketing and product development, as well as increasing efficiency of our operations. </FONT></TD>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Products & Markets </FONT></H1>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Breathe Right Nasal Strips.</I></B> The
Breathe Right nasal strip is a non-prescription, single-use disposable device that improves breathing by dilating 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. Business – Government
Regulation. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Breathe Right nasal strip includes two embedded flexible
“spring-like” pieces which gently lift nasal passages open while a special adhesive holds the strip comfortably in
place. The product improves nasal breathing during use and is drug-free, thereby avoiding the side effects associated with many
competing products. The Breathe Right nasal strip is offered in two sizes (small/medium and large), and three varieties (tan, clear, and
mentholated). Mentholated nasal strips contain a soothing mentholated aroma for additional relief from nasal congestion.
Clear nasal strips have been positioned as an alternative for consumers who wish to use the product
frequently, but suffer from dry or sensitive skin. </FONT></TD>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Other Breathe Right
Products.</I></B> We currently market and sell three non-nasal strip products under the Breate Right brand.
Breathe Right Snore Relief™ throat spray is a drug-free astringent and lubricating spray that addresses the snoring condition
in a complementary way relative to nasal strips. Breathe Right VaporShot! is a “personal vaporizer” which
works by dropping an effervescent tablet into a cup of warm tap water with a vapor concentrating lid. Breathe Right saline nasal
spray is a nasal moisturizing spray that soothes dry, irritated nasal passages due to colds, allergies, dry air and overuse of
nasal decongestants. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Breathe Right Markets &
Competition.</I></B> Our marketing efforts capitalize on the multiple benefits of Breathe Right® products,
providing solutions to consumers within the following market segments: </FONT></TD>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• <I><U>Nasal Congestion
Market</U></I>. Annually most Americans suffer some nasal congestion 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. </FONT></TD>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• <I><U>Snoring
Market</U></I>. Snoring is a large potential market given estimates that approximately 37 million Americans snore
regularly, while another 50 million Americans snore occasionally. We believe that the percentage of international consumers that
suffer from snoring is roughly equivalent to the United States. Based on results from clinical trials, Breathe Right products were
effective in reducing snoring for approximately 85% of participants. </FONT></TD>
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<TD WIDTH=90%><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></TD>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• <I><U>Athletic
Market</U></I>. We believe 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. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Competition in Breathe Right
Markets.</I></B> The market for decongestant products is highly competitive, and many of the competitors have
significantly greater financial and operating resources than CNS. Our 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. Competition in the snoring remedies market consists primarily of nasal dilators, throat
sprays, herbs, including supplements and homeopathic remedies. </FONT></TD>
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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>Although we have historically achieved approximately 90% share of the
external nasal dilator market, Schering Plough Corp. entered the market in September 1998 with an external nasal dilation device.
In May 2003, Aso Corporation announced it was acquiring the brand, 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></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>We believe 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. We intend to aggressively enforce our patent
rights covering the Breathe Right nasal strip and have engaged in litigation to protect its patent rights. However, there can be no
assurance that potential competitors will not be able to develop nasal dilation products which circumvent our patents. </FONT></TD>
</TR>
</TABLE>
<BR>
<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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<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><I>FiberChoice® Daily Fiber
Supplement.</I></B> FiberChoice is a line of daily fiber supplements that offer consumers an effective,
convenient, good-tasting way to supplement their daily intake of dietary fiber. Two tablets or drops contain four grams of fiber
and provide more than twice the amount of fiber per dose compared to other convenient fiber supplements. The active ingredient in
FiberChoice tablets is inulin, a natural fiber source, which is a prebiotic that helps promote the growth of healthy bacteria in
the intestinal tract. FiberChoice products can be taken without water and have been clinically proven to be as effective as powder
alternatives. </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>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. We believe this is an attractive product category due to the demographics associated with the
aging population. </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><I>Competition in FiberChoice®
Markets.</I></B> The market for dietary fiber supplements is highly competitive and dominated by large companies
with better established brands and greater resources than CNS. Competitors include Metamucil® manufactured by Procter and
Gamble, Citrucel® manufactured by GlaxoSmithKline, Benefiber manufactured by Novartis and FiberCon® manufactured by
Wyeth. 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></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>Manufacturing and Operations </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We outsource all
manufacturing to outside suppliers. Each supplier manufactures a portion of our product line to our detailed specifications using
raw materials specified by CNS. All suppliers have entered into confidentiality agreements with CNS to protect our
intellectual property rights. Our quality control and operations personnel regularly inspect these manufacturers to
observe processes and procedures to ensure compliance with FDA Good Manufacturing Practice Standards. Finished goods are also
inspected to ensure that they meet quality requirements. We work closely with raw material vendors and our manufacturers to reduce
scrap and waste, improve efficiency and improve yields to reduce the manufacturing costs of the product. We have received
certification that CNS 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> All of our manufacturing
supply agreements are documented by contracts, with terms ranging from 2 to 5 years. Prices under these agreements are generally
established annually and subject to periodic adjustments for changes in actual raw material costs. All of our products are ordered
as-needed on a purchase order basis. We are not obligated to buy any particular quantity of product or use any manufacturer exclusively.</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, we have multi-year contracts with the suppliers that provide most of the major components for nasal strips. In 2001,
we 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, we have historically utilized 3M components for
manufacturing nasal strips. Although we believe that this relationship will not be disrupted, 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 our operations until new sources of these components become available. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We consolidate all finished
goods inventories into our leased warehouse adjacent to our offices in Eden Prairie, MN. We retain control of all aspects of
customer service, including arranging logistics for shipment of our product to domestic customers and to international distributors.
</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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<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, we are subject to regulation by governmental agencies including the FDA and the corresponding
agencies of the states and foreign countries in which we sell our products. We must comply with a variety of regulations, relating
to the manufacture, marketing and sale of our products as well as our recordkeeping and other general business practices,
including the FDA’s Good Manufacturing Practice regulations. We are subject to periodic inspections by the FDA and applicable
state and foreign agencies. If the FDA believes that there is a violation of its regulations, 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. We believe that CNS is currently in compliance with applicable FDA
regulations.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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 our 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 for approval 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. We have
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> Our 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 of 1994 (DSHEA), 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 our FiberChoice
product line. However, at this time, the impact of any proposed regulation on our product lines is not certain. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales of our products outside
the United States are subject to regulatory requirements that vary widely from country to country. We have selected a third party
to act as an “authorized representative” in the European Union. We believe that we have the necessary documentation to
support affixing the “CE” mark, an international symbol of quality and compliance with applicable European medical
device directives, to our Breathe Right® nasal strips in Europe. We will pursue additional approvals in other jurisdictions as
needed. </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 approvals or clearances for additional applications for the Breathe
Right nasal strip or for any of our other products. Moreover, after clearance is given, we are required to advise the FDA and
these other regulatory agencies of modifications to our products. These agencies have the power to withdraw the clearance or
require us 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 our
products. Furthermore, federal, state and foreign regulations regarding the manufacture and sale of medical devices and other
products are subject to future change. We cannot predict what impact, if any, such changes might have on our business. </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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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are 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> We have registered
trademarks, own several patents and pending patent applications, and have a number of patents through licenses which are used in
connection with our business. Some of these patents and licenses cover significant product formulations, methods and designs for
our current and possible future products. We believe our trademarks are important as protection for CNS’ image in the
marketplace. Our success is and will continue to be dependent upon the existence of and ability to protect our patents, trademarks
and those under our licenses and we intend to take such steps as are necessary to protect our 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 our technology and proprietary rights will not be challenged on the grounds that our 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 our
technology without compensation to CNS. Nor can there be any assurance that others will not attempt to challenge the validity or
enforceability of our patents and licensed patents on the basis of prior art or introduce competitive products. In addition to
seeking patent protection for our products, we also intend to protect our 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> Through license
agreements CNS has acquired the exclusive worldwide rights to manufacture and sell nasal strips
and chewable inulin based fiber tablets. Specifically, we have 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. We are obligated to pay royalties to the licensors based on sales of the products
typically including certain minimum royalty amounts in order to maintain our exclusive rights. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The original licensor of
nasal strip technology has filed patent applications with the U.S. Patent and Trademark Office seeking patent protection for different
aspects of the 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 nasal strip. The licensor of nasal strip technology also has one
patent application which is currently pending. In addition, that licensor has obtained patent protection on the 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 licensor of the mentholated vapor strip technology 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. In addition to the
patents and patent applications pending in the U.S. mentioned above, we have filed corresponding patent applications seeking
protection in several foreign countries to protect certain rights to nasal dilation technology that have been acquired.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The licensor of the 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 we believe that our
owned and licensed patents will limit the ability of others to introduce competitive products in the United States, there can be
no assurance that the patents on the Breathe Right nasal strip and FiberChoice chewable fiber tablets will effectively foreclose
the development of competitive products or that we will have sufficient resources to pursue enforcement of any patents issued. We
do, however, intend to aggressively enforce our patents. In order to enforce any patents issued, we may have to engage in
litigation which may result in substantial expense and counterclaims against CNS. Any adverse outcome of such litigation could
have a negative impact on our business. </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> We have engaged in litigation
to enforce our patent rights relating to the Breathe Right nasal strip. In 1999, CNS 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,
U.S. Patent No. 5,533,499 (“ ‘499 Patent”). In the course of this suit, the defendant requested reexamination in
the U.S. Patent and Trademark Office (the “Patent Office”) of the ‘499 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. We have joined the licensor, Creative Integration & Design, Inc., in the exercise of our
rights to contest the action of the Patent Office and have provided reasons that we believe establish that the claims should not
have been rejected. CNS and its licensor are also seeking to amend certain claims to provide us with additional protection under
the patent. On January 21, 2005, we received a determination from the Patent Office that the ‘499 Patent has significant
allowable claims. With some formal amendments, we expect the Patent Office will confirm these claims as allowable. As the date of
filing of this Annual Report on Form 10-K for the year ended March 31, 2005, we have not received final notice from the Patent
Office of the claims of the ‘499 Patent it has confirmed as allowable. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
February 18, 2004, CNS, together with Creative Integration & Design, Inc., sued Silver
Eagle Labs, Inc. (“Silver Eagle”) 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 CNS. The two patents at issue are U.S. Patent No.
6,318,362 (the “ ‘362 Patent”) and U.S. Patent No. 3,533,503 (the “ ‘503 Patent”). The
suit seeks injunctive relief, damages, enhanced damages for willful infringement,
attorneys’ fees and costs. Silver Eagle has counterclaimed for a declaration that the ‘362
Patent and ‘503 Patent are invalid and not infringed and asks for its attorneys’ fees and
costs. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
November 24, 2004, we announced that the Patent Office will reexamine the ‘362 Patent and
the ‘503 Patent. In response to this action by the Patent Office, on November 29, 2004,
the Court issued an order staying our suit against Silver Eagle pending the
reexamination. We believe that when the ‘362 and ‘503 Patents emerge from reexamination,
we will maintain significant patent protection under those patents and will recommence
enforcement of those patents in the litigation described above. As of the date of filing
of this Annual Report on Form 10-K for the year ended March 31, 2005, we have not
received information that the Patent Office has acted on the reexamination of the ‘362
and ‘503 Patents. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
final outcome of the reexamination of the ‘499, ‘362 and ‘503 Patents 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 our
patent protection, we believe that our current portfolio of both pending patent
applications and newly issued patents will enable CNS to maintain significant patent
protection for our nasal strip products. See Item 3. Legal Proceedings. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS 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 May 31, 2005, we had 56
full-time employees and 7 part-time employees, of whom 16 were engaged in operations, 22 in general administration, and 25 in
marketing and sales. There are no unions representing CNS’ employees. Relations with our 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><BR><BR><BR><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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<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<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 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=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name and Age </FONT><HR WIDTH=25% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Office </FONT><HR WIDTH=12% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Daniel E. Cohen (53)</FONT></TD>
<TD WIDTH=4% 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=8% 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 (47)</FONT></TD><TD ALIGN=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" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Samuel Reinkensmeyer (44)</FONT></TD><TD ALIGN=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" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John J. Keppeler (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 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 (52)</FONT></TD><TD ALIGN=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" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Larry R. Muma (54)</FONT></TD><TD ALIGN=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>Susan Horvath (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>Vice President of International</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nicole Strait (34)</FONT></TD><TD ALIGN=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 Human Resources</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<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, and as a director of Intrawest Corporation, a Vancouver-based developer
and operator of ski and golf resorts. </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 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 businesses.
</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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<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- 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 businesses
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 Hazelden Foundation, Dow Brands, Pillsbury and Munsingwear. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<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. Mr. Muma worked for PepsiCo from 1976 to 1992, serving most recently as its Vice
President of International Technical Services.</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Susan Horvath</I> has
served as the Company’s Vice President of International since April of 2005. From September 1999 to April 2005, Ms. Horvath
has served in a variety of roles with the Company, including Director of Financial Planning and Analysis from September 2002 to
April 2005. Prior to joining CNS in 1999, Ms. Horvath was the senior finance manager for the advertising and sales promotion
department of The Pillsbury Company, a Minneapolis-based manufacturer and distributor of food products. Previously Ms. Horvath
worked for Coopers and Lybrand.</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Nicole Strait</I> has
served as the Company’s Vice President of Human Resources since March of 2005. Prior to joining the Company, from November
2002 to March 2005, Ms. Strait was with The J.M Smucker Company/International Multifoods Corporation, a Minneapolis-based
manufacture and distributor of food products, most recently employed as its Director, Human Resources. From May 2000 to October
2002, Ms. Strait held various human resources positions with SimonDelivers.com, Inc., a Minneapolis-based online grocery shopping
and grocery delivery company. </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_2">Item 2.</A> PROPERTIES</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">Item 3.</A> LEGAL PROCEEDINGS</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, CNS,
Inc., together with Creative Integration & Design, Inc., sued Silver Eagle Labs, Inc. (“Silver
Eagle”) 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 CNS. The two patents at issue are U.S. Patent No.
6,318,362 (the ” ‘362 Patent”) and U.S. Patent No. 3,533,503 (the ” ‘503 Patent”). The suit seeks
injunctive relief, damages, enhanced damages for willful infringement, attorneys’ fees and costs. Silver Eagle has
counterclaimed for a declaration that the ‘362 Patent and ‘503 Patent are invalid and therefore not infringed and asks for its
attorneys’ fees and costs. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On November 24, 2004, we announced that the U.S. Patent and Trademark Office will reexamine the ‘362 Patent and the ‘503 Patent. In
response to this action by the U.S. Patent and Trademark Office, on November 29, 2004, the Court issued an order staying
our suit against Silver Eagle pending the reexamination. We believe that when the ‘362 and ‘503
Patents emerge from reexamination, we will maintain significant patent protection under those patents and will recommence
enforcement of those patents in the litigation described above. We maintain patent protection for our nasal dilator
products under other United States and foreign patents and will continue to vigorously enforce all of our intellectual
property.</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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<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of the date of filing of
this Annual Report on Form 10-K for the year ended March 31, 2005, we have not received information that the U.S. Patent
and Trademark Office has acted on the reexamination of the ‘362 and ‘503 Patents. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Another of our
patents covering our nasal strip technology, U.S. Patent No. 5,533,499 (the “ ‘499 Patent”), is also subject to
reexamination by the U.S. Patent and Trademark Office. On January 21, 2005, we received a determination from the U.S.
Patent and Trademark Office that the ‘499 Patent has significant allowable claims. With some formal amendments, we
expect the U.S. Patent and Trademark Office will confirm these claims as allowable. As of the date of filing of this Annual
Report on Form 10-K for the year ended March 31, 2005, we have not received final notice from the U.S. Patent and
Trademark Office of the claims of the ‘499 Patent it has confirmed as allowable. </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">Item 4.</A> SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</U> </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>
<BR><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>13 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II </FONT></H1>
<!-- 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><U><A NAME="item_5">Item 5.</A></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>MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES</U> </FONT></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>Market Information </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our 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 our common stock for the period indicated which cover our
fiscal years ending March 31, 2005 and 2004. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=500>
<TR VALIGN=Bottom>
<TH ALIGN=LEFT COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fiscal Year Ended March 31, 2005</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>High </FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Low </FONT></TH></TR>
<TR>
<TD COLSPAN=2></TD>
<TD COLSPAN=1><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=1><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quarter Ended March 31, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.08</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>12.43</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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, 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>13.25</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>10.95</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quarter Ended September 30, 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>11.30</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.86</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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, 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>11.04</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>9.31</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TH ALIGN=LEFT COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fiscal Year Ended March 31, 2004</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>High </FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Low </FONT></TH></TR>
<TR>
<TD COLSPAN=2></TD>
<TD COLSPAN=1><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>
<TD COLSPAN=1><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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" BGCOLOR="#CCEEFF">
<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>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On June 3, 2005, the last
sale price of the common stock was $20.76 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 3, 2005, there
were approximately 600 owners of record of our 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> We paid four
quarterly dividends of $.05 per share of common stock during fiscal 2005. We paid three quarterly dividends of $.04 per share of common
stock during fiscal 2004. The payment of future dividends, if any, will be at the discretion of our Board of Directors
and will depend upon, among other things, future earnings, capital requirements, restrictions in future financing agreements, our
general financial condition and general business considerations. </FONT></P>
<BR><BR><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>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuer Purchases of Equity Securities </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following table provides
certain information regarding purchases made by us of our common stock in the quarter ended March 31, 2005: </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuer Purchases of Equity Securities </FONT></H1>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR>
<TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Period</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total Number<BR>of Shares<BR>Purchased</FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Average Price<BR>Paid per Share</FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total Number of Shares Purchased as Part of Publicly Announced Plan or Program </FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) </FONT></TH></TR>
<TR>
<TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=29% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 1 – January 31, 2005</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=8% ALIGN=CENTER><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=8% ALIGN=CENTER><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=14% ALIGN=CENTER><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=16% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>470,400</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>February 1 – February 28, 2005</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>12,000</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>$ 15.83</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>12,000</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>458,400</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>March 1 – March 31, 2005</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>32,895</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>$ 15.37</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>32,895</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>425,505</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44,895</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>$ 15.49</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>44,895</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>425,505</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></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>(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>On February 11, 2002, we announced that our board of
directors had approved a stock repurchase program authorizing us to repurchase up to 1,000,000 shares of
our common stock from time to time in open market transactions or in privately negotiated transactions. </FONT></TD>
</TR>
</TABLE>
<BR><BR>
<!-- 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 our equity compensation plans in effect as of March 31, 2005. Each of
our equity compensation plans is an “employee benefit plan” as defined by Rule 405 of Regulation C of the
Securities Act of 1933. </FONT></P>
<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 WIDTH=100%>
<TR>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Plan Category</FONT></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></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></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></TH></TR>
<TR>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equity compensation plans approved</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=14% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,476,668</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=14% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 6.91</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=14% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>265,145</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD colspan=8 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>by stockholders:</FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equity compensation plans not</FONT></TD><TD ALIGN=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>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>1,476,668</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>$ 6.91</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>265,145</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></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 our 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 the 1994, 1990 or 1987 Plans.
</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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We also maintain a
1989 Employee Stock Purchase Plan, participation in which is available to substantially all of our employees.
Participating employees may purchase our 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 our shareholders. </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_6">Item 6.</A> SELECTED FINANCIAL DATA</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 our 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, 2000 through March 31, 2005 have been derived from our Consolidated Financial
Statements included elsewhere in this Annual 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 WIDTH=100%>
<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 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>March 31,<BR>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,<BR>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31,<BR>2003 </FONT><HR 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 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 SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=24% 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=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>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 93,732</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</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>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,242</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=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>20,051</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>(18,696</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>13,702</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>(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> 0.93</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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> (0.89</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=18> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Working capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 67,650</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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> 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>87,215</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>65,337</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>71,151</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>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>16 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<BR>
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<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 audited consolidated financial statements
and notes thereto appearing elsewhere in this Annual Report. In this discussion, our three fiscal years ended March 31, 2005, 2004
and 2003 are referred to as fiscal years 2005, 2004 and 2003, respectively. </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> We are in the business of
developing and marketing consumer health care products, including Breathe Right® branded products that focus on better breathing,
and FiberChoice® branded products that focus on digestive health. We operate in niche categories of the large over-the-counter
health care market with unique product offerings that are supported by strong advertising and promotion programs. Our
competitive strengths include our brands, patented technologies, established domestic and international distribution networks, a
flexible and low-cost operating model and an experienced management team. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our financial goals are to
achieve sustainable long-term growth in consumer demand for our products, which should leverage our efficient operating model to
generate further growth in operating profit and operating cash flow: </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>• </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>Sustainable Growth in Consumer
Demand.</I> During the three fiscal years ended March 31, 2005, consolidated net sales have grown from $79.1
million to $93.7 million. During this same three year period, net sales of domestic Breathe Right products have grown from $57.9
million to $68.4 million, net sales of FiberChoice products have grown from $7.1 million to $12.2 million, and net sales of
International Breathe Right products have declined from $13.8 million to $12.9 million. </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><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Operating Profit.</I> During the past three
fiscal years, we have grown operating profit at a rate which exceeds the growth rate of net sales. This has been achieved through
the increased efficiency of our advertising and promotional campaigns and improvement in our gross profit rate, resulting from
continued reductions in cost of goods sold and stronger growth of higher margin items within our product mix.
</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>• </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>Operating Cash Flow.</I> We are also focused
on growing 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. We are adept at managing an efficient operating model which requires limited
capital expenditures to support our current business. </FONT></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>Critical Accounting Policies and Estimates </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our consolidated financial
statements are prepared in accordance with generally accepted accounting principles (GAAP) in the United Sates of America. In
connection with the preparation of the consolidated financial statements, we are required to make assumptions and estimates about
future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related
disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that
management believes to be relevant at the time the consolidated financial statements are prepared. On a quarterly basis,
management reviews the accounting policies, assumptions, estimates and judgments to ensure our financial statements are presented
fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual
results could differ from our assumptions and estimates, and such differences could be material. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our significant accounting
policies are discussed in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements,
included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Management believes that the
following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results,
and they require management’s most difficult and subjective judgments, resulting from the need to make estimates about the
effect of matters that are inherently uncertain. Management has reviewed these critical accounting policies and estimates with our
independent auditor and the Audit Committee of our Board of Directors. </FONT></P>
<!-- 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><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 trade promotions, estimated sales returns, certain promotional costs and other allowances in the same period as the
related sales are recorded. We must make estimates of potential future product returns and other allowances related to current
period revenue. We analyze historical returns, current trends, and changes in customer and consumer demand when evaluating the
adequacy of the sales returns and other allowances. We have established reserves of $1.4 million for future sales returns and
$263,000 for other allowances as of March 31, 2005. Similarly, we must make estimates of the uncollectability of accounts
receivable. We specifically analyze customer account balances, historical bad debts, current economic trends and changes in the
timing of customer payments. The balance of accounts receivable was $15.0 million, net of the allowance for doubtful accounts of
$183,000, as of March 31, 2005.
</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><I>Inventory Valuation.</I> Inventory is valued
at the lower of cost, determined on a first-in, first-out basis (FIFO), or market. We analyze the cost and the market value of
inventory items and establish the appropriate valuation reserves. We have established a reserve for excess or obsolete inventory
of $545,000 as of March 31, 2005. We believe that the inventory valuation results in carrying inventory at the lower of cost or
market. </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><I>Accounting for Income Taxes.</I> As part of
the process of preparing financial statements, we are required to estimate income taxes, both state and federal. This process
involves 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. We 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, we believe that
it is more likely than not that CNS will realize the benefits of these deductible differences. </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><I>Trade and Consumer Promotions</I>. Our
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. We
have established a liability for trade and consumer promotions of $1.3 million as of March 31, 2005. </FONT></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>Selected Consolidated Statements of Earnings Data and Executive Summary </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the fiscal year ended March 31, 2005 (“fiscal 2005”), we
reported net sales of $93.7 million, up 7.8% versus the prior year. Revenues declined in the first half of fiscal 2005 due to the
early and abrupt end to the domestic cold and flu season, a weak allergy season in Japan and related high levels of inventories in
that market, and the lack of a new product launch. Revenues strengthened significantly during the second half of fiscal 2005 due
to strong demand for domestic nasal strips, driven by the successful relaunch of clear nasal strips including a new advertising
message, and the benefit of a longer cold and flu season compared to the prior year; continued strong demand for FiberChoice
products and the launch of two new FiberChoice items in March 2005; and the resumption of shipments to our distributor in Japan,
where we experienced a strong spring allergy season.</FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating income for fiscal 2005 was $20.1 million, up 57.3% versus the prior
year. Growth in operating income was driven by 7.8% revenue growth, strong improvements in advertising and promotion efficiencies
and a one-time reduction in cost of goods sold of $1.1 million, related to the refund of import duties paid in prior fiscal years.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our financial position remains strong, with cash and marketable securities of
$60.8 million and no debt on our balance sheet as of March 31, 2005. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe the percentage relationship between net sales and major expense
lines in the statement of operations and the percentage change in the dollar amounts of each of the items presented below is
important in evaluating the performance of our business operations. We operate as one business segment and believe the information
presented in our Management’s Discussion and Analysis of Results of Operations and Financial Condition provides an
understanding of our business, operations and financial condition. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<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>% of Net Sales </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>% Increase (Decrease) in<BR>Dollar Amounts </FONT><HR 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=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fiscal Year </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH ROWSPAN=2 COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 vs.<BR>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH ROWSPAN=2 COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 vs.<BR>2003 </FONT><HR 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>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=37% 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=5% 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=5% 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=5% 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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.8</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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.0</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></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>71.5</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>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>11.6</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>13.2</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>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" BGCOLOR="#CCEEFF">
<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>32.6</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>38.1</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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>(7.8</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>7.0</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>17.6</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>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>15.7</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>13.7</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>50.1</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>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>(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>8.9</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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>21.4</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>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>57.3</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>32.3</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></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 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 WIDTH=100%>
<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>Fiscal Year </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>% Change </FONT><HR 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>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 vs.<BR>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 vs.<BR>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></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=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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 68,423</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>6.7</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>10.8</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> 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>12,245</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>31.8</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>31.1</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>197</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>(66.</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5%)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>84.3</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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>80,865</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>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>9.3</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>13.4</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </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" BGCOLOR="#CCEEFF">
<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>2,404</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>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>(45.7</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>(17.4</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>2,223</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>(5.4</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>3.3</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>3,371</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>77.5</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>(6.0</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> 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>1,826</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>33.1</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>18.2</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>3,043</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>4.0</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>(2.5</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></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>12,867</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>(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>(6.1</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 93,732</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>7.8</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>10.0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=18><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<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 Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS achieved consolidated net
sales growth of 7.8% in fiscal 2005 and 10.0% in fiscal 2004. Domestic sales of Breathe Right® branded products grew by 6.7%
in fiscal 2005 and 10.8% in fiscal 2004 due primarily to stronger consumer demand for nasal strips. Breathe Right domestic sales
for the first half of fiscal 2005 were negatively impacted by the early and abrupt end to last year’s cold and flu season and
the lack of a new product launch, but sales strengthened markedly in the second half of the year based on the successful relaunch
of clear nasal strips, combined with a successful new advertising message and a longer cold and flu season. FiberChoice® sales
grew by 31.8% in fiscal 2005 and 31.1% in fiscal 2004. Growth in FiberChoice sales results from continued strong development of
consumer demand, resulting from its unique product benefits, strong levels of advertising and promotion supporting its “fiber
for health” consumer positioning, and the launch of two new FiberChoice items during the March 2005 quarter. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> International sales declined
in both fiscal 2005 and 2004 by 0.8% and 6.1%, respectively. Lower international revenue resulted primarily from lower
shipments to our distributor in Japan, caused by high distributor inventory levels in that market, exacerbated by last year’s
very weak spring allergy season. Growing revenues in Europe, Canada and the fiscal 2005 launch of Breathe Right nasal strips in
Mexico partly offset the declines in sales to Japan. As of March 31, 2005, inventories have been normalized to approximately three
months of sales in the Japanese market, which will allow for future revenues to more closely match consumer demand for nasal
strips in Japan. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During fiscal 2004, we
decided to exit our line of Flair equine products which are included in “other” on the net sales breakdown, shown on the
prior page. Effective April 30, 2004, we terminated our agreements with our distributor of Flair products and the licensor of technology
related to this business. 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> Our gross
profit 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 on-package promotional programs are executed, and the cost of materials and
manufacturing. The gross profit rate for fiscal 2005 was 71.5%, including a one-time reduction to cost of goods sold related to
receipt of an import duty refund of $1.1 million, which was recorded during the December 2004 quarter. The refunded duties had
been properly paid and expensed during fiscal years 2000 to 2004. Excluding this one-time item, the fiscal 2005 gross margin rate
was 70.3% up 1.2 percentage points versus the fiscal 2004 gross margin rate, which was up 2.0 percentage points versus fiscal 2003. The improving gross margin
rates in 2005 and 2004 resulted primarily from lower costs of goods sold including increasing efficiency in procuring and distributing our
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
expense expressed as a percentage of revenue declined to 32.6% in fiscal 2005, down 5.5 percentage points compared
to fiscal 2004, which was down 1.0 percentage point compared to fiscal 2003. Lower advertising and promotion expense in fiscal
2005 was partly related to the lack of a new product launch, compared to the prior two years that included advertising and
promotion investments related to new products. In addition, this reduction in expense as a percentage of net sales is the result
of economies of scale driven by growth of our brands, as well as continuing efforts by our marketing team to develop more
efficient and effective methods of stimulating consumer demand. </FONT></P>
<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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<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- 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 $16.5 million for 2005, up 15.7% compared to the prior year. Selling, general and administrative
expense increased in fiscal 2005 due to higher levels of new product development expense for both the Breathe Right and
FiberChoice brands, as well as increased legal expenses associated with defending our intellectual property assets and increased
cost of regulatory compliance. Selling, general and administrative expense increased 13.7% in fiscal 2004 due to severance and
recruitment costs associated with several changes on our management team. </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
$935,000 for 2005 compared to $725,000 for 2004. The benefit of higher levels of marketable securities and an increase in market
interest rates for municipal obligations more than offset declines in market interest rates for corporate bonds and U.S.
government obligations. The following table compares the average bond equivalent yield of various marketable securities held as of
March 31, 2005 and 2004 (in thousands): </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=11><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Ave. Yield </FONT></TH><TH></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT></TH><TH></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Ave. Yield </FONT></TH></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Municipal obligations</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 41,358</FONT></TD>
<TD WIDTH=5% 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>2.86%</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 15,157</FONT></TD>
<TD WIDTH=5% 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>1.96%</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></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>6,064</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>2.03%</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=CENTER><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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>8,514</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>1.82%</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=CENTER><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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></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> 55,936</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>2.66%</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=CENTER><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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=2></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 our portfolio of marketable securities has decreased to 303 days as of March 31, 2005
compared to 403 days as of March 31, 2004. </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 </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income tax expense was $7.3
million for 2005 compared to $4.9 million for 2004. The effective tax rate for 2005 was 34.7% compared to an effective tax rate in
2004 of 36.6%. The change in the effective tax rate is the result of utilizing foreign export incentives, a change in investment
strategy from taxable corporate and U.S. Government obligations to tax exempt municipal obligations and the resolution of
outstanding refund claims. The following table reconciles the various tax rates to our effective tax rate: </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=6 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=65% 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=7% 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=3% ALIGN=LEFT><FONT FACE="Times 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>2.0</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>2.3</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax exempt investment 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>(0.9</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.1</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Export incentive</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>(0.9</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>.1</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></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>34.7</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>36.6</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></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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<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating 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 profit rates, partly related to the fiscal 2005 one-time reduction to cost of goods sold related to receipt of
an import duty refund of $1.1 million, as well as lower advertising and promotion expense relating to new products introductions
and continued improvement in the efficiency of advertising and promotions provided significant improvement in operating income.
Operating income for fiscal 2005 was $20.1 million, up 57.3% compared to fiscal 2004 operating income, which was up 32.3% compared
to 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>Seasonality </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS has experienced in the
past, and we expect that we will continue to experience in the future, quarterly fluctuations in both domestic and international
sales and earnings. These fluctuations are due in part to the timing of advertising and promotion campaigns and seasonality of
sales, as well as increases and decreases in purchases by distributors and retailers in anticipation of future demand by
consumers. Significant portions of the Breathe Right® product line are used for the temporary relief of nasal congestion and
congestion-related snoring. Sales of these items are higher during the fall and winter seasons, corresponding with our 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> As of March 31, 2005, we have
cash and marketable securities of $60.8 million and no debt on our balance sheet. In addition, we have generated strong and
improving cash from operations in the past three fiscal years, and barring an unforeseen decline in our revenues or operating margins,
we expect future cash flows from operations to continue to be strong and growing. The existing cash and marketable securities may
be used to acquire complementary consumer healthcare businesses, pay dividends to our shareholders and/or, buy back additional
shares of CNS common stock. In summary, we believe that our existing funds will be sufficient to support our planned operations
for the foreseeable future. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Operating
Activities</I>. We generated cash from operating activities of $14.7 million during fiscal 2005 compared to $8.6
million during fiscal 2004, primarily due to the increases in operating income described above. The changes in operating assets
and liabilities in the aggregate had only a minor impact on cash flow for fiscal 2005. For fiscal 2004, cash from operating
activities was driven by net income of $8.5 million, utilization of deferred tax assets of $2.5 million and a use of cash
related to changes in operating assets and liabilities of $3.5 million. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Investing
Activities</I>. During fiscal 2005, we continued to invest excess cash in short term marketable securities in
order to improve our investment return. Purchase of marketable securities exceeded sales and maturities by $15.9 million and $15.6
million in 2005 and 2004, respectively. For 2005, marketable securities purchased consisted primarily of tax exempt municipal
securities which provide a higher after tax yield. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchased $557,000,
$310,000 and $510,000 of product rights during fiscal 2005, 2004 and 2003, respectively. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Financing
Activities</I>. We paid cash dividends during fiscal 2005 of $2.8 million and $1.6 million during fiscal 2004. No
dividends had been paid during fiscal 2003 or prior periods. In making the decision to initiate a cash dividend, our 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>
<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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<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchased 106,000
shares of our common stock for $1.4 million during fiscal 2005. We did not repurchase any shares of our common stock in
2004. These treasury shares will be used to meet future obligations under our employee stock purchase plan and stock option plans,
and for possible future acquisitions. We are authorized to repurchase an additional 425,000 shares of our common stock as of March
31, 2005. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> CNS received $1.9 million and
$1.8 million during fiscal 2005 and 2004 from the exercise of stock options and issuance of stock under the employee stock
purchase plan. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Significant Agreements and
Lease Obligations.</I> We have entered into certain agreements and operating leases in order to secure product
rights and office space. The following is a summary of significant agreements and lease obligations (in thousands):
</FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=80%>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=18><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Payments Due by Period<BR>Fiscal Year </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2006 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2007 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2008 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2009 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2010 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Thereafter </FONT></TH></TR>
<TR>
<TD COLSPAN=21><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="Bottom" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating leases</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>766</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>741</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>495</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH=26% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum royalties</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 850</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 850</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 850</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 850</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 850</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=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="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase 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>11,586</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,068</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=21><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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> 13,214</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,684</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,591</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,591</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,591</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> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=21><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have 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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have entered into
operating leases for office space and office equipment. Leases expire at various dates beginning in 2007 through 2010. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Management is not aware of
any significant agreements or obligations that would have a material negative impact upon our short-term or
long-term liquidity. </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><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="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 2004, the FASB
issued Statement of Financial Accounting Standards (“SFAS”) 151, “Inventory Costs: an amendment to Accounting
Research Bulletin (“ARB”)” 43, to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. The provisions of the interpretation are effective for our financial
statements for periods beginning April 1, 2006. We do not anticipate a material impact from the adoption of this
accounting standard. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In December 2004, the FASB
issued SFAS 123R, “Share-Based Payment: an amendment of FASB Statements No. 123 and 95", which requires companies to
recognize in the income statement the grant-date fair value of stock options and other equity-based compensation issued to
employees. The provisions of the interpretation are effective for our financial statements for periods beginning
April 1, 2006. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<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> We make written and oral
statements from time to time regarding our business and prospects, such as projections of future performance, statements of
management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,”
“is anticipated,” “estimates,” “projects,” “believes,” “expects,”
“anticipates,” “intends,” “target,” “goal,” “plans,” “objective,”
“should” or similar expressions identify forward-looking statements, which may appear in documents, reports, filings
with the Securities and Exchange Commission, news releases, and written or oral presentations made by our authorized officers or
other representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our future results, including
results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the
results reflected in any forward-looking statements will be achieved. Any forward-looking statement made by or on behalf of us
speaks only as of the date on which such statement is made. We do not undertake any obligation to update or keep current either
(i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or
(ii) the important factors that could cause our future results to differ materially from historical results or trends,
results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement which may be made
by or on behalf of us. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In addition to other matters
identified or described by us from time to time in filings with the Securities and Exchange Commission, there are several
important factors that could cause our future results to differ materially from historical results that are reflected from time to
time in any forward-looking statement that may be made by or on behalf of us. Some of these important factors include the
following: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We depend upon sales of our Breathe Right nasal strip for the majority of
our revenues.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales from our Breathe Right
nasal strips accounted for 79.7%, 77.0% and 79.9% of our revenues during the fiscal years ended March 31, 2005, 2004 and 2003,
respectively. As a result, our success is substantially dependent upon the success of our Breathe Right nasal strip products. If
we are unable to successfully create sustained demand for our Breathe Right nasal strip products and introduce new Breathe Right
nasal strip products to generate additional sales, our business, financial condition and results of operations will be materially
and adversely affected. Effective marketing and advertising drive sales of Breathe Right nasal strips and therefore, our success
will also depend significantly on our ability to effectively market our Breathe Right nasal strips to consumers. Further, higher
than expected manufacturing, marketing and distribution costs, mild cold and flu seasons, lower than expected customer acceptance
of new products and competitive forces may require us to alter our pricing or marketing structure in a manner that could have a
material and adverse effect on us or otherwise adversely affect our sales of Breathe Right nasal strip products. </FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our business is subject to seasonality that may cause our quarterly
operating results to fluctuate materially and cause the market price of our common stock to decline.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales of our Breathe Right
products are seasonal in nature with consumer demand generally higher during the cold and flu season and dependent upon the
severity of the cold/flu season. The cold and flu season corresponds with the third and fourth quarters of each of our fiscal years.
Therefore, we will typically experience periods of increased revenues during the third and fourth quarter.
Additionally, because consumer demand for our Breathe Right nasal strip is tied to the severity of the cold/flu season, our
revenues from sales of our Breathe Right products will be adversely affected by a mild cold/flu season. However, because the
length and severity of the season is difficult to anticipate, we cannot estimate the fluctuation of our sales from quarter to
quarter in a fiscal year or the impact of the cold/flu season year to year. If our operating results are below financial
analysts’ or investors’ expectations due to seasonality factors, the market price of our common stock may decline.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our future growth will depend in part upon our ability to develop and achieve
sales of new products.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> One element of our
growth strategy is focused on successful development of new products, including new products under the Breathe Right and Fiber
Choice brand names. We may develop new products internally or through acquisition of products or product rights from other
companies. We cannot assure you that we will successfully develop any new products. Further, in developing new products, we will
incur additional research and development and marketing expenses and, if acquired from another company, additional expense
associated with acquisition and integration of these products into our existing business. Our success in this area will depend upon cost
effective development of new products. Revenues, if any, that we generate from new products may not be sufficient to recoup the
expenses we will incur in the development of new products. Consumers may be slow to accept our new products, if at all, and
therefore, we cannot assure you that we will generate sales from any new products we develop. If we cannot successfully develop
new products and achieve sales of our new products, our financial performance and results of operations will be adversely
affected. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>If our domestic or international intellectual property rights are not
adequately protected, others may offer products similar to ours which could depress our product selling prices and gross profit
margins or result in loss of market share.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe that protecting
our proprietary technology is important to our success and competitive positioning. In addition to common law intellectual
property rights, we rely on patents, trade secrets, trademarks, copyrights, know-how, license agreements and contractual
provisions to establish and protect our intellectual property rights. However, these legal means afford us only limited protection
and may not adequately protect our rights to keep any advantages we may have over our competitors. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We cannot assure you that
others may not independently develop the same or similar technologies incorporated into our products, including technologies
relating to external nasal dilator products, even if these technologies are the subject of our patents, patent applications or
licenses. We have a license to the exclusive worldwide rights to manufacture and sell nasal strips in its various versions and
chewable fiber supplements. Although we believe that our owned and licensed patents will limit the ability of others to introduce
competitive products in the United States, there can be no assurance that the patents on the nasal strip or the chewable fiber
supplements, or any additional patents on these or other products that may be issued in the future, if any, will effectively
foreclose the development or sale of competitive products or that we will have sufficient resources to pursue enforcement of any
patents issued. </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: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Additionally, we have engaged
in litigation to enforce our patent rights relating to our nasal strip technologies. In 1999, we brought suit in federal district
court to enforce our rights under U.S. Patent No.5,533,499 (the ” ‘499 Patent”), one of the licensed nasal strip
patents containing the broadest claims relating to the nasal strip. In the course of this suit, the defendant requested
reexamination in the U.S. Patent and Trademark Office (the “Patent Office”) of the claims of the ‘499 Patent and on
January 21, 2005, we received a determination from the Patent Office that the ‘499 Patent has significant allowable claims.
We are seeking, with the licensor of the ‘499 Patent, to amend certain claims of the ‘499 Patent to provide us with
additional protection under the ‘499 Patent. We believe that the allowable claims of the ‘499 Patent, if and when
reissued, will enable us to maintain significant patent protection for our nasal strip products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In February 2004, we,
together with Creative Integration & Design, Inc., sued Silver Eagle Labs, Inc. (“Silver Eagle”) 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 us. The two patents at issue are U.S. Patent No. 6,318,362 (the ” ‘362
Patent”) and U.S. Patent No. 3,533,503 (the ” ‘503 Patent”). The suit seeks injunctive relief, damages,
enhanced damages for willful infringement, attorneys’ fees and costs. Silver Eagle has counterclaimed for a declaration that
the ‘362 Patent and ‘503 Patent are invalid and not infringed and asks for its attorneys’ fees and costs. In the
course of this suit, Silver Eagle requested reexamination of the ‘362 Patent and the ‘503 Patent. In response to the
reexamination by the Patent Office, on November 29, 2004, the Court issued an order staying our suit against Silver Eagle pending
the reexamination. We have not yet received information that the Patent Office has acted on the reexamination of the ‘362
Patent and ‘503 Patents. The final outcome of the reexamination by the Patent Office of the ‘362 Patent and ‘503
Patent is uncertain. An adverse ruling from the Patent Office would narrow the protection available for nasal dilators, limit the
breadth of our patent protection and may increase the likelihood that competitors will introduce competitive external nasal
dilator products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Further, our competitors,
many of which have substantial resources and may make substantial investments in competing technologies, may apply for and obtain
patents that will prevent, limit, or interfere with our ability to manufacture or market our products. While we do not believe
that any of our products or processes interfere with the rights of others, third parties may nonetheless assert patent
infringement claims against us in the future. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Additional costly litigation
may be necessary to enforce patents issued to us, to protect trade secrets or “know-how” we own, to defend us against
claimed infringement of the rights of others or to determine the ownership, scope, or validity of our proprietary rights and the
rights of others. Any claim of infringement against us may involve significant liabilities to third parties, could require us to
seek licenses from third parties, and could prevent us from manufacturing, selling, or using our products. The occurrence of this
litigation, or the effect of an adverse determination in any of this type of litigation, could have a material adverse effect on
our business, financial condition and results of operations. Further, the laws of some of the countries in which our products are
or may be sold may not protect our products and intellectual property to the same extent as the United States or at all. Our
failure to protect or enforce our intellectual property rights could have a material adverse effect on our business, results of
operations and financial condition. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our market is highly competitive and many of our competitors have
substantial resources. Competition may result in price reductions, lower gross profits and loss of market share.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We face significant
competition in developing and selling our nasal decongestant products and dietary fiber supplement products in both the U.S. and
in foreign markets. Our Breathe Right nasal strip, Breathe Right VaporShot! personal vaporizer and Breathe Right Snore Relief
throat spray compete in the consumer market with decongestant products and other cold, allergy and sinus relief products
consisting primarily of pharmaceutical products sold over the counter, other nasal sprays and external nasal dilators, throat
sprays, herbs, supplements and homeopathic remedies. Additionally, we will compete with prescription nasal decongestants. We
compete with these other products on the basis of numerous factors including brand recognition, product quality, efficacy, price
and product availability at the retail store. If consumers perceive any product that competes with ours as more effective, more
reliable, less expensive or having other advantages, the demand for our products could decrease.</FONT></P>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Although we are currently the
leading manufacturer of external nasal dilation products, Schering Plough Corp. entered the market in September 1998 with an
external nasal dilation device. 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. Our FiberChoice product competes with Metamucil® manufactured by Proctor and Gamble, Citrucel®
manufactured by GlaxoSmithKline, Benefiber manufactured by Novartis and FiberCon® manufactured by Wyeth. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We cannot assure you that we
will be able to compete successfully against our current or future competitors. Many of our competitors are significantly larger
than we are and have greater financial, technical, research, marketing, sales, distribution and other resources than we do.
Additionally, large, well-known, well-financed companies may enter into our markets. Increased competition from other companies
may force us to reduce the prices of our products, decrease our gross profit margins, increase discounts to distributors and
result in loss of our market share and could require increased spending by us on research and development and sales and marketing.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We rely on third-party manufacturers for our product with the raw
materials for our Breathe Right nasal strip being supplied by a single-source supplier. Any failure of these parties to deliver
our products or raw materials would cause delays, increase our costs or prevent us from completing customer orders.</B>
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Breathe Right nasal
strips are manufactured for us by a limited number of manufacturers using raw materials supplied by a single supplier, 3M Company.
Our other Breathe Right brand products and our FiberChoice products are manufactured for us by a limited number of manufacturers
using raw materials supplied by multiple suppliers. If 3M Company is unable to ship the critical raw materials for our Breathe
Right nasal strip, our manufacturers would be unable to manufacture our products, and therefore CNS would be unable to ship
products to our customers and distributors. If the price of raw materials increases for any reason, or if our suppliers are unable
or unwilling to deliver raw materials, we may have to find an alternative source, which could result in interruptions, increased
costs, delays, loss of sales and quality control problems. Further, if our manufacturers were unable to manufacture our products
for any reason, our customers and distributors would experience delays in receipt of orders of our product. The termination or
interruption of any of these relationships, or the failure of these manufacturers or suppliers to supply products or materials
consistent with our requirements as to quality, quantity and timeliness, likely would cause shortages of our products, delays in
fulfilling orders for our products and harm our reputation and our business by causing delays, loss of sales, increases in costs
and lower gross profit margin. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our sales will decline and our business will be materially harmed if there
is any loss of any significant retailer or any reduction, delay or cancellation of orders from any significant retailer.</B>
</FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our retail customers include
national chains of mass merchants, drug stores and grocery stores, warehouse clubs and regional and independent stores in the
retail channels. In the years ended March 31, 2005, 2004 and 2003, Wal-Mart accounted for approximately 31%, 32% and 29% of our
sales, respectively. The loss of this customer or any other large retailer would have a negative impact on our operating results.
While we would attempt to replace the lost sales through other retail outlets, we cannot assure you that we would be able to
replace any lost sales. Because we typically do not enter into long-term contracts with our customers but rather fulfill demand
for our products upon individual sales orders, our customers could cease buying our products from us at any time and for any
reason. The loss of any major retailer would disrupt distribution of our products and result in a loss of revenue. If a
significant number of our customers cease purchasing products from us, our business would be materially and adversely harmed.
Further, any significant reduction or delay in the historical level of orders from our customers, cancellation of orders from any
significant retailer or any significant decrease in our retail display space in any of these customers’ stores would have a
negative impact on our operating results.</FONT></P>
<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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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We sell a significant portion of our products internationally, which
exposes us to risks associated with foreign operations.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We sell a significant amount
of our products to customers outside the United States, particularly in Europe and Asia. International sales accounted for 14%,
15%, and 17% of our revenue for the years ended March 31, 2005, 2004 and 2003, respectively. We expect that shipments to
international customers, including customers in Europe and Asia, will continue to account for a significant portion of our net
sales. Sales outside the United States involve the following risks, among others: </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>foreign governments may impose tariffs, quotas and taxes;
</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>• </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 demand for our products will depend, in part, on local
economic health; </FONT></TD>
</TR>
</TABLE>
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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>expense in developing advertising and marketing campaigns targeted
to consumers in foreign countries; </FONT></TD>
</TR>
</TABLE>
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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>political and economic instability may reduce demand for our products; </FONT></TD>
</TR>
</TABLE>
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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>potentially limited intellectual property protection in certain countries may limit our recourse against infringing products or cause us to refrain from selling our products in certain markets; </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>• </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>regulatory restrictions may require additional qualification or testing, resulting in further cost and delay in reaching the related markets; </FONT></TD>
</TR>
</TABLE>
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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>we may face difficulties in managing our international distributors, customers or service partners; </FONT></TD>
</TR>
</TABLE>
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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>the burden and cost of complying with a variety of foreign laws; </FONT></TD>
</TR>
</TABLE>
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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>we may be exposed to fluctuations in foreign currency exchange rates; </FONT></TD>
</TR>
</TABLE>
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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>our contracts with foreign distributors and resellers cannot fully protect us against political and economic instability; </FONT></TD>
</TR>
</TABLE>
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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>we may face difficulties in collecting receivables; and </FONT></TD>
</TR>
</TABLE>
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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>we may not be able to control our international distributors’ efforts on our behalf. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> While most of our sales are
made in U.S. dollars, some are conducted in the local currencies of foreign countries. These foreign currencies are translated
into U.S. dollars for the balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue
and expense accounts using a weighted average exchange rate during the fiscal year. Gains and losses resulting from transactions
denominated in foreign currencies are included in our consolidated statements of operations. Currency fluctuations may adversely
affect our financial performance and also may increase the relative price of our product in foreign markets and thereby could also
cause our products to become less affordable or less price competitive than those of foreign manufacturers. These risks associated
with foreign operations may have a material adverse effect on our revenue from, or costs associated with, international sales.
</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our business and our products are subject to governmental
regulation, which could have a significant negative effect upon our business.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Nasal dilators, such as our
Breathe Right nasal strips, have been classified by the Food and Drug Administration (“FDA”) as Class I medical devices.
Our Breathe Right nasal strip products are subject to extensive regulation regarding manufacturing, packaging, labeling,
distribution, importation, sale and storage by various federal agencies, including the FDA, the Federal Trade Commission (the
“FTC”), the Consumer Product Safety Commission, the Environmental Protection Agency and by various agencies of the
states, localities and foreign countries in which our products are manufactured, distributed and sold. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our FiberChoice dietary fiber
supplement is in a category of products commonly referred to for regulatory purposes as “dietary supplements.” Under the
Dietary Supplement Health and Education Act (“DSHEA”), dietary supplements are not subject to pre-market approval by the
FDA. However, the manufacturing, packaging, labeling, advertising, distribution and sale of dietary supplement products is subject
to regulation by federal, state and local governmental agencies, including the FDA and the FTC. Among other matters, regulation by
the FDA and FTC is concerned with product safety and claims made with respect to a product’s ability to provide
health-related benefits. </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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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our third-party manufacturers
are also subject to governmental regulation in the manufacture of our products, including compliance with rules regarding
packaging, labeling and manufacturing practices and equivalent state and foreign regulations. Our manufacturers are subject to
periodic inspection to determine if they are complying with the rules regarding packaging, labeling and manufacturing. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Furthermore, we also are
subject to a variety of other regulations in various foreign markets, including regulations pertaining to import/export
regulations. To the extent we decide to commence or expand operations in additional countries, government regulations in those
countries may prevent or delay entry into or expansion of operations in those markets. In addition, our ability to sustain
satisfactory levels of sales in our markets is dependent in significant part on our ability to introduce additional products into
the markets. However, government regulations in both our domestic and international markets can delay or prevent the introduction,
or require the reformulation or withdrawal, of some of our products. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our failure or the failure of
our manufacturers to comply with local, state, federal or foreign regulations could lead to the imposition of significant civil
and criminal fines, product recalls, detentions, seizures, injunctions and criminal prosecutions, suspension of product sales or
manufacturing, change product design or formulation, or changes product labeling, packaging or advertising or require us to take
other corrective action, any of which would materially adversely affect our business. Further, violation of these regulations or
the assertion of a violation of these regulations could have a material adverse effect on our reputation and the reputation of our
products, which could materially damage our business. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Further, the regulatory
environment in which we operate is continually changing. Future changes in regulations or enforcement policies could impose more
stringent requirements on us, compliance with which could adversely affect our business. These changes could also prove beneficial
to our competitors and thus, adversely affect our business. In addition, regulations of the FDA and state and foreign laws and
regulations depend heavily on administrative interpretations. We cannot assure you that future interpretations made by the FDA, or
other regulatory authorities, with possible retroactive effect, will not adversely affect our business, financial condition and
results of operations. It is not possible to assess the likelihood that the laws affecting our products and business will change,
or to predict whether such changes, if they occur, will have a material effect on us. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our business of the manufacturing, marketing, and sale of our products
involves the risk of liability claims and such claims could seriously harm our business, particularly if our insurance coverage is
inadequate.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our business exposes us to
potential product liability claims that are inherent in the testing, production, marketing and sale of our products. Like other
participants in these markets, we may from time to time be involved in lawsuits, claims and proceedings alleging product liability
and related claims such as negligence. If product liability claims become substantial, our reputation could be damaged
significantly, thereby harming our business. We may be required to pay substantial damage awards as a result of any successful
product liability claims. Any product liability claim against us, whether with or without merit, could result in costly
litigation, and divert the time, attention, and resources of our management. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As a result of our exposure
to product liability claims, we currently carry product liability insurance covering our products with policy limits per
occurrence and in the aggregate that we have deemed to be sufficient. We cannot predict, however, whether this insurance is
sufficient, or if not, whether we will be able to obtain sufficient insurance to cover the risks associated with our business or
whether such insurance will be available at premiums that are commercially reasonable. In addition, these insurance policies must
be renewed annually. Although we have been able to obtain product liability insurance, such insurance may not be available in the
future on acceptable terms, if at all. A successful claim against us or settlement by us in excess of our insurance coverage or
our inability to maintain insurance in the future could have a material adverse effect on our business, results of operations,
liquidity and financial condition. </FONT></P>
<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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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>If we are required to, or voluntarily, recall our products, our reputation and
our business could be materially harmed.
</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The U.S. Food and Drug
Administration and similar governmental authorities in other countries in which our products are sold, have the authority to
request and, in some cases, require the recall of our products in the event of material deficiencies or defects in design or
manufacture. A government-mandated or voluntary recall by us could occur as a result of product functionality, manufacturing
errors or design defects. Any recall of product would divert managerial and financial resources, harm our reputation with our
customers and damage our business. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Fluctuations in our future operating results may negatively affect the
market price of our common stock. </B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have experienced
fluctuations in our quarterly operating results and we expect those fluctuations to continue due to a variety of factors. Some of
the factors that influence our quarterly operating results include: </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>seasonality of demand for our products; </FONT></TD>
</TR>
</TABLE>
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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>severity of the cold and flu season; </FONT></TD>
</TR>
</TABLE>
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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>timing of the cold and flu season in the United States, Europe and Asia; </FONT></TD>
</TR>
</TABLE>
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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>the number and mix of products sold in the quarter; </FONT></TD>
</TR>
</TABLE>
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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>the availability and cost of materials; </FONT></TD>
</TR>
</TABLE>
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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>timing, costs and benefits of new product introductions; </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>• </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>customer order size and shipment timing; </FONT></TD>
</TR>
</TABLE>
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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>promotions by ourselves or competitors, and the timing of the advertising and promotion expense; </FONT></TD>
</TR>
</TABLE>
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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>the impact to the marketplace of competitive products and pricing; and </FONT></TD>
</TR>
</TABLE>
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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>the timing and level of operating expenses. </FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Because of these factors, our
quarterly operating results are difficult to predict and are likely to vary in the future. If our operating results are below
financial analysts’ or investors’ expectations, the market price of our common stock may fall abruptly and
significantly. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We are dependent on key personnel.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our future success depends,
in significant part, upon the continued service and performance of our senior management and other key personnel, in particular
Marti Morfitt, our Chief Executive Officer. The loss of Ms. Morfitt’s services could impair our ability to effectively
manage our company and to carry out our business plan. We have an employment agreement with Ms. Morfitt that provides that
Ms. Morfitt will serve as our Chief Executive Officer and that either party may terminate Ms. Morfitt’s employment at any
time with or without cause. However, if we terminate Ms. Morfitt’s employment without cause, we would be required to make
specified payments to her as described in her employment agreement. The other members of our management team also have significant
experience in our industry and the loss of any other member of our other senior management could likewise impair our ability to
effectively manage our company and carry out our business plan. We do not carry key person life insurance on any of our
executive officers. In addition, competition for skilled employees in our industry is intense. Our future success also
depends on our continuing ability to attract, retain and motivate highly qualified managerial, technical and sales personnel. Our
inability to retain or attract qualified personnel could have a significant negative effect and materially harm our business and
financial condition. </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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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our stock price may be volatile and a stockholder’s investment could
decline in value.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our stock price has
fluctuated in the past and may continue to fluctuate significantly, making it difficult for an investor to resell shares or to
resell shares at an attractive price. The market prices for securities of companies with relatively small capitalization, like us,
have historically been highly volatile. Future events concerning us or our competitors could cause such volatility, including:
</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>actual or anticipated variations in our operating results; </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>• </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>new innovations in existing products or new products introduced by us or our competitors; </FONT></TD>
</TR>
</TABLE>
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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>developments concerning proprietary rights; </FONT></TD>
</TR>
</TABLE>
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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>changes in senior management; </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>• </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>investor perception of us and our industry; </FONT></TD>
</TR>
</TABLE>
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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>general economic and market conditions including market uncertainty; </FONT></TD>
</TR>
</TABLE>
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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>national or global political events; and </FONT></TD>
</TR>
</TABLE>
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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>public confidence in the securities markets and regulation by or of the securities markets. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In addition, the stock market
is subject to price and volume fluctuations that affect the market prices for companies in general, and small-capitalization,
high-technology companies in particular, which are often unrelated to the operating performance of these companies. In addition to
fluctuations unrelated to our financial performance, our failure to meet expectations of financial analysts and investors will
likely cause a decline in the price of our common stock. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Future sales of shares of our common stock in the public market may
negatively affect our stock price.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future sales of our common stock, or the perception that these sales could
occur, could have a significant negative effect on the market price of our common stock. In addition, upon exercise of outstanding
options and warrants, the number of shares outstanding of our common stock could increase substantially. This increase, in turn,
could dilute future earnings per share, if any, and could depress the market value of our common stock. Dilution and potential
dilution, the availability of a large amount of shares for sale, and the possibility of additional issuances and sales of our
common stock may negatively affect both the trading price of our common stock and the liquidity of our common stock. These sales
also might make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price
that we would deem appropriate. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Provisions of Delaware law, our bylaws and other agreements may deter a
change of control of us and may have a possible negative effect on our stock price.</B> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Certain provisions of
Delaware law, our bylaws and other agreements may make it more difficult for a third party to acquire, or discourage a third party
from attempting to acquire, control of us, including: </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>the provisions of Delaware law relating to business combinations and control share acquisitions; </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>• </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 provisions of our bylaws regarding the business properly brought before stockholders; </FONT></TD>
</TR>
</TABLE>
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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>the right of our board of directors to establish more than one class or series of shares and to fix the relative rights and preferences of any such different classes or series; </FONT></TD>
</TR>
</TABLE>
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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>our stockholder rights plan, which would cause substantial dilution to any person or group attempting to acquire our company on terms not approved in advance by our board of directors; and </FONT></TD>
</TR>
</TABLE>
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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>the provisions of our stock option plans allowing for the acceleration of vesting or payments of awards granted under the plans in the event of specified events that result in a “change in control” and provisions of agreements with certain of our executive officers requiring payments if their employment is terminated and there is a “change in control.” </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> These measures could
discourage or prevent a takeover of us or changes in our management, even if an acquisition or such changes would be beneficial to
our stockholders. This may have a negative effect on the price of our common stock. </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>
<!-- 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_7a">Item 7A.</A> QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our market risk exposure is primarily interest rate risk
related to our cash and cash equivalents and investments in marketable securities. We have an investment policy that
limits the types of securities in which we 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, 2005 was 303 days. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The table below provides
information about our cash and cash equivalents and marketable securities as of March 31, 2005: </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>(in thousands)</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>Cost </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair<BR>Value </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=6><HR SIZE=1 COLOR=BLACK NOSHADE></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 34,599</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 34,483</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>21,717</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,453</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=6><HR SIZE=1 COLOR=BLACK NOSHADE></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,316</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 55,936</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=6><HR SIZE=1 COLOR=BLACK NOSHADE></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"><U><A NAME="item_8">Item 8.</A> FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</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, 2005 and 2004, and the related Consolidated Statements of Operations, Stockholders’
Equity and Comprehensive Income, and Cash Flows for each of the years ended March 31, 2005, 2004 and 2003, the Notes to the
Consolidated Financial Statements and the Reports of Independent Registered Public Accounting Firm, are listed under Item 15.
Exhibits and Financial Statement Schedules of this Report. </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_9">Item 9.</A> CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </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_9a">Item 9A.</A> CONTROLS AND PROCEDURES</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosure Controls and
Procedures </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
Company’s Chief Executive Officer, Marti Morfitt, and Chief Financial Officer, Samuel
Reinkensmeyer, have evaluated the Company’s disclosure controls and procedures as of the
end of the period covered by this report. Based upon that evaluation, they have
concluded that as of such date, the Company’s disclosure controls and procedures
are effective. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes in Internal
Control Over Financial Reporting </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There
have been no changes in internal control financial reporting that occurred during the
fiscal period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting. </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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<BR>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><A NAME="item_9b">Item 9B.</A> OTHER INFORMATION</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We
entered into a letter agreement with Nicole C. Strait dated January 31, 2005 in
connection with her appointment as our Vice President of Human Resources, which letter
agreement is attached to this form 10-K as Exhibit 10.19. This letter agreement contains
provisions regarding, among other things, termination of employement and change in
control. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Additionally,
in connection with our appointment of Susan Horvath as Vice President, International, we
entered into a memorandum agreement with her dated June 1, 2005, which memorandum
agreement is attached to this Form 10-K as Exhibit 10.20. This memorandum agreement
contains provisions regarding, among other things, termination of employement and change
in control. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Effective June 7, 2005, we
entered into an Amended and Restated Employment Agreement with Daniel E. Cohen, our Chairman, attached to this Annual Report on
Form 10-K as Exhibit 10.21. The Amended and Restated Employment Agreement contains the same terms as our prior
employment agreements with Mr. Cohen, as amended, but extends the term of his employment an additional year to June 30, 2006.
</FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III </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_10">Item 10.</A> DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</U> </FONT> </H1>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Directors </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following sets forth
certain information with respect to our directors. Please see Item 1. Business – Executive Officers of the
Company for biographical information for Daniel E. Cohen, our Chairman and a director and Marti Morfitt,
our Chief Executive Officer and a director: </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Karen T. Beckwith</I>, 45,
has served as our director 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 President and
Chief Executive Officer of the Trade Management Group division. 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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Patrick Delaney</I>, 62,
has served as our director since 1983 and as our 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 an author and serves on the board of a number of privately-held companies. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Andrew J.
Greenshields</I>, 68, has served as our director 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>
<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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<!-- MARKER PAGE="sheet: 18; page: 18" -->
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>H. Robert
Hawthorne</I>, 61, has served as our director 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>Richard W. Perkins</I>,
75, has been our director 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>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>Morris J. Siegel</I>, 56,
has served as our director 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; a director of Camelbak Corp., an outdoor sporting goods company; and Avid Health Corp., a
manufacturer of vitamins. </FONT></P>
<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 our Proxy Statement for the Annual Meeting of Stockholders
to be held on August 30, 2005 (the “2005 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>
<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<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">Item 11.</A> EXECUTIVE COMPENSATION</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 our 2005 Proxy Statement and
is incorporated herein by reference. </FONT></P>
<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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<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
our 2005 Proxy Statement and is incorporated herein by reference. </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_13">Item 13.</A> CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</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 our
2005 Proxy Statement and is incorporated herein by reference. </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_14">Item 14.</A> PRINCIPAL ACCOUNTANT FEES AND SERVICES</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 our 2005
Proxy Statement and is incorporated herein by reference. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<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 AND FINANCIAL STATEMENT SCHEDULES</U> </FONT> </H1>
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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>(a) </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>Documents filed as part of this Report: </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<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=1 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Form 10-K<BR>Page Reference </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
<TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </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=49% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statements.</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=5% ALIGN=CENTER><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=25% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD> </TD>
</TR>
<tr valign=Bottom>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management's Report on Internal Control over Financial Reporting</FONT></td>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1</FONT></td>
<td align=LEFT></td>
<td align=LEFT></td>
</tr>
<tr valign=Bottom>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=LEFT></td>
<td align=CENTER></td>
<td align=LEFT></td>
<td align=LEFT></td>
</tr>
<TR><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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent Registered Public Accounting Firm</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> March 31, 2005, 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-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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Balance Sheets as of March 31, 2005 and 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=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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income for the Years Ended March 31, 2005, 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-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>
<TR>
<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=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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> March 31, 2005, 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-7</FONT></TD><TD ALIGN=LEFT><FONT 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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<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-8</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD> </TD>
</TR>
<TR VALIGN=Bottom>
<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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statement Schedules.</FONT></TD><TD ALIGN=LEFT><FONT 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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See Schedule II of Valuation and Qualifying Accounts on the page</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> following Exhibit Index.</FONT></TD><TD ALIGN=LEFT><FONT 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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits.</FONT></TD><TD ALIGN=LEFT><FONT 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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See “Exhibit Index” on the page following the Signature Page.</FONT></TD><TD ALIGN=LEFT><FONT 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><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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<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 10, 2005 </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>
<!-- 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 Large Indent" FSL="Default" -->
<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 10, 2005 on behalf of the
Registrant in the capacities indicated. </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>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<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>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<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>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<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>36 </FONT></P>
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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/ 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><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37 </FONT></P>
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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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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.09** </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>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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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>38 </FONT></P>
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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment Agreement between the Company and John J. Keppeler
dated February 12, 1999 (incorporated by referenced to Exhibit 10.13 to the 1998 Form 10-K). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter Agreement between the Company and Samuel E.
Reinkensmeyer dated September 18, 2003 (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on
Form 10-K for March 31, 2004 (the “2004 Form 10-K”)). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment Agreement between the Company and Samuel E.
Reinkensmeyer dated October 15, 2003 (incorporated by reference to Exhibit 10.27 to the 2004 Form 10-K).
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.17 </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>Lease Agreement between the Company and Liberty Property Limited
partnership dated December 19, 2004 (incorporated by reference to Exhibit 10.30 to the 2004 Form 10-K) </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.18* </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>Employment Agreement between the Company and Marti Morfitt dated
July 20, 2004 (incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2004). </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter Agreement between the Company and Nicole C. Strait dated January 31, 2005. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Memorandum
Agreement between the Company and Sue Horvath dated June 1, 2005. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended
and Restated Employment Agreement between the Company and Daniel E. Cohen dated as of
June 7, 2005. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Independent Registered Public Accounting Firm </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=10%><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=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Powers of Attorney (included on signature page hereof). </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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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<TD WIDTH=10%><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=90%><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>_________________ </P>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*Indicates Compensatory Agreement </FONT></P>
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<P><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>39 </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
<BR>ON FINANCIAL STATEMENT SCHEDULE </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Stockholders
<BR>CNS, Inc. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under date of June 3, 2005, we reported on the consolidated balance sheets of
CNS, Inc. as of March 31, 2005 and, 2004, and the related consolidated statements of operations,
stockholders’ equity and comprehensive income, and cash flows for each of the fiscal years in the three-year period ended
March 31, 2005, as contained in the 2005 Annual Report on Form 10-K to stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form 10-K for the year 2004. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the related financial statement schedule. This financial
statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the
information set forth therein. </FONT></P>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP </FONT></P>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota
<BR>June 3, 2005 </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40 </FONT></P>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CNS, INC.</B>
<BR><A NAME="schedule_ii__valuation_and_qualifying_accounts">Schedule II – Valuation and Qualifying Accounts </A>
<BR>(in thousands) </FONT> </P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Allowance for doubtful accounts:</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=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>
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 380</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
<TD ALIGN=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" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Provision/adjustment to 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>(66</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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> Bad debt write-offs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(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>(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=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 380</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reserve for excess or obsolete inventory</FONT></TD><TD ALIGN=LEFT><FONT 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 551</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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> 506</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Provision/adjustment to 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>105</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>855</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Charge offs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(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>(477</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(694</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 545</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 551</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 667</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
<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>41 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING </FONT></H1>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our
management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s
internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that: </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>(i) </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>pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; </FONT></TD>
</TR>
</TABLE>
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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>(ii) </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>provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and </FONT></TD>
</TR>
</TABLE>
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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>(iii) </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>provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the financial statements. </FONT></TD>
</TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Because
of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may
deteriorate. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Under
the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in
<I>Internal Control – Integrated Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation under the framework in
<I>Internal Control – Integrated Framework</I>, our management concluded that our internal control
over financial reporting was effective as of March 31, 2005. </FONT> </P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our
management’s assessment of the effectiveness of our internal control over financial
reporting as of March 31, 2005, has been audited by KPMG LLP, the independent registered
public accounting firm that audited the consolidated financial statements in this
Form10-K, as stated in their report, which is included herein. </FONT></P><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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<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="report_of_independent_registered_public_accounting_firm">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 management’s assessment, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting that CNS, Inc. maintained effective internal control over
financial reporting as of March 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). CNS, Inc.’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the
effectiveness of the Company’s internal control over financial reporting 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 audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing
and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides 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>A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, management’s assessment that CNS, Inc. maintained
effective internal control over financial reporting as of March 31, 2005, is fairly stated, in all material respects, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Also, in our opinion, CNS, Inc. maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of CNS, Inc. and subsidiaries as of March 31, 2005 and
2004, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows
for each of the years in the three-year period ended March 31, 2005, and our report dated June 3, 2005 expressed an unqualified
opinion on those consolidated financial statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG
LLP </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT ><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota
<BR>June 3, 2005 </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>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM </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, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and
comprehensive income, and cash flows for each of the years in the three-year period ended March 31, 2005. 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, 2005 and 2004, and
the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2005, in
conformity with U.S. generally accepted accounting principles. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of CNS, Inc.’s internal control over financial reporting as of
March 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated June 3, 2005 expressed an unqualified opinion on
management’s assessment of, and the effective operation of, internal control over financial reporting. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP
</FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota
<BR>June 3, 2005 </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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<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>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=52% 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=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>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 93,732</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 86,980</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=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 79,075</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>26,704</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>67,028</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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>30,515</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>16,462</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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>46,977</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>20,051</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR><TD> </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>935</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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>20,986</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>7,284</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><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> 13,702</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .98</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .48</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common shares outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,972</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,576</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,467</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .93</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<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>14,758</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></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><BR><BR><BR><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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<!-- MARKER PAGE="sheet: 18; page: 18" -->
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<!-- 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 Balance Sheets
<BR>(in thousands, except per share amounts) </FONT></P>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<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 SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD COLSPAN=1 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Assets</FONT></TD><TD></TD><TD></TD>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=73% 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=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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=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" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,814</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></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>55,936</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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 VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD colspan=9 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts receivable, net of allowance for doubtful accounts</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> of $183 in 2005 and $380 in 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>15,030</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>4,531</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>1,968</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>1,435</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total current assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>83,714</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR><TD> </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>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>1,562</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>1,360</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>1,107</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,023</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 87,215</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 73,534</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liabilities and Stockholders’ Equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,770</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> 6,970</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>7,177</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>1,117</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total current liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,064</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR><TD> </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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Preferred stock – authorized 8,484 shares;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<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" BGCOLOR="#CCEEFF">
<TD colspan=9 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Common stock – $.01 par value; authorized 50,000 shares;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> issued 19,295 shares in 2005 and 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>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>
<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>61,693</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Treasury shares – at cost; 5,049 shares in 2005 and 5,512 shares in 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>(23,779</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN=Bottom>
<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>33,284</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accumulated other comprehensive 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>(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>115</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total stockholders’ equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>71,151</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 87,215</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></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-5 </FONT></P>
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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 Stockholders’ Equity and Comprehensive Income
<BR>(in thousands) </FONT> </P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<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 SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH ROWSPAN=2 COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional<BR>paid-in<BR>capital </FONT></TH><TH></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Treasury shares </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH ROWSPAN=2 COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Retained<BR>earnings </FONT></TH><TH></TH>
<TH ROWSPAN=2 COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>other<BR>comprehensive<BR>income (loss) </FONT></TH><TH></TH>
<TH ROWSPAN=2 COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total<BR>stockholders’<BR>equity </FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>of shares </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Par<BR>value </FONT></TH><TH></TH>
<TH COLSPAN=1><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></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT></TH></TR>
<TR>
<TD COLSPAN=27><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=27% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 2002</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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,295</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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 193</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>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 60,796</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,756</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (25,821</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>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8,956</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 98</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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 44,222</FONT></TD>
<TD WIDTH=2% 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> Stock issued in connection with</FONT></TD><TD ALIGN=LEFT><FONT 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> 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>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>(69</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>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>94</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>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>(862</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(206</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,717</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>855</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>14</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>16</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Treasury shares purchased</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>458</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>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>(2,755</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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></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>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>
<TD ALIGN=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>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>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>6,516</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD nowrap colspan=27 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Unrealized gains on marketable securities</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> net of income tax effect of $60</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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>
<TD ALIGN=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>106</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>106</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=24> </td>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total 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> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>6,622</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=27><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>19,295</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 59,879</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,989</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 15,472</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
<TD ALIGN=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><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Stock issued in connection with</FONT></TD><TD ALIGN=LEFT><FONT 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> 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>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>2</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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>
<TD ALIGN=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>150</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,051</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(453</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,668</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,617</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Tax benefit of options 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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,005</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,005</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Dividends ($.12 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=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>(1,640</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> 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></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>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>
<TD ALIGN=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>8,547</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>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>8,547</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD nowrap colspan=27 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Unrealized losses on marketable securities</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> net of income tax effect of $52</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=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>(89</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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=24> </td>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total 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> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>8,458</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=27><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>19,295</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 59,835</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,512</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,379</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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> 58,644</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> Stock issued in connection with</FONT></TD><TD ALIGN=LEFT><FONT 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> 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>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>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=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>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>
<TD ALIGN=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>158</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Exercise of stock options and warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>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>(551</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,376</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,749</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Tax benefit of options 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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,400</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,400</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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 ($.20 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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,797</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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>(2,797</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Treasury shares purchased</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>106</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,351</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,351</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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></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>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>
<TD ALIGN=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>13,702</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>13,702</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD nowrap colspan=27 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Unrealized losses on marketable securities</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> net of income tax effect of $140</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=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>(355</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(355</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=24> </td>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total 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> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>13,347</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=27><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,295</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 61,693</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,049</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (23,779</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,284</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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> 71,151</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=27><HR NOSHADE COLOR=#000000 SIZE=2></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-6 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->
<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 Cash Flows
<BR>(in thousands) </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=54% 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=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=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=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=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=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" BGCOLOR="#CCEEFF">
<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> 13,702</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Adjustments to reconcile net income 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>797</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>299</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="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></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>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>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></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="#CCEEFF">
<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>(3,636</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN="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></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>(399</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>1,402</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="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></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>2,576</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>(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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net cash provided by 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>14,742</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>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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investing activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>(80,795</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>(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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>64,846</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>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></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>(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>(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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>(557</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN="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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net cash 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>(16,558</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financing activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD colspan=12 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Proceeds from the issuance of common stock</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>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></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>1,749</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>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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>(1,351</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN="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></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>(2,797</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>(2,241</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN="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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>(4,057</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>(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></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>5,633</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> End of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,814</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,554</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplemental disclosure of cash flow information:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Cash paid during the year for interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 132</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Cash paid during the year for income taxes, net of refunds</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,633</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>2,994</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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></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-7 </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. <BR>
Notes to Consolidated Financial Statements <BR>March 31, 2005, 2004 and 2003 </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>Business</B> The Company develops and markets
consumer health care products, including Breathe Right® branded products focused on better breathing, and FiberChoice®
branded products focused on digestive health. Theses products are sold over-the-counter in retail outlets, including mass
merchant, drug, grocery, club stores, military base stores and on-line retailers. 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>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>Accounting Estimates</B> The preparation of
consolidated financial statements in conformity with U.S. generally accepted accounting principles 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 consolidated 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’ consolidated 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> Revenue 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. The Company records provisions for trade promotions, returns and customer discounts as a
reduction to 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 because of the short-term nature of
these instruments.
</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 and in the establishment of a new cost basis for the security. Realized securities gains or losses are included in gain
(loss) on sales of marketable securities in the consolidated statements of operations. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=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>
<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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<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 consolidated 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=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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TH COLSPAN=3> </TH>
<TH COLSPAN=9><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected lives (Years)</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.6</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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.7</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=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.0</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>Dividend Yield</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.95</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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> </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" BGCOLOR="#CCEEFF">
<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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61.00</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>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> </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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.80</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>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> </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><BR><BR><BR><BR><BR><BR><BR><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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<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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=56% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income, as reported</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,702</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8,547</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> 6,516</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>Deduct: Total stock-based compensation</FONT></TD><TD ALIGN=LEFT><FONT 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 determined under the fair value</FONT></TD><TD ALIGN=LEFT><FONT 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> based method for all awards, net of related</FONT></TD><TD ALIGN=LEFT><FONT 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> tax 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>810</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Proforma 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> 12,892</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
<TD COLSPAN=8><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Earnings 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .98</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .48</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic – proforma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .59</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .93</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .46</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Diluted – proforma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .56</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></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>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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<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>
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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 includes
federal and state income taxes. The provision for income taxes is composed of current income tax expense and the 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 Earnings Per Share</B> Basic net income
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.
</FONT></TD>
</TR>
</TABLE>
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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>Comprehensive Income</B> Comprehensive income
consists of the Company’s net income and unrealized gains (losses) on marketable securities and is presented in the
consolidated statements of stockholders’ equity and comprehensive income. </FONT></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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<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 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 151, “Inventory Costs: an
amendment to Accounting Research Bulletin (“ARB”)” 43, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material. The provisions of the interpretation are effective for the
Company’s consolidated financial statements for periods beginning April 1, 2006. The Company does not anticipate a material
impact from the adoption of this accounting standard. </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>In December 2004, the FASB issued SFAS 123R, “Share-Based
Payment: an amendment of FASB Statements No. 123 and 95”, which requires companies to recognize in the statement of
operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The provisions of
the interpretation are effective for the Company’s consolidated financial statements for periods beginning April 1,
2006. </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=12><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR 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>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR 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></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT></TH></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Municipal obligations</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 41,634</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 41,358</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 15,172</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 15,157</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>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>6,110</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>6,064</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>8,572</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,514</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>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></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR>
<TD COLSPAN=15> </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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,316</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 55,936</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=15><HR NOSHADE COLOR=#000000 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>Maturities of marketable securities at March 31, 2005 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=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cost </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fair Value </FONT></TH></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=62% 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=11% 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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 34,599</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 34,483</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>21,717</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,453</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR>
<TD COLSPAN=9> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,316</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 55,936</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 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>Gross unrealized gains on marketable securities available for sale
totaled $0 and $201,000 at March 31, 2005 and 2004, respectively. Gross unrealized losses on marketable securities available
for sale totaled $380,000 and $18,000 at March 31, 2005 and 2004, 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, $0 and
$18,000 for the years ended March 31, 2005, 2004 and 2003, respectively. </FONT></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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<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, 2005 and 2004, the Company reported $472,000 and
$409,000, respectively, of advertising costs as prepaid assets. Advertising expense was $24,083,000, $25,211,000 and $22,657,000
for the years ended March 31, 2005, 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"><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=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31, </FONT><HR 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>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=70% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Allowance for doubtful accounts:</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=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></FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 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 VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Provision/adjustment 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>(66</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>(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>(60</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </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> 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 380</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Finished goods</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,547</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,014</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Raw materials and component parts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>984</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,118</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total inventories</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,531</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,132</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Warehouse and production equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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> 770</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>4,161</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>4,111</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>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>1,087</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>(4,900</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>(4,406</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </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> 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,562</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product rights:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Product rights</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,170</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,614</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Less accumulated amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,810</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,507</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Product rights, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,360</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,107</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accrued expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Promotions and allowances</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,230</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>791</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>2,373</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>2,466</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>777</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </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> 7,177</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,055</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Product rights amortization:</FONT></TH>
<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended<BR>March 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3></TH>
<TH COLSPAN=9><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization expense</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 303</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 542</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 397</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
<TH COLSPAN=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Estimated amortization expense for the year ending March 31,</FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT></TH></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=53% 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> 313</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>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>290</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>256</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>235</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>235</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-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"><B>(5)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </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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<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 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, 2005. </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>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=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average<BR>Exercise Price<BR>Per Option</FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options<BR>Outstanding</FONT></TH><TH></TH>
<TH COLSPAN=2><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=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 2002</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=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.43</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=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,176,034</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=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>208,640</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>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" BGCOLOR="#CCEEFF">
<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" BGCOLOR="#CCEEFF">
<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=#000000 SIZE=1></TD></TR>
<TR><TD> </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" BGCOLOR="#CCEEFF">
<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" BGCOLOR="#CCEEFF">
<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" BGCOLOR="#CCEEFF">
<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=#000000 SIZE=1></TD></TR>
<TR><TD> </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 VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>10.84</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>243,188</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(243,188</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>4.69</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(575,467</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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>10.32</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(78,613</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>78,613</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(21,870</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at March 31, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6.91</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,476,668</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>265,145</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></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>Information on outstanding and currently exercisable options by
price range as of March 31, 2005, 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=4> </TH>
<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Outstanding </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Exercisable </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=1> </TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Price Range<BR>Per Option </FONT></TH>
<TH COLSPAN=2> </TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total<BR>Number<BR>of Options </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted-average<BR>Remaining<BR>Life (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=20><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=16% 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=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>59,700</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=13% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.0</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=13% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.81</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59,700</FONT></TD>
<TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=13% 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=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=1% 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>3.13 – 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>97,000</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>4.8</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.66</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>86,800</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>3.67</FONT></TD><TD ALIGN=LEFT><FONT 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="#CCEEFF">
<TD WIDTH=1% 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>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>391,780</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>5.2</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>4.23</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>390,580</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>4.23</FONT></TD><TD ALIGN=LEFT><FONT 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 WIDTH=1% 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>5.00 – 5.44</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>256,900</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>4.0</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.34</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>222,900</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>5.34</FONT></TD><TD ALIGN=LEFT><FONT 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="#CCEEFF">
<TD WIDTH=1% 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>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>166,160</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>7.2</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>6.46</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>120,560</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>6.40</FONT></TD><TD ALIGN=LEFT><FONT 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 WIDTH=1% 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>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>20,000</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>2.3</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<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>20,000</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>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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=1% 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>10.06 – 10.95</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>172,508</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>9.2</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>10.13</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,560</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>10.9</FONT></TD><TD ALIGN=LEFT><FONT 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 WIDTH=1% 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>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>286,020</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>8.5</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>
<TD ALIGN=CENTER><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=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>92,006</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>11.35</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=1% 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>12.04 – 12.90</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,400</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>9.8</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.88</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>200</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>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></TR>
<TR VALIGN=Bottom>
<TD WIDTH=1% 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>18.08</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,200</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>10.0</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.08</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=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></TR>
<TR>
<TD COLSPAN=4> </TD>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
<TD COLSPAN=6> </TD>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=1% 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> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,476,668</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>6.3</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>
<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>995,306</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>5.35</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=4> </TD>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
<TD COLSPAN=6> </TD>
<TD COLSPAN=2><HR NOSHADE COLOR=#000000 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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<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, 2005, 2004 and 2003, currently exercisable options
aggregated 995,306, 1,384,500 and 1,630,456 shares of common stock, respectively and the weighted-average exercise price of those
options was $5.35, $4.60 and $4.43, 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 years ended March 31, 2005, 2004 and 2003 is estimated as $4.90, $5.71 and $3.54, respectively, on the date of grant
using the Black-Scholes option pricing model with the following weighted-average assumptions: volatility of 61% in 2005, 62% in
2004 and 60% in 2003; risk-free interest rate of 3.86% in 2005, 3.19% in 2004 and 5.00% in 2003, and an expected life of 4.9 years
in 2005, 5.8 years in 2004 and 6.0 years in 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> </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 285,743 shares as of March 31, 2005. Common shares sold to employees under the Purchase Plan in fiscal 2005, 2004 and
2003 were 18,446, 23,413 and 19,517, 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 weighted-average fair value of each purchase right granted in
fiscal 2005, 2004 and 2003 was $4.17, $5.02 and $2.26, 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> Warrants to purchase 50,000
shares of the Company’s common stock were exercised during the fiscal year ended March 31, 2005. As of March 31, 2005, no
warrants were outstanding. </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>Preferred Stock</B> At March 31, 2005, 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>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Income tax expense for the
years ended March 31, 2005, 2004 and 2003 is as follows (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=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>For the Years Ended<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current income tax expense</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=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=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=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=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=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=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" BGCOLOR="#CCEEFF">
<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> 6,728</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>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>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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,984</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred 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></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>(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>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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 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>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>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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,284</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></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>The following table is a reconciliation of the statutory federal
income tax expense to the effective income tax expense for the years ended March 31, 2005, 2004 and 2003 (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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statutory federal tax expense</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=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,345</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,715</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,667</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 taxes, 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>427</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax exempt investment 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>(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>(13</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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>Export incentive</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(93</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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" BGCOLOR="#CCEEFF">
<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>(181</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
<TD ALIGN=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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Actual 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,284</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 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>The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities for 2005 and 2004 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></TH></TR>
<TR>
<TD COLSPAN=3></TD>
<TD COLSPAN=6><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=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=65% 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=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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></FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 202</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>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>141</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>437</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>1,564</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>524</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Unrealized losses 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>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>0</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>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>158</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 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>3,033</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </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" BGCOLOR="#CCEEFF">
<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>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>(68</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>(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>(12</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>(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</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 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>(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>(80</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 2,991</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=2></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>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>
<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>(7)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </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>
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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>The Company had one significant customer who accounted for 31%,
32% and 29% of sales in the years ended March 31, 2005, 2004 and 2003, respectively. Accounts receivable from this customer as of
March 31, 2005 and 2004 were $4,933,000 and $4,112,000, respectively. </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>The Company operates as a single operating segment of consumer
health care products that are similar with respect to: economic characteristics, gross margins, products and services, production
processes, types or classes of customers, methods of distribution, and regulatory environments. 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=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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD WIDTH=53% 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=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=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></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></FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 68,423</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>12,245</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>197</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></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>80,865</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>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></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" BGCOLOR="#CCEEFF">
<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>2,404</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>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></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>2,223</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>3,371</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></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>1,826</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>3,043</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 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>12,867</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 93,732</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
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<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>
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<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
$266,000, $251,000 and $204,000 for the years ended March 31, 2005, 2004 and 2003, respectively. </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>(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>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 $850,000 each year until patents for the products
expire. Royalties are classified as a component of cost of goods sold. Royalty expense was approximately $3,225,000, $2,612,000
and $2,652,000 for the years ended March 31, 2005, 2004 and 2003, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(10)</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Operating Leases</B> </FONT> </TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company leases equipment and office space under noncancelable
operating leases that have initial or noncancelable lease terms in excess of one year. Future minimum lease payments due in
accordance with these leases as of March 31, 2005 are as follows (in thousands): </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
<TR VALIGN=Bottom>
<TH COLSPAN=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year ending March 31,</FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT></TH></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=80% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 778</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>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>766</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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>495</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 4,262</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=6><HR NOSHADE COLOR=#000000 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 $783,000, $780,000
and $781,000 for the years ended March 31, 2005, 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"><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>Realization of Contingent Gain</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><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
received a $1.1 million refund of previously paid European Community import duties
on Breathe Right nasal strips relating to an import duty appeal. The Company recorded
this nonrecurring item as a reduction in cost of goods sold during the quarter ended
December 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"><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 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<BR>March 31, </FONT><HR 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>2005 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=9><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=56% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common shares<BR> outstanding</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>13,972</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>13,576</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>13,467</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>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>786</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD colspan=12 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common and potential </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>14,758</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=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></TR>
<TR>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 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, 2005, a total of 26,600 options to purchase shares
of common stock with a range of exercise prices from $12.90 to $18.08 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 2015. </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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<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 2005 and 2004 (in thousands): </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=75%>
<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>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sep 30,<BR>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31,<BR>2004 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 31,<BR>2005 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD WIDTH=42% 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=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,531</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,041</FONT></TD>
<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 28,737</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> 28,421</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>5,394</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>5,716</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>7,099</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>8,496</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>11,137</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,325</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>21,638</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,925</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>5,148</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,652</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,721</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>8,994</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>3,578</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>3,519</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>4,506</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,857</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></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>8,726</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,171</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,227</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>13,851</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>2,411</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,154</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,411</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,074</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>214</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>200</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>265</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>2,625</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,354</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,667</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>6,339</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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>952</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,870</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,262</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,200</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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> 1,673</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,484</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,405</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,139</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .25</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .32</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .29</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .24</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .30</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .28</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Jun 30,<BR>2003 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sep 30,<BR>2003 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dec 31,<BR>2003 </FONT></TH><TH></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 31,<BR>2004 </FONT></TH></TR>
<TR>
<TD COLSPAN=3> </TD>
<TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,497</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,621</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,395</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,467</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times 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=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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" BGCOLOR="#CCEEFF">
<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=15><HR NOSHADE COLOR=#000000 SIZE=1></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=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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=15><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 341</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR>
<TD COLSPAN=15><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> .02</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted net income per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
</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>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-18 </FONT></P>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<HTML>
<HEAD>
<TITLE>CNS, Inc. Exhibit 10.19 to Form 10-K dated March 31, 2005</TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.19 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS, Inc.<BR>7615 Smetana Lane<BR>
Eden Prairie, Minnesota 55344 </FONT></P><BR><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 31, 2005 </FONT></P><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nicole C. Strait<BR>[address]<BR>[address] </FONT></P><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Nicole: </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 Human Resources reporting to me. If you accept this
offer, your start date will be as mutually agreed between us, but not later than March 7,
2005. </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>
<UL>
<li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Your base salary will be $130,000
annualized, paid over our regular semi-monthly pay periods. </FONT><BR><BR>
<li><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 are presented by management for approval by the
Board of Directors each year. </FONT><BR><BR>
<li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Subject to approval of the CNS, Inc. Board of Directors, we will grant you an option to
purchase 12,000 shares of CNS common stock. These shares will vest in equal amounts over a
five year period beginning on the first anniversary of the grant date (date of Board
approval). The exercise price will be determined based on the Fair Market Value at the
market close on the date of grant. </FONT><BR><BR>
<li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Periodically, at the discretion of the Compensation Committee, you will be eligible to
receive stock option grants that will vest over a three-year period. </FONT><BR><BR>
</UL><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- MARKER PAGE="sheet: 1; page: 1" -->
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nicole C. Strait Offer
Letter<BR>Page Two </FONT></P><BR>
<UL>
<li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You will be eligible for a one time
hiring bonus of $30,000 to be paid with your first pay check. </FONT><BR><BR>
<li><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><BR><BR>
<li><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 salary 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 payable over a period of 18 months
from your termination date.</FONT><BR><BR>
</UL>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will schedule pre-employment drug
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>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nicole, 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>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Sincerely,</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Accepted and agreed to this offer on the</FONT></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Marti Morfitt</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7th day of February, 2005.</FONT></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Marti Morfitt</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>/s/ Nicole C. Strait
</U> </FONT> </TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President & CEO </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Nicole C. Strait</FONT></TD></TR>
</TABLE><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- MARKER PAGE="sheet: 2; page: 2" -->
<!-- MARKER FORMAT-SHEET="Head Sub 2 Left" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXHIBIT
A</FONT></H1><BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><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></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><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 Vice President of Human Resources; (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></P><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>4
<FILENAME>cns052583_ex10-20.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>CNS, Inc. Exhibit 10.20 to Form 10-K dated March 31, 2005</TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.20 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MEMORANDUM </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DATE:</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>June
1, 2005 </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>TO:</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>Sue
Horvath </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>FROM:</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>Marti
Morfitt </FONT></TD>
</TR>
</TABLE>
<BR><BR>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This is intended to confirm your
recent promotion to Vice President & Team Leader, International reporting to me and
effective April 1, 2005. Your new base salary is $145,000 annualized, paid over regular
semi-monthly pay periods. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><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 salary 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 payable over a period of 18 months from your termination date. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sue, we are excited to have you take
on these new responsibilities. If you have any questions about the terms of this new
position, please see me or Nicole Strait. I know that this will be a challenging and
rewarding opportunity for you 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>Regards, </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marti Morfitt </FONT></P>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- MARKER PAGE="sheet: 3; page: 3" -->
<!-- MARKER FORMAT-SHEET="Head Major 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" FSL="Default" -->
<P><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></P>
<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><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 Vice President of Human Resources; (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></P><BR><BR><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>5
<FILENAME>cns052583_ex10-21.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>CNS, Inc. Exhibit 10.21 to Form 10-K dated March 31, 2005</TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.21 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMENDED AND RESTATED<BR>EXECUTIVE EMPLOYMENT
AGREEMENT </FONT></H1>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> This
Amended and Restated Executive Employment Agreement (the “Agreement”) is made as
of June 7, 2005 (the “Effective Date”) between CNS, Inc., a Delaware
corporation (“CNS”), and Dan Cohen (“Employee”) and amends and
restates the Executive Employment Agreement dated February 12, 1999, as amended June
29, 2001, June 29, 2003 and June 30, 2004 between CNS and Employee. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> WHEREAS,
CNS considers the establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of CNS and its shareholders; and </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> WHEREAS,
Employee has made and is expected to continue to make, due to his experience and
knowledge, a significant contribution to the profitability, growth and financial strength
of CNS; and </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> WHEREAS,
it is in the best interests of CNS to receive certain assurances from Employee regarding
CNS’s confidentiality, competition and other proprietary business concerns; </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> THEREFORE,
in consideration of the foregoing and of this Agreement, continued employment and other
benefits hereunder, as well as other mutual covenants and obligations hereinafter set
forth, CNS and Employee agree as follows: </FONT></P>
<!-- 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>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><U>Employment</U>.
Employee’s sole duties and responsibilities will be that of Chairman of the
Board of Directors of CNS, Inc., a part-time, regular position with the Company. As such,
Employee will perform the duties of Board Chairman and director, which shall include
chairing Board meetings and interacting with the Chief Executive Officer as appropriate.
Employee agrees to make himself available to assist the CEO and CFO, as requested, in
reviewing new products and negotiating licensing contracts with inventors. Employee will
also provide other expertise and assistance, as requested by the CEO or other members of
the Management Team. The Company will provide Employee home office support and will make
an office available to Employee at CNS. </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>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><U>Term</U>.
The Company agrees to retain Employee as an employee of the Company under the terms
of this Agreement until June 30, 2006, at which time, unless the Agreement is
extended by mutual agreement of the parties, the Agreement shall terminate, except with
respect to the provisions of Sections 6, 7, 8, 9, 10 and 11 of the Agreement, which
shall survive. Effective June 30, 2006, Employee will cease to be an employee of the
Company, and Employee’s salary, perquisites and any other welfare and fringe
benefits provided to him as an employee shall thereupon cease. Employee shall not be
entitled to any salary continuation, severance or similar payment from the Company under
the Agreement or any policy or practice of the Company because of such termination on June 30,
2006. </FONT></TD>
</TR>
</TABLE>
<BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 4; page: 4" -->
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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>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><U>Compensation</U>.
As full compensation during the term of employment for services as Chairman, the
Company will pay Employee a base salary at a rate of One Hundred Thousand Dollars
($100,000) per annum, payable in semi-monthly installments, subject to tax withholding to
the extent required by law. Employee will not accrue paid time off during the term of
employment, but shall be entitled to take time off as required without any change in base
salary. </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>4. </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>Benefits</U>.
Employee shall be entitled to such insurance, 401(k) program and other benefits
available to all part-time salaried employees of CNS, subject to any limitations on such
benefits to officers, directors or highly paid employees in order that such benefit
programs qualify under federal or state law for favored tax or other treatment. Such
benefit programs may be changed from time to time by the Company. Employee shall also be
entitled to reimbursement of his reasonable and necessary expenses incurred in connection
with the performance of his duties hereunder. The Company shall also pay or reimburse
Employee for the reasonable and necessary costs associated with a home office maintained
by the Employee, provided that the Employee provides reasonable proof of such expenses in
accordance with general Company policies. </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>5. </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>Termination
by Employee</U>. Employee may resign his employment with CNS effective upon 30 days’ advance
written notice to the Chief Executive Officer. If Employee resigns under this paragraph,
the Chief Executive Officer retains the right to terminate his employment, effective upon
written notice to Employee, at any time during the 30-day notice period; provided,
however, that base salary and the employer portion of his health insurance premiums will
continue to be paid by CNS for the duration of the 30-day notice period. </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>6. </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>Confidential
Information</U>. All knowledge and information not already available to the
public which Employee may acquire or has acquired with respect to product development,
improvements, modifications, discoveries, designs, methods, systems, computer software,
programs, codes and documentation, research, designs, formulas, instructions, methods,
inventions, trade secrets, services or other private or confidential matters of CNS (such
as those concerning sales, costs, profits, organizations, customer lists, pricing
methods, etc.), or of any third party which CNS is obligated to keep confidential, shall
be regarded by Employee as strictly confidential and shall not be used by Employee
directly or indirectly or disclosed to any persons, corporations or firms. All of the
foregoing knowledge and information are collectively termed “Confidential Information” herein.
Employee’s obligations under this paragraph will not apply to any information which
(a) is or becomes known to the general public under circumstances involving no breach by
Employee of the terms of this paragraph; (b) is generally disclosed to third parties by
CNS as a continuing practice without restriction on such third parties; (c) is approved
for release by written authorization of CNS’s Board; or (d) Employee is obligated by
law to disclose. </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>7. </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>Disclosure
and Transfer of Product Developments, etc.</U> </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 2" 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 WIDTH=5%><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=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employee
will make full and prompt disclosure to CNS of all product developments, improvements,
modifications, discoveries, computer software, programs, codes and documentation,
research, designs, formulas, configurations, </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></H1>
<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=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=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>instructions, methods
and inventions (all of which are collectively termed “Developments” herein),
whether patentable or not, made, discovered, conceived or first reduced to practice by
Employee or under his direction during his employment, alone or with others, whether or
not made or conceived during normal working hours or on the premises of CNS which relate
in any material way to the business or to research or development work of CNS. Employee
confirms by his acceptance of this Agreement that CNS owns and shall own all of the
Developments. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 2" 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 WIDTH=5%><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=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employee
also agrees on behalf of himself and his heirs and legal representatives that he will promptly communicate, disclose and transfer
to CNS, free of encumbrances and restrictions, all of his right, title and interest in the Developments covered by subparagraph
7.a. and any patents or patent applications covering such Developments and to execute and deliver such assignments, patents and
applications, and any other documents as CNS may direct, and to cooperate fully with CNS to enable it to secure any patents or
otherwise protect such Developments in any and all countries. Employee shall assign to CNS any and all copyrights and reproduction
rights to all material prepared by Employee in connection with his employment. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Hang Level 2" 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 WIDTH=5%><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=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding
subparagraphs 7.a. and b., however, this paragraph 7 shall not apply to Developments for which no equipment, supplies, facility or
trade secret information of CNS was used and which was developed entirely on the Employee’s own time, and (1) which do not
relate (a) directly to the business of CNS, or (b) to CNS’s actual or demonstrably anticipated research or development; or
(2) which does not result from any work performed by Employee for CNS. </FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> This
will confirm that Employee’s obligations to CNS under paragraphs 6, 7 and 8 will
continue after the termination of Employee’s employment. </FONT></P>
<!-- 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>8. </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>Non-Competition</U>.
During the term of Employee’s employment by CNS and for twelve (12) months
thereafter, Employee shall not directly or indirectly engage in, enter into or
participate in the business of CNS or in any business or commercial activity which does
or is reasonably likely to compete with or adversely affect the Business or products of
CNS, either as an individual for Employee’s own account, as a partner or a joint
venturer, or as an officer, director, consultant or holder of more than five percent (5%)
of the entity interest in, any other person, firm, partnership or corporation, or an
employee, agent or salesman for any person. In addition, during such period Employee
shall not: avail himself of any advantages or acquaintances he has made with any person
who has, within the twelve (12) month period ended on the date of termination of his
employment, been a customer of CNS or its affiliates, and which would, directly or
indirectly, materially divert business from or materially and adversely affect the
Business of CNS; interfere with the contractual relations between CNS and any of its
employees; or employ or cause to be employed in any capacity or retain or cause to be
retained as a consultant any person who was employed in any capacity by CNS during the
twelve (12) month period ended on the date of termination of Employee’s employment. </FONT></TD>
</TR>
</TABLE>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></H1>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><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 and any other products currently offered or currently under
development by CNS or offered or currently under development by CNS during one (1) year
prior to the date of termination of Employee’s employment. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Inasmuch
as the activities of CNS are conducted on an international basis, the restrictions of this
paragraph 8 shall apply throughout the United States, Canada, Japan, Europe and Mexico. </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>9. </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>Non-Solicitation</U>.
During the term of Employee’s employment by CNS and for twelve (12) months
thereafter, Employee shall not directly or indirectly solicit any current or prospective
CNS customer, broker, vendor or distributor for the purpose of providing products or
services for or on behalf of said customer, broker, vendor or distributor which are
competitive with the products or services being provided by CNS, which are in the
development stages of being competitive with the products or services being provided by
CNS, or which would in any way cause said customer, broker, vendor or distributor to
discontinue or reduce its business relationship with CNS. Current CNS customers, brokers,
vendors or distributors include those customer, brokers, vendors or distributors with
whom CNS has had a business relationship at any time within one year immediately
preceding Employee’s termination date. Prospective CNS customers, brokers, vendors
and distributors include those with whom (a) a CNS representative has been in direct
personal contact; and (b) CNS has a reasonable opportunity of entering into a business
relationship within six months following Employee’s termination date. Employee also
agrees that during his employment in the one-year period following his employment, he
will not directly or indirectly solicit any CNS employees to terminate his or her
employment with CNS. This Employee non-solicitation obligation applies to Employees of
CNS during Employee’s employment and as of his termination date. </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>10. </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>Remedies</U>.
Employee acknowledges that the restrictions set forth in paragraphs 6, 7, 8
and 9 hereof are reasonably necessary to protect legitimate business interests of CNS. It
is understood that if Employee violates his obligations under any of these paragraphs,
CNS would suffer irreparable harm for which a recovery of money damages would be an
incomplete and inadequate remedy. It is therefore agreed that CNS, in addition to any
remedies at law, shall be entitled, as a matter of right, in any court of competent
jurisdiction, to a mandatory injunction restraining Employee pending litigation, as well
as upon final determination thereof, from violating this Agreement. In addition, CNS will
discontinue payment to Employee of any salary, benefits or bonus which he may be entitled
to receive or is receiving under paragraph 5 hereunder, or otherwise in the event of
his violation of any of his obligations under this Agreement. </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>11. </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>Severability</U>.
The parties intend that the covenants and agreements contained herein shall be
deemed to be a series of separate covenants and agreements, one for each and every state
of the United States and political subdivision outside the United States where the
business described is conducted. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in such action, then such
unenforceable covenants </FONT></TD>
</TR>
</TABLE>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></H1>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>shall be deemed eliminated from the
provisions of this Agreement for the purpose of such proceeding to the extent necessary
to permit the remaining covenants to be enforced in such proceeding. Further, in the
event that any provision is held to be overbroad as written, such provision shall be
deemed amended to narrow its application to the extent necessary to make the provision
enforceable according to applicable law and enforced as amended. </FONT></P>
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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>12. </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>Binding
Effect</U>. </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> </FONT></TD>
<TD WIDTH=5%><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=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CNS
will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of CNS to expressly assume and agree to perform this Agreement in the same manner and to the
same extent that CNS would be required to perform it if no such succession had taken place, in which case, the term
“CNS” as used in this Agreement shall instead refer to CNS’ successor. Failure of CNS to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. </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.</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>This
Agreement shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, successors,
heirs, and designated beneficiaries. If Employee should die while any amount would still be payable to Employee hereunder if
Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Employee’s designated beneficiaries, or, if there is no such designated beneficiary, to Employee’s
estate. </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>13. </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>Entire
Agreement</U>. From and after the date of this Agreement the terms and provisions
of this Agreement constitute the entire agreement between the parties and this Agreement
supersedes any previous oral or written communications, representations or agreements
with respect to any subject, including the subject matter of compensation, bonus,
participation and profit sharing and termination compensation. </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>14. </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>Waiver
and Interpretation</U>. The waiver by either party of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver of any
subsequent breach by the breaching party. No waiver shall be valid unless in writing and
signed by the party providing such waiver. If any provision of this Agreement is held by
any court to be unenforceable, then such provision shall be deemed to be eliminated from
the Agreement to permit enforceability of the remaining provisions. If any provision is
held to be overbroad, such provision shall be amended to narrow its application to the
extent necessary for enforceability. </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>15. </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>Applicable
Law</U>. All questions pertaining to the validity, construction, execution and
performance of this Agreement shall be construed and governed in accordance with the laws
of the State of Minnesota. The parties consent to the personal jurisdiction of the State
of Minnesota, waive any argument that such a forum is not convenient, and agree that any
litigation relating to this Agreement shall be venued in Minneapolis, Minnesota. </FONT></TD>
</TR>
</TABLE>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></H1>
<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>16. </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>Tax
Withholding</U>. CNS may withhold from any payment of benefits under this Agreement
(and forward to the appropriate taxing authority) any taxes required to be withheld under
applicable law. </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>17. </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>Notice</U>.
Any notice required or desired to be given under this Agreement shall be deemed
given if in writing sent by certified mail to his residence in the case of Employee, or
to its principal office in the case of CNS. </FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set
forth above. </FONT></P><BR>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">CNS, INC.</FONT></TD></TR>
<TR><TD> </TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> By /s/ Marti Morfitt</FONT>
<HR WIDTH="250" SIZE="1" ALIGN="Left" COLOR="Black"></TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Its<U> President and Chief Executive Officer</U> </FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">EMPLOYEE</FONT></TD></TR>
<TR><TD> </TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Dan Cohen</FONT><HR WIDTH="250" SIZE="1" ALIGN="Left" COLOR="Black"></TD></TR>
<TR VALIGN="TOP">
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dan Cohen</FONT></TD></TR>
</TABLE>
<BR><BR><BR><BR><BR><BR><BR>
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</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>cns052583_ex23-1.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 23.1 to CNS, Inc. Form 10-K dated March 31, 2005 </TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 23.1 </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM </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
<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
(File Nos. 333-109110, 333-68310, 333-42108, 333-60017, 33-59719, 33-42971, 33-29454, 33-19043, 33-15044 and 33-14052) on Form S-8
of CNS, Inc. and subsidiaries of our reports dated June 3, 2005, with respect to the consolidated balance sheets of CNS, Inc. and
subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and
comprehensive income, and cash flows for each of the years in the three-year period ended March 31, 2005, and the related
financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting as of
March 31, 2005 and the effectiveness of internal control over financial reporting as of March 31, 2005, which reports appear in
the March 31, 2005 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>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota
<BR>June 10, 2005 </FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>cns052583_ex31-1.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.1 to CNS, Inc. Form 10-K dated March 31, 2005</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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<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>I have reviewed this Form 10-K of CNS, Inc.; </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>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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<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>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>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>
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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>4. </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 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>
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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> </FONT></TD>
<TD WIDTH=5%><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=85%><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>
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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) </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>Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; </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>(c) </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>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>
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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>(d) </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>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>
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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>5. </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 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>
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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>(a) </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>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>
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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) </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>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=80%>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date June 10, 2005 </FONT></TD>
<TD WIDTH=40% 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/ 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>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>cns052583_ex31-2.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.2 to CNS, Inc. Form 10-K dated March 31, 2005</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>
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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>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>I have reviewed this Form 10-K of CNS, Inc.; </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>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>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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<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>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>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>
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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>4. </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 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>
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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>(a) </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>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>
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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) </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>Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; </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>(c) </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>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>
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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>(d) </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>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>
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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>5. </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 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 2" 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 WIDTH=5%><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=85%><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 2" 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 WIDTH=5%><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=85%><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=80%>
<TR VALIGN=Top>
<TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date June 10, 2005 </FONT></TD>
<TD WIDTH=40% 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/ 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<BR>Chief Financial Officer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
</BODY>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>9
<FILENAME>cns052583_ex32.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32 to CNS, Inc. Form 10-K dated March 31, 2005</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>
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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>(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>The accompanying Annual Report on Form 10-K for the period
ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; 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>(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>The information contained in the accompanying Report fairly
presents, in all material respects, the financial condition and results of operations of the Company. </FONT></TD>
</TR>
</TABLE>
<BR><BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 10, 2005 </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=80%>
<TR VALIGN=Top>
<TD WIDTH=28% 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> </FONT></TD>
<TD WIDTH=30% 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 &<BR>Chief Executive Officer </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 10, 2005 </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=80%>
<TR VALIGN=Top>
<TD WIDTH=28% 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> </FONT></TD>
<TD WIDTH=30% 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>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><BR><BR><BR><BR>
<HR SIZE=3 COLOR=GRAY NOSHADE>
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