edX - TXT1x Data
-----BEGIN PRIVACY-ENHANCED MESSAGE-----1Proc-Type: 2001,MIC-CLEAR2Originator-Name: [email protected]3Originator-Key-Asymmetric:4MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen5TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB6MIC-Info: RSA-MD5,RSA,7A1MqEXt/9NTvw2dd8kqu8KS990FBPJuWvK9lqRhf2Xhs5UkCnQePWl4jYL0Nlm6Z8bp2pnzalE5QsaRdqxf7aXQ==910<SEC-DOCUMENT>0000897101-05-000384.txt : 2005021011<SEC-HEADER>0000897101-05-000384.hdr.sgml : 2005021012<ACCEPTANCE-DATETIME>2005021017004413ACCESSION NUMBER: 0000897101-05-00038414CONFORMED SUBMISSION TYPE: 10-K15PUBLIC DOCUMENT COUNT: 1016CONFORMED PERIOD OF REPORT: 2004123117FILED AS OF DATE: 2005021018DATE AS OF CHANGE: 200502101920FILER:2122COMPANY DATA:23COMPANY CONFORMED NAME: VASCULAR SOLUTIONS INC24CENTRAL INDEX KEY: 000103020625STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]26IRS NUMBER: 41185967927STATE OF INCORPORATION: DE28FISCAL YEAR END: 12312930FILING VALUES:31FORM TYPE: 10-K32SEC ACT: 1934 Act33SEC FILE NUMBER: 000-2760534FILM NUMBER: 055938473536BUSINESS ADDRESS:37STREET 1: 6464 SYCAMORE COURT NORTH38CITY: MINNEAPOLIS39STATE: MN40ZIP: 5536941BUSINESS PHONE: 76365643004243MAIL ADDRESS:44STREET 1: 6464 SYCAMORE COURT NORTH45CITY: MINNEAPOLIS46STATE: MN47ZIP: 5536948</SEC-HEADER>49<DOCUMENT>50<TYPE>10-K51<SEQUENCE>152<FILENAME>vasc050575_10k.htm53<TEXT>5455<HTML>56<HEAD>57<TITLE>Vascular Solutions, Inc. Form 10-K dated December 31, 2004</TITLE></HEAD>58<BODY>59<BR><BR><BR><BR>6061<HR SIZE=3 COLOR=BLACK NOSHADE>62<BR>6364<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->65<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>UNITED STATES66<BR>SECURITIES AND EXCHANGE COMMISSION </b></FONT>67<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>WASHINGTON, D.C. 20549 </b></FONT></P>6869<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->70<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 10-K </FONT></H1>7172<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->73<P style=margin-left:160pt;><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(MARK ONE)</B> </FONT> </P>7475<TABLE WIDTH=500 CELLPADDING=0 CELLSPACING=0 align=center>76<TR VALIGN=TOP>77<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>[X]</B> </FONT> </TD>78<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>79<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>80</TR>81</TABLE>82<BR>8384<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->85<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the fiscal year ended December 31, 2004 </FONT></H1>8687<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->88<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OR </FONT></H1>8990<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->91<TABLE WIDTH=500 CELLPADDING=0 CELLSPACING=0 align=center>92<TR VALIGN=TOP>93<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>[ ]</B> </FONT> </TD>94<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>95<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></TR>96</TABLE>97<BR>9899<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->100<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>For the transition period from __________________ to ________________</B> </FONT> </P>101102<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->103<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commission file number: 0-27605 </FONT></P>104105<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->106<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>VASCULAR SOLUTIONS, INC.</B></FONT>107<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Exact name of registrant as specified in its charter) </FONT> </P>108109<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>110<TR VALIGN=Bottom>111<TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>112<TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>113<TR VALIGN=Bottom>114<TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Minnesota</B> </FONT></TD>115<TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>41-1859679</B> </FONT></TD></TR>116<TR VALIGN=Bottom>117<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(State or other jurisdiction<BR>of incorporation or organization)</FONT></TD>118<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(IRS Employer Identification No.)<BR> </FONT></TD></TR>119</TABLE>120<BR>121122<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->123<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6464 Sycamore Court</B>124<BR><B>Minneapolis, Minnesota 55369 </B><BR>(Address of principal executive offices, including zip code) </FONT> </P>125126<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->127<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(763) 656-4300</B>128<BR>(Registrant’s telephone number, including area code) </FONT> </P>129130<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->131<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities registered pursuant to Section 12(b) of the Act: <B>None </B>132<BR>Securities registered pursuant to Section 12(g) of the Act:133<BR><B>Common Stock, par value $.01 per share</B><BR>___________________________ </FONT> </P>134135<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->136<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the registrant (1) has filed all reports137required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such138shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for139the past 90 days. Yes [X] No [ ] </FONT></P>140141<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->142<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if disclosure of delinquent filers pursuant to Item143405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in144definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this145Form 10-K. [X] </FONT></P>146147<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->148<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the registrant is an accelerated filer (as149defined in Rule 12b-2 of the Act). Yes [X] No [ ] </FONT></P>150151<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->152<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The aggregate market value of voting and non-voting common equity held by153non-affiliates computed by reference to the price at which the common equity was last sold on June 30, 2004 was $118,383,145.154</FONT></P>155156157<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->158<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of February 4, 2005, the number of shares outstanding of the159registrant’s common stock was 14,352,547. </FONT></P>160161<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->162<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DOCUMENTS INCORPORATED BY REFERENCE</B> </FONT> </P>163164<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->165<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Portions of the Registrant’s Proxy Statement for its 2005 Annual Meeting166of Shareholders to be held on April 19, 2005 are incorporated by reference in Part III of this Annual Report on Form 10-K.167</FONT></P>168<HR SIZE=3 COLOR=BLACK NOSHADE>169<BR>170171<!-- *************************************************************************** -->172<!-- MARKER PAGE="sheet: 0; page: 0" -->173<BR><BR>174175<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->176<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART I</B> </FONT> </P>177178<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->179<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 1. BUSINESS</B> </FONT> </P>180181<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->182<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Overview</B> </FONT> </P>183184<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->185<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Vascular Solutions, Inc. (we,186us or Vascular) is a medical device company focused on bringing clinically advanced solutions to interventional cardiologists and187interventional radiologists worldwide. We were incorporated in the state of Minnesota in December 1996, and we began operations in188February 1997. Our current product line consists of the following medical devices: </FONT></P>189190<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->191<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>192<TR VALIGN=TOP>193<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>194<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>195<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>196<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry™ hemostatic bandage, a topical pad with a bandage used to control surface bleeding, </FONT></TD>197</TR>198</TABLE>199200201<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->202<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>203<TR VALIGN=TOP>204<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>205<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>206<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>207<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto™ extraction catheter, a mechanical system for the208removal of soft thrombus from arteries, </FONT></TD>209</TR>210</TABLE>211212<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->213<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>214<TR VALIGN=TOP>215<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>216<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>217<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>218<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase® endovenous laser, a laser and procedure kit used219for the treatment of varicose veins, </FONT></TD>220</TR>221</TABLE>222223<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->224<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>225<TR VALIGN=TOP>226<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>227<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>228<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>229<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Duett™ sealing device, used to seal the puncture site230following catheterization procedures, </FONT></TD>231</TR>232</TABLE>233234<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->235<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>236<TR VALIGN=TOP>237<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>238<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>239<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>240<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat® Flowable hemostat, a thick, yet flowable, mixture used241to control bleeding, </FONT></TD>242</TR>243</TABLE>244245<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->246<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>247<TR VALIGN=TOP>248<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>249<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>250<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>251<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Langston™ dual lumen pigtail catheter, used to measure252intravascular pressure gradients, </FONT></TD>253</TR>254</TABLE>255256<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->257<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>258<TR VALIGN=TOP>259<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>260<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>261<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>262<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAX-Support™ abdominal retraction belt, used to allow femoral263access in obese patients, and </FONT></TD>264</TR>265</TABLE>266267<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->268<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>269<TR VALIGN=TOP>270<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>271<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>272<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>273<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis® ultrasound (international only), a treatment for274peripheral occlusive arterial disease. </FONT></TD>275</TR>276</TABLE>277<BR>278279<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->280<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a vertically-integrated medical device company, we generate ideas and281create new interventional medical devices, and then deliver these products directly to the physician through our direct domestic282sales force and our international distribution network. </FONT></P>283284<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->285<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We currently have in286development several additional products that leverage our existing infrastructure to bring additional solutions to the287interventional cardiologist and interventional radiologist. Additional products that we expect to gain regulatory clearance and288market launch before the end of 2005 in the United States include the following medical devices: </FONT></P>289290<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->291<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>292<TR VALIGN=TOP>293<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>294<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>295<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>296<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Skyway™ exchange catheter and the SideKick™ dual access297catheter, both specialty-purpose catheters designed for interventional cardiology which address market opportunities we estimate298at between $1 million and $5 million per year. </FONT></TD>299</TR>300</TABLE>301302<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->303<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>304<TR VALIGN=TOP>305<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>306<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>307<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>308<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Foam™ hemostat, a resorbable version of our D-Stat Dry309which we expect to launch in 2005 with a limited topical indication, and expect to expand to a much broader surgical indication by310the end of 2006. This resorbable version of the D-Stat Dry addresses a market in excess of $100 million annually for a surgical311thrombin-based resorbable pad hemostat. </FONT></TD>312</TR>313</TABLE>314<BR>315316<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->317<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interventional Cardiology and Interventional Radiology Industry Background </FONT></H1>318319<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->320<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Over 60 million321Americans have one or more types of cardiovascular disease—diseases of the heart and blood vessels. Cardiovascular disease is322the number one cause of death in the United States and is replacing infectious disease as the world’s pre-eminent health323risk. Advances in medicine have enabled physicians to perform an increasing number of diagnostic and therapeutic treatments of324cardiovascular disease using minimally invasive methods, such as catheters placed inside the arteries, instead of highly invasive325open surgery. Cardiologists and radiologists use diagnostic procedures, such as angiography, to confirm, and interventional326procedures, such as angioplasty and stenting, to treat diseases of the coronary and peripheral arteries. Based on industry327statistics, we estimate that cardiologists and radiologists performed over nine million diagnostic and interventional328catheterization procedures worldwide in 2004. Oftentimes, these procedures are performed to remove blood clots or plaque which329have been generated and deposited inside the patient’s artery and are an impediment to normal blood flow. The number of330catheterization procedures performed is expected to grow by more than 5% each year for the next three years as the incidence of331cardiovascular disease continues to increase. The overall interventional medical device market in 2004 exceeded $5 billion332worldwide. </FONT></P>333334<BR>335<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></P>336<HR SIZE=3 COLOR=GRAY NOSHADE>337<!-- *************************************************************************** -->338<!-- MARKER PAGE="sheet: 0; page: 0" -->339<BR>340341<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->342<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Each procedure using a343catheter requires a puncture in an artery, usually the femoral artery in the groin area and sometimes the radial artery in the344wrist of the patient to gain access for the catheter. The catheter then is deployed through an introducer sheath and into the345vessel to be diagnosed or treated. Upon completion of the procedure and removal of the catheter, the physician must seal this346puncture in the artery and the tissue tract that leads from the skin surface to the artery to stop bleeding. The traditional347method for sealing the puncture site has been a manual process whereby a healthcare professional applies direct pressure to the348puncture site, sometimes using a sand bag or a large C-clamp, for 20 minutes to an hour in order to form a blood clot. The349healthcare professional then monitors the patient, who must remain immobile in order to prevent dislodging of the clot, for an350additional four to 48 hours. </FONT></P>351352<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->353<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Patients subjected to manual354compression generally experience significant pain and discomfort during compression of the puncture site and during the period in355which they are required to be immobile. Many patients report that this pain is the most uncomfortable aspect of the356catheterization procedure. In addition, patients can develop a substantial coagulated mass of blood, or hemotoma, around the357puncture site, limiting patient mobility for up to six weeks following the procedure. Finally, the need for healthcare personnel358to provide compression and the use of hospital beds during the recovery period results in substantial costs to the institution359which, under virtually all current healthcare payment systems, are not separately reimbursed. </FONT></P>360361<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->362<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Until 1996, manual363compression was used following virtually all catheterization procedures. In late 1995, the first vascular sealing device which did364not rely on compression was introduced in the United States. In addition to our Duett sealing device, three other invasive sealing365devices have received FDA approval and are currently being marketed around the world. In the aggregate, over $380 million of the366five FDA-approved invasive sealing devices were sold worldwide in 2004, compared to less than $20 million in 1996. In addition to367invasive (below the skin surface) sealing devices, starting in 2000, non-invasive “patches” have begun to be used as an368assistance to manual compression following catheterizations. Non-invasive patches are used by physicians who (principally due to369cost, complexity or risk of complications) do not wish to use invasive sealing devices, and for those patients who are370contra-indicated for an invasive sealing device. Based on the number of catheterization procedures performed annually by371cardiologists and radiologists, industry sources report that the total market opportunity for vascular sealing devices (invasive372and non-invasive) is more than $1 billion annually. </FONT></P>373374<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->375<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry and D-Stat Radial Hemostat Products </FONT></H1>376377<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->378<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In September 2003 we received379regulatory clearance and commenced sales of our D-Stat Dry hemostatic bandage in the United States and international markets. The380D-Stat Dry hemostatic bandage is a version of our proprietary blood clotting substance that is lyophilized (freeze-dried) into a381gauze pad and combined with an adhesive bandage for application. The D-Stat Dry is used as an assistance for manual compression to382manage bleeding after catheterization procedures. We believe that the market for a hemostatic pad in this indication has grown383substantially since the first competitive patch was introduced in 2000, with a market size greater than $40 million in 2004.384</FONT></P>385386<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->387<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe that the D-Stat388Dry has many potential uses beyond this initial application, and to date, we have developed four variations of our D-Stat Dry389— the D-Stat 2Dry, the D-Stat Clamp, the D-Stat Radial and the D-Stat Dry 3x3. The D-Stat 2 Dry is a convenient 2-bandage390version of the D-Stat Dry used in the dialysis market. The D-Stat Clamp utilizes our D-Stat Dry pad and is configured for391attachment to standard compression devices. </FONT></P>392393<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->394<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The D-Stat Radial hemostat395band is a specially-sized version of the D-Stat Dry that includes a compression band that allows it to be applied over the radial396artery in the wrist. In approximately 5% of all catheterizations, the radial artery in the wrist instead of the femoral artery in397the groin is used to gain arterial access. In these cases using the radial artery, the health care professional must control398bleeding from the artery after the procedure. A variety of compression splints and tapes have been used for this purpose. The399D-Stat Radial is the first device that contains an active blood clotting agent together with the compression </FONT></P>400401<BR>402<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>403<HR SIZE=3 COLOR=GRAY NOSHADE>404<!-- *************************************************************************** -->405<!-- MARKER PAGE="sheet: 0; page: 0" -->406<BR>407408409<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->410<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>collar for this purpose. We received regulatory clearance for the D-Stat411Radial hemostat band in September 2003, and made manufacturing improvements to the product before launching it in the United412States in early 2004. </FONT></P>413414<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->415<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At the end of the first416quarter of 2004 we received regulatory clearance in the United States for the D-Stat Dry 3x3 bandage. The 3x3 version of the417D-Stat Dry, which is designed for use in trauma indications, continues to proceed through clinical evaluations and discussions418with potential corporate distribution partners. The 3x3 version of the D-Stat Dry is a bandage that does not require mixing or419special storage requirements and it can be quickly applied to even severely bleeding wounds. During the fourth quarter of 2004, we420advanced discussions with two potential corporate partners that have expressed an interest in branding and distributing this421product for us on an exclusive or non-exclusive basis, pending further due diligence and negotiations. We also have conducted422clinical evaluations at 11 U.S. trauma centers and four U.S. military operations in Iraq that requested the product directly from423us. To date, we have received feedback on approximately 60 successful deployments, with no adverse events reported, all from the424U.S. trauma centers. </FONT></P>425426<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->427<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto Extraction Catheter </FONT></H1>428429<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->430<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Pronto product consists431of an extraction catheter with a proprietary distal tip and large extraction lumen that can be delivered into arteries to432mechanically remove blood clots using simple vacuum suction. The Pronto extraction catheter was initially developed by Dr. Pedro433Silva of Milan, Italy, who exclusively licensed the design to us in 2002. We received CE mark approval and commenced international434sales of the Pronto in August 2003, and received FDA clearance in December 2003 and commenced sales in the United States in early4352004. In the fourth quarter of 2004 we completed development work on the third generation design of the Pronto, called the Pronto436V3, which we expect to launch in the United States in the third quarter of 2005. We believe this new version of the Pronto437incorporates several improvements that physicians have requested, and we believe there will be a very substantial boost to our438Pronto sales starting in the fourth quarter of 2005. We believe that the market size for the removal of soft thrombus is greater439than $100 million per year worldwide. </FONT></P>440441<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->442<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase Endovenous Laser Products </FONT></H1>443444<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->445<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Vari-Lase endovenous446laser products consist of a laser console, procedure kits and accessories used in the treatment of reflux of the great saphenous447vein, commonly referred to as varicose veins. More than one million people in the United States seek treatment each year for448varicose veins. Left untreated, varicose veins can result in serious clinical consequences, including limited mobility and venous449ulcers. Historically, an invasive surgical procedure known as vein stripping was the only treatment for severe varicose veins.450While vein stripping is still performed on over 100,000 patients each year in the United States, a new non-surgical procedure451using endovenous laser energy to treat and close the diseased vein has emerged since 2002 as a preferred alternative. Recent452clinical data on endovenous laser therapy has demonstrated excellent clinical results and outstanding patient satisfaction. During453the fourth quarter of 2004 the Center for Medicare and Medicaid Services (CMS) published the Medicare Physicians Fee Schedule454which established favorable reimbursement rates for the endoveneous laser procedure starting January 1, 2005. Private insurance455also has continued its favorable trend with coverage decisions which have caused more physicians to add this procedure to their456practice. We believe the current U.S. market size for treating varicose veins using endovenous therapy is greater than $60 million457per year. </FONT></P>458459<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->460<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The first product we launched461in our Vari-Lase product line was our Vari-Lase procedure kit in July 2003 in the United States. Our procedure kit is462custom-designed for the endovenous procedure, with features supporting ease-of-use and safety, and is compatible with the463competitive laser consoles already in use for this procedure. In December 2003 we received FDA clearance for our laser console,464which we have manufactured to our specifications by MedArt Corporation, a subsidiary of Asah Medico, a leading Denmark-based465medical laser manufacturer. During 2004 we developed and commenced sales of our Auto-Fill™ syringe and Vari-Lase procedure466packs as accessory products to the Vari-Lase product line. The Auto-Fill </FONT></P>467468<BR>469<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>470<HR SIZE=3 COLOR=GRAY NOSHADE>471<!-- *************************************************************************** -->472<!-- MARKER PAGE="sheet: 0; page: 0" -->473<BR>474475476<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->477<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>syringe is an easy fluid delivery system for tumescent local anesthesia. The478Vari-Lase Procedure Pack is a complete sterile pack of accessories designed for endovenous laser procedures. To complete our479Vari-Lase product line, we sell micro-introducers and guidewires which are used as accessory items in the endovenous laser480procedure as well as used in other interventional medical procedures. </FONT></P>481482<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->483<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Duett Sealing Device </FONT></H1>484485<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->486<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The first product we brought487to market, the Duett sealing device, is designed to provide a complete seal of the puncture site following catheterization488procedures such as angiography, angioplasty and stenting. Our Duett sealing device combines an easy-to-use balloon catheter489delivery mechanism with a biological procoagulant mixture, which we believe offers advantages over both manual compression and490competitive vascular sealing devices. We began selling our Duett sealing device in Europe in February 1998 and in the United491States in June 2000. Over 200,000 Duett sealing devices have been sold and deployed worldwide. In the fourth quarter of 2001 we492introduced the Diagnostic Duett version of the Duett sealing device, which utilizes a lower dose of procoagulant for the493less-challenging diagnostic subset of catheterization procedures. In mid-2002 we introduced the next generation “Pro”494line of the Duett sealing device for improved ease-of-use. In 2003 we made the decision to reduce our focus on growing the Duett495product line in order to focus on increasing sales of our new products. </FONT></P>496497<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->498<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe our Duett sealing499device (1) offers a complete seal of the puncture site with nothing left behind in the artery, (2) is an easy-to-use system and500(3) minimizes patient discomfort and permits early ambulation. Our product uses a balloon catheter, a device already familiar to501cardiologists and radiologists, which is inserted through the introducer sheath that is already in the patient. The inflated502balloon serves as a temporary mechanical seal, preventing the flow of blood from the artery. Our biological procoagulant, which is503a proprietary mixture of collagen, thrombin and diluent, is then delivered to the puncture site, stimulating rapid clotting and504creating a complete seal of both the arterial puncture and the tissue tract from the artery to the skin surface. The505blood-clotting speed and strength of thrombin enables the use of the Duett sealing device even in the presence of powerful506anti-clotting medications, such as ReoPro®, increasingly used in interventional catheterization procedures. With our Duett507sealing device, nothing is left behind in the artery, so immediate reaccess of the site, if necessary, is possible, and the508potential for infection is minimized. </FONT></P>509510<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->511<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Flowable Hemostat </FONT></H1>512513<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->514<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The second product we515developed and commercialized is the D-Stat Flowable hemostat, which we began selling worldwide in February 2002. The D-Stat516Flowable hemostat is a blood clotting material that can be delivered topically and into voids and open spaces to control active517bleeding. The D-Stat Flowable offers the advantage of being thick to maintain its position, yet easily deliverable. The D-Stat518Flowable consists of the same collagen, thrombin and diluent components as the Duett sealing device, which has been proven519effective in controlling bleeding from aggressive arterial puncture sites. </FONT></P>520521<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->522<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The D-Stat Flowable hemostat523can be used in a wide variety of interventional procedures as an adjunct to hemostasis. An example of these uses includes sealing524the access site after the removal of catheters from A-V access grafts. We believe that the D-Stat Flowable hemostat is the only525hemostat available in the United States that combines the thick consistency and extremely flowable delivery that is preferred by526the interventional physician in these opportunities. </FONT></P>527528<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->529<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We commenced sales of the530D-Stat Flowable worldwide in the first quarter of 2002. Currently, the approved clinical indications for the D-Stat Flowable are531limited to topical bleeding and blood “oozing” following percutaneous procedures. We believe these indications are but a532small fraction of the total potential market for the D-Stat Flowable. In December 2004 we completed enrollment in a 268 patient533clinical study of the use of the D-Stat Flowable in the hemostasis of prepectoral pockets created in pacemaker and defibrillator534implantations. We expect that follow-up should be completed in this “Pocket Protector” clinical study and, assuming535satisfactory data, the PMA will be submitted to the FDA by the middle of 2005. We estimate that the U.S. market opportunity for536this prepectoral pocket indication is greater than 100,000 </FONT></P>537538<BR>539<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>540<HR SIZE=3 COLOR=GRAY NOSHADE>541<!-- *************************************************************************** -->542<!-- MARKER PAGE="sheet: 0; page: 0" -->543<BR>544545546<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->547<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>procedures (or $10 million) annually. We also believe that the D-Stat548Flowable has application for use to seal following breast biopsy and liver biopsy procedures, each of which we believe can match549or exceed the prepectoral pocket market opportunity for D-Stat Flowable. </FONT></P>550551<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->552<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Langston Dual Lumen Pigtail Catheter </FONT></H1>553554<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->555<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At the end of the third556quarter of 2004 we received regulatory clearance in the United States for the Lanston dual lumen pigtail catheter. The Langston557catheter is used for the precise measurement of intravascular pressure gradients, primarily measured to diagnose aortic valve558stenosis. We believe our Langston catheter is the only dual lumen pigtail catheter on the U.S. market that can be used for this559intended indication. </FONT></P>560561<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->562<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our first configuration of563the Langston catheter is in an 8 French size. Due to customer requests, we have recently submitted our 510(k) application for a564smaller 7 French size of the product that we expect will be launched during the second quarter of 2005, and we have prototyped a 6565French size that we believe we could have on the U.S. market by the end of 2005. We believe the U.S. market potential for all of566the Langston catheter product line is $10 million annually. </FONT></P>567568<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->569<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAX-Support abdominal retraction belt </FONT></H1>570571<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->572<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the first quarter of5732005 we launched the MAX-Support abdominal retraction belt. This product is a tape-free retraction system to expose the femoral574artery puncture site in obese patients. Nationwide, approximately 7% of catheterization laboratory patients require taping of575their belly apron to allow visualization of the femoral crease for the purpose of gaining access for the catheterization. The576Max-Support belt is a tape-free alternative that avoids the discomfort, inefficiencies and time involved in the current practice577of taping. We believe the market potential for the MAX-Support belt is approximately $1 million annually with no existing578competition. </FONT></P>579580<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->581<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis Ultrasound Thrombolysis System </FONT></H1>582583<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->584<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the second quarter of5852002 we acquired the Acolysis ultrasound thrombolysis system. The Acolysis system uses ultrasound energy generated by the Acolysis586controller that is delivered intravascularly by the disposable Acolysis probe to lyse blood clots and plaque. The Acolysis587controller and probes are sold only in international markets, where it has been sold principally for the treatment of peripheral588vascular disease. Upon completion of our acquisition and integration of the Acolysis business, we commenced active international589sales of the Acolysis probes through our existing international distribution network in late 2002. </FONT></P>590591<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->592<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Acolysis ultrasound593thrombolysis system uses high energy, low frequency ultrasound to lyse thrombus into subcapillary particles without damaging594vessel walls. The therapeutic principle of the Acolysis system is to generate ultrasound thrombolysis by the selective disruption595of the fibrin matrix of the thrombus. Cavitation produces subcapillary-sized particles, resulting in a debulking of the arterial596lesion. The first application of the Acolysis product is to treat chronic occlusions in peripheral arteries. Peripheral vascular597disease currently affects over eight million people worldwide, with limited effective treatment options. We believe the Acolysis598product represents a new approach in both therapy and technology, and initial clinical experience and one-year follow-up with the599product have been favorable. </FONT></P>600601<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->602<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our international sales603efforts on the Acolysis product began in 2002 on a limited basis. We are in the process of working on our next generation Acolysis604ultrasound thrombolysis system. Once we complete our improvement on the current system we will plan and structure a clinical study605in the United States to study the effectiveness of the use of the Acolysis system to open chronic peripheral occlusions, with the606study not expected to be completed before 2007. </FONT></P>607608<BR>609<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></P>610<HR SIZE=3 COLOR=GRAY NOSHADE>611<!-- *************************************************************************** -->612<!-- MARKER PAGE="sheet: 0; page: 0" -->613<BR>614615<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->616<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business Strategy </FONT></H1>617618<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->619<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our primary objective is to620establish ourselves as a leading supplier of clinically superior medical devices for substantial opportunities within621interventional medicine. The key steps in achieving our primary objective are the following: </FONT></P>622623<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->624<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>625<TR VALIGN=TOP>626<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>627<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>628<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>629<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Maintain and Improve our Clinically-Oriented Direct Sales Force630in the United States.</I> During the third quarter of 2000 we commenced sales of our Duett sealing device in the631United States through a direct sales force that includes clinical specialists who train interventional cardiologists, radiologists632and catheterization laboratory administrators on the use of our products. We believe that effective knowledge and training are key633factors in promoting use of interventional medical devices, and we have created and will continue to work to improve an634in-the-field training program for the use of our products. </FONT></TD>635</TR>636</TABLE>637<BR>638639<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->640<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>641<TR VALIGN=TOP>642<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>643<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>644<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>645<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Expand our Existing Products to Our Existing646Market.</I> Since the end of 2002 we have received clearance for a total of five new product lines to be sold in647the United States through our existing direct sales force to our existing markets. Each of these product lines has generated648material sales, and we believe that each of these product lines has the potential to generate even more sales during 2005 and649beyond. </FONT></TD>650</TR>651</TABLE>652<BR>653654<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->655<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>656<TR VALIGN=TOP>657<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>658<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>659<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>660<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Develop New Devices to be Sold Through our Direct Sales Force661to our Existing Customers.</I> We intend to continue to leverage our direct sales force by bringing additional662products to the interventional physician. During 2005 we expect to launch three new product lines in the U.S. – the Skyway663exchange catheter, the SideKick dual access catheter and the D-Stat Foam hemostat, with additional products being developed for an664expected 2006 launch. </FONT></TD>665</TR>666</TABLE>667<BR>668669<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->670<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>671<TR VALIGN=TOP>672<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>673<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>674<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>675<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Explore Corporate Relationships to Augment our Direct Sales676Force.</I> In markets for our products beyond the interventional physician (such as the trauma market for our677D-Stat Dry 3x3 product) and in other situations where synergistic sales can result, we intend to enter into corporate678relationships to broaden our products’ reach and increase our revenues. </FONT></TD>679</TR>680</TABLE>681<BR>682683<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->684<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales, Marketing and Distribution </FONT></H1>685686<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->687<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the third quarter of 2000688we commenced sales of our Duett sealing device in the United States through our direct sales organization. As of December 31,6892004, our direct sales force consisted of approximately 57 employees. We believe that the majority of interventional690catheterization procedures in the United States are performed in high volume catheterization laboratories, and that these691institutions can be served by our focused direct sales force. We also believe that our sales force is able to sell each of our new692products to the same customer base. </FONT></P>693694<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->695<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As part of our sales696strategy, our sales force is clinically trained and is able to train physicians and other healthcare personnel on the use of our697products. We believe that effective training is a key factor in encouraging physicians to use interventional medical devices. We698have created, and will continue to work to improve, an in-the-field training program for the use of all of our products. We also699develop and maintain close working relationships with our customers to continue to receive input concerning our product700development plans. </FONT></P>701702<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->703<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are focused on building704market awareness and acceptance of our products. Our marketing organization provides a wide range of programs, materials and705events that support our sales force. These include product training, conference and trade show appearances and sales literature706and promotional materials. Members of our medical advisory board also aid in marketing our products by publishing articles and707making presentations at physicians’ meetings and conferences. </FONT></P>708709<BR>710<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>711<HR SIZE=3 COLOR=GRAY NOSHADE>712<!-- *************************************************************************** -->713<!-- MARKER PAGE="sheet: 0; page: 0" -->714<BR>715716717<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->718<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our international sales and719marketing strategy has been to sell to interventional cardiologists and interventional radiologists through established720independent distributors in major international markets, subject to required regulatory approvals. In Germany, we created our721wholly-owned subsidiary Vascular Solutions GmbH to sell directly to customers in the German market beginning in the fourth quarter722of 2000. In most of the other major developed markets our products are currently marketed through independent distributors. Under723multi-year written distribution agreements with each of our independent distributors, we ship our products to these distributors724upon receipt of purchase orders. Each of our independent distributors has the exclusive right to sell our products within a725defined territory. These distributors also market other medical products, although they have agreed not to sell directly726competitive products. Our independent distributors purchase our products from us at a discount from list price and resell the727device to hospitals and clinics. Sales to international distributors are denominated in United States dollars. The end-user price728is determined by the distributor and varies from country to country. </FONT></P>729730<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->731<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>New Product Development </FONT></H1>732733<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->734<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our research and development735staff is currently focused on developing new products to sell to our existing customer base through our direct sales force and on736developing next generation versions of our existing products. We incurred expenses of $3,400,864 in 2004, $3,670,935 in 2003 and737$3,227,538 in 2002 for research and development activities. To further leverage our efficiencies, our research and development738group continues to develop in-house capabilities to manufacture some of the components currently produced by outside vendors.739</FONT></P>740741<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->742<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In addition to our normal743research and development expenses, in the fourth quarter of 2004 we incurred $210,069 in thrombin qualification expenses relating744to our project to qualify a new source of thrombin. On October 18, 2004, we entered into a supply agreement with Sigma-Aldrich745Fine Chemicals, an operating division of Sigma-Aldrich, Inc. (Sigma) for the supply of thrombin for use in our hemostatic746products. The Sigma contract is the start of our plan to fully qualify a new source of thrombin and to bring the new thrombin747through the regulatory process over the next two years. We expect our total estimated expenditures will be $6.1 million to748complete this project, including the costs associated with the Sigma agreement. Of the total expenditures, we expect approximately749$3.3 million will be for development expenses, $0.3 million will be for capital equipment and $2.5 million will be for the750purchase of inventory of thrombin. The purchase of the $2.5 million in thrombin is expected to be used in our hemostatic products751beginning in 2007. Following the qualification of the Sigma thrombin, we believe we can launch several additional new752thrombin-based surgical products into the existing $200 million annual U.S. thrombin market, which currently has only one753competitor. </FONT></P>754755<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->756<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We expect our research and757development activities to continue to expand to include evaluation of new concepts and products for the interventional cardiology758and interventional radiology field. We believe that there are many potential new interventional products that would fit within the759development, clinical, manufacturing and distribution network we have created for our existing products. </FONT></P>760761<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->762<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing </FONT></H1>763764<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->765<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We manufacture our products766in our facility in a suburb of Minneapolis, Minnesota. The catheter manufacturing and packaging processes occur under a controlled767clean room environment. Our manufacturing facility and processes were certified in July 1998 as compliant with the European768Community’s EN 46001 standards and were audited most recently in April 2004 for compliance with the FDA’s quality769systems regulations with no deficiencies noted. In March 2003 we moved to our current facility, and the FDA approved our new770facility in May 2003, also with no deficiencies noted. </FONT></P>771772<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->773<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchase components from774various suppliers and rely on single sources for several parts of the Duett sealing device and D-Stat flowable hemostat. In775September 1998, we entered into a ten year, sole-source, supply agreement with our collagen supplier, Davol Inc., that provides776for a fixed price based on volume purchases which is adjusted annually for increases in the Department of Labor’s777employer’s cost index. In </FONT></P>778779<BR>780<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>781<HR SIZE=3 COLOR=GRAY NOSHADE>782<!-- *************************************************************************** -->783<!-- MARKER PAGE="sheet: 0; page: 0" -->784<BR>785786787<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->788<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June 1999, we entered into a five year, sole-source, supply agreement with789our thrombin supplier, GenTrac, Inc., a subsidiary of King Pharmaceuticals, Inc., that provides for a fixed price with a price790adjustment formula based on increased costs and wholesale price increases. Our agreement with GenTrac, Inc. expires in May 2005.791As a result of the favorable price provisions in our current thrombin supply agreement, we expect to increase our inventory of792thrombin by approximately $3 million during the second and third quarters of 2005, which we believe will be sufficient for all of793our thrombin requirements through the end of 2006. To date, we have not experienced any significant adverse effects resulting from794shortages of components. </FONT></P>795796<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->797<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The manufacture and sale of798our products entails significant risk of product liability claims. Although we have product liability insurance coverage in an799amount which we consider reasonable, it may not be adequate to cover potential claims. Any product liability claims asserted800against us could result in costly litigation, reduced sales and significant liabilities and divert the attention of our technical801and management personnel away from the development and marketing of our products for significant periods of time. </FONT></P>802803<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->804<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Competition </FONT></H1>805806<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->807<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Competition in the808interventional medical device industry is intense and dominated by very large and experienced companies such as Medtronic, Inc.,809Abbott Laboratories and Boston Scientific. We compete on the basis of our clinically differentiated products and focused810opportunities within this interventional medical device market. </FONT></P>811812<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->813<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our D-Stat Dry hemostatic814bandage competes in the noninvasive topical patch market segment of sealing devices. These patches are applied directly over the815puncture site and held in place with adjunctive manual compression for a period of 10-20 minutes. These patches include:816</FONT></P>817818<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->819<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>820<TR VALIGN=TOP>821<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>822<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>823<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>824<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Syvek™ Patch, manufactured and marketed by Marine Polymer Technologies, Inc. </FONT></TD>825</TR>826</TABLE>827828<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->829<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>830<TR VALIGN=TOP>831<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>832<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>833<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>834<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Closur-P.A.D.™, manufactured by Scion Cardiovascular and distributed by Medtronic, Inc. </FONT></TD>835</TR>836</TABLE>837838<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->839<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>840<TR VALIGN=TOP>841<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>842<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>843<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>844<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Chito-Seal™, distributed by Abbott Vascular, Inc. a division of Abbott Laboratories </FONT></TD>845</TR>846</TABLE>847<BR>848849<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->850<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Pronto extraction851catheter competes in the market segment for removal of thrombus from the arterial system. There are many companies that are852selling or have developed products in this segment, including Possis Medical, Medtronic, Boston Scientific and ev3. </FONT></P>853854<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->855<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are aware of five856companies that sell a product for the endovenous laser treatment of varicose veins. These companies are AngioDynamics, biolitec,857Dornier MedTech, CoolTouch and Diomed. Each of these companies’ products contain the same components for the therapy but858differ in procedural training, laser wavelength, custom-designed features and customer support. In addition, VNUS Medical859Technologies sells a radiofrequency alternative to the laser for the treatment of varicose veins. </FONT></P>860861<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->862<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Duett sealing device863principally competes with three vascular sealing devices and manual compression. The three principal competitive vascular sealing864devices are: </FONT></P>865866<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->867<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>868<TR VALIGN=TOP>869<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>870<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>871<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>872<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The VasoSeal<SUP>®</SUP> device, manufactured and marketed by873Datascope Corp., seals the tissue tract by placing a dry collagen plug in the tissue tract adjacent to the puncture in the artery.874</FONT></TD>875</TR>876</TABLE>877<BR>878879<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->880<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>881<TR VALIGN=TOP>882<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>883<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>884<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>885<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Angio-Seal<SUP>®</SUP> device, sold by the Daig division886of St. Jude Medical, Inc. and developed by Kensey Nash Corporation, seals the puncture site through the use of a collagen plug on887the outside of the artery connected by a suture to a biodegradable anchor which is inserted into the artery. </FONT></TD>888</TR>889</TABLE>890<BR>891892<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->893<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>894<TR VALIGN=TOP>895<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>896<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>897<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>898<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Closer™ device, sold by Perclose, Inc., a subsidiary of899Abbott Laboratories, seals the puncture site through the use of a mechanical device that enables a physician to perform a900minimally invasive replication of open surgery. </FONT></TD>901</TR>902</TABLE>903<BR>904905<BR>906<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>907<HR SIZE=3 COLOR=GRAY NOSHADE>908<!-- *************************************************************************** -->909<!-- MARKER PAGE="sheet: 0; page: 0" -->910<BR>911912<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->913<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There are many companies that914are selling or have developed hemostats which compete generally with our D-Stat Flowable hemostat. Virtually all of these devices,915however, are positioned as hemostats for the surgical market and are not designed specifically for use in interventional916procedures. </FONT></P>917918<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->919<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In each of our product areas,920we believe that several other companies are developing new devices. The medical device industry is characterized by rapid and921significant technological change as well as the frequent emergence of new technologies. There are likely to be research and922development projects related to these market areas of which we are currently unaware. A new technology or product may emerge that923results in a reduced need for our products or results in a product that renders our product noncompetitive. </FONT></P>924925<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->926<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Regulatory Requirements </FONT></H1>927928<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->929<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>United States</I></B> </FONT> </P>930931<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->932<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our products are regulated in933the United States as medical devices by the FDA under the Federal Food, Drug and Cosmetic Act. The FDA classifies medical devices934into one of three classes based upon controls the FDA considers necessary to reasonably ensure their safety and effectiveness.935Class I devices are subject to general controls such as labeling, adherence to good manufacturing practices and maintenance of936product complaint records, but are usually exempt from premarket notification requirements. Class II devices are subject to the937same general controls and also are subject to special controls such as performance standards, and FDA guidelines, and may also938require clinical testing prior to approval. Class III devices are subject to the highest level of controls because they are used939in life-sustaining or life-supporting implantable devices. Class III devices require rigorous clinical testing prior to their940approval and generally require a premarket approval (PMA) application prior to their sale. </FONT></P>941942<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->943<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> If a medical device944manufacturer can establish that a device is “substantially equivalent” to a legally marketed Class I or Class II device,945or to an unclassified device, or to a Class III device for which the FDA has not called for PMAs, the manufacturer may seek946clearance from the FDA to market the device by filing a 510(k) premarket notification. The 510(k) notification must be supported947by appropriate data establishing the claim of substantial equivalence to the satisfaction of the FDA. Following submission of the948510(k) notification, the manufacturer may not place the device into commercial distribution in the United States until an order is949issued by the FDA. </FONT></P>950951<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->952<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Manufacturers must file an953investigated device exemption (or IDE) application if human clinical studies of a device are required and if the FDA considers954experimental use of the device to represent significant risk to the patient. The IDE application must be supported by data,955typically including the results of animal and mechanical testing of the device. If the IDE application is approved by the FDA,956human clinical studies may begin at a specific number of investigational sites with a maximum number of patients, as approved by957the FDA. The clinical studies must be conducted under the review of an independent institutional review board to ensure the958protection of the patients’ rights. </FONT></P>959960<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->961<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Generally, upon completion of962these human clinical studies, a manufacturer seeks approval of a Class III medical device from the FDA by submitting a PMA963application. A PMA application must be supported by extensive data, including the results of the clinical studies, as well as964literature to establish the safety and effectiveness of the device. </FONT></P>965966<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->967<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Duett sealing device is968classified as a Class III device and is subject to the PMA requirements. In May 1997, the FDA determined that the review of the969Duett sealing device would be delegated to the Center for Devices and Radiological Health area of the FDA, with a consulting970review by the Center for Biologic Evaluation and Research. During 1998 and 1999, we received approval of our IDE application to971start our feasibility clinical study, filed our IDE Supplement to begin our multi-center clinical study, completed the SEAL972multi-center clinical study and filed our PMA application with the FDA. In September 1999 our manufacturing facility was audited973by the FDA, with no deficiencies or non-compliances noted by the </FONT></P>974975<BR>976<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>977<HR SIZE=3 COLOR=GRAY NOSHADE>978<!-- *************************************************************************** -->979<!-- MARKER PAGE="sheet: 0; page: 0" -->980<BR>981982983<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->984<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inspector. In December 1999, we received the FDA’s review letter of our985PMA application, and we submitted an amendment to our PMA to the FDA in January 2000. On June 22, 2000, we received approval from986the FDA of our PMA application to sell the Duett sealing device in the United States. </FONT></P>987988<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->989<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our D-Stat Flowable, D-Stat990Dry, D-Stat Radial, D-Stat Clamp, Pronto, Langston Catheter and Vari-Lase products also are regulated in the United States as991medical devices by the FDA and required clearance of our 510(k) notification by the FDA prior to being sold in the United States.992Each of these devices was the subject of a 510(k) notification which was determined to be “substantially equivalent” to993a legally marketed predicate device by the FDA, thereby allowing commercial marketing in the United States. We received FDA994clearance for these products in the following months: </FONT></P>995996997<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->998<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>999<TR VALIGN=TOP>1000<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1001<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1002<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1003<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Flowable hemostat – February 2002 </FONT></TD>1004</TR>1005</TABLE>10061007<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1008<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1009<TR VALIGN=TOP>1010<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1011<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1012<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1013<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry hemostatic bandage – September 2003 </FONT></TD>1014</TR>1015</TABLE>10161017<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1018<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1019<TR VALIGN=TOP>1020<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1021<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1022<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1023<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Radial hemostat band – September 2003 </FONT></TD>1024</TR>1025</TABLE>10261027<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1028<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1029<TR VALIGN=TOP>1030<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1031<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1032<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1033<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase endovenous laser products – June & November10342003 </FONT></TD>1035</TR>1036</TABLE>10371038<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1039<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1040<TR VALIGN=TOP>1041<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1042<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1043<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1044<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto extraction catheter – January 2004 </FONT></TD>1045</TR>1046</TABLE>10471048<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1049<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1050<TR VALIGN=TOP>1051<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1052<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1053<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1054<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry 3x3 – March 2004 </FONT></TD>1055</TR>1056</TABLE>10571058<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1059<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1060<TR VALIGN=TOP>1061<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1062<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1063<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1064<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Clamp accessory – June 2004 </FONT></TD>1065</TR>1066</TABLE>10671068<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1069<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1070<TR VALIGN=TOP>1071<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1072<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1073<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1074<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Langston dual lumen pigtail catheter – September 20041075</FONT></TD>1076</TR>1077</TABLE>1078<BR>10791080<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1081<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We also are subject to FDA1082regulations concerning manufacturing processes and reporting obligations. These regulations require that manufacturing steps be1083performed according to FDA standards and in accordance with documentation, control and testing standards. We also are subject to1084inspection by the FDA on an on-going basis. We are required to provide information to the FDA on adverse incidents as well as1085maintain a documentation and record keeping system in accordance with FDA guidelines. The advertising of our products also is1086subject to both FDA and Federal Trade Commission jurisdiction. If the FDA believes that we are not in compliance with any aspect1087of the law, it can institute proceedings to detain or seize products, issue a recall, stop future violations and assess civil and1088criminal penalties against us, our officers and our employees. </FONT></P>10891090<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->1091<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>International</I></B> </FONT> </P>10921093<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1094<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The European Union has1095adopted rules which require that medical products receive the right to affix the CE mark, an international symbol of adherence to1096quality assurance standards and compliance with applicable European medical device directives. As part of the CE compliance,1097manufacturers are required to comply with the ISO series of quality systems standards. We received the CE mark approval for our1098Duett sealing device and certification of our quality system in July 1998, and we received the CE mark approval for our other1099products in the following months: </FONT></P>110011011102<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1103<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1104<TR VALIGN=TOP>1105<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1106<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1107<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1108<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Flowable hemostat – November 2001 </FONT></TD>1109</TR>1110</TABLE>11111112<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1113<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1114<TR VALIGN=TOP>1115<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1116<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1117<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1118<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto extraction catheter – June 2003 </FONT></TD>1119</TR>1120</TABLE>11211122<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1123<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1124<TR VALIGN=TOP>1125<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1126<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1127<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1128<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry and D-Stat Radial hemostats – September 20031129</FONT></TD>1130</TR>1131</TABLE>11321133<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1134<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1135<TR VALIGN=TOP>1136<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1137<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1138<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1139<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase endovenous laser procedure kit – December 20031140</FONT></TD>1141</TR>1142</TABLE>11431144<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1145<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1146<TR VALIGN=TOP>1147<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1148<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1149<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1150<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis probe internal manufacturing – November 20031151</FONT></TD>1152</TR>1153</TABLE>11541155<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1156<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1157<TR VALIGN=TOP>1158<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1159<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1160<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1161<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis controller internal manufacturing – January 20051162</FONT></TD>1163</TR>1164</TABLE>1165<BR>11661167<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1168<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> International sales of our1169products are subject to the regulatory requirements of each country in which we sell. These requirements vary from country to1170country but generally are much less stringent than those in the United States. We have obtained regulatory approvals where1171required for us to sell our products in the country. Through our Japanese distributor, we are pursuing the regulatory approval of1172our Pronto extraction catheter for commercial sale in Japan, which we expect will be completed in the first half of 2005.1173</FONT></P>11741175<BR>1176<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11 </FONT></P>1177<HR SIZE=3 COLOR=GRAY NOSHADE>1178<!-- *************************************************************************** -->1179<!-- MARKER PAGE="sheet: 0; page: 0" -->1180<BR>118111821183<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1184<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Third Party Reimbursement </FONT></H1>11851186<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1187<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the United States,1188healthcare providers that purchase medical devices, generally rely on third-party payors, principally the Centers for Medicare and1189Medicaid Services or CMS (formerly the Health Care Financing Administration, or HCFA), and private health insurance plans, to1190reimburse all or part of the cost of therapeutic and diagnostic catheterization procedures. We believe that in the current United1191States reimbursement system, the cost of vascular sealing devices is incorporated into the overall cost of the catheter procedure.1192Our other products are subject to reimbursement rules depending on the specific medical procedure in which they are utilized.1193</FONT></P>11941195<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1196<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Market acceptance of our1197products in international markets is dependent in part upon the availability of reimbursement from healthcare payment systems.1198Reimbursement and healthcare payment systems in international markets vary significantly by country. The main types of healthcare1199payment systems in international markets are government sponsored healthcare and private insurance. Countries with government1200sponsored healthcare, such as the United Kingdom, have a centralized, nationalized healthcare system. New devices are brought into1201the system through negotiations between departments at individual hospitals at the time of budgeting. In most foreign countries,1202there are also private insurance systems that may offer payments for alternative therapies. </FONT></P>12031204<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1205<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Patents and Intellectual Property </FONT></H1>12061207<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1208<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We file patent applications1209to protect technology, inventions and improvements that are significant to the development of our business, and use trade secrets1210and trademarks to protect other areas of our business. Prior to the formation of our company, Dr. Gary Gershony filed a number of1211patent applications in the United States and other countries directed to proprietary technology used in our Duett sealing device.1212Upon the commencement of our operations in February 1997, Dr. Gershony assigned all patents and patent applications relating to1213the Duett sealing device to us on a worldwide, perpetual, royalty-free basis. At the time of assignment, there existed one United1214States patent issued that is directed to a balloon catheter sealing device and method and which expires in May 2013, three United1215States patents pending and an international patent application pending which designated numerous foreign countries and regions.1216</FONT></P>12171218<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1219<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since commencing operations,1220we have continued the prosecution of the pending United States patent applications and filed new patent applications. A second1221United States patent was issued that is directed to a balloon catheter and procoagulant sealing device and method and which1222expires in October 2015. A third United States patent was issued that contains method claims concerning the use of a balloon1223catheter and flowable procoagulant and which expires in October 2015. A fourth United States patent was issued concerning our1224procoagulant mixture and which expires in October 2015. A fifth United States patent was issued concerning a balloon catheter1225sealing device and which expires in May 2013. A sixth United States patent was issued concerning a balloon catheter and1226procoagulant sealing device and which expires in October 2015. A seventh United States patent was issued concerning a balloon1227catheter sealing device and which expires in October 2015. We currently have five additional United States patents issued and1228seven additional patents pending concerning new versions of our Duett sealing device, our Pronto catheter, our Langston dual lumen1229pigtail catheter, our MAX-Support abdominal retraction belt and our D-Stat Dry product. We also have pursued international patent1230applications, which designate the key developed nations with substantive patent protection systems. </FONT></P>12311232<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1233<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The interventional medical1234device market in general, and the vascular sealing device and endovenous laser therapy fields in particular, are characterized by1235frequent and substantial intellectual property litigation. Each of the vascular sealing products currently on the U.S. market,1236including our Duett sealing device, has been subject to infringement litigation. (See “Legal Proceedings” in Item 3 of1237Part I of this Form 10-K.) In addition, one of our competitors in the endovenous laser therapy market (Diomed) has brought five1238separate intellectual property lawsuits against its competitors, including two against us. The interpretation of patents </FONT></P>12391240<BR>1241<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></P>1242<HR SIZE=3 COLOR=GRAY NOSHADE>1243<!-- *************************************************************************** -->1244<!-- MARKER PAGE="sheet: 0; page: 0" -->1245<BR>124612471248<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1249<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>involves complex and evolving legal and factual questions. Intellectual1250property litigation in recent years has proven to be complex and expensive, and the outcome of such litigation is difficult to1251predict. </FONT></P>12521253<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1254<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We may become the subject of1255additional intellectual property claims in the future related to our products. Our defense of any intellectual property claims1256filed in the future, regardless of the merits of the complaint, could divert the attention of our technical and management1257personnel away from the development and marketing of our products for significant periods of time. The costs incurred to defend1258future claims could be substantial and adversely affect us, even if we are ultimately successful. </FONT></P>12591260<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1261<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We also rely on trade secret1262protection for certain aspects of our technology. We typically require our employees, consultants and vendors for major components1263to execute confidentiality agreements upon their commencing services with us or before the disclosure of confidential information1264to them. These agreements generally provide that all confidential information developed or made known to the other party during1265the course of that party’s relationship with us is to be kept confidential and not disclosed to third parties, except in1266special circumstances. The agreements with our employees also provide that all inventions conceived or developed in the course of1267providing services to us shall be our exclusive property. </FONT></P>12681269<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1270<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We also register the1271trademarks and trade names through which we conduct our business. To date, we have registered the trademarks “D-Stat,”1272and “Vari-Lase,” and have applied for registration in the United States of the marks “Vascular Solutions1273Duett,” “Pronto,” “MAX-Support,” “Langston,” “SideKick,” “Skyway,” and the1274Duett stylized logo. We acquired the registered trademark “Acolysis” in connection with our acquisition of the Acolysis1275therapeutic ultrasound business in 2002. </FONT></P>12761277<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1278<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employees </FONT></H1>12791280<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1281<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of December 31, 2004, we1282had 144 full time employees. Of these employees, 32 were in manufacturing activities, 72 were in sales and marketing activities,128312 were in research and development activities, 17 were in regulatory, quality assurance and clinical research activities and 111284were in general and administrative functions. We have never had a work stoppage and none of our employees are covered by1285collective bargaining agreements. We believe our employee relations are good. </FONT></P>12861287<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1288<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Officers of the Registrant </FONT></H1>12891290<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1291<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The executive officers of the1292Company as of February 4, 2005 are as follows: </FONT></P>129312941295<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>1296<TR VALIGN=Bottom>1297<TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name </FONT><HR WIDTH=14% SIZE=1 COLOR=BLACK NOSHADE></TH>1298<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Age </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1299<TH COLSPAN=1 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position </FONT><HR WIDTH=10% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1300<TR VALIGN=Bottom>1301<TD WIDTH=26% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root</FONT></TD>1302<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1303<TD WIDTH=2% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44</FONT></TD>1304<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1305<TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer and Director</FONT></TD>1306<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1307<TR VALIGN=Bottom>1308<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael Nagel</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1309<TD ALIGN=CENTER><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>1310<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Sales and Secretary</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1311<TR VALIGN=Bottom>1312<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deborah Neymark</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1313<TD ALIGN=CENTER><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>1314<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Regulatory Affairs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1315<TR VALIGN=Bottom>1316<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Quackenbush</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1317<TD ALIGN=CENTER><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>1318<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Manufacturing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1319<TR VALIGN=Bottom>1320<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gregg Sutton</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1321<TD ALIGN=CENTER><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>1322<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Research and Development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1323<TR VALIGN=Bottom>1324<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1325<TD ALIGN=CENTER><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>1326<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1327</TABLE>132813291330<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1331<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Howard Root</I></B> has1332served as our Chief Executive Officer and a director since he co-founded Vascular Solutions in February 1997. From 1990 to 1995,1333Mr. Root was employed by ATS Medical, Inc., a mechanical heart valve company, most recently as Vice President and General Counsel.1334Prior to joining ATS Medical, Mr. Root practiced corporate law, specializing in representing emerging growth companies, at the law1335firm of Dorsey & Whitney for over five years. Mr. Root received his B.S. in Economics and J.D. degrees from the University of1336Minnesota. </FONT></P>13371338<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1339<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Michael Nagel</I></B>1340has served as our Vice President of Sales since June 1997. Prior to joining us, Mr. Nagel was the Director of Sales &1341Marketing at Quantech, Ltd., a developer of point of care medical diagnostic </FONT></P>13421343<BR>1344<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13 </FONT></P>1345<HR SIZE=3 COLOR=GRAY NOSHADE>1346<!-- *************************************************************************** -->1347<!-- MARKER PAGE="sheet: 0; page: 0" -->1348<BR>134913501351<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1352<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>testing products, where he worked since July 1996. From 1992 through July13531996, Mr. Nagel was the mid-west division sales manager of B. Braun Cardiovascular, a manufacturer of cardiovascular1354devices and catheters. From 1991 through 1992, Mr. Nagel was the Director of Worldwide Sales for the Medical Products1355Division of Angeion Corporation, a manufacturer of angioplasty accessories and pediatric catheters. Prior to 1991, Mr. Nagel1356performed a variety of sales and marketing functions with Abbott Labs Diagnostic Division for over five years. Mr. Nagel received1357his B.A. and M.B.A. degrees from the University of St. Thomas. </FONT></P>13581359<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1360<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <B><I>Deborah1361Neymark</I></B> has served as our Vice President of Regulatory Affairs, Clinical Affairs and Quality Systems since October 2000.1362Mrs. Neymark served as the Corporate Compliance Officer and Vice President of Regulatory Affairs, Clinical Research and Quality1363Systems for Empi, Inc. from October 1995 to October 2000. From May 1993 to October 1995, Mrs. Neymark was employed as a1364Regulatory Affairs Manager for Boston Scientific's Scimed division. Prior to May 1993, Mrs. Neymark held regulatory affairs,1365clinical research and quality assurance positions at Medtronic and Lifecore Biomedical. She received her B.S. in Biology from1366Valparaiso University. </FONT> </P>13671368<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1369<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>James1370Quackenbush</I></B> has served as our Vice President of Manufacturing since March 1999. Prior to joining us, Mr. Quackenbush1371served as Vice President of Manufacturing and Operations with Optical Sensors, Inc., a diagnostic medical device company, where he1372worked since October 1992. From March 1989 through October 1992, Mr. Quackenbush served as operations manager with Schneider1373USA’s stent division. Prior to this time, he was an advanced project engineer with the 3M Medical Products Division. Mr.1374Quackenbush received a B.S. in Industrial Engineering from Iowa State University. </FONT></P>13751376<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1377<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Gregg Sutton</I></B>1378joined us as our Vice President of Research & Development in October 2004. Prior to joining us, Mr. Sutton served as Vice1379President of Research & Development with AtriTech, Inc., a development stage interventional medical device company since1380January 2000. From 1998 to 2000, he was Vice President of Research & Development of AngioGuard, Inc., an interventional1381medical device company that was acquired by Johnson & Johnson in 2000. In 1990 Mr. Sutton co-founded Navarre Biomedical, Inc.,1382a manufacturer of interventional radiology products that was acquired by CR Bard in 1997. Prior to 1990 Mr. Sutton held product1383engineering positions at St. Jude Medical, Claris Medical and Daig Corporation. Mr. Sutton received a B.S. in Mechanical1384Engineering from the University of Minnesota. </FONT></P>13851386<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1387<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>James Hennen</I></B>1388has served as our Chief Financial Officer since January 2004. Mr. Hennen served as our Controller & Director of Finance from1389February 2002 through December 2003. Prior to joining us, Mr. Hennen served in accounting positions, most recently as1390International Controller with WAM!NET, Inc., a globally networked information technology company for media transfer, where he1391worked since December 1997. From October 1995 through December 1997, Mr. Hennen was a Senior Auditor for Ernst and Young, LLP. Mr.1392Hennen received a B.S. in Business/Accounting from the University of Minnesota. Mr. Hennen is a Certified Public Accountant.1393</FONT></P>13941395<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1396<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There are no family1397relationships among any of our executive officers. </FONT></P>13981399<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1400<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Available Information </FONT></H1>14011402<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->1403<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We make available free of1404charge on or through our internet website at <U>http://www.vascularsolutions.com </U>our annual report on Form 10-K, quarterly1405reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or140615(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the1407SEC. </FONT></P>14081409<BR><BR><BR><BR><BR><BR>1410<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></P>1411<HR SIZE=3 COLOR=GRAY NOSHADE>1412<!-- *************************************************************************** -->1413<!-- MARKER PAGE="sheet: 0; page: 0" -->1414<BR>14151416<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1417<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 2. PROPERTIES </FONT></H1>14181419<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1420<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our offices are in1421approximately 33,000 square feet of leased space in a suburb of Minneapolis, Minnesota. These facilities include approximately142211,200 square feet used for manufacturing activities and approximately 1,400 square feet used for research and laboratory1423activities, with the remainder used for administrative offices. Our lease for these facilities expires in September 2008. We1424believe that we may require additional space for our expanding operations before the expiration of this lease. We believe that1425there is suitable space available in the local market (although not in our current facility) at reasonable rates that are1426available to us if we need expansion space prior to the end of our lease. </FONT></P>14271428<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1429<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 3. LEGAL PROCEEDINGS </FONT></H1>14301431<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1432<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On November 26, 2002, we1433entered into an agreement that settled all existing intellectual property litigation with Datascope Corporation. Under the terms1434of the Settlement Agreement, Datascope granted us a non-exclusive license to its Janzen patents as they apply to all current1435versions of the Duett sealing device, and to certain permitted future product improvements. Datascope also has released us from1436any claim of patent infringement based on past or future sales of the Duett sealing device. In exchange, we paid Datascope a1437single lump sum of $3,750,000 in the fourth quarter of 2002. </FONT></P>14381439<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1440<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On July 12, 2001, we entered1441into an agreement that settled all existing intellectual property litigation with St. Jude Medical. Under the terms of the1442settlement agreement, we agreed to pay a royalty of 2.5% of net sales of our Duett sealing device to St. Jude Medical, up to a1443maximum amount over the remaining life of the St. Jude Fowler patents. In exchange, St. Jude Medical granted to us a non-exclusive1444license to its Fowler patents and has released us from any claim of patent infringement based on sales of our Duett sealing1445device. We granted a non-exclusive cross-license to our Gershony patents to St. Jude Medical, subject to a similar royalty payment1446if St. Jude Medical utilizes our Gershony patents in any future device. Beginning on July 1, 2001, a royalty expense of 2.5% of1447net sales is included in our cost of goods sold until the maximum royalty is attained. </FONT></P>14481449<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1450<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On December 11, 2003, we and1451a non-officer employee of the Company were named as defendants in a lawsuit brought by Diomed, Inc. in the United States District1452Court for the District of Massachusetts. The complaint alleges that in marketing our Vari-Lase endovenous laser procedure kit we1453engaged in false advertising and infringed a registered trademark of Diomed. The complaint also alleges that the non-officer1454employee, who previously worked for a company that conducted business with Diomed, improperly utilized trade secrets of Diomed in1455developing our Vari-Lase procedure kit. The complaint requests monetary damages and an injunction on the sale of our Vari-Lase1456procedure kit. We believe that the allegations included in the complaint are wholly without merit, have filed our answer to the1457complaint, and intend to defend this litigation vigorously. Our insurance carrier has accepted their tender of this claim and is1458defending this lawsuit. It is not possible to predict the timing or outcome of this litigation, including whether it will affect1459our ability to sell our Vari-Lase procedure kit, or to estimate the amount or range of potential loss, if any. </FONT></P>14601461<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1462<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On March 4, 2004, we were1463named as the defendant in an intellectual property lawsuit brought by Diomed, Inc. in the United States District Court for the1464District of Massachusetts. The complaint requested a judgment that our Vari-Lase procedure kit and Vari-Lase laser console1465infringe on a single patent held by Diomed, Inc. and asked for relief in the form of an injunction that would prevent us from1466selling our Vari-Lase products, compensatory and treble damages caused by the manufacture and sale of our product, and other1467costs, disbursements and attorneys’ fees. We believe that the allegations included in the complaint are wholly without merit,1468have filed our answer to the complaint, and intend to defend this litigation vigorously. It is not possible to predict the timing1469or outcome of this litigation, including whether it will affect our ability to sell our Vari-Lase products, or to estimate the1470amount or range of potential loss, if any. </FONT></P>14711472<BR>1473<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15 </FONT></P>1474<HR SIZE=3 COLOR=GRAY NOSHADE>1475<!-- *************************************************************************** -->1476<!-- MARKER PAGE="sheet: 0; page: 0" -->1477<BR>147814791480<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1481<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> From time to time we are1482involved in legal proceedings arising in the normal course of our business. As of the date of this report we are not a party to1483any legal proceeding not described in this section in which an adverse outcome would reasonably be expected to have a1484material adverse effect on our results of operations or financial condition. </FONT></P>14851486<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1487<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS </FONT></H1>14881489<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1490<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> No matters were submitted to1491a vote of security holders during the quarter ended December 31, 2004. </FONT></P>149214931494<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>1495<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></P>1496<HR SIZE=3 COLOR=GRAY NOSHADE>1497<!-- *************************************************************************** -->1498<!-- MARKER PAGE="sheet: 0; page: 0" -->1499<BR>150015011502<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->1503<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II </FONT></H1>15041505<!-- MARKER FORMAT-SHEET="Head Sub 1 Left" FSL="Default" -->1506<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER1507<BR> MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES </FONT></H1>15081509<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1510<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our1511common stock began trading on the NASDAQ National Market under the symbol “VASC”1512on July 20, 2000. The following table sets forth, for the periods indicated, the range of1513high and low last sale prices for the common stock as reported by the NASDAQ National1514Market. </FONT></P>15151516<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=50%>1517<TR VALIGN=Bottom>1518<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1519<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>High </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1520<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Low </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1521<TR VALIGN=Bottom>1522<TD WIDTH=52% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2004</B> </FONT></TD>1523<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1524<TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1525<TD WIDTH=18% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1526<TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1527<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1528<TR VALIGN=Bottom>1529<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> First Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1530<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.690</FONT></TD>1531<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1532<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.090</FONT></TD>1533<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1534<TR VALIGN=Bottom>1535<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Second Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1536<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.740</FONT></TD>1537<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1538<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.900</FONT></TD>1539<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1540<TR VALIGN=Bottom>1541<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Third Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1542<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.100</FONT></TD>1543<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1544<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.000</FONT></TD>1545<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1546<TR VALIGN=Bottom>1547<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Fourth Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1548<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.750</FONT></TD>1549<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1550<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.730</FONT></TD>1551<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1552<TR><TD> </TD></TR>1553<TR VALIGN=Bottom>1554<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2003</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1555<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1556<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1557<TR VALIGN=Bottom>1558<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> First Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1559<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.160</FONT></TD>1560<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1561<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.750</FONT></TD>1562<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1563<TR VALIGN=Bottom>1564<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Second Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1565<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.280</FONT></TD>1566<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1567<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.750</FONT></TD>1568<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1569<TR VALIGN=Bottom>1570<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Third Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1571<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.880</FONT></TD>1572<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1573<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.350</FONT></TD>1574<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1575<TR VALIGN=Bottom>1576<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Fourth Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1577<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.420</FONT></TD>1578<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1579<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.100</FONT></TD>1580<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1581</TABLE>1582<BR>15831584<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1585<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holders </FONT></H1>15861587<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1588<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of December 31, 2004, we1589had 181 shareholders of record. Such number of record holders does not reflect shareholders who beneficially own common stock in1590nominee or street name. </FONT></P>15911592<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1593<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends </FONT></H1>15941595<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1596<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have paid no cash1597dividends on our common stock, and do not intend to pay cash dividends on our common stock in the future. </FONT></P>15981599<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1600<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 6. SELECTED FINANCIAL DATA </FONT></H1>16011602<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1603<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following selected1604financial data as of December 31, 2004 and 2003 and for the three years ended December 31, 2004, 2003 and 2002 are derived from,1605and should be read together with, our financial statements included elsewhere in this Form 10-K. The following selected financial1606data as of December 31, 2002, 2001 and 2000 and for the fiscal years ended December 31, 2001 and 2000 are derived from financial1607statements not included herein. The information set forth below should be read in conjunction with “Management’s1608Discussion and Analysis of Financial Condition and Results of Operations,” the Financial Statements and Notes thereto and1609other financial information included elsewhere in this Form 10-K. </FONT></P>16101611<BR><BR><BR><BR><BR><BR><BR><BR>1612<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>1613<HR SIZE=3 COLOR=GRAY NOSHADE>1614<!-- *************************************************************************** -->1615<!-- MARKER PAGE="sheet: 0; page: 0" -->1616<BR><BR>161716181619<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>1620<TR VALIGN=Bottom>1621<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1622<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31,</FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1623<TR VALIGN=Bottom>1624<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1625<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1626<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1627<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1628<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1629<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2000 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1630<TR VALIGN=Bottom>1631<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1632<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(in thousands, except per share amounts) </FONT></TH></TR>1633<TR VALIGN=Bottom>1634<TD WIDTH=39% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statements of Operations Data:</FONT></TD>1635<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1636<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1637<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>1638<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1639<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>1640<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1641<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>1642<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1643<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>1644<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1645<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>1646<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1647<TR VALIGN=Bottom>1648<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>1649<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,265</FONT></TD>1650<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1651<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,804</FONT></TD>1652<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1653<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,101</FONT></TD>1654<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1655<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,082</FONT></TD>1656<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1657<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,193</FONT></TD>1658<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1659<TR VALIGN=Bottom>1660<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Cost of 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>1661<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,608</FONT></TD>1662<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1663<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,570</FONT></TD>1664<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1665<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,986</FONT></TD>1666<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1667<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,961</FONT></TD>1668<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1669<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,701</FONT></TD>1670<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1671<TR>1672<TD COLSPAN=3></TD>1673<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1674<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1675<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1676<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1677<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>1678<TR VALIGN=Bottom>1679<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>1680<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,657</FONT></TD>1681<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1682<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,234</FONT></TD>1683<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1684<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,115</FONT></TD>1685<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1686<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,121</FONT></TD>1687<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1688<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,492</FONT></TD>1689<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1690<TR VALIGN=Bottom>1691<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>1692<TR VALIGN=Bottom>1693<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1694<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,401</FONT></TD>1695<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1696<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,671</FONT></TD>1697<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1698<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,227</FONT></TD>1699<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1700<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,124</FONT></TD>1701<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1702<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,117</FONT></TD>1703<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1704<TR VALIGN=Bottom>1705<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical and regulatory</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1706<TD ALIGN=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>1707<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1708<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,536</FONT></TD>1709<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1710<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,348</FONT></TD>1711<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1712<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,288</FONT></TD>1713<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1714<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,082</FONT></TD>1715<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1716<TR VALIGN=Bottom>1717<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales and marketing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1718<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,360</FONT></TD>1719<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1720<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,646</FONT></TD>1721<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1722<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,964</FONT></TD>1723<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1724<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,772</FONT></TD>1725<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1726<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,700</FONT></TD>1727<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1728<TR VALIGN=Bottom>1729<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>1730<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,138</FONT></TD>1731<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1732<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,942</FONT></TD>1733<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1734<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,167</FONT></TD>1735<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1736<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,498</FONT></TD>1737<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1738<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,255</FONT></TD>1739<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1740<TR VALIGN=Bottom>1741<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1742<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>210</FONT></TD>1743<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1744<TD ALIGN=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>1745<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1746<TD ALIGN=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>1747<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1748<TD ALIGN=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>1749<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1750<TD ALIGN=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>1751<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1752<TR VALIGN=Bottom>1753<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Legal settlement</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1754<TD ALIGN=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>1755<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1756<TD ALIGN=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>1757<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1758<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,750</FONT></TD>1759<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1760<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>350</FONT></TD>1761<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1762<TD ALIGN=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>1763<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1764<TR VALIGN=Bottom>1765<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of purchased technology</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1766<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218</FONT></TD>1767<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1768<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>217</FONT></TD>1769<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1770<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>145</FONT></TD>1771<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1772<TD ALIGN=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>1773<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1774<TD ALIGN=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>1775<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1776<TR>1777<TD COLSPAN=3></TD>1778<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1779<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1780<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1781<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1782<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>1783<TR VALIGN=Bottom>1784<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>1785<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,233</FONT></TD>1786<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1787<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,012</FONT></TD>1788<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1789<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,601</FONT></TD>1790<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1791<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,032</FONT></TD>1792<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1793<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,154</FONT></TD>1794<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1795<TR>1796<TD COLSPAN=3></TD>1797<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1798<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1799<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1800<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1801<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>1802<TR><TD> </TD></TR>1803<TR VALIGN=Bottom>1804<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating 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>1805<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,576</FONT></TD>1806<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1807<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,778</FONT></TD>1808<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1809<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(15,486</FONT></TD>1810<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1811<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13,911</FONT></TD>1812<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1813<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,662</FONT></TD>1814<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>1815<TR VALIGN=Bottom>1816<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest 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>1817<TD ALIGN=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>1818<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1819<TD ALIGN=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>1820<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1821<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>507</FONT></TD>1822<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1823<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,661</FONT></TD>1824<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1825<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,453</FONT></TD>1826<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1827<TR>1828<TD COLSPAN=3></TD>1829<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1830<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1831<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1832<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>1833<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>1834<TR VALIGN=Bottom>1835<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net 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>1836<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,508</FONT></TD>1837<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1838<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628</FONT></TD>1839<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1840<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,979</FONT></TD>1841<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1842<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,250</FONT></TD>1843<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1844<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (8,209</FONT></TD>1845<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>1846<TR>1847<TD COLSPAN=3></TD>1848<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>1849<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>1850<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>1851<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>1852<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>1853<TR VALIGN=Bottom>1854<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss per common share –</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1855<TR VALIGN=Bottom>1856<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic and diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1857<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.25</FONT></TD>1858<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1859<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>1860<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1861<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>1862<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1863<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.93</FONT></TD>1864<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1865<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.95</FONT></TD>1866<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>1867<TR VALIGN=Bottom>1868<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>1869<TR VALIGN=Bottom>1870<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>1871<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,952</FONT></TD>1872<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1873<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,859</FONT></TD>1874<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1875<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,276</FONT></TD>1876<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1877<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,217</FONT></TD>1878<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1879<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,645</FONT></TD>1880<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1881<TR><TD> </TD></TR>1882<TR VALIGN=Bottom>1883<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1884<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31,</FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1885<TR VALIGN=Bottom>1886<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1887<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1888<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1889<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1890<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>1891<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2000 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1892<TR VALIGN=Bottom>1893<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1894<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(in thousands) </FONT></TH></TR>1895<TR VALIGN=Bottom>1896<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance Sheet Data:</FONT></TD><TD ALIGN=LEFT><FONT 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>1897<TR VALIGN=Bottom>1898<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Cash, cash equivalents and</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1899<TR VALIGN=Bottom>1900<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> available-for-sale 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>1901<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,184</FONT></TD>1902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1903<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,885</FONT></TD>1904<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1905<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,750</FONT></TD>1906<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1907<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,318</FONT></TD>1908<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1909<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 44,098</FONT></TD>1910<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1911<TR VALIGN=Bottom>1912<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>1913<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,833</FONT></TD>1914<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1915<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,223</FONT></TD>1916<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1917<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,656</FONT></TD>1918<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1919<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34,712</FONT></TD>1920<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1921<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46,300</FONT></TD>1922<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1923<TR VALIGN=Bottom>1924<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>1925<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,822</FONT></TD>1926<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1927<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,992</FONT></TD>1928<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1929<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,280</FONT></TD>1930<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1931<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37,593</FONT></TD>1932<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1933<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49,661</FONT></TD>1934<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1935<TR VALIGN=Bottom>1936<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Long-term debt</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1937<TD ALIGN=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>1938<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1939<TD ALIGN=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>1940<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1941<TD ALIGN=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>1942<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1943<TD ALIGN=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>1944<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1945<TD ALIGN=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>1946<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1947<TR VALIGN=Bottom>1948<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total shareholders’ 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>1949<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,690</FONT></TD>1950<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1951<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,872</FONT></TD>1952<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1953<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,369</FONT></TD>1954<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1955<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35,630</FONT></TD>1956<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1957<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47,194</FONT></TD>1958<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1959</TABLE>1960<BR>1961196219631964<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>1965<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>1966<HR SIZE=3 COLOR=GRAY NOSHADE>1967<!-- *************************************************************************** -->1968<!-- MARKER PAGE="sheet: 0; page: 0" -->1969<BR><BR>19701971<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1972<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </FONT></H1>19731974<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1975<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following discussion of1976our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and1977Notes thereto, and the other financial information included elsewhere in this Form 10-K Report. This Management’s Discussion1978and Analysis of Financial Condition and Results of Operations contains descriptions of the Company’s expectations regarding1979future trends affecting our business. These forward-looking statements and other forward-looking statements made elsewhere in this1980document are made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following1981discussion sets forth certain factors we believe could cause actual results to differ materially from those contemplated by the1982forward looking statements. </FONT></P>19831984<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1985<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overview </FONT></H1>19861987<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1988<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are a medical device1989company focused on bringing solutions to interventional cardiologists and interventional radiologists. As a vertically-integrated1990medical device company, we generate ideas and create new interventional medical devices, and then deliver those products directly1991to the physician through our direct domestic sales force and international distribution network. We continue to develop new1992products and applications for our existing products. </FONT></P>19931994<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1995<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since 2003, we have launched1996four new interventional product categories: </FONT></P>19971998<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1999<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2000<TR VALIGN=TOP>2001<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2002<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2003<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2004<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>D-Stat Dry Hemostatic Bandage.</I> We launched2005this product in September 2003. The D-Stat Dry hemostatic bandage consists of a freeze-dried pad of our D-Stat procoagulant which2006can be applied to topical bleeding with a custom adhesive bandage. </FONT></TD>2007</TR>2008</TABLE>2009<BR>20102011<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2012<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2013<TR VALIGN=TOP>2014<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2015<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2016<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2017<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Pronto Extraction Catheter.</I> We launched2018this product in international markets at the end of the third quarter of 2003, and received regulatory clearance for United States2019sales in December 2003. The Pronto extraction catheter consists of a catheter with a proprietary atraumatic distal tip and large2020extraction lumen for the removal of soft thrombus from arteries. </FONT></TD>2021</TR>2022</TABLE>2023<BR>20242025<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2026<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2027<TR VALIGN=TOP>2028<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2029<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2030<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2031<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Vari-Lase endovenous laser procedure kit and laser2032console.</I> We launched the procedure kit in the third quarter of 2003 and the laser console in the first2033quarter of 2004. The Vari-Lase product is a treatment for superficial venous reflux, otherwise known as varicose veins.2034</FONT></TD>2035</TR>2036</TABLE>2037<BR>20382039<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2040<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2041<TR VALIGN=TOP>2042<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2043<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2044<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2045<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Langston dual lumen pigtail catheter.</I> We2046received regulatory clearance for this product in September 2004 and launched this product in the fourth quarter of 2004. The2047Langston catheter is used to measure the precise measurement of aortic stenosis. </FONT></TD>2048</TR>2049</TABLE>2050<BR>20512052<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2053<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe these four2054new recently launched product categories together with sales of our existing Duett, D-Stat Flowable and Acolysis products, will2055result in continued substantial revenue growth in the range of $35 million to $40 million for 2005. We also believe that these new2056products will increase our gross margin percent to approximately 71% to 73% during 2005. </FONT></P>20572058<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2059<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Results of Operations </FONT></H1>20602061<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2062<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Year ended December 31, 2004 compared to year ended December 31, 2003</I></B> </FONT> </P>20632064<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2065<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net sales increased to2066$22,265,000 for the year ended December 31, 2004 from $11,804,000 for the year ended December 31, 2003. Approximately 89% of our2067net sales for the year ended December 31, 2004 were to customers in the United States and 11% of the net sales were to customers2068in international markets. Net sales by product category were as follows: </FONT></P>20692070<BR>2071<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>2072<HR SIZE=3 COLOR=GRAY NOSHADE>2073<!-- *************************************************************************** -->2074<!-- MARKER PAGE="sheet: 0; page: 0" -->2075<BR><BR>20762077<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2078<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2079<TR VALIGN=TOP>2080<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2081<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2082<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2083<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the D-Stat Dry were $8,831,000 for the year ended2084December 31, 2004 compared to $1,085,000 for the year ended December 31, 2003. Our D-Stat Dry product was launched at the end of2085the third quarter of 2003. Through December 31, 2004, we have sold our D-Stat Dry to 574 of the estimated 3,000 cardiac and2086interventional radiology labs in the United States. </FONT></TD>2087</TR>2088</TABLE>2089<BR>20902091<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2092<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2093<TR VALIGN=TOP>2094<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2095<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2096<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2097<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Pronto were $3,051,000 for the year ended2098December 31, 2004 compared to $97,000 for the year ended December 31, 2003. Our Pronto product was launched at the end of the2099third quarter of 2003 in international markets, and we received FDA approval in December 2003 but did not commence sales in the2100United States until 2004. We have sold our Pronto to 450 accounts in the United States through December 31, 2004. </FONT></TD>2101</TR>2102</TABLE>2103<BR>21042105<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2106<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2107<TR VALIGN=TOP>2108<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2109<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2110<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2111<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Vari-Lase products were $2,662,000 for the year ended2112December 31, 2004 compared to $255,000 for the year ended December 31, 2003. Our Vari-Lase procedure kit was launched during the2113third quarter of 2003 and our Vari-Lase laser console was launched during the first quarter of 2004. We have sold our Vari-Lase2114kits to 172 accounts in the United States through December 31, 2004. </FONT></TD>2115</TR>2116</TABLE>2117<BR>21182119<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2120<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2121<TR VALIGN=TOP>2122<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2123<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2124<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2125<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of our Duett sealing device were $5,973,000 for the year2126ended December 31, 2004 compared to $8,995,000 for the year ended December 31, 2003. We expect Duett sales to continue to decline2127at a rate of between 20% to 30%, year over year, as we continue to harvest this product and focus on our new higher margin2128products. </FONT></TD>2129</TR>2130</TABLE>2131<BR>21322133<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2134<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2135<TR VALIGN=TOP>2136<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2137<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2138<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2139<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of D-Stat Flowable increased to $1,441,000 for the year2140ended December 31, 2004 compared to $1,187,000 for the year ended December 31, 2003, a 21% increase. Our reorder rate for the2141D-Stat Flowable in 2004 compared to 2003 has increased to 63% from 58%. </FONT></TD>2142</TR>2143</TABLE>2144<BR>21452146<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2147<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2148<TR VALIGN=TOP>2149<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2150<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2151<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2152<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Langston dual lumen pigtail catheter were $133,0002153for the year ended December 31, 2004 compared to no sales for the year ended December 31, 2003. In September 2004 we launched the2154Langston dual lumen pigtail catheter. </FONT></TD>2155</TR>2156</TABLE>2157<BR>21582159<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2160<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2161<TR VALIGN=TOP>2162<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2163<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2164<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2165<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Acolysis products were $174,000 for the year ended2166December 31, 2004 compared to $185,000 for the year ended December 31, 2003. The Acolysis products are only sold in international2167markets. </FONT></TD>2168</TR>2169</TABLE>2170<BR>21712172<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2173<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Gross profit as a percentage2174of net sales increased to 70% for the year ended December 31, 2004 from 61% for the year ended December 31, 2003. Our selling mix2175continues to change to our higher margin products such as our D-Stat Dry which has gross margins greater than 80% and our Pronto2176which has gross margins in excess of 75%. We expect gross margins to stabilize in 2005 to approximately 71% to 73%. </FONT></P>21772178<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2179<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development2180expenses decreased 7% to $3,401,000 for the year ended December 31, 2004 from $3,671,000 for the year ended December 31, 2003. The2181decrease was related to less outside project spending in 2004 compared to 2003. We expect our research and development expenses to2182be approximately $800,000 to $1,000,000 per quarter in 2005 as we continue to pursue additional new products at an expected rate2183of approximately two new products per year and we continue to move our longer term development projects forward. </FONT></P>21842185<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2186<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical and regulatory2187expenses increased 24% to $1,906,000 for the year ended December 31, 2004 from $1,536,000 for the year ended December 31, 2003.2188The increase was the result of increased clinical study activity, increased FDA fees and increased number of employees compared to21892003. During 2004 our clinical studies consisted of the “Pocket Protector” study for a new indication of our D-Stat2190Flowable product and the D-Stat Dry study to obtain clinical data to support growing sales of the D-Stat Dry. Clinical and2191regulatory expenses fluctuate due to the timing of clinical and marketing studies. We expect clinical and regulatory expenses to2192be approximately $500,000 to $600,000 per quarter in 2005. </FONT></P>21932194<BR>2195<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20 </FONT></P>2196<HR SIZE=3 COLOR=GRAY NOSHADE>2197<!-- *************************************************************************** -->2198<!-- MARKER PAGE="sheet: 0; page: 0" -->2199<BR><BR>220022012202<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2203<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales and marketing expenses2204increased 18% to $11,360,000 for the year ended December 31, 2004 from $9,646,000 for the year ended December 31, 2003. The2205increase in sales and marketing expenses is the direct result of our increase in our direct sales force to 57 employees at the end2206of 2004 compared to 47 as of December 31, 2003. We expect to add approximately 10 field sales employees during 2005 to complete2207our geographic coverage of the United States. As a result, we expect our sales and marketing expenses to increase to approximately2208$3,200,000 to $3,500,000 per quarter in 2005. </FONT></P>22092210<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2211<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> General and administrative2212expenses increased 10% to $2,138,000 for the year ended December 31, 2004 from $1,942,000 for the year ended December 31, 2003.2213The increase was primarily the result of higher legal fees relating to the Diomed litigation (see “Legal Proceedings” in2214Item 3 of Part I of this Form 10-K) along with higher business insurance in 2004 compared to 2003. We expect general and2215administrative expenses to be approximately $550,000 to $650,000 per quarter in 2005. </FONT></P>22162217<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2218<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification2219project expenses were $210,000 for the year ended December 31, 2004 compared to no expenses for the year ended December 31, 2003.2220We expect the total remaining expenses associated with our qualification of the new source of thrombin to be approximately $3.12221million to be incurred over the next two years, with approximately $1.8 million incurred in 2005 and $1.3 million incurred in22222006. </FONT></P>22232224<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2225<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of purchased2226technology was $218,000 for the year ended December 31, 2004 and $218,000 for the year ended December 31, 2003. The amortization2227resulted from our acquisition of the Acolysis assets from the secured creditors of Angiosonics, Inc. We allocated $870,000 from2228the acquisition to purchased technology and are amortizing the amount over four years. </FONT></P>22292230<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2231<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest income decreased to2232$68,000 for the year ended December 31, 2004 from $150,000 for the year ended December 31, 2003 primarily as a result of lower2233interest rates and lower cash balances. </FONT></P>22342235<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2236<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Results of Operations </FONT></H1>22372238<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2239<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Year ended December 31, 2003 compared to year ended December 31, 2002</I></B> </FONT> </P>22402241<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2242<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net sales decreased modestly2243to $11,804,000 for the year ended December 31, 2003 from $12,101,000 for the year ended December 31, 2002. Approximately 87% of2244our net sales for the year ended December 31, 2003 were to customers in the United States and 13% of the net sales were to2245customers in international markets. Net sales by product category were as follows: </FONT></P>22462247<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2248<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2249<TR VALIGN=TOP>2250<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2251<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2252<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2253<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the D-Stat Dry were $1,085,000 for the year ended2254December 31, 2003, compared to no sales in 2002. Our D-Stat Dry product was launched at the end of the third quarter of 2003.2255Through December 31, 2003, we sold our D-Stat Dry to 187 of the estimated 3,000 cardiac and interventional radiology labs in the2256United States. </FONT></TD>2257</TR>2258</TABLE>2259<BR>22602261<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2262<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2263<TR VALIGN=TOP>2264<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2265<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2266<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2267<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Pronto were $97,000 for the year ended December226831, 2003, all from international sales, compared to no sales in 2002. Our Pronto product was launched at the end of the third2269quarter of 2003 in international markets, and we received FDA approval in December 2003 but did not commence sales in the United2270States until 2004. </FONT></TD>2271</TR>2272</TABLE>2273<BR>22742275<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2276<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2277<TR VALIGN=TOP>2278<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2279<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2280<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2281<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Vari-Lase products were $255,000 for the year ended2282December 31, 2003, compared to no sales in 2002. Our Vari-Lase procedure kit was launched during the third quarter of 2003.2283</FONT></TD>2284</TR>2285</TABLE>2286<BR>22872288<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2289<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2290<TR VALIGN=TOP>2291<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2292<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2293<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2294<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of our Duett sealing device were $8,995,000 for the year2295ended December 31, 2003 compared to $11,235,000 for the year ended December 31, 2002. We expect Duett sales to continue to decline2296at a rate of between 20% to 30%, year over year, as we continue to harvest this product. </FONT></TD>2297</TR>2298</TABLE>2299<BR>23002301<BR>2302<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></P>2303<HR SIZE=3 COLOR=GRAY NOSHADE>2304<!-- *************************************************************************** -->2305<!-- MARKER PAGE="sheet: 0; page: 0" -->2306<BR><BR>230723082309<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2310<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2311<TR VALIGN=TOP>2312<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2313<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2314<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2315<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of D-Stat Flowable increased to $1,187,000 for the year2316ended December 31, 2003 from $764,000 for the year ended 2002, a 55% increase. Our reorder rate for the D-Stat Flowable in 20032317compared to 2002 remained steady at 58%. </FONT></TD>2318</TR>2319</TABLE>2320<BR>23212322<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2323<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2324<TR VALIGN=TOP>2325<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2326<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2327<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2328<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Acolysis products were $185,000 for the year ended2329December 31, 2003 compared to $102,000 for the year ended December 31, 2002. </FONT></TD>2330</TR>2331</TABLE>2332<BR>23332334<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2335<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Gross profit as a percentage2336of net sales increased to 61% for the year ended December 31, 2003 from 59% for the year ended December 31, 2002. We added higher2337margin products to our selling mix during 2003, particularly our D-Stat Dry which has gross margins greater than 80%. </FONT></P>23382339<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2340<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development2341expenses increased 14% to $3,671,000 for the year ended December 31, 2003 from $3,228,000 for the year ended December 31, 2002.2342The increase was directly related to our increased activity in launching four new products in 2003 and the continued work on the2343long term research and development projects. Research and development expenses fluctuate due to outside project spending.2344</FONT></P>23452346<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2347<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical and regulatory2348expenses increased 14% to $1,536,000 for the year ended December 31, 2003 from $1,348,000 for the year ended December 31, 2002.2349The expected increase was the result of the approval of the four new products in the second half of 2003 as well as the2350“Pocket Protector” clinical study for a new indication of our D-Stat Flowable product. Clinical and regulatory expenses2351fluctuate due to the timing of clinical and marketing studies. </FONT></P>23522353<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2354<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales and marketing expenses2355decreased 19% to $9,646,000 for the year ended December 31, 2003 from $11,964,000 for the year ended December 31, 2002. During23562002 and 2003 we reviewed our sales and marketing expenditures and focused our spending in the areas that drove sales and provided2357an adequate financial return. As of December 31, 2003, our direct sales force consisted of approximately 40 employees compared to2358approximately 50 as of December 31, 2002. </FONT></P>23592360<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2361<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> General and administrative2362expenses decreased 10% to $1,942,000 for the year ended December 31, 2003 from $2,167,000 for the year ended December 31, 2002.2363The decrease was primarily the result of lower legal fees in 2003 compared to 2002, as we incurred legal fees in 2002 relating to2364the Datascope litigation which was settled in the fourth quarter of 2002. The reduction in legal fees was partially offset by an2365increase in the cost of business insurance. </FONT></P>23662367<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2368<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Legal settlement expenses2369were $3,750,000 for the year ended December 31, 2002. We entered into an agreement that settled all existing intellectual property2370litigation with Datascope Corporation in the fourth quarter of 2002 (see “Legal Proceedings” in Item 3 of Part I of this2371Form 10-K). As part of the settlement, Datascope released us from any claim of patent infringement based on past or future sales2372of the Duett sealing device. In exchange, we paid Datascope a single lump sum of $3,750,000 in the fourth quarter of 2002.2373</FONT></P>23742375<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2376<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of purchased2377technology was $218,000 for the year ended December 31, 2003 and $145,000 for the year ended December 31, 2002. The increase is2378the result of a full year of amortization in 2003 compared to 2002. The amortization resulted from our acquisition of the Acolysis2379assets from the secured creditors of Angiosonics, Inc. We allocated $870,000 from the acquisition to purchased technology and are2380amortizing the amount over four years. </FONT></P>23812382<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2383<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest income decreased to $150,000 for the year ended December 31, 20032384from $507,000 for the year ended December 31, 2002 primarily as a result of a reduced cash balance and lower interest rates.2385</FONT></P>23862387<BR>2388<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22 </FONT></P>2389<HR SIZE=3 COLOR=GRAY NOSHADE>2390<!-- *************************************************************************** -->2391<!-- MARKER PAGE="sheet: 0; page: 0" -->2392<BR><BR>239323942395<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2396<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income Taxes </FONT></H1>23972398<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2399<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have not generated any2400pre-tax income to date and therefore have not paid any federal income taxes since inception in December 1996. No provision or2401benefit for federal and state income taxes has been recorded for net operating losses incurred in any period since our inception.2402</FONT></P>24032404<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2405<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of December 31, 2004, we2406had net operating loss carryforwards of approximately $57,865,000 for U.S. federal income tax purposes that begin to expire in the2407year 2013. As of December 31, 2004, we also had federal and state research and development tax credit carryforwards of2408approximately $1,598,000 that begin to expire in the year 2013. As of December 31, 2004, we also had a foreign tax loss2409carryforward of approximately $2,358,000 that do not expire. Under the Tax Reform Act of 1986, the amounts of and benefits from2410net operating loss carryforwards may be impaired or limited in certain circumstances, including significant changes in ownership2411interests. Future use of our existing net operating loss carryforwards may be restricted due to changes in ownership or from2412future tax legislation. </FONT></P>24132414<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2415<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity and Capital Resources </FONT></H1>24162417<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2418<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have financed all of our2419operations since inception through the issuance of equity securities and, to a lesser extent, sales of our products. Through2420December 31, 2004, we have sold common stock and preferred stock generating aggregate net proceeds of approximately $76.6 million.2421At December 31, 2004, we had $7,184,000 in cash, cash equivalents and available-for-sale securities on-hand compared to $5,885,0002422at December 31, 2003. </FONT></P>24232424<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2425<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the year ended2426December 31, 2004, we used $4,115,000 to fund operating activities. The cash used in operating activities was primarily used to2427fund our net loss for the period of $3,508,000 and an increase in accounts receivable of $1,723,000, which was offset by2428depreciation and amortization of $692,000. The increase in accounts receivable is due to the increase in sales of 89% in 2004 from24292003. During 2004 we generated proceeds of $2,120,000 in investing activities, primarily from the net sales of investment2430securities of $3,020,000, offset by net equipment purchases of $900,000. Also during 2004 we generated $6,212,000 in financing2431activities, primarily from $5,868,000 we received through the sale of common stock. On March 9, 2004, we sold 888,900 shares of2432our common stock at an offering price of $6.75 per share through a private placement. Our net proceeds from the offering were2433approximately $5,594,000. </FONT></P>24342435<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2436<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the fourth quarter of24372004, we renewed our credit facility with Silicon Valley Bank and increased the line of credit to $5.0 million. The line of credit2438has a 12 month term, bears interest at the rate of prime plus 0.5% and is secured by a first security interest on all of our2439assets. The line of credit includes two covenants: minimum tangible net worth of $11.0 million and a liquidity coverage of not2440less than 1.25 to 1.00. We were in compliance with these covenants at December 31, 2004. As of December 31, 2004, we had no2441outstanding balance on the line of credit balance and the availability was $3.1 million. </FONT></P>24422443<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2444<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchase our requirements2445for thrombin (a component in the Duett and all of the D-Stat products) under a Purchase Agreement dated June 10, 1999 with a2446subsidiary of King Pharmaceuticals, Inc. The agreement provides for a fixed price, with adjustments based on the supplier’s2447manufacturing costs and the supplier’s annual percentage increase in the wholesale price of thrombin. The agreement expires2448on May 29, 2005. During the second and third quarters of 2005, we intend to increase our purchases of thrombin to benefit from the2449pricing provisions of the agreement, which we expect will increase our inventory of thrombin by approximately $3.0 million. We2450believe that these purchases will satisfy our thrombin requirements for all of 2005 and 2006. </FONT></P>24512452<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2453<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On October 18, 2004, we2454entered into a supply agreement with Sigma-Aldrich Fine Chemicals, an operating division of Sigma-Aldrich, Inc. (Sigma) for the2455supply of thrombin. Pursuant to the terms of the agreement, we will be paying for certain development costs of Sigma to allow2456Sigma to produce thrombin. We will pay Sigma $570,000 for its development and qualification costs, $182,000 for capital equipment2457and $1,725,000 for the first three lots of thrombin. The payments are based on certain milestones over a two year </FONT></P>24582459<BR>2460<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23 </FONT></P>2461<HR SIZE=3 COLOR=GRAY NOSHADE>2462<!-- *************************************************************************** -->2463<!-- MARKER PAGE="sheet: 0; page: 0" -->2464<BR><BR>246524662467<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2468<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>period. We do not have any minimum purchase requirements under the contract;2469however, if we purchase less than three lots of thrombin in any year Sigma will be released from its agreement not to sell2470thrombin in or as a component of a hemostatic product for medical use, and Sigma will have the right to terminate the contract on247130 days notice. </FONT></P>24722473<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2474<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Sigma contract is the2475start of our plan to fully qualify a new source of thrombin and to bring the new thrombin through the regulatory process by the2476end of 2006. We expect total estimated expenditures of $6.1 million to complete this project (including the payments to Sigma),2477with approximately $3.3 million in expenses, $0.3 million in capital equipment purchases and $2.5 million in thrombin inventory2478purchases. We expect to utilize the thrombin inventory in sales of our hemostatic products starting in 2007. </FONT></P>24792480<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2481<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We signed a purchase2482agreement with MedArt Corporation on September 22, 2003 for the manufacture of our Vari-Lase laser console. Under that agreement,2483we were obligated to purchase laser consoles with an aggregate purchase price of $1,197,000 for our Vari-Lase business during the2484first year of the agreement, which commenced in December 2003. We fulfilled this obligation during 2004. </FONT></P>24852486<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2487<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We do not have any other2488significant cash commitments related to supply agreements, nor do we have any significant commitments for capital expenditures.2489</FONT></P>24902491<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2492<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following table2493summarizes our contractual cash commitments as of December 31, 2004: </FONT></P>2494249524962497<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>2498<TR VALIGN=Bottom>2499<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2500<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Payments Due by Period</FONT></TH></TR>2501<TR>2502<TD COLSPAN=3></TD>2503<TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2504<TR VALIGN=Bottom>2505<TH COLSPAN=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Contractual Obligations</FONT></TH>2506<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT></TH>2507<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2508<TH COLSPAN=2 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Less than<BR>1 year</FONT></TH>2509<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2510<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1-3 years</FONT></TH>2511<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2512<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4-5 years</FONT></TH>2513<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2514<TH COLSPAN=2 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>After<BR>5 years</FONT></TH></TR>2515<TR>2516<TD COLSPAN=2 ALIGN=left><HR NOSHADE COLOR=#000000 SIZE=1 width=50%></TD><TD></TD>2517<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2518<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2519<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2520<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2521<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2522<TR><td> </td></tr>2523<TR VALIGN=Bottom>2524<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif">Facility Operating Lease</FONT></TD>2525<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2526<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2527<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> 1,345,000</FONT></TD>2528<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2529<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> 345,000</FONT></TD>2530<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2531<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> 1,000,000</FONT></TD>2532<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2533<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> —</FONT></TD>2534<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2535<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> —</FONT></TD>2536<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD></TR>2537<TR VALIGN=Bottom>2538<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif">Sigma Contract Commitment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2539<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">2,477,000</FONT></TD>2540<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2541<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">2,388,000</FONT></TD>2542<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2543<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">89,000</FONT></TD>2544<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2545<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">—</FONT></TD>2546<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2547<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">—</FONT></TD>2548<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD></TR>2549<TR>2550<TD COLSPAN=3></TD>2551<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2552<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2553<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2554<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2555<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2556<TR VALIGN=Bottom>2557<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif">Total Contractual Cash Obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2558<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> 3,822,000</FONT></TD>2559<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2560<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> 2,733,000</FONT></TD>2561<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2562<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> 1,089,000</FONT></TD>2563<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2564<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> —</FONT></TD>2565<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD>2566<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif">$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif"> —</FONT></TD>2567<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif"> </FONT></TD></TR>2568<TR>2569<TD COLSPAN=3></TD>2570<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>2571<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>2572<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>2573<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>2574<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>2575</TABLE>257625772578<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2579<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Principally due to the2580thrombin inventory purchases and the Sigma thrombin qualification project, we currently anticipate that we will continue to2581experience a negative cash flow until at least the fourth quarter of 2005, at which time we project that we will become cash flow2582neutral. We currently believe that our working capital of $11.8 million, anticipated cash from product sales and, if needed, our2583$5.0 million credit facility with Silicon Valley Bank will be sufficient to meet our operating and capital requirements until we2584reach cash flow neutral in the fourth quarter of 2005. However, our actual liquidity and capital requirements will depend upon2585numerous factors, including the costs and timing of expansion of sales and marketing activities; the amount of revenues from sales2586of our existing and new products; the cost of maintaining, enforcing and defending patents and other intellectual property rights;2587competing technological and market developments; developments related to regulatory and third party reimbursement matters; the2588cost and progress of our research and development efforts; the cost and progress or our thrombin qualification efforts; and other2589factors. </FONT></P>25902591<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2592<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the event that additional2593financing is needed and depending on market conditions, we may seek to raise additional funds for working capital purposes at any2594time through the sale of equity or debt securities. If cash generated from operations is insufficient to satisfy our cash needs,2595we may be required to raise additional funds. We currently have no commitments for additional funding and so our ability to meet2596our long-term liquidity needs is uncertain. If we raise additional funds through the issuance of equity securities, our2597shareholders may experience significant dilution. Furthermore, additional financing may not be available when needed or, if2598available, financing may not be on terms favorable to us or our shareholders. If financing is not available when required or is2599not available on acceptable terms, we may be unable to develop or market our products or take advantage of business opportunities2600or may be required to significantly curtail our business operations. </FONT></P>26012602<BR>2603<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24 </FONT></P>2604<HR SIZE=3 COLOR=GRAY NOSHADE>2605<!-- *************************************************************************** -->2606<!-- MARKER PAGE="sheet: 0; page: 0" -->2607<BR><BR>260826092610<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2611<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical Accounting Policies </FONT></H1>26122613<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2614<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Management’s Discussion2615and Analysis of Financial Condition and Results of Operations addresses our financial statements, which have been prepared in2616accordance with accounting principles generally accepted in the United States. The preparation of our financial statements2617requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of2618contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during2619the reporting period. On an on-going basis, we evaluate these estimates and judgments. We base our estimates and judgments on2620historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of2621which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from2622other sources. Actual results may differ from these estimates under different assumptions or conditions. </FONT></P>26232624<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2625<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our accounting policies are2626described in Note 2 to the financial statements. We set forth below those material accounting policies that we believe are the2627most critical to an investor’s understanding of our financial results and condition, and require complex management judgment.2628</FONT></P>26292630<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2631<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Inventory</I> </FONT> </P>26322633<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2634<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We state our inventory at the2635lower of cost (first-in, first-out method) or market. The estimated value of excess, obsolete and slow-moving inventory as well as2636inventory with a carrying value in excess of its net realizable value is established by us on a quarterly basis through review of2637inventory on hand and assessment of future demand, anticipated release of new products into the market, historical experience and2638product expiration. Our stated value of inventory could be materially different if demand for our products decreased because of2639competitive conditions or market acceptance, or if products become obsolete because of advancements in the industry. </FONT></P>26402641<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2642<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Revenue Recognition</I> </FONT> </P>26432644<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2645<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We recognize revenue in2646accordance with generally accepted accounting principles as outlined in the SEC’s Staff Accounting Bulletin No. 1042647“Revenue Recognition,” which requires that four basic criteria be met before revenue can be recognized: (i) persuasive2648evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectibility is reasonably assured; and (iv)2649product delivery has occurred or services have been rendered. We recognize revenue as products are shipped based on FOB shipping2650point terms when title passes to customers. We negotiate credit terms on a customer-by-customer basis and products are shipped at2651an agreed upon price. All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.2652</FONT></P>26532654<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2655<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We analyze the rate of2656historical returns when evaluating the adequacy of the allowance for sales returns, which is included with the allowance for2657doubtful accounts on our balance sheet. At December 31, 2004, this reserve was $20,000 compared to $20,000 at December 31, 2003.2658If the historical data we use to calculate these estimates does not properly reflect future returns, revenue could be overstated.2659</FONT></P>26602661<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2662<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Allowance for Doubtful Accounts</I> </FONT> </P>26632664<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2665<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We maintain allowances for2666doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance is2667regularly evaluated by us for adequacy by taking into consideration factors such as past experience, credit quality of the2668customer base, age of the receivable balances, both individually and in the aggregate, and current economic conditions that may2669affect a customer’s ability to pay. At December 31, 2004, this reserve was $160,000 compared to $140,000 at December 31,26702003. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make2671payments, additional allowances may be required. </FONT></P>26722673<BR>2674<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25 </FONT></P>2675<HR SIZE=3 COLOR=GRAY NOSHADE>2676<!-- *************************************************************************** -->2677<!-- MARKER PAGE="sheet: 0; page: 0" -->2678<BR><BR>267926802681<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2682<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Warranty Costs</I> </FONT> </P>26832684<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2685<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We provide a warranty for2686certain products against defects in material and workmanship for periods of up to 24 months. We record a liability for warranty2687claims at the time of sale. The amount of the liability is based on the amount we are charged by our original equipment2688manufacturer to cover the warranty period. The original equipment manufacturer includes a year warranty with each product sold to2689us. We record a liability for the uncovered warranty period offered to a customer, provided the warranty period offered exceeds2690the initial one year warranty period covered by the original equipment manufacturer. At December 31, 2004, this warranty provision2691was $33,000 compared to $0 at December 31, 2003. If the assumptions used in calculating the provision were to materially change,2692resulting in more defects than anticipated, an additional provision may be required. </FONT></P>26932694<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2695<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Income Taxes</I> </FONT> </P>26962697<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2698<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The carrying value of our net2699deferred tax assets assumes that we will be able to generate sufficient taxable income in the United States and to a lesser extent2700Germany, based on estimates and assumptions. We record a valuation allowance to reduce the carrying value of our net deferred tax2701asset to the amount that is more likely than not to be realized. For the year ended December 31, 2004, we recorded a $26.4 million2702valuation allowance related to our net deferred tax assets of $26.4 million. In the event we were to determine that we would be2703able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase net income in the2704period such determination is made. On a quarterly basis, we evaluate the realizability of our deferred tax assets and assess the2705requirement for a valuation allowance. </FONT></P>27062707<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2708<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>New Accounting Pronouncements</I> </FONT> </P>27092710<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2711<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In December 2004, the2712Financial Accounting Standards Board (FASB) issued Statement No. 123R, “Share-Based Payment” (SFAS 123R), which requires2713companies to measure and recognize compensation expense for all stock-based payments at fair value. SFAS 123R is effective2714for all interim periods beginning after June 15, 2005. Early adoption is encouraged and retroactive application of the2715provisions of SFAS 123R to the beginning of the fiscal year that includes the effective date is permitted, but not required. 2716We are currently evaluating the impact of SFAS 123R our financial position and results of operations. See Note 2 for2717information related to the pro forma effects on our reported net loss and net loss per share of applying the fair value2718recognition provisions of the previous Statement of Financial Accounting Standards (SFAS) 123, “Accounting for Stock-Based2719Compensation,” to stock-based employee compensation. </FONT></P>27202721<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2722<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk Factors </FONT> </H1>27232724<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2725<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>The risks and2726uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to2727us or that we currently deem immaterial may also impair our business operations. If any of the following risks occur, our2728business, financial condition or results of operations could be seriously harmed.</I> </FONT></P>27292730<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2731<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We will not be successful if the interventional medical device community2732does not adopt our new products</I> </FONT></P>27332734<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2735<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the third quarter of27362000 we commenced sales of our first product, the Duett sealing device, in the United States, which we believe represents the2737largest market for interventional medical devices. We have not become profitable with our sales of the Duett. In the second half2738of 2003, we received clearance to commence sales of four new interventional products in the United States. Our success will depend2739on the medical community’s acceptance of our new products. We cannot predict how quickly, if at all, the medical community2740will accept our new products, or, if accepted, the extent of their use. Our potential customers must: </FONT></P>274127422743<BR>2744<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26 </FONT></P>2745<HR SIZE=3 COLOR=GRAY NOSHADE>2746<!-- *************************************************************************** -->2747<!-- MARKER PAGE="sheet: 0; page: 0" -->2748<BR><BR>274927502751<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2752<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2753<TR VALIGN=TOP>2754<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2755<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2756<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2757<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>believe that our products offer benefits compared to the2758methodologies and/or devices that they are currently using; </FONT></TD>2759</TR>2760</TABLE>2761<BR>27622763<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2764<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2765<TR VALIGN=TOP>2766<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2767<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2768<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2769<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>use our products and obtain acceptable clinical outcomes;2770</FONT></TD>2771</TR>2772</TABLE>2773<BR>27742775<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2776<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2777<TR VALIGN=TOP>2778<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2779<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2780<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2781<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>believe that our products are worth the price that they will be2782asked to pay; and </FONT></TD>2783</TR>2784</TABLE>2785<BR>27862787<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2788<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2789<TR VALIGN=TOP>2790<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2791<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2792<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2793<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be willing to commit the time and resources required to change2794their current methodology. </FONT></TD>2795</TR>2796</TABLE>2797<BR>27982799<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2800<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Because we have only limited2801experience with sales of our D-Stat Dry hemostatic bandage, Pronto extraction catheter, Vari-Lase endovenous laser and Langston2802catheter products, we have no ability to predict the level of sales of these products. If we encounter difficulties in growing our2803sales of our new medical devices in the United States, our business will be seriously harmed. </FONT></P>28042805<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2806<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>We have limited working capital to pursue our business</I> </FONT> </P>28072808<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2809<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On December 31, 2004, we had2810$7.2 million in cash, cash equivalents and marketable securities and a working capital of $11.8 million. During 2004, our2811operating activities resulted in the use of $4.1 million of cash. There can be no assurance that our existing working capital will2812be sufficient to satisfy our working capital needs. If our sales do not increase, or if we encounter unexpected expenses, we will2813need to raise additional working capital. We have no commitments for additional funding and so our ability to meet our long-term2814liquidity needs is uncertain. If we raise additional funds through the issuance of equity securities, our shareholders may2815experience significant dilution. Furthermore, additional financing may not be available when needed or, if available, financing2816may not be on terms favorable to us or our shareholders. If financing is not available when required or is not available on2817acceptable terms, we may be unable to develop or market our products or unable to take advantage of business opportunities, or we2818may be required to significantly curtail our business operations. </FONT></P>28192820<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2821<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>We have incurred losses and we may not be profitable in the future</I> </FONT> </P>28222823<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2824<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since we commenced operations2825in February 1997, we have incurred net losses primarily from costs relating to the development and commercialization of our Duett2826sealing device and new products. At December 31, 2004, we had an accumulated deficit of $63.2 million. We expect to continue to2827significantly invest in our sales and marketing, and research and development activities. Because of our plans to introduce new2828products and expand our commercialization, we expect to incur net losses through at least the first quarter of 2005. Our business2829strategies may not be successful, and we may not become profitable in any future period or at all. If we do become profitable, we2830cannot be certain that we can sustain or increase profitability on a quarterly or annual basis. </FONT></P>28312832<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2833<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We may face additional intellectual property claims in the future which2834could prevent us from manufacturing and selling our products or result in our incurring substantial costs and liabilities</I> </FONT></P>28352836<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2837<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The interventional medical2838device industry is characterized by numerous patent filings and frequent and substantial intellectual property litigation.2839Companies in the interventional medical device industry have employed intellectual property litigation in an attempt to gain a2840competitive advantage. We have been subject to two intellectual property lawsuits concerning our Duett sealing device. Although we2841have settled both of these intellectual property lawsuits, it is possible that additional claims relating to the Duett could be2842brought in the future. We also are the subject of two intellectual property lawsuits concerning our Vari-Lase products. In2843addition, while we do not believe that any of our new products infringes any existing patent, it is highly likely that we will2844become subject to intellectual property claims with respect to our new products in the future. Intellectual property litigation in2845recent years has proven to be very complex, and the outcome of such litigation is difficult to predict. </FONT></P>28462847<BR>2848<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27 </FONT></P>2849<HR SIZE=3 COLOR=GRAY NOSHADE>2850<!-- *************************************************************************** -->2851<!-- MARKER PAGE="sheet: 0; page: 0" -->2852<BR><BR>285328542855<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2856<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> An adverse determination in2857any intellectual property litigation or interference proceedings could prohibit us from selling a product, subject us to2858significant liabilities to third parties or require us to seek licenses from third parties. The costs associated with these2859license arrangements may be substantial and could include ongoing royalties. Furthermore, the necessary licenses may not be2860available to us on satisfactory terms, if at all. Adverse determinations in a judicial or administrative proceeding or failure to2861obtain necessary licenses could prevent us from manufacturing and selling a product. </FONT></P>28622863<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2864<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our defense of intellectual2865property claims filed in the future, regardless of the merits of the complaint, could divert the attention of our technical and2866management personnel away from the development and marketing of our products for significant periods of time. The costs incurred2867to future claims could be substantial and seriously harm us, even if our defense is ultimately successful. </FONT></P>28682869<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2870<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The loss of, or interruption of supply from, key vendors, including our2871single source supplier of thrombin, could limit our ability to manufacture our products</I> </FONT></P>28722873<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2874<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchase components used2875in our products from various suppliers and rely on a single source for the thrombin component of our Duett sealing device and2876D-Stat products. There are currently no FDA-approved alternative suppliers of thrombin. Our current supply agreement with our2877thrombin vendor terminates in May 2005. Because it requires FDA approval, establishing our new supplier for thrombin requires a2878lead-time of at least two years and involves significant additional costs. The failure by us to complete our thrombin2879qualification project on time and on budget, or the loss of any other key vendor, may limit our ability to manufacture our Duett,2880D-Stat Flowable and D-Stat Dry products and could therefore seriously harm our business. </FONT></P>28812882<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2883<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our future operating results are difficult to predict and may vary2884significantly from quarter to quarter, which may adversely affect the price of our common stock</I> </FONT></P>28852886<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2887<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The limited history of our2888sales and our history of losses make prediction of future operating results difficult. You should not rely on our past revenue2889growth as any indication of future growth rates or operating results. The price of our common stock will likely fall in the event2890that our operating results do not meet the expectations of analysts and investors. Comparisons of our quarterly operating results2891are an unreliable indication of our future performance because they are likely to vary significantly based on many factors,2892including: </FONT></P>28932894<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2895<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2896<TR VALIGN=TOP>2897<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2898<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2899<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2900<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the level of sales of our products in the United States market;2901</FONT></TD>2902</TR>2903</TABLE>2904<BR>29052906<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2907<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2908<TR VALIGN=TOP>2909<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2910<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2911<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2912<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our ability to introduce new products and enhancements in a timely2913manner; </FONT></TD>2914</TR>2915</TABLE>2916<BR>29172918<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2919<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2920<TR VALIGN=TOP>2921<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2922<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2923<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2924<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the demand for and acceptance of our products; </FONT></TD>2925</TR>2926</TABLE>2927<BR>29282929<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2930<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2931<TR VALIGN=TOP>2932<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2933<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2934<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2935<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the success of our competition and the introduction of alternative2936products; </FONT></TD>2937</TR>2938</TABLE>2939<BR>29402941<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2942<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2943<TR VALIGN=TOP>2944<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2945<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2946<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2947<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our ability to command favorable pricing for our products;2948</FONT></TD>2949</TR>2950</TABLE>2951<BR>29522953<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2954<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2955<TR VALIGN=TOP>2956<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2957<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2958<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2959<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the growth of the market for our devices; </FONT></TD>2960</TR>2961</TABLE>2962<BR>29632964<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2965<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2966<TR VALIGN=TOP>2967<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2968<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2969<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2970<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the expansion and rate of success of our direct sales force in the2971United States and our independent distributors internationally; </FONT></TD>2972</TR>2973</TABLE>2974<BR>29752976<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2977<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2978<TR VALIGN=TOP>2979<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2980<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2981<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2982<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actions relating to ongoing FDA compliance; </FONT></TD>2983</TR>2984</TABLE>2985<BR>29862987<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2988<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2989<TR VALIGN=TOP>2990<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2991<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2992<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2993<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the effect of intellectual property disputes; </FONT></TD>2994</TR>2995</TABLE>2996<BR>29972998<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2999<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3000<TR VALIGN=TOP>3001<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3002<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3003<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3004<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the size and timing of orders from independent distributors or3005customers; </FONT></TD>3006</TR>3007</TABLE>3008<BR>300930103011<BR>3012<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28 </FONT></P>3013<HR SIZE=3 COLOR=GRAY NOSHADE>3014<!-- *************************************************************************** -->3015<!-- MARKER PAGE="sheet: 0; page: 0" -->3016<BR><BR>301730183019<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3020<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3021<TR VALIGN=TOP>3022<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3023<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3024<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3025<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the attraction and retention of key personnel, particularly in3026sales and marketing, regulatory, manufacturing and research and development; </FONT></TD>3027</TR>3028</TABLE>3029<BR>30303031<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3032<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3033<TR VALIGN=TOP>3034<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3035<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3036<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3037<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unanticipated delays or an inability to control costs;3038</FONT></TD>3039</TR>3040</TABLE>3041<BR>30423043<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3044<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3045<TR VALIGN=TOP>3046<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3047<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3048<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3049<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>general economic conditions as well as those specific to our3050customers and markets; and </FONT></TD>3051</TR>3052</TABLE>3053<BR>30543055<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3056<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3057<TR VALIGN=TOP>3058<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3059<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3060<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3061<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>seasonal fluctuations in revenue due to the elective nature of3062some procedures. </FONT></TD>3063</TR>3064</TABLE>3065<BR>30663067<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3068<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We may face product liability claims that could result in costly3069litigation and significant liabilities</I> </FONT></P>30703071<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3072<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The manufacture and sale of3073medical products entail significant risk of product liability claims. The medical device industry in general has been subject to3074significant medical malpractice litigation. Any product liability claims, with or without merit, could result in costly3075litigation, reduced sales, cause us to incur significant liabilities and divert our management’s time, attention and3076resources. Because of our limited operating history and lack of experience with these claims, we cannot be sure that our product3077liability insurance coverage is adequate or that it will continue to be available to us on acceptable terms, if at all.3078</FONT></P>30793080<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3081<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The market for interventional medical devices is highly competitive and3082will likely become more competitive, and our competitors may be able to respond more quickly to new or emerging technologies and3083changes in customer requirements that may render our products obsolete</I> </FONT></P>30843085<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3086<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The existing market for3087interventional medical devices is intensely competitive. We expect competition to increase further as companies develop new3088products and/or modify their existing products to compete directly with ours. The primary competitors for our Duett sealing device3089are Abbott Laboratories (through its subsidiary Abbott Vascular), Datascope Corp. and St. Jude Medical, Inc., which sells a3090product developed by Kensey Nash Corporation. Each of our new products encounters competition from at least several medical device3091companies, including Medtronic Inc. Each of these companies has: </FONT></P>30923093<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3094<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3095<TR VALIGN=TOP>3096<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3097<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3098<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3099<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>better name recognition; </FONT></TD>3100</TR>3101</TABLE>3102<BR>31033104<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3105<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3106<TR VALIGN=TOP>3107<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3108<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3109<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3110<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>broader product lines; </FONT></TD>3111</TR>3112</TABLE>3113<BR>31143115<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3116<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3117<TR VALIGN=TOP>3118<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3119<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3120<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3121<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>greater sales, marketing and distribution capabilities;3122</FONT></TD>3123</TR>3124</TABLE>3125<BR>31263127<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3128<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3129<TR VALIGN=TOP>3130<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3131<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3132<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3133<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>significantly greater financial resources; </FONT></TD>3134</TR>3135</TABLE>3136<BR>31373138<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3139<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3140<TR VALIGN=TOP>3141<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3142<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3143<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3144<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>larger research and development staffs and facilities; and3145</FONT></TD>3146</TR>3147</TABLE>3148<BR>31493150<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3151<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3152<TR VALIGN=TOP>3153<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3154<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3155<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3156<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>existing relationships with some of our potential customers.3157</FONT></TD>3158</TR>3159</TABLE>3160<BR>31613162<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3163<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We may not be able to3164effectively compete with these companies. In addition, broad product lines may allow our competitors to negotiate exclusive,3165long-term supply contracts and offer comprehensive pricing for their products. Broader product lines may also provide our3166competitors with a significant advantage in marketing competing products to group purchasing organizations and other managed care3167organizations that are increasingly seeking to reduce costs through centralized purchasing. Greater financial resources and3168product development capabilities may allow our competitors to respond more quickly to new or emerging technologies and changes in3169customer requirements that may render our products obsolete. </FONT></P>31703171<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3172<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our international sales are subject to a number of risks that could3173seriously harm our ability to successfully commercialize our products in any international market</I> </FONT></P>31743175<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3176<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our international sales are3177subject to several risks, including: </FONT></P>31783179<BR>3180<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29 </FONT></P>3181<HR SIZE=3 COLOR=GRAY NOSHADE>3182<!-- *************************************************************************** -->3183<!-- MARKER PAGE="sheet: 0; page: 0" -->3184<BR><BR>318531863187<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3188<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3189<TR VALIGN=TOP>3190<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3191<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3192<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3193<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the ability of our independent distributors to sell our products;3194</FONT></TD>3195</TR>3196</TABLE>3197<BR>31983199<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3200<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3201<TR VALIGN=TOP>3202<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3203<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3204<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3205<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the impact of recessions in economies outside the United States;3206</FONT></TD>3207</TR>3208</TABLE>3209<BR>32103211<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3212<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3213<TR VALIGN=TOP>3214<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3215<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3216<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3217<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>greater difficulty in collecting accounts receivable and longer3218collection periods; </FONT></TD>3219</TR>3220</TABLE>3221<BR>32223223<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3224<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3225<TR VALIGN=TOP>3226<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3227<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3228<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3229<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unexpected changes in regulatory requirements, tariffs or other3230trade barriers; </FONT></TD>3231</TR>3232</TABLE>3233<BR>32343235<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3236<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3237<TR VALIGN=TOP>3238<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3239<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3240<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3241<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>weaker intellectual property rights protection in some countries;3242</FONT></TD>3243</TR>3244</TABLE>3245<BR>32463247<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3248<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3249<TR VALIGN=TOP>3250<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3251<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3252<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3253<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>potentially adverse tax consequences; and </FONT></TD>3254</TR>3255</TABLE>3256<BR>32573258<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3259<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3260<TR VALIGN=TOP>3261<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3262<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3263<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3264<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>political and economic instability. </FONT></TD>3265</TR>3266</TABLE>3267<BR>32683269<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3270<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The occurrence of any of3271these events could seriously harm our future international sales and our ability to successfully commercialize our products in any3272international market. </FONT></P>32733274<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3275<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We have limited manufacturing experience and may encounter difficulties in3276our manufacturing operations which could seriously harm our business</I> </FONT></P>32773278<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3279<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have limited experience in3280manufacturing our products. In particular, we have very limited experience in lyophilization, which is a key manufacturing step3281for our D-Stat Dry hemostatic bandage. We believe our facilities are adequate for our projected production of our products for the3282foreseeable future, but future facility requirements will depend largely on future sales of our products in the United States. We3283may encounter unforeseen difficulties in expanding our production of our new products, including problems involving production3284yields, quality control and assurance, component supply and shortages of qualified personnel, compliance with FDA regulations and3285requirements regarding good manufacturing practices, and the need for further regulatory approval of new manufacturing processes.3286Difficulties encountered by us in expanding and maintaining our manufacturing capabilities could seriously harm our business.3287</FONT></P>32883289<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3290<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our business and results of operations may be seriously harmed by changes3291in third-party reimbursement policies</I> </FONT></P>32923293<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3294<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We could be seriously harmed3295by changes in reimbursement policies of governmental or private healthcare payors, particularly to the extent any changes affect3296reimbursement for catheterization procedures in which our products are used. Failure by physicians, hospitals and other users of3297our products to obtain sufficient reimbursement from healthcare payors for procedures in which our products are used or adverse3298changes in governmental and private third-party payors’ policies toward reimbursement for such procedures would seriously3299harm our business. </FONT></P>33003301<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3302<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the United States,3303healthcare providers, including hospitals and clinics that purchase medical devices such as our products, generally rely on3304third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to reimburse all or part of3305the cost of catheterization procedures. Any changes in this reimbursement system could seriously harm our business. </FONT></P>33063307<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3308<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In international markets,3309acceptance of our products is dependent in part upon the availability of reimbursement within prevailing healthcare payment3310systems. Reimbursement and healthcare payment systems in international markets vary significantly by country. Our failure to3311receive international reimbursement approvals could have a negative impact on market acceptance of our products in the markets in3312which these approvals are sought. </FONT></P>33133314<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3315<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our products and our manufacturing activities are subject to extensive3316governmental regulation that could prevent us from selling our products in the United States or introducing new and improved3317products</I> </FONT></P>33183319<BR>3320<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30 </FONT></P>3321<HR SIZE=3 COLOR=GRAY NOSHADE>3322<!-- *************************************************************************** -->3323<!-- MARKER PAGE="sheet: 0; page: 0" -->3324<BR><BR>332533263327<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3328<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our products and our3329manufacturing activities are subject to extensive regulation by a number of governmental agencies, including the FDA and3330comparable international agencies. We are required to: </FONT></P>33313332<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3333<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3334<TR VALIGN=TOP>3335<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3336<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3337<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3338<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>obtain the clearance of the FDA and international agencies before3339we can market and sell our products; </FONT></TD>3340</TR>3341</TABLE>3342<BR>33433344<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3345<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3346<TR VALIGN=TOP>3347<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3348<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3349<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3350<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>satisfy these agencies’ content requirements for all of our3351labeling, sales and promotional materials; and </FONT></TD>3352</TR>3353</TABLE>3354<BR>33553356<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3357<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3358<TR VALIGN=TOP>3359<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3360<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3361<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3362<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>undergo rigorous inspections by these agencies. </FONT></TD>3363</TR>3364</TABLE>3365<BR>33663367<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3368<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Compliance with the3369regulations of these agencies may delay or prevent us from introducing any new model of our existing products or other new3370products. Furthermore, we may be subject to sanctions, including temporary or permanent suspension of operations, product recalls3371and marketing restrictions if we fail to comply with the laws and regulations pertaining to our business. </FONT></P>33723373<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3374<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are also required to3375demonstrate compliance with the FDA’s quality system regulations. The FDA enforces its quality system regulations through3376pre-approval and periodic post-approval inspections. These regulations relate to product testing, vendor qualification, design3377control and quality assurance, as well as the maintenance of records and documentation. If we are unable to conform to these3378regulations, the FDA may take actions which could seriously harm our business. In addition, government regulation may be3379established that could prevent, delay, modify or rescind regulatory clearance or approval of our products. </FONT></P>33803381<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3382<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK </FONT></H1>33833384<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3385<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Financial instruments that3386potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale3387securities and accounts receivables. We maintain our accounts for cash and cash equivalents and available-for-sale securities3388principally at one major bank and one investment firm in the United States. We have a formal written investment policy that3389restricts the placement of investments to issuers evaluated as creditworthy. We have not experienced any losses on our deposits of3390our cash and cash equivalents. </FONT></P>33913392<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3393<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> With respect to accounts3394receivable, we perform credit evaluations of our customers and do not require collateral. There have been no material losses on3395accounts receivables. </FONT></P>33963397<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3398<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the United States and3399Germany, we sell our products directly to hospitals and clinics in the local currency. </FONT></P>34003401<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3402<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In all other international3403markets, we sell our products to independent distributors who, in turn, sell to medical clinics. We sell our product in these3404countries through independent distributors denominated in United States dollars. Loss, termination or ineffectiveness of3405distributors to effectively promote our product would have a material adverse effect on our financial condition and results of3406operations. </FONT></P>34073408<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3409<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We do not believe our3410operations are currently subject to significant market risks for interest rates, foreign currency exchange rates, commodity prices3411or other relevant market price risks of a material nature. </FONT></P>34123413<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3414<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We do not have any3415indebtedness as of December 31, 2004. If we were to borrow from our revolving credit agreement, we would be exposed to changes in3416interest rates. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate3417changes. </FONT></P>34183419<BR><BR><BR><BR>3420<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31 </FONT></P>3421<HR SIZE=3 COLOR=GRAY NOSHADE>3422<!-- *************************************************************************** -->3423<!-- MARKER PAGE="sheet: 0; page: 0" -->3424<BR><BR>342534263427<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3428<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA </FONT></H1>34293430<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3431<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Consolidated Financial3432Statements and Notes thereto required pursuant to this Item begin on page 38 of this Annual Report on Form 10-K. </FONT></P>34333434<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3435<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE </FONT></H1>34363437<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3438<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> No additional disclosure is3439required regarding our recent change in independent accountants, as disclosed in our Form 8-K filed on October 1, 20043440and Form 8-K/A filed on October 22, 2004. </FONT></P>34413442<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3443<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 9A. CONTROLS AND PROCEDURES </FONT></H1>34443445<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3446<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluation of disclosure controls and procedures. </FONT></H1>34473448<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3449<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Under the supervision and3450with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the3451effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the3452Exchange Act of 19934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial3453Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective3454in timely alerting them to the material information relating to us (or our consolidated subsidiaries) required to be included in3455the reports we file or submit under the Exchange Act. </FONT></P>34563457<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3458<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Changes in internal controls.</B> </FONT></P>34593460<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3461<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the fiscal quarter3462ended December 31, 2004, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f)3463under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over3464financial reporting. </FONT></P>34653466<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3467<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management’s Report on Internal Control Over Financial Reporting. </FONT></H1>34683469<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3470<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our management is responsible3471for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act3472Rule 13a-15(f). Our internal control system was designed to provide reasonable assurance to our management and board of3473directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no3474matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only3475reasonable assurance with respect to financial statement preparation and presentation. </FONT></P>34763477<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3478<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Under the supervision and3479with the participation of our management, including our chief executive officer and chief financial officer, we conducted an3480evaluation of the effectiveness of our internal control over financial reporting based on the framework in3481<I>Internal Control — Integrated Framework </I>issued by the Committee of Sponsoring3482Organizations of the Treadway Commission. Based on our evaluation under the framework in3483<I>Internal Control — Integrated Framework</I>, our management concluded that our3484internal control over financial reporting was effective as of December 31, 2004. </FONT></P>34853486<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3487<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our management’s3488assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by3489Virchow, Krause & Company, LLP, an independent registered public accounting firm, as stated in their report which is included3490herein on page 42. </FONT></P>34913492<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3493<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 9B. OTHER INFORMATION </FONT></H1>34943495<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3496<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> No information was required3497to be disclosed in a report on Form 8-K in the fourth quarter that was not so disclosed. </FONT></P>349834993500<BR>3501<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32 </FONT></P>3502<HR SIZE=3 COLOR=GRAY NOSHADE>3503<!-- *************************************************************************** -->3504<!-- MARKER PAGE="sheet: 0; page: 0" -->3505<BR><BR>350635073508<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->3509<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III </FONT></H1>35103511<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3512<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT </FONT></H1>35133514<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3515<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3516reference to the Sections under the headings “Election of Directors,” “Committees of the Board of Directors”3517and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Proxy Statement for our Annual Meeting of3518Shareholders to be filed with the Securities and Exchange Commission within 120 days of the close of the year ended December 31,35192004. </FONT></P>35203521<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3522<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> See Item 1 of Part I hereof3523for information regarding our executive officers. </FONT></P>35243525<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3526<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have adopted a code of3527ethics that applies to all of our directors, officers (including our chief executive officer, chief financial officer, chief3528accounting officer, and any person performing similar functions) and employees. We have made our Code of Ethics available by3529filing it as Exhibit 14 with our 2003 Annual Report on Form 10-K. </FONT></P>35303531<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3532<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 11. EXECUTIVE COMPENSATION </FONT></H1>35333534<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3535<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3536reference to the Sections under the headings “Director Compensation” and “Executive Compensation and Other3537Information” contained in the Proxy Statement for our Annual Meeting of Shareholders to be filed with the Securities and3538Exchange Commission within 120 days of the close of the year ended December 31, 2004. </FONT></P>35393540<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3541<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS </FONT></H1>35423543<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3544<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3545reference to the Section under the heading “Security Ownership of Certain Beneficial Owners and Management” and3546“Equity Compensation Plan Information” contained in the Proxy Statement for our Annual Meeting of Shareholders to be3547filed with the Securities and Exchange Commission within 120 days of the close of the year ended December 31, 2004. </FONT></P>35483549<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3550<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS </FONT></H1>35513552<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3553<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>35543555<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3556<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES </FONT></H1>35573558<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3559<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3560reference to the Section under the heading “Additional Information about our Independent Auditor” contained in the Proxy3561Statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the3562close of the year ended December 31, 2004. </FONT></P>356335643565<BR><BR><BR><BR><BR><BR>3566<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33 </FONT></P>3567<HR SIZE=3 COLOR=GRAY NOSHADE>3568<!-- *************************************************************************** -->3569<!-- MARKER PAGE="sheet: 0; page: 0" -->3570<BR><BR>357135723573<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->3574<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART IV </FONT></H1>35753576<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3577<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES </FONT></H1>35783579<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->3580<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3581<TR VALIGN=TOP>3582<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>3583<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3584<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Documents filed as part of this Report. </FONT></TD>3585</TR>3586</TABLE>3587<BR>35883589<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3590<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3591<TR VALIGN=TOP>3592<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3593<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>3594<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3595<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following financial statements are filed herewith in Item 8 in Part II. </FONT></TD>3596</TR>3597</TABLE>3598<BR>35993600<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3601<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3602<TR VALIGN=TOP>3603<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3604<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3605<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>3606<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3607<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reports of Independent Registered Public Accounting Firms3608</FONT></TD>3609</TR>3610</TABLE>3611<BR>36123613<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3614<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3615<TR VALIGN=TOP>3616<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3617<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3618<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>3619<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3620<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Balance Sheets </FONT></TD>3621</TR>3622</TABLE>3623<BR>36243625<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3626<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3627<TR VALIGN=TOP>3628<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3629<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3630<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) </FONT></TD>3631<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3632<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Operations </FONT></TD>3633</TR>3634</TABLE>3635<BR>36363637<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3638<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3639<TR VALIGN=TOP>3640<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3641<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3642<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv) </FONT></TD>3643<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3644<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Changes in Shareholders’ Equity3645</FONT></TD>3646</TR>3647</TABLE>3648<BR>36493650<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3651<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3652<TR VALIGN=TOP>3653<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3654<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3655<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v) </FONT></TD>3656<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3657<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Cash Flows </FONT></TD>3658</TR>3659</TABLE>3660<BR>36613662<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3663<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3664<TR VALIGN=TOP>3665<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3666<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3667<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi) </FONT></TD>3668<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3669<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes to Consolidated Financial Statements </FONT></TD>3670</TR>3671</TABLE>3672<BR>36733674<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3675<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3676<TR VALIGN=TOP>3677<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3678<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>3679<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3680<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statement Schedules </FONT></TD>3681</TR>3682</TABLE>3683<BR>36843685<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->3686<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Schedule II – Valuation3687and Qualifying Accounts. Such schedule should be read in conjunction with the consolidated financial statements. All other3688supplemental schedules are omitted because of the absence of conditions under which they are required. </FONT></P>36893690<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3691<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3692<TR VALIGN=TOP>3693<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3694<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>3695<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3696<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits </FONT></TD>3697</TR>3698</TABLE>3699<BR>3700370137023703<TABLE CELLPADDING=6 CELLSPACING=0 BORDER=0 WIDTH=100%>3704<TR VALIGN=Top>3705<TD WIDTH=7% ALIGN=left nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit<BR>3706<u>Number</U></FONT></TD>3707<TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR><U>Description</U></FONT></TD></TR>3708<TR VALIGN=Top>3709<TD WIDTH=7% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.1</FONT></TD>3710<TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Articles of Incorporation of Vascular Solutions, Inc. (incorporated by reference to Exhibit 3.1 to Vascular Solutions’ Form 10-Q for the quarter ended September 30, 2000).</FONT></TD></TR>3711<TR VALIGN=Top>3712<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.2</FONT></TD>3713<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bylaws of Vascular Solutions, Inc. (incorporated by reference to Exhibit 3.2 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3714<TR VALIGN=Top>3715<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.1</FONT></TD>3716<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Specimen of Common Stock certificate (incorporated by reference to Exhibit 4.1 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3717<TR VALIGN=Top>3718<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.2</FONT></TD>3719<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of warrant dated January 31 and February 14, 1997 issued to representatives of Miller, Johnson & Kuehn, Incorporated (incorporated by reference to Exhibit 4.2 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3720<TR VALIGN=Top>3721<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.3</FONT></TD>3722<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of warrant dated December 29, 1997 issued to representatives of Miller, Johnson &Kuehn, Incorporated (incorporated by reference to Exhibit 4.3 of Vascular Solutions’Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3723<TR VALIGN=Top>3724<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.4</FONT></TD>3725<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Investors' Rights Agreement dated December 9, 1998, by and between Vascular Solutions, Inc. and the purchasers of Series A and Series B preferred stock (incorporated by reference to Exhibit 4.4 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3726<TR VALIGN=Top>3727<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1</FONT></TD>3728<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lease Agreement dated August 30, 2002 by and between First Industrial, L.P. as Landlord and Vascular Solutions, Inc. as Tenant (incorporated by reference to Exhibit 10.1 of Vascular Solutions' Form 10-Q for the quarter ended September 30, 2002).</FONT></TD></TR>3729<TR VALIGN=Top>3730<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2</FONT></TD>3731<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mutual and General Release dated November 9, 1998 by and between Vascular Solutions, Inc., Dr. Gary Gershony and B. Braun Medical, Inc. (incorporated by reference to Exhibit 10.5 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3732</TABLE>37333734<BR>3735<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34 </FONT></P>3736<HR SIZE=3 COLOR=GRAY NOSHADE>3737<!-- *************************************************************************** -->3738<!-- MARKER PAGE="sheet: 0; page: 0" -->3739<BR><BR>374037413742<TABLE CELLPADDING=6 CELLSPACING=0 BORDER=0 WIDTH=100%>3743<TR VALIGN=Top>3744<TD WIDTH=7% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3</FONT></TD>3745<TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase and Sale Agreement dated September 17, 1998 by and between Vascular Solutions, Inc. and Davol Inc. (incorporated by reference to Exhibit 10.8 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3746<TR VALIGN=Top>3747<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4</FONT></TD>3748<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase Agreement dated June 10, 1999 by and between GenTrac, Inc. and Vascular Solutions, Inc. (incorporated by reference to Exhibit 10.9 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3749<TR VALIGN=Top>3750<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5*</FONT></TD>3751<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Employment Agreement by and between Vascular Solutions, Inc. and each of its executive officers (incorporated by reference to Exhibit 10.5 of Vascular Solutions' Form 10-Q for the quarter ended March 31, 2004).</FONT></TD></TR>3752<TR VALIGN=Top>3753<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.6</FONT></TD>3754<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Distribution Agreement (incorporated by reference to Exhibit 10.12 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3755<TR VALIGN=Top>3756<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.7*</FONT></TD>3757<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.14 to Vascular Solutions' Form 10-K for the year ended December 31, 2000).</FONT></TD></TR>3758<TR VALIGN=Top>3759<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.8</FONT></TD>3760<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Settlement Agreement dated July 12, 2001 by and between Vascular Solutions and St. Jude Medical and Daig Corporation (incorporated by reference to Exhibit 99.2 to Vascular Solutions’ Form 8-K dated July 12, 2001).</FONT></TD></TR>3761<TR VALIGN=Top>3762<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.9</FONT></TD>3763<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase Agreement dated April 30, 2002 by and between Vascular Solutions and Angiosonics (incorporated by reference to Exhibit 99.2 to Vascular Solutions’ Form 8-K dated April 30, 2002).</FONT></TD></TR>3764<TR VALIGN=Top>3765<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.10*</FONT></TD>3766<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option and Stock Award Plan as Amended July 16, 2002 (incorporated by reference to Exhibit 10.1 of Vascular Solutions’ Form 10-Q for the quarter ended June 30, 2002).</FONT></TD></TR>3767<TR VALIGN=Top>3768<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.11</FONT></TD>3769<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Settlement Agreement dated November 26, 2002 by and between Vascular Solutions and Datascope (incorporated by reference to Exhibit 99.2 to Vascular Solutions’ Form 8-K dated November 26, 2002).</FONT></TD></TR>3770<TR VALIGN=Top>3771<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.12**</FONT></TD>3772<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supply Agreement dated October 18, 2004 by and between Vascular Solutions and Sigma-Aldrich Fine Chemicals, an operating division of Sigma-Aldrich, Inc.</FONT></TD></TR>3773<TR VALIGN=Top>3774<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.13**</FONT></TD>3775<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Private Label Purchase Agreement dated September 22, 2003 by and between Vascular Solutions and MedArt Corporation (incorporated by reference to Exhibit 10.18 of Vascular Solutions’ Form 10-Q for the quarter ended September 30, 2003).</FONT></TD></TR>3776<TR VALIGN=Top>3777<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.14</FONT></TD>3778<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loan and Security Agreement dated December 31, 2003 by and between Vascular Solutions and Silicon Valley Bank (incorporated by reference to Exhibit 10.14 of Vascular Solutions’ Form 10-K for the year ended December 31, 2003).</FONT></TD></TR>3779<TR VALIGN=Top>3780<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.15</FONT></TD>3781<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment to Loan Agreement dated December 9, 2004 by and between Vascular Solutions and Silicon Valley Bank.</FONT></TD></TR>3782<TR VALIGN=Top>3783<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.16*</FONT></TD>3784<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Incentive Stock Option Agreement (Plan) (incorporated by reference to Exhibit 10.1 of Vascular Solutions’ 8-K dated September 22, 2004).</FONT></TD></TR>3785<TR VALIGN=Top>3786<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.17*</FONT></TD>3787<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Nonqualified Stock Option Agreement (Plan) (incorporated by reference to Exhibit 10.2 of Vascular Solutions’ 8-K dated September 22, 2004).</FONT></TD></TR>3788<TR VALIGN=Top>3789<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.18*</FONT></TD>3790<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Board of Director Stock Option Agreement (Plan) (incorporated by reference to Exhibit 10.3 of Vascular Solutions’ 8-K dated September 22, 2004).</FONT></TD></TR>3791<TR VALIGN=Top>3792<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></TD>3793<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Code of Ethics (incorporated by reference to Exhibit 14 of Vascular Solutions’ Form 10-K for the year ended December 31, 2003).</FONT></TD></TR>3794<TR VALIGN=Top>3795<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></TD>3796<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>List of Subsidiaries</FONT></TD></TR>3797<TR VALIGN=Top>3798<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1</FONT></TD>3799<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Virchow, Krause & Company, LLP.</FONT></TD></TR>3800<TR VALIGN=Top>3801<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.2</FONT></TD>3802<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Ernst & Young LLP.</FONT></TD></TR>3803<TR VALIGN=Top>3804<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24.1</FONT></TD>3805<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Power of Attorney (included on signature page).</FONT></TD></TR>3806<TR VALIGN=Top>3807<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31.1</FONT></TD>3808<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT></TD></TR>3809<TR VALIGN=Top>3810<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31.2</FONT></TD>3811<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT></TD></TR>3812<TR VALIGN=Top>3813<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32.1</FONT></TD>3814<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD></TR>3815<TR VALIGN=Top>3816<TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3817<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>3818</TABLE>381938203821<BR>3822<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></P>3823<HR SIZE=3 COLOR=GRAY NOSHADE>3824<!-- *************************************************************************** -->3825<!-- MARKER PAGE="sheet: 0; page: 0" -->3826<BR><BR>382738283829<TABLE CELLPADDING=6 CELLSPACING=0 BORDER=0 WIDTH=100%>3830<TR VALIGN=Top>3831<TD WIDTH=7% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32.2</FONT></TD>3832<TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to Exhibit 10.8 of Vascular Solutions' Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD></TR>3833</table>38343835<!-- MARKER FORMAT-SHEET="Cutoff Rule" FSL="Default" -->3836<P>_________________ </P>38373838<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3839<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* Management contract or compensatory3840plan or arrangement required to be filed as an Exhibit to this Form 10-K. </font></P>38413842<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3843<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>** Pursuant to Rule 24b-2 of the3844Securities Exchange Act of 1934, as amended, confidential portions of these exhibits have3845been deleted and filed separately with the Securities and Exchange Commission pursuant to3846a request for confidential treatment. </FONT></P>38473848384938503851<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>3852<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36 </FONT></P>3853<HR SIZE=3 COLOR=GRAY NOSHADE>3854<!-- *************************************************************************** -->3855<!-- MARKER PAGE="sheet: 0; page: 0" -->3856<BR><BR>38573858<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->3859<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>SIGNATURES </FONT></H1>38603861<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->3862<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant3863to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the3864registrant has duly caused this report to be signed on its behalf by the undersigned,3865thereunto duly authorized, on the 4th day of February 2005. </FONT></P>3866<BR>386738683869<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>3870<TR VALIGN=Top>3871<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3872<TD WIDTH=37% ALIGN=LEFT colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VASCULAR SOLUTIONS, INC.</FONT></TD></TR>3873<TR><td> </td></tr>3874<TR VALIGN=Top>3875<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3876<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By:</FONT></TD>3877<TD WIDTH=37% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Howard Root</FONT></TD></TR>3878<TR>3879<TD></TD><td></td>3880<TD ALIGN=left><HR NOSHADE COLOR=#000000 width=65% SIZE=1></TD></TR>3881<TR VALIGN=Top>3882<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><td> </td>3883<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root<BR>Chief Executive Officer and Director</FONT></TD></TR>3884</TABLE>38853886<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->3887<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> KNOW3888ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes3889and appoints Howard Root and James Hennen (with full power to act alone), as his or her3890true and lawful attorneys-in-fact and agents, with full powers of substitution and3891resubstitution, for him or her and in his or her name, place and stead, in any and all3892capacities, to sign any and all amendments to the Annual Report on Form 10-K of Vascular3893Solutions, Inc., and to file the same, with all exhibits thereto, and other documents in3894connection therewith, with the Securities and Exchange Commission, granting unto said3895attorneys-in-fact and agents full power and authority to do and perform each and every act3896and thing requisite or necessary to be done in and about the premises, as fully to all3897intents and purposes as he or she might or could do in person, hereby ratifying and3898confirming all that said attorneys-in-fact and agents, or their substitute or substitutes,3899lawfully do or cause to be done by virtue hereof. </FONT></P>39003901<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->3902<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant3903to the requirements of the Securities Exchange Act of 1934, this report has been signed on3904the 4th day of February, 2005, by the following persons in the capacities indicated. </FONT></P>3905390639073908<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>3909<TR VALIGN=Top>3910<TD WIDTH="35%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Signature</u></FONT></TD>3911<TD WIDTH="65%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Title</u></FONT></TD></TR>3912<TR><td> </td></tr>3913<TR VALIGN=Top>3914<TD WIDTH="35%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Howard Root</FONT></TD>3915<TD WIDTH="65%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer and Director</FONT></TD></TR>3916<TR VALIGN=Top>3917<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD>3918<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(principal executive officer)</i></FONT></TD></TR>3919<TR VALIGN=Top>3920<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root</FONT></TD></TR>3921<TR>3922<TD WIDTH="35%" ALIGN="CENTER"></TD>3923<TD WIDTH="65%"></TD></TR>3924<TR><td> </td></tr>3925<TR VALIGN=Top>3926<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ James Hennen</FONT></TD>3927<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer</FONT></TD></TR>3928<TR VALIGN=Top>3929<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD>3930<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(principal financial and accounting officer)</i></FONT></TD></TR>3931<TR VALIGN=Top>3932<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen</FONT></TD></TR>3933<TR>3934<TD WIDTH="35%" ALIGN="CENTER"></TD>3935<TD WIDTH="65%"></TD></TR>3936<TR><td> </td></tr>3937<TR VALIGN=Top>3938<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ James Jacoby, Jr.</FONT></TD>3939<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>3940<TR>3941<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD></TR>3942<TR VALIGN=Top>3943<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Jacoby, Jr.</FONT></TD></TR>3944<TR>3945<TD WIDTH="35%" ALIGN="CENTER"></TD>3946<TD WIDTH="65%"></TD></TR>3947<TR><td> </td></tr>3948<TR VALIGN=Top>3949<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Richard Nigon</FONT></TD>3950<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>3951<TR>3952<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD></TR>3953<TR VALIGN=Top>3954<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Richard Nigon</FONT></TD></TR>3955<TR>3956<TD WIDTH="35%" ALIGN="CENTER"></TD>3957<TD WIDTH="65%"></TD></TR>3958<TR><td> </td></tr>3959<TR VALIGN=Top>3960<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Michael Kopp</FONT></TD>3961<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>3962<TR>3963<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD></TR>3964<TR VALIGN=Top>3965<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael Kopp</FONT></TD></TR>3966<TR>3967<TD WIDTH="35%" ALIGN="CENTER"></TD>3968<TD WIDTH="65%"></TD></TR>3969<TR><td> </td></tr>3970<TR VALIGN=Top>3971<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Paul O'Connell</FONT></TD>3972<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>3973<TR>3974<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD></TR>3975<TR VALIGN=Top>3976<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Paul O'Connell</FONT></TD></TR>3977<TR>3978<TD WIDTH="35%" ALIGN="CENTER"></TD>3979<TD WIDTH="65%"></TD></TR>3980<TR><td> </td></tr>3981<TR VALIGN=Top>3982<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ John Erb</FONT></TD>3983<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>3984<TR>3985<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD></TR>3986<TR VALIGN=Top>3987<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Erb</FONT></TD></TR>3988<TR>3989<TD WIDTH="35%" ALIGN="CENTER"></TD>3990<TD WIDTH="65%"></TD></TR>3991<TR><td> </td></tr>3992<TR VALIGN=Top>3993<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Dr. Gary Dorfman</FONT></TD>3994<TD ALIGN="LEFT" WIDTH="65%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>3995<TR>3996<TD ALIGN="CENTER" WIDTH="35%"><HR NOSHADE COLOR=#000000 SIZE=1 width=90%></TD></TR>3997<TR VALIGN=Top>3998<TD ALIGN="CENTER" WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr. Gary Dorfman</FONT></TD></TR>3999</TABLE>4000400140024003<BR>4004<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37 </FONT></P>4005<HR SIZE=3 COLOR=GRAY NOSHADE>4006<!-- *************************************************************************** -->4007<!-- MARKER PAGE="sheet: 0; page: 0" -->4008<BR><BR>400940104011<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->4012<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SCHEDULE II<BR>4013VALUATION AND QUALIFYING ACCOUNTS<BR>4014YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 </FONT></H1>40154016401740184019<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4020<TR VALIGN=Bottom>4021<TH COLSPAN=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Description</FONT></TH>4022<TH COLSPAN=2 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<BR>4023Beginning<BR>4024of Year</FONT></TH>4025<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4026<TH COLSPAN=2 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additions<BR>4027Charged<BR>4028to Costs<BR>4029and<BR>4030Expenses</FONT></TH>4031<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4032<TH COLSPAN=2 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Less<BR>4033Deductions</FONT></TH>4034<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4035<TH COLSPAN=2 nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<BR>4036End of Year</FONT></TH></TR>4037<TR>4038<TD COLSPAN=3></TD>4039<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4040<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4041<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4042<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4043<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">4044<TD WIDTH="45%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2004:</FONT></TD>4045<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4046<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4047<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4048<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4049<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4050<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4051<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4052<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4053<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4054<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4055<TR VALIGN=Bottom>4056<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales return 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>4057<TD ALIGN=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>4058<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4059<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,324</FONT></TD>4060<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4061<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,324</FONT></TD>4062<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4063<TD ALIGN=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>4064<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4065<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4066<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Allowance for doubtful accounts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4067<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>140,000</FONT></TD>4068<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4069<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,774</FONT></TD>4070<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4071<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,774</FONT></TD>4072<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4073<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>160,000</FONT></TD>4074<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4075<TR>4076<TD COLSPAN=3></TD>4077<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4078<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4079<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4080<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4081<TR VALIGN=Bottom>4082<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>4083<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 160,000</FONT></TD>4084<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4085<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 54,098</FONT></TD>4086<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4087<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 34,098</FONT></TD>4088<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4089<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 180,000</FONT></TD>4090<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4091<TR>4092<TD COLSPAN=3></TD>4093<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4094<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4095<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4096<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4097<TR><td> </td></tr>4098<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4099<TD ALIGN=LEFT colspan=15><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2003:</FONT></TD></TR>4100<TR VALIGN=Bottom>4101<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales return allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4102<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,000</FONT></TD>4103<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4104<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,708</FONT></TD>4105<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4106<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,292</FONT></TD>4107<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4108<TD ALIGN=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>4109<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4110<TR VALIGN=Bottom>4111<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Allowance for doubtful accounts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4112<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>90,000</FONT></TD>4113<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4114<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>69,099</FONT></TD>4115<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4116<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,099</FONT></TD>4117<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4118<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>140,000</FONT></TD>4119<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4120<TR>4121<TD COLSPAN=3></TD>4122<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4123<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4124<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4125<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4126<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4127<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>4128<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 130,000</FONT></TD>4129<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4130<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,391</FONT></TD>4131<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4132<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,391</FONT></TD>4133<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4134<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 160,000</FONT></TD>4135<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4136<TR>4137<TD COLSPAN=3></TD>4138<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4139<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4140<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4141<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4142<TR><td> </td></tr>4143<TR VALIGN=Bottom>4144<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2002:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4145<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4146<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales return allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4147<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 64,526</FONT></TD>4148<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4149<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 174,642</FONT></TD>4150<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4151<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 199,168</FONT></TD>4152<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4153<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,000</FONT></TD>4154<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4155<TR VALIGN=Bottom>4156<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Allowance for doubtful accounts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4157<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>110,000</FONT></TD>4158<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4159<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,592</FONT></TD>4160<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4161<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43,592</FONT></TD>4162<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4163<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>90,000</FONT></TD>4164<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4165<TR>4166<TD COLSPAN=3></TD>4167<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4168<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4169<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4170<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4171<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4172<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>4173<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 174,526</FONT></TD>4174<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4175<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 198,234</FONT></TD>4176<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4177<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 242,760</FONT></TD>4178<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4179<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 130,000</FONT></TD>4180<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4181<TR>4182<TD COLSPAN=3></TD>4183<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4184<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4185<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>4186<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4187</TABLE>418841894190<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>4191<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38 </FONT></P>4192<HR SIZE=3 COLOR=GRAY NOSHADE>4193<!-- *************************************************************************** -->4194<!-- MARKER PAGE="sheet: 0; page: 0" -->4195<BR><BR>419641974198<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4199<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent4200Registered Public Accounting Firm </FONT></P>42014202<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4203<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors4204and Shareholders<BR>Vascular Solutions, Inc. </FONT></P>42054206<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4207<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the accompanying consolidated4208balance sheet of Vascular Solutions, Inc. as of December 31, 2004, and the related4209consolidated statements of operations, changes in shareholders’ equity and cash flows4210for the year ended December 31, 2004. These consolidated financial statements are the4211responsibility of the company’s management. Our responsibility is to express an4212opinion on these consolidated financial statements based on our audit. </FONT></P>42134214<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4215<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audit in accordance4216with the standards of the Public Company Accounting Oversight Board (United States). Those4217standards require that we plan and perform the audit to obtain reasonable assurance about4218whether the consolidated financial statements are free of material misstatement. An audit4219includes examining, on a test basis, evidence supporting the amounts and disclosures in4220the consolidated financial statements. An audit also includes assessing the accounting4221principles used and significant estimates made by management as well as evaluating the4222overall consolidated financial statement presentation. We believe that our audit provides4223a reasonable basis for our opinion. </FONT></P>42244225<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4226<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the consolidated4227financial statements referred to above present fairly, in all material respects, the4228financial position of Vascular Solutions, Inc. as of December 31, 2004 and the results of4229their operations and their cash flows for the year ended December 31, 2004, in conformity4230with U.S. generally accepted accounting principles. </FONT></P>42314232<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4233<TR VALIGN=Top>4234<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4235<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Virchow, Krause & Company, LLP</FONT></TD></TR>4236</TABLE>423742384239<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4240<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>4241January 21, 2005 </FONT></P>42424243<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>4244<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39 </FONT></P>4245<HR SIZE=3 COLOR=GRAY NOSHADE>4246<!-- *************************************************************************** -->4247<!-- MARKER PAGE="sheet: 0; page: 0" -->4248<BR><BR>424942504251<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4252<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent4253Registered Public Accounting Firm </FONT></P>42544255<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4256<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders<BR>4257Vascular Solutions, Inc. </FONT></P>42584259<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4260<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the consolidated balance4261sheet of Vascular Solutions, Inc. as of December 31, 2003, and the related statements of4262operations, changes in shareholders’ equity, and cash flows for each of the two years4263in the period ended December 31, 2003. These financial statements are the responsibility4264of the Company’s management. Our responsibility is to express an opinion on these4265financial statements based on our audits. </FONT></P>42664267<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4268<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in accordance4269with the standards of the Public Company Accounting Oversight Board (United States). Those4270standards require that we plan and perform the audit to obtain reasonable assurance about4271whether the financial statements are free of material misstatement. An audit includes4272examining, on a test basis, evidence supporting the amounts and disclosures in the4273financial statements. An audit also includes assessing the accounting principles used and4274significant estimates made by management, as well as evaluating the overall financial4275statement presentation. We believe that our audits provide a reasonable basis for our4276opinion. </FONT></P>42774278<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4279<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the financial4280statements referred to above present fairly, in all material respects, the consolidated4281financial position of Vascular Solutions, Inc. at December 31, 2003, and the consolidated4282results of its operations and its cash flows for each of the two years in the period ended4283December 31, 2003, in conformity with U.S. generally accepted accounting principles. </FONT></P>428442854286<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4287<TR VALIGN=Top>4288<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4289<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Ernst & Young LLP</FONT></TD></TR>4290</TABLE>4291429242934294<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4295<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>4296January 16, 2004 </FONT></P>42974298<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>4299<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40 </FONT></P>4300<HR SIZE=3 COLOR=GRAY NOSHADE>4301<!-- *************************************************************************** -->4302<!-- MARKER PAGE="sheet: 0; page: 0" -->4303<BR><BR>430443054306<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4307<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent4308Registered Public Accounting Firm </FONT></P>43094310<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4311<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders<BR>4312Vascular Solutions, Inc. </FONT></P>43134314<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4315<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under date of January 21, 2005,4316we reported on the consolidated balance sheet of Vascular Solutions, Inc. as of December431731, 2004, and the related consolidated statements of operations, changes in4318shareholders’ equity, and cash flows for the year ended December 31, 2004, as4319contained in the annual report on Form 10-K for the year ended December 31, 2004. In4320connection with our audit of the aforementioned consolidated financial statements, we have4321also audited the related financial statement schedule as listed in the accompanying index.4322This financial statement schedule is the responsibility of the Company’s management.4323Our responsibility is to express an opinion on this financial statement schedule based on4324our audit. </FONT></P>432543264327<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4328<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, such financial4329statement schedule, when considered in relation to the basic consolidated financial4330statements taken as a whole, presents fairly, in all material respects, the information4331set forth therein. </FONT></P>43324333<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4334<TR VALIGN=Top>4335<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4336<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Virchow, Krause & Company LLP</FONT></TD></TR>4337</TABLE>433843394340<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4341<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>4342January 21, 2005 </FONT></P>434343444345<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>4346<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41 </FONT></P>4347<HR SIZE=3 COLOR=GRAY NOSHADE>4348<!-- *************************************************************************** -->4349<!-- MARKER PAGE="sheet: 0; page: 0" -->4350<BR><BR>435143524353<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4354<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent4355Registered Public Accounting Firm </FONT></P>43564357<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4358<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders<BR>4359Vascular Solutions, Inc. </FONT></P>43604361<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4362<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited management’s4363assessment, included in the accompanying Management’s Report on Internal Control Over4364Financial Reporting appearing under Item 9A, that Vascular Solutions, Inc. (the4365“Company”) maintained effective internal control over financial reporting as of4366December 31, 2004, based on the criteria established in Internal Control – Integrated4367Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission4368(COSO). Vascular Solutions, Inc.‘s management is responsible for maintaining4369effective internal control over financial reporting and for its assessment of the4370effectiveness of internal control over financial reporting. Our responsibility is to4371express an opinion on management’s assessment and an opinion on the effectiveness of4372the Company’s internal control over financial reporting based on our audit. </FONT></P>43734374<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4375<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audit in accordance4376with standards of the Public Company Accounting Oversight Board (United States). Those4377standards require that we plan and perform the audit to obtain reasonable assurance about4378whether effective internal control over financial reporting was maintained in all material4379respects. Our audit included obtaining an understanding of internal control over financial4380reporting, evaluating management’s assessment, testing and evaluating the design and4381operating effectiveness of internal control, and performing such other procedures as we4382considered necessary in the circumstances. We believe that our audit provides a reasonable4383basis for our opinion. </FONT></P>43844385<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4386<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A company’s internal control4387over financial reporting is a process designed to provide reasonable assurance regarding4388the reliability of financial reporting and the preparation of financial statements for4389external purposes in accordance with generally accepted accounting principles. A4390company’s internal control over financial reporting includes those policies and4391procedures that (1) pertain to the maintenance of records that, in reasonable detail,4392accurately and fairly reflect the transactions and dispositions of the assets of the4393company; (2) provide reasonable assurance that transactions are recorded as necessary to4394permit preparation of financial statements in accordance with generally accepted4395accounting principles, and that receipts and expenditures of the company are being made4396only in accordance with authorizations of management and directors of the company; and (3)4397provide reasonable assurance regarding prevention or timely detection of unauthorized4398acquisition, use, or disposition of the company’s assets that could have a material4399effect on the financial statements. </FONT></P>44004401<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4402<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because of its inherent limitations,4403internal control over financial reporting may not prevent or detect misstatements. Also,4404projections of any evaluation of effectiveness to future periods are subject to the risk4405that controls may become inadequate because of changes in conditions, or that the degree4406of compliance with the policies and procedures may deteriorate. </FONT></P>44074408<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4409<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, management’s4410assessment that Vascular Solutions, Inc. maintained effective internal control over4411financial reporting as of December 31, 2004, is fairly stated, in all material respects,4412based on criteria established in Internal Control – Integrated Framework issued by4413the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our4414opinion, Vascular Solutions, Inc. maintained, in all material respects, effective internal4415control over financial reporting as of December 31, 2004, based on criteria established in4416Internal Control – Integrated Framework issued by the Committee of Sponsoring4417Organizations of the Treadway Commission (COSO). </FONT></P>44184419<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4420<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have also audited, in accordance4421with the standards of the Public Company Accounting Oversight Board (United States), the4422accompanying consolidated balance sheet of Vascular Solutions, Inc. as of December 31,44232004 and the related consolidated statements of operations, changes in shareholder’s4424equity and cash flows for the year ended December 31, 2004, and our report dated January442521, 2005, expresses an unqualified opinion on those consolidated financial statements. </FONT></P>442644274428<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4429<TR VALIGN=Top>4430<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4431<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Virchow, Krause & Company, LLP</FONT></TD></TR>4432</TABLE>443344344435<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4436<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>4437January 21, 2005 </FONT></P>443844394440<BR>4441<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42 </FONT></P>4442<HR SIZE=3 COLOR=GRAY NOSHADE>4443<!-- *************************************************************************** -->4444<!-- MARKER PAGE="sheet: 0; page: 0" -->4445<BR><BR>444644474448<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4449<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vascular Solutions, Inc. </b></FONT></P>44504451<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4452<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Consolidated Balance Sheets</b> </FONT></P>445344544455<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="75%" ALIGN="CENTER">4456<TR VALIGN=Bottom>4457<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4458<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31</FONT></TH></TR>4459<TR VALIGN=Bottom>4460<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4461<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>4462<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4463<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>4464<TR>4465<TD COLSPAN=3></TD>4466<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4467<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">4468<TD WIDTH="67%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Assets</b></FONT></TD>4469<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4470<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4471<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"><B></B> </FONT></TD>4472<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4473<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></FONT></TD>4474<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4475<TR VALIGN=Bottom>4476<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current assets:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4477<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4478<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>4479<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 7,183,891</B> </FONT></TD>4480<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4481<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,864,913</FONT></TD>4482<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4483<TR VALIGN=Bottom>4484<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Available-for-sale 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>4485<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>4486<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4487<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,019,693</FONT></TD>4488<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4489<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4490<TD ALIGN=LEFT colspan=9><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts receivable, net of reserves of $180,000 and $160,000 at</FONT></TD></TR>4491<TR VALIGN=Bottom>4492<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> December 31, 2004 and 2003, respectively</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4493<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,533,857</B> </FONT></TD>4494<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4495<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,810,443</FONT></TD>4496<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4497<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4498<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>4499<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,658,836</B> </FONT></TD>4500<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4501<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,186,274</FONT></TD>4502<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4503<TR VALIGN=Bottom>4504<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Prepaid 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>4505<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>588,638</B> </FONT></TD>4506<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4507<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>462,154</FONT></TD>4508<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4509<TR>4510<TD COLSPAN=3></TD>4511<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4512<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4513<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>4514<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>14,965,222</B> </FONT></TD>4515<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4516<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,343,477</FONT></TD>4517<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4518<TR><TD> </td></tr>4519<TR VALIGN=Bottom>4520<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>4521<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,374,146</B> </FONT></TD>4522<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4523<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>948,602</FONT></TD>4524<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4525<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4526<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intangible assets, 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>4527<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>482,595</B> </FONT></TD>4528<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4529<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>700,095</FONT></TD>4530<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4531<TR>4532<TD COLSPAN=3></TD>4533<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4534<TR VALIGN=Bottom>4535<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>4536<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 16,821,963</B> </FONT></TD>4537<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4538<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,992,174</FONT></TD>4539<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4540<TR>4541<TD COLSPAN=3></TD>4542<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4543<TR><td> </td></tr>4544<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4545<TD ALIGN=LEFT colspan=9><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Liabilities and shareholders' equity</b></FONT></TD></TR>4546<TR VALIGN=Bottom>4547<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4548<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4549<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4550<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 856,613</B> </FONT></TD>4551<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4552<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 750,762</FONT></TD>4553<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4554<TR VALIGN=Bottom>4555<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accrued 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>4556<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,612,684</B> </FONT></TD>4557<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4558<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,111,049</FONT></TD>4559<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4560<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4561<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>4562<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>663,017</B> </FONT></TD>4563<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4564<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>258,228</FONT></TD>4565<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4566<TR>4567<TD COLSPAN=3></TD>4568<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4569<TR VALIGN=Bottom>4570<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>4571<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,132,314</B> </FONT></TD>4572<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4573<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,120,039</FONT></TD>4574<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4575<TR><td> </td></tr>4576<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4577<TD ALIGN=LEFT colspan=9><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commitments</FONT></TD></TR>4578<TR><td> </td></tr>4579<TR VALIGN=Bottom>4580<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders' 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>4581<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4582<TD ALIGN=LEFT colspan=9><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Common stock, $0.01 par value:</FONT></TD></TR>4583<TR VALIGN=Bottom>4584<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Authorized shares - 40,000,000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4585<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4586<TD ALIGN=LEFT colspan=9><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issued and outstanding shares - 14,350,937 - 2004;</FONT></TD></TR>4587<TR VALIGN=Bottom>4588<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,989,170 - 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>4589<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>143,509</B> </FONT></TD>4590<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4591<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>129,892</FONT></TD>4592<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4593<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4594<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>4595<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>76,675,125</B> </FONT></TD>4596<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4597<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>70,422,926</FONT></TD>4598<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4599<TR VALIGN=Bottom>4600<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>4601<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>100,992</B> </FONT></TD>4602<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4603<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,356</FONT></TD>4604<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4605<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4606<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accumulated deficit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4607<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(63,229,977</B> </FONT></TD>4608<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4609<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(59,722,039</FONT></TD>4610<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4611<TR>4612<TD COLSPAN=3></TD>4613<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4614<TR VALIGN=Bottom>4615<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total shareholders' 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>4616<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>13,689,649</B> </FONT></TD>4617<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4618<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,872,135</FONT></TD>4619<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4620<TR>4621<TD COLSPAN=3></TD>4622<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4623<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4624<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total liabilities and shareholders' 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>4625<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 16,821,963</B> </FONT></TD>4626<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4627<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,992,174</FONT></TD>4628<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4629<TR>4630<TD COLSPAN=3></TD>4631<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4632</TABLE>463346344635<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4636<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying notes</i> </FONT></P>46374638<BR>4639<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43 </FONT></P>4640<HR SIZE=3 COLOR=GRAY NOSHADE>4641<!-- *************************************************************************** -->4642<!-- MARKER PAGE="sheet: 0; page: 0" -->4643<BR><BR>4644464546464647<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4648<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vascular Solutions, Inc. </b></FONT></P>46494650<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4651<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consolidated Statements of Operations </b></FONT></P>4652465346544655<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="75%" ALIGN="CENTER">4656<TR VALIGN=Bottom>4657<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4658<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31</FONT></TH></TR>4659<TR VALIGN=Bottom>4660<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4661<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>4662<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4663<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>4664<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4665<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH></TR>4666<TR>4667<TD COLSPAN=3></TD>4668<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4669<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">4670<TD WIDTH="48%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>4671<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4672<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4673<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"><B> 22,265,022</B> </FONT></TD>4674<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4675<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,804,328</FONT></TD>4676<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4677<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,100,526</FONT></TD>4678<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4679<TR VALIGN=Bottom>4680<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>4681<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6,607,718</B> </FONT></TD>4682<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4683<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,570,242</FONT></TD>4684<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4685<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,985,587</FONT></TD>4686<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4687<TR>4688<TD COLSPAN=3></TD>4689<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4690<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4691<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>4692<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>15,657,304</B> </FONT></TD>4693<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4694<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,234,086</FONT></TD>4695<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4696<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,114,939</FONT></TD>4697<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4698<TR VALIGN=Bottom>4699<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>4700<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4701<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4702<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,400,864</B> </FONT></TD>4703<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4704<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,670,935</FONT></TD>4705<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4706<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,227,538</FONT></TD>4707<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4708<TR VALIGN=Bottom>4709<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical and regulatory</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4710<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,906,473</B> </FONT></TD>4711<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4712<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,535,989</FONT></TD>4713<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4714<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,347,694</FONT></TD>4715<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4716<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4717<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales and marketing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4718<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>11,360,046</B> </FONT></TD>4719<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4720<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,645,920</FONT></TD>4721<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4722<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,963,907</FONT></TD>4723<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4724<TR VALIGN=Bottom>4725<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>4726<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,137,831</B> </FONT></TD>4727<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4728<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,942,483</FONT></TD>4729<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4730<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,166,883</FONT></TD>4731<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4732<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4733<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Legal settlement</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4734<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>4735<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4736<TD ALIGN=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>4737<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4738<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,750,000</FONT></TD>4739<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4740<TR VALIGN=Bottom>4741<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4742<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>210,069</B> </FONT></TD>4743<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4744<TD ALIGN=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>4745<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4746<TD ALIGN=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>4747<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4748<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4749<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of purchased technology</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4750<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>217,500</B> </FONT></TD>4751<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4752<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>217,500</FONT></TD>4753<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4754<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>145,000</FONT></TD>4755<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4756<TR>4757<TD COLSPAN=3></TD>4758<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4759<TR VALIGN=Bottom>4760<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>4761<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>19,232,783</B> </FONT></TD>4762<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4763<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,012,827</FONT></TD>4764<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4765<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,601,022</FONT></TD>4766<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4767<TR>4768<TD COLSPAN=3></TD>4769<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4770<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4771<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating 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>4772<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(3,575,479</B> </FONT></TD>4773<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4774<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,778,741</FONT></TD>4775<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4776<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(15,486,083</FONT></TD>4777<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4778<TR VALIGN=Bottom>4779<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest 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>4780<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>67,541</B> </FONT></TD>4781<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4782<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,342</FONT></TD>4783<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4784<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>507,169</FONT></TD>4785<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4786<TR>4787<TD COLSPAN=3></TD>4788<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4789<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4790<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net 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>4791<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (3,507,938</B> </FONT></TD>4792<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4793<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628,399</FONT></TD>4794<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4795<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,978,914</FONT></TD>4796<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4797<TR>4798<TD COLSPAN=3></TD>4799<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4800<TR VALIGN=Bottom>4801<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss per common share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4802<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (0.25</B> </FONT></TD>4803<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4804<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>4805<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4806<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>4807<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4808<TR>4809<TD COLSPAN=3></TD>4810<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4811<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4812<TD ALIGN=LEFT colspan=12><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares used in computing basic and diluted</FONT></TD></TR>4813<TR VALIGN=Bottom>4814<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> net loss per common 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>4815<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>13,952,278</B> </FONT></TD>4816<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4817<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,858,765</FONT></TD>4818<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4819<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,276,147</FONT></TD>4820<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4821<TR>4822<TD COLSPAN=3></TD>4823<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>4824</TABLE>48254826<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4827<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying notes </I></FONT></P>482848294830<BR>4831<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44 </FONT></P>4832<HR SIZE=3 COLOR=GRAY NOSHADE>4833<!-- *************************************************************************** -->4834<!-- MARKER PAGE="sheet: 0; page: 0" -->4835<BR><BR>483648374838<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4839<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vascular Solutions, Inc.</b> </FONT></P>48404841<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4842<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Consolidated Statements of Changes in Shareholders’ Equity</b> </FONT></P>484348444845<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>484648474848<TR VALIGN=Bottom>4849<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4850<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH>4851<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1> </FONT></TH></TR>4852<TR VALIGN=Bottom>4853<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4854<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Common Stock</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4855<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional<BR>Paid-In</FONT></TH>4856<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>4857<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated</FONT></TH></TR>4858<TR VALIGN=Bottom>4859<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4860<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4861<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4862<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4863<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4864<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4865<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4866<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Other</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4867<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4868<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deficit</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4869<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4870<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>487148724873<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">4874<TD WIDTH="38%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2001</FONT></TD>4875<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4876<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4877<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,327,002</FONT></TD>4878<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4879<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>133,270</FONT></TD>4880<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4881<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>70,712,174</FONT></TD>4882<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4883<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(100,834</FONT></TD>4884<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4885<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>(35,114,726</FONT></TD>4886<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4887<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>35,629,884</FONT></TD>4888<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4889<TR VALIGN=Bottom>4890<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>4891<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,000</FONT></TD>4892<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4893<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100</FONT></TD>4894<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4895<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,900</FONT></TD>4896<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4897<TD ALIGN=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>4898<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4899<TD ALIGN=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>4900<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4901<TD ALIGN=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>4902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4903<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4904<TD ALIGN=LEFT colspan=21><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issuance of common stock under the</FONT></TD></TR>4905<TR VALIGN=Bottom>4906<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>4907<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>152,737</FONT></TD>4908<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4909<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,528</FONT></TD>4910<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4911<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>163,043</FONT></TD>4912<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4913<TD ALIGN=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>4914<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4915<TD ALIGN=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>4916<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4917<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>164,571</FONT></TD>4918<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4919<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4920<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Stock repurchase program</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4921<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(608,900</FONT></TD>4922<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4923<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6,090</FONT></TD>4924<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4925<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(541,632</FONT></TD>4926<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4927<TD ALIGN=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>4928<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4929<TD ALIGN=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>4930<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4931<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(547,722</FONT></TD>4932<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4933<TR VALIGN=Bottom>4934<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Deferred compensation related to</FONT></TD><TD ALIGN=LEFT><FONT 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>4935<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4936<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> option grants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4937<TD ALIGN=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>4938<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4939<TD ALIGN=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>4940<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4941<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,858</FONT></TD>4942<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4943<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,858</FONT></TD>4944<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4945<TD ALIGN=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>4946<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4947<TD ALIGN=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>4948<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4949<TR VALIGN=Bottom>4950<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of deferred 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>4951<TD ALIGN=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>4952<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4953<TD ALIGN=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>4954<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4955<TD ALIGN=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>4956<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4957<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>74,668</FONT></TD>4958<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4959<TD ALIGN=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>4960<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4961<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>74,668</FONT></TD>4962<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4963<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4964<TD ALIGN=LEFT colspan=21><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Comprehensive loss:</FONT></TD></TR>4965<TR VALIGN=Bottom>4966<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net 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>4967<TD ALIGN=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>4968<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4969<TD ALIGN=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>4970<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4971<TD ALIGN=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>4972<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4973<TD ALIGN=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>4974<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4975<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(14,978,914</FONT></TD>4976<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4977<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(14,978,914</FONT></TD>4978<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4979<TR VALIGN=Bottom BGCOLOR="#CCEEFF">4980<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Translation adjustment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4981<TD ALIGN=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>4982<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4983<TD ALIGN=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>4984<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4985<TD ALIGN=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>4986<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4987<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,746</FONT></TD>4988<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4989<TD ALIGN=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>4990<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4991<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,746</FONT></TD>4992<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4993<TR>4994<TD COLSPAN=3></TD>4995<TD COLSPAN=3></TD>4996<TD COLSPAN=3></TD>4997<TD COLSPAN=3></TD>4998<TD COLSPAN=3></TD>4999<TD COLSPAN=3></TD>5000<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5001<TR VALIGN=Bottom>5002<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total comprehensive 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>5003<TD colspan=16></td><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(14,972,168</FONT></TD>5004<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5005<TR>5006<TD COLSPAN=3></TD>5007<TD COLSPAN=17 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5008<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5009<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5010<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,880,839</FONT></TD>5011<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5012<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 128,808</FONT></TD>5013<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5014<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 70,355,343</FONT></TD>5015<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5016<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (21,278</FONT></TD>5017<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5018<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (50,093,640</FONT></TD>5019<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5020<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,369,233</FONT></TD>5021<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5022<TR VALIGN=Bottom>5023<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>5024<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>65,855</FONT></TD>5025<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5026<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>659</FONT></TD>5027<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5028<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>81,710</FONT></TD>5029<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5030<TD ALIGN=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>5031<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5032<TD ALIGN=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>5033<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5034<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82,369</FONT></TD>5035<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5036<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5037<TD ALIGN=LEFT colspan=21><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issuance of common stock under the</FONT></TD></TR>5038<TR VALIGN=Bottom>5039<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>5040<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>195,876</FONT></TD>5041<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5042<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,959</FONT></TD>5043<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5044<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>123,972</FONT></TD>5045<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5046<TD ALIGN=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>5047<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5048<TD ALIGN=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>5049<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5050<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>125,931</FONT></TD>5051<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5052<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5053<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Stock repurchase program</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5054<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(153,400</FONT></TD>5055<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5056<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,534</FONT></TD>5057<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5058<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(138,099</FONT></TD>5059<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5060<TD ALIGN=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>5061<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5062<TD ALIGN=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>5063<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5064<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(139,633</FONT></TD>5065<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5066<TR VALIGN=Bottom>5067<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of deferred 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>5068<TD ALIGN=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>5069<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5070<TD ALIGN=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>5071<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5072<TD ALIGN=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>5073<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5074<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,545</FONT></TD>5075<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5076<TD ALIGN=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>5077<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5078<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,545</FONT></TD>5079<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5080<TR VALIGN=Bottom>5081<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Comprehensive loss:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5082<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5083<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net 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>5084<TD ALIGN=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>5085<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5086<TD ALIGN=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>5087<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5088<TD ALIGN=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>5089<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5090<TD ALIGN=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>5091<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5092<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,628,399</FONT></TD>5093<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5094<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,628,399</FONT></TD>5095<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5096<TR VALIGN=Bottom>5097<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Translation adjustment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5098<TD ALIGN=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>5099<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5100<TD ALIGN=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>5101<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5102<TD ALIGN=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>5103<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5104<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,089</FONT></TD>5105<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5106<TD ALIGN=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>5107<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5108<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,089</FONT></TD>5109<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5110<TR>5111<TD COLSPAN=3></TD>5112<TD COLSPAN=3></TD>5113<TD COLSPAN=3></TD>5114<TD COLSPAN=3></TD>5115<TD COLSPAN=3></TD>5116<TD COLSPAN=3></TD>5117<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5118<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5119<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total comprehensive 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>5120<TD colspan=15></td><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,606,310</FONT></TD>5121<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5122<TR>5123<TD COLSPAN=3></TD>5124<TD COLSPAN=17 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5125<TR VALIGN=Bottom>5126<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 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>5127<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,989,170</FONT></TD>5128<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5129<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 129,892</FONT></TD>5130<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5131<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 70,422,926</FONT></TD>5132<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5133<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 41,356</FONT></TD>5134<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5135<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (59,722,039</FONT></TD>5136<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5137<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,872,135</FONT></TD>5138<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5139<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5140<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>5141<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>227,300</FONT></TD>5142<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5143<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,272</FONT></TD>5144<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5145<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>341,305</FONT></TD>5146<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5147<TD ALIGN=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>5148<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5149<TD ALIGN=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>5150<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5151<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>343,577</FONT></TD>5152<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5153<TR VALIGN=Bottom>5154<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issuance of common stock under the</FONT></TD><TD ALIGN=LEFT><FONT 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>5155<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5156<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>5157<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>245,567</FONT></TD>5158<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5159<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,456</FONT></TD>5160<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5161<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>273,463</FONT></TD>5162<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5163<TD ALIGN=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>5164<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5165<TD ALIGN=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>5166<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5167<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>275,919</FONT></TD>5168<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5169<TR VALIGN=Bottom>5170<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sale of common stock in private</FONT></TD><TD ALIGN=LEFT><FONT 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>5171<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5172<TD ALIGN=LEFT colspan=21><FONT FACE="Times New Roman, Times, Serif" SIZE=2> placement at $6.75 per share in</FONT></TD></TR>5173<TR VALIGN=Bottom>5174<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> March 2004, net of offering costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5175<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>888,900</FONT></TD>5176<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5177<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,889</FONT></TD>5178<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5179<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,583,672</FONT></TD>5180<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5181<TD ALIGN=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>5182<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5183<TD ALIGN=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>5184<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5185<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,592,561</FONT></TD>5186<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5187<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5188<TD ALIGN=LEFT colspan=21><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Deferred compensation related to</FONT></TD></TR>5189<TR VALIGN=Bottom>5190<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> option grants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5191<TD ALIGN=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>5192<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5193<TD ALIGN=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>5194<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5195<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53,759</FONT></TD>5196<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5197<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(53,759</FONT></TD>5198<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5199<TD ALIGN=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>5200<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5201<TD ALIGN=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>5202<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5203<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5204<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of deferred 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>5205<TD ALIGN=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>5206<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5207<TD ALIGN=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>5208<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5209<TD ALIGN=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>5210<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5211<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,788</FONT></TD>5212<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5213<TD ALIGN=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>5214<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5215<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,788</FONT></TD>5216<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5217<TR VALIGN=Bottom>5218<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Comprehensive loss:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5219<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5220<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net 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>5221<TD ALIGN=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>5222<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5223<TD ALIGN=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>5224<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5225<TD ALIGN=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>5226<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5227<TD ALIGN=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>5228<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5229<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,507,938</FONT></TD>5230<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5231<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,507,938</FONT></TD>5232<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5233<TR VALIGN=Bottom>5234<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Translation adjustment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5235<TD ALIGN=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>5236<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5237<TD ALIGN=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>5238<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5239<TD ALIGN=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>5240<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5241<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>101,607</FONT></TD>5242<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5243<TD ALIGN=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>5244<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5245<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>101,607</FONT></TD>5246<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5247<TR>5248<TD COLSPAN=3></TD>5249<TD COLSPAN=3></TD>5250<TD COLSPAN=3></TD>5251<TD COLSPAN=3></TD>5252<TD COLSPAN=3></TD>5253<TD COLSPAN=3></TD>5254<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5255<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5256<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Total comprehensive 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>5257<TD colspan=15></td><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,406,331</FONT></TD>5258<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5259<TR>5260<TD COLSPAN=3></TD>5261<TD COLSPAN=17 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5262<TR VALIGN=Bottom>5263<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 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>5264<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,350,937</FONT></TD>5265<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5266<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 143,509</FONT></TD>5267<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5268<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,675,125</FONT></TD>5269<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5270<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 100,992</FONT></TD>5271<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5272<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (63,229,977</FONT></TD>5273<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5274<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,689,649</FONT></TD>5275<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5276<TR>5277<TD COLSPAN=3></TD>5278<TD COLSPAN=17 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>5279</TABLE>528052815282<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5283<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying notes.</I> </FONT></P>528452855286<BR>5287<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45 </FONT></P>5288<HR SIZE=3 COLOR=GRAY NOSHADE>5289<!-- *************************************************************************** -->5290<!-- MARKER PAGE="sheet: 0; page: 0" -->5291<BR><BR>5292529352945295<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5296<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vascular Solutions, Inc.</b> </FONT></P>52975298<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5299<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consolidated Statements of Cash Flows</b> </FONT></P>530053015302<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="75%" ALIGN="CENTER">5303<TR VALIGN=Bottom>5304<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5305<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31</FONT></TH></TR>5306<TR VALIGN=Bottom>5307<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5308<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>5309<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5310<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>5311<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5312<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>5313<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">5314<TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating activities</FONT></TD>5315<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5316<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5317<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"><B></B> </FONT></TD>5318<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5319<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></FONT></TD>5320<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5321<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></FONT></TD>5322<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5323<TR VALIGN=Bottom>5324<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net 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>5325<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (3,507,938</B> </FONT></TD>5326<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5327<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628,399</FONT></TD>5328<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5329<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,978,914</FONT></TD>5330<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5331<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5332<TD ALIGN=LEFT colspan=12><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adjustments to reconcile net loss to net cash used</FONT></TD></TR>5333<TR VALIGN=Bottom>5334<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>5335<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5336<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>5337<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>474,026</B> </FONT></TD>5338<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5339<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>386,196</FONT></TD>5340<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5341<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>502,390</FONT></TD>5342<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5343<TR VALIGN=Bottom>5344<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>5345<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>217,500</B> </FONT></TD>5346<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5347<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>217,500</FONT></TD>5348<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5349<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>145,000</FONT></TD>5350<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5351<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5352<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Deferred compensation expense</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5353<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>11,788</B> </FONT></TD>5354<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5355<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,545</FONT></TD>5356<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5357<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>74,668</FONT></TD>5358<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5359<TR VALIGN=Bottom>5360<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>5361<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5362<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>5363<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(1,723,414</B> </FONT></TD>5364<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5365<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(452,497</FONT></TD>5366<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5367<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(72,935</FONT></TD>5368<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5369<TR VALIGN=Bottom>5370<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>5371<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(472,562</B> </FONT></TD>5372<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5373<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,053,758</FONT></TD>5374<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5375<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>113,455</FONT></TD>5376<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5377<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5378<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Prepaid 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>5379<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(126,484</B> </FONT></TD>5380<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5381<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(135,381</FONT></TD>5382<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5383<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(36,885</FONT></TD>5384<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5385<TR VALIGN=Bottom>5386<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>5387<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>105,851</B> </FONT></TD>5388<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5389<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(20,316</FONT></TD>5390<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5391<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,222</FONT></TD>5392<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5393<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5394<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accrued compensation and 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>5395<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>906,424</B> </FONT></TD>5396<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5397<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>229,370</FONT></TD>5398<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5399<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(78,309</FONT></TD>5400<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5401<TR>5402<TD COLSPAN=3></TD>5403<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5404<TR VALIGN=Bottom>5405<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash 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>5406<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(4,114,809</B> </FONT></TD>5407<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5408<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,416,740</FONT></TD>5409<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5410<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(14,305,308</FONT></TD>5411<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5412<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5413<TD ALIGN=LEFT colspan=12><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Investing activities</b></FONT></TD></TR>5414<TR VALIGN=Bottom>5415<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase of Acolysis 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>5416<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>5417<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5418<TD ALIGN=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>5419<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5420<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,550,203</FONT></TD>5421<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5422<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5423<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase of 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>5424<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(899,570</B> </FONT></TD>5425<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5426<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(538,913</FONT></TD>5427<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5428<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(356,696</FONT></TD>5429<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5430<TR VALIGN=Bottom>5431<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase of 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>5432<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>5433<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5434<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,695,249</FONT></TD>5435<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5436<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(33,173,021</FONT></TD>5437<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5438<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5439<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Proceeds from sales of 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>5440<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,019,693</B> </FONT></TD>5441<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5442<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,590,000</FONT></TD>5443<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5444<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,485,052</FONT></TD>5445<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5446<TR>5447<TD COLSPAN=3></TD>5448<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5449<TR VALIGN=Bottom>5450<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash provided by 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>5451<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,120,123</B> </FONT></TD>5452<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5453<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,355,838</FONT></TD>5454<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5455<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,405,132</FONT></TD>5456<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5457<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5458<TD ALIGN=LEFT colspan=12><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Financing activities</B></FONT></TD></TR>5459<TR VALIGN=Bottom>5460<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Proceeds from 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>5461<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>343,577</B> </FONT></TD>5462<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5463<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82,369</FONT></TD>5464<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5465<TD ALIGN=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>5466<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5467<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5468<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net proceeds from sale of common stock</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5469<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5,868,480</B> </FONT></TD>5470<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5471<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>125,931</FONT></TD>5472<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5473<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>164,571</FONT></TD>5474<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5475<TR VALIGN=Bottom>5476<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Repurchase of common stock</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5477<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>5478<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5479<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(139,633</FONT></TD>5480<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5481<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(547,722</FONT></TD>5482<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5483<TR>5484<TD COLSPAN=3></TD>5485<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5486<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5487<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>5488<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6,212,057</B> </FONT></TD>5489<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5490<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68,667</FONT></TD>5491<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5492<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(363,151</FONT></TD>5493<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5494<TR VALIGN=Bottom>5495<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effect of exchange rate changes on cash and 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>5496<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5497<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>5498<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>101,607</B> </FONT></TD>5499<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5500<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,089</FONT></TD>5501<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5502<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,746</FONT></TD>5503<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5504<TR>5505<TD COLSPAN=3></TD>5506<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5507<TR VALIGN=Bottom>5508<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>5509<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,318,978</B> </FONT></TD>5510<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5511<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,029,854</FONT></TD>5512<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5513<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(7,256,581</FONT></TD>5514<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5515<TR VALIGN=Bottom BGCOLOR="#CCEEFF">5516<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents at beginning of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5517<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,864,913</B> </FONT></TD>5518<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5519<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,835,059</FONT></TD>5520<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5521<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,091,640</FONT></TD>5522<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5523<TR>5524<TD COLSPAN=3></TD>5525<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5526<TR VALIGN=Bottom>5527<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents at end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5528<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 7,183,891</B> </FONT></TD>5529<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5530<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,864,913</FONT></TD>5531<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5532<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,835,059</FONT></TD>5533<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5534<TR>5535<TD COLSPAN=3></TD>5536<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>5537</TABLE>5538553955405541<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5542<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying notes.</i> </FONT></P>554355445545<BR>5546<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46 </FONT></P>5547<HR SIZE=3 COLOR=GRAY NOSHADE>5548<!-- *************************************************************************** -->5549<!-- MARKER PAGE="sheet: 0; page: 0" -->5550<BR><BR>55515552555355545555<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5556<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. Description of Business </FONT></H1>55575558<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5559<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. (the5560Company) is a medical device company focused on bringing solutions to interventional5561cardiologists and interventional radiologists. The Company’s current principle5562product lines consist of the following medical devices: </FONT></P>55635564<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5565<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5566<TR VALIGN=TOP>5567<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5568<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5569<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5570<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat5571Dry™ hemostatic bandage, a topical pad with a bandage used to control surface5572bleeding, </FONT></TD>5573</TR>5574</TABLE>5575<BR>55765577<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5578<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5579<TR VALIGN=TOP>5580<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5581<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5582<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5583<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto™ extraction5584catheter, a mechanical system for the removal of soft thrombus from arteries, </FONT></TD>5585</TR>5586</TABLE>5587<BR>55885589<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5590<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5591<TR VALIGN=TOP>5592<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5593<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5594<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5595<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase® endovenous5596laser system, a laser console and procedure kit used for the treatment of varicose veins, </FONT></TD>5597</TR>5598</TABLE>5599<BR>56005601<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5602<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5603<TR VALIGN=TOP>5604<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5605<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5606<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5607<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Duett™ sealing5608device, used to seal the puncture site following catheterization procedures, </FONT></TD>5609</TR>5610</TABLE>5611<BR>56125613<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5614<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5615<TR VALIGN=TOP>5616<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5617<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5618<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5619<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat® Flowable5620hemostat, a thick, yet flowable, mixture used to control bleeding, </FONT></TD>5621</TR>5622</TABLE>5623<BR>56245625<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5626<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5627<TR VALIGN=TOP>5628<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5629<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5630<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5631<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Langston™ dual5632lumen pigtail catheter, used for the measurement of differential arterial pressures, </FONT></TD>5633</TR>5634</TABLE>5635<BR>56365637<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5638<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5639<TR VALIGN=TOP>5640<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5641<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5642<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5643<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAX-Support™ abdominal5644retraction belt, used to allow femoral access in obese patients, and </FONT></TD>5645</TR>5646</TABLE>5647<BR>56485649<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5650<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5651<TR VALIGN=TOP>5652<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5653<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5654<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5655<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis® ultrasound5656(sold in international markets only), a treatment for peripheral occlusive arterial5657disease. </FONT></TD>5658</TR>5659</TABLE>5660<BR>566156625663<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5664<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a vertically-integrated medical device company, the Company generates5665ideas and creates new interventional medical devices, and then delivers the products directly to the physician through their5666direct domestic sales force and their international distribution network. The Company was incorporated in the state of Minnesota5667in December 1996 and began operations in February 1997. </FONT></P>56685669<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5670<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of Significant Accounting Policies </FONT></H1>56715672<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5673<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Basis of Consolidation</I> </FONT></P>56745675<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5676<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated financial statements5677include the accounts of Vascular Solutions, Inc. and its wholly owned subsidiary, Vascular5678Solutions GmbH, after elimination of intercompany accounts and transactions. </FONT></P>56795680<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5681<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Segment Reporting</I> </FONT></P>56825683<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5684<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A business segment is a5685distinguishable component of an enterprise that is engaged in providing an individual5686product or service or a group of related products or services and that is subject to risks5687and returns that are different from those of other business segments. The Company’s5688segments have similar economic characteristics and are similar in the nature of the5689products sold, type of customers, methods used to distribute the Company’s products5690and regulatory environment. Management believes that the Company meets the criteria5691for aggregating its operating segments into a single reporting segment. </FONT></P>56925693<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5694<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Foreign Currency5695Translation and Transactions </I></FONT></P>56965697<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5698<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign assets and liabilities are5699translated using the year-end exchange rates. Results of operations are translated using5700the average exchange rates throughout the year. Translation gains or losses are5701accumulated as a separate component of shareholders’ equity. </FONT></P>57025703<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5704<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Comprehensive Loss</I> </FONT></P>57055706<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5707<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of comprehensive loss5708are net loss and the effects of foreign currency translation adjustments. The accumulated5709other comprehensive income for the foreign currency translation adjustment at December 31,57102004 and 2003 was $143,660 and $42,052, respectively. </FONT></P>57115712<BR>5713<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47 </FONT></P>5714<HR SIZE=3 COLOR=GRAY NOSHADE>5715<!-- *************************************************************************** -->5716<!-- MARKER PAGE="sheet: 0; page: 0" -->5717<BR><BR>571857195720<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5721<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of5722Significant Accounting Policies (continued) </FONT></H1>57235724<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5725<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Fair Value of Financial5726Instruments </I></FONT></P>57275728<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5729<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The carrying amount for cash and cash5730equivalents, accounts receivable, accounts payable, and accrued expenses approximates fair5731value due to the immediate or short-term maturity of these financial instruments. </FONT></P>57325733<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5734<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Use of Estimates</I> </FONT></P>57355736<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5737<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The preparation of financial5738statements in conformity with accounting principles generally accepted in the United5739States requires management to make estimates and assumptions that affect the amounts5740reported in the financial statements and accompanying notes. Actual results could differ5741from those estimates. </FONT></P>57425743<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5744<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Cash and Cash Equivalents</I> </FONT></P>57455746<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5747<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company classifies all highly5748liquid investments with initial maturities of three months or less as cash equivalents.5749Cash equivalents consist of cash and money market funds and are stated at cost, which5750approximates market value. The Company deposits its cash in high quality financial5751institutions. The balances, at times may exceed federally insured limits. </FONT></P>57525753<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5754<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Credit risk and allowance5755for doubtful accounts </I></FONT></P>57565757<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5758<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company maintains allowances for5759doubtful accounts for estimated losses resulting from the inability of our customers to5760make required payments. This allowance is regularly evaluated by the Company for adequacy5761by taking into consideration factors such as past experience, credit quality of the5762customer base, age of the receivable balances, both individually and in the aggregate, and5763current economic conditions that may affect a customer’s ability to pay. Accounts5764receivable over 60 days past due are considered past due. The Company does not accrue5765interest on past due accounts receivable. Receivables are written off only after all5766collection attempts have failed and are based on individual credit evaluation and the5767specific circumstances of the customer. At December 31, 2004 and 2003, the allowance for5768doubtful accounts was $160,000 and $140,000, respectively. </FONT></P>57695770<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5771<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All product returns must be5772pre-approved and, if approved, customers are subject to a 20% restocking charge. The5773Company analyzes the rate of historical returns when evaluating the adequacy of the5774allowance for sales returns, which is included with the allowance for doubtful accounts on5775our balance sheet. At December 31, 2004 and 2003, the sales and return allowance was5776$20,000 and $20,000, respectively. </FONT></P>57775778<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5779<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts receivable are shown net of5780the combined total of the allowance for doubtful accounts and allowance for sales returns5781of $180,000 and $160,000 at December 31, 2004 and 2003, respectively. </FONT></P>57825783<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5784<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Available-for-Sale5785Securities </I></FONT></P>57865787<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5788<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company classifies investments as5789available-for-sale securities. Available-for-sale securities consist of U.S. government5790obligations and investment-grade corporate debt with maturities of up to one year. These5791investments are stated at amortized cost, which approximates market value. <B><I>5792</I></B><I></I>There were no material realized gains or losses on the sales of5793available-for-sale securities during the years ended December 31, 2004, 2003 and57942002. For purposes of determining gross realized gains or losses, the cost of5795available-for-sale securities is based on specific identification. </FONT></P>57965797<BR>5798<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48 </FONT></P>5799<HR SIZE=3 COLOR=GRAY NOSHADE>5800<!-- *************************************************************************** -->5801<!-- MARKER PAGE="sheet: 0; page: 0" -->5802<BR><BR>580358045805<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5806<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of5807Significant Accounting Policies (continued) </FONT></H1>58085809<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5810<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2004 and 2003, the5811Company had the following available for sale securities with carrying values equal to fair5812values: </FONT></P>581358145815<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=50%>5816<TR VALIGN=Bottom>5817<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5818<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>5819<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5820<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>5821<TR>5822<TD COLSPAN=3></TD>5823<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>5824<TR VALIGN=Bottom>5825<TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Corporate Debt</FONT></TD>5826<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5827<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5828<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"><B>—</B> </FONT></TD>5829<TD WIDTH=11% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5830<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>2,021,567</FONT></TD>5831<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5832<TR VALIGN=Bottom>5833<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>5834<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>5835<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5836<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>998,126</FONT></TD>5837<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5838<TR>5839<TD COLSPAN=3></TD>5840<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>584158425843<TR VALIGN=Bottom>5844<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5845<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>5846<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5847<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,019,693</FONT></TD>5848<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>58495850<TR>5851<TD COLSPAN=3></TD>5852<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>5853</TABLE>58545855<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5856<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Inventories</I> </FONT></P>58575858<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5859<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories are stated at the lower5860of cost (first-in, first-out method) or market. Appropriate consideration is given to5861deterioration, obsolescence and other factors in evaluating net realizable value.5862Inventories are comprised of the following at December 31: </FONT></P>586358645865<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=50%>5866<TR VALIGN=Bottom>5867<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5868<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>5869<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5870<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>5871<TR>5872<TD COLSPAN=3></TD>5873<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>5874<TR VALIGN=Bottom>5875<TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw materials</FONT></TD>5876<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5877<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5878<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 2,378,619</B> </FONT></TD>5879<TD WIDTH=11% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5880<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> 2,100,775</FONT></TD>5881<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5882<TR VALIGN=Bottom>5883<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Work-in-process</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5884<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>221,547</B> </FONT></TD>5885<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5886<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>260,887</FONT></TD>5887<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5888<TR VALIGN=Bottom>5889<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>5890<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,058,670</B> </FONT></TD>5891<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5892<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>824,612</FONT></TD>5893<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5894<TR>5895<TD COLSPAN=3></TD>5896<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>5897<TR VALIGN=Bottom>5898<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5899<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 3,658,836</B> </FONT></TD>5900<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5901<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,186,274</FONT></TD>5902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5903<TR>5904<TD COLSPAN=3></TD>5905<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>5906</TABLE>5907590859095910<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5911<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Property and Equipment</I> </FONT></P>59125913<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5914<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment are stated at5915cost. Depreciation is provided on a straight-line basis over the estimated useful lives of5916the assets as follows: </FONT></P>59175918<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=50%>5919<TR VALIGN=Top>5920<TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing equipment</FONT></TD>5921<TD WIDTH=36% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 to 5 years</FONT></TD></TR>5922<TR VALIGN=Top>5923<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office and computer equipment</FONT></TD>5924<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 years</FONT></TD></TR>5925<TR VALIGN=Top>5926<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Furniture and fixtures</FONT></TD>5927<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 to 5 years</FONT></TD></TR>5928<TR VALIGN=Top>5929<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leasehold improvements</FONT></TD>5930<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Remaining term of the lease</FONT></TD></TR>5931<TR VALIGN=Top>5932<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development equipment</FONT></TD>5933<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 to 5 years</FONT></TD></TR>5934</TABLE>59355936<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5937<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Impairment of Long-Lived5938Assets </I></FONT></P>59395940<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5941<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company will record impairment losses5942on long-lived assets used in operations when indicators of impairment are present and the5943undiscounted cash flows estimated to be generated by those assets are less than the5944assets’ carrying amount. The amount of impairment loss recorded will be measured as5945the amount by which the carrying value of the assets exceeds the fair value of the assets.5946To date, the Company has determined that no impairment of long-lived assets exists. </FONT></P>59475948<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5949<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Revenue Recognition</I> </FONT></P>59505951<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5952<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States and Germany, the5953Company sells its products directly to hospitals and clinics. Revenue is recognized in5954accordance with generally accepted accounting principles as outlined in the SEC’s5955Staff Accounting Bulletin No. 104 “Revenue Recognition,” which requires that5956four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an5957arrangement exists; (ii) the price is fixed or determinable; (iii) collectibility is5958reasonably assured; and (iv) product delivery has occurred or services have been rendered.5959The Company recognizes revenue as products are shipped based on FOB shipping point terms5960when title passes to customers. The Company negotiates credit terms on a5961customer-by-customer basis and products are shipped at an </font></p>59625963<BR>5964<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49 </FONT></P>5965<HR SIZE=3 COLOR=GRAY NOSHADE>5966<!-- *************************************************************************** -->5967<!-- MARKER PAGE="sheet: 0; page: 0" -->5968<BR><BR>5969597059715972<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5973<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2. Summary of Significant Accounting Policies (continued)</B> </FONT></H1>59745975<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5976<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>agreed upon price. All product returns must be pre-approved and, if approved,5977customers are subject to a 20% restocking charge. </FONT></P>59785979<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5980<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In all other international markets,5981the Company sells its products to international distributors which subsequently resell the5982products to hospitals and clinics. The Company has agreements with each of its5983distributors which provide that title and risk of loss pass to the distributor upon5984shipment of the products to the distributor. The Company warrants that its products are5985free from manufacturing defects at the time of shipment to the distributor. Revenue is5986recognized upon shipment of products to distributors following the receipt and acceptance5987of a distributor’s purchase order. Allowances are provided for estimated returns and5988warranty costs at the time of shipment. </FONT></P>59895990<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5991<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Shipping and handling5992costs </I></FONT></P>59935994<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5995<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with the Emerging Issues5996Task Force (EITF) issue 00-10, “Accounting for Shipping and Handling Fees and5997Costs,” the Company includes shipping and handling revenues in net sales and shipping5998and handling costs in cost of sales. </FONT></P>59996000<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6001<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Research and Development6002Costs </I></FONT></P>60036004<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6005<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All research and development costs are6006charged to operations as incurred. </FONT></P>60076008<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6009<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Warranty Costs </I></FONT></P>60106011<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6012<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective during the year ended6013December 31, 2004, certain of the Company’s products are covered by warranties6014against defects in material and workmanship for periods of up to 24 months. The Company6015records a liability for warranty claims at the time of sale. The amount of the liability6016is based on the amount the Company is charged from their original equipment manufacturer6017to cover the warranty period. The original equipment manufacturer includes a year warranty6018with each product sold to the Company. The Company records a liability for the uncovered6019warranty period offered to a customer, provided the warranty period offered exceeds the6020initial one year warranty period covered by the original equipment manufacturer. </FONT></P>60216022<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6023<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warranty provisions and claims for6024the year ended December 31, 2004, were as follows: </FONT></P>602560266027<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=75%>6028<TR VALIGN=Top>6029<TD WIDTH=20% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Twelve Months End</FONT></TD>6030<TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beginning Balance</FONT></TD>6031<TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warrant</FONT></TD>6032<TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warranty Claims</FONT></TD>6033<TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ending</FONT></TD></TR>6034<TR>6035<TD ALIGN=RIGHT colspan=5><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>6036<TR VALIGN=Top>6037<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> December 31, 200</B> </FONT></TD>6038<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$—</B> </FONT></TD>6039<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$32,895</B> </FONT></TD>6040<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$—</B> </FONT></TD>6041<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$32,895</B> </FONT></TD></TR>6042</TABLE>604360446045<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6046<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Stock-Based Compensation</I> </FONT> </P>60476048<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6049<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2004, the Company had a stock-based employee compensation6050plan, which is described more fully in Note 10. The Company accounts for the plan under the recognition and measurement principles6051of Accounting Principles Board (APB) Opinion No. 25, <I>Accounting for Stock Issued to Employees</I>, and related interpretations.6052No stock-based employee compensation cost is reflected in net loss, as all options granted under the plan had an exercise price6053equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net6054loss and loss per share if the Company had applied the fair value recognition provisions of Financial Accounting Standards Board6055(FASB) Statement of Financial Accounting Standards (SFAS) No. 123, <I>Accounting for Stock-Based Compensation</I>, to stock-based6056employer compensation. </FONT></P>60576058<BR>6059<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50 </FONT></P>6060<HR SIZE=3 COLOR=GRAY NOSHADE>6061<!-- *************************************************************************** -->6062<!-- MARKER PAGE="sheet: 0; page: 0" -->6063<BR><BR>606460656066<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6067<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of6068Significant Accounting Policies (continued) </FONT></H1>606960706071<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6072<TR VALIGN=Bottom>6073<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6074<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31</FONT></TH></TR>6075<TR VALIGN=Bottom>6076<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6077<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>6078<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6079<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>6080<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6081<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH></TR>6082<TR>6083<TD COLSPAN=3></TD>6084<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6085<TR VALIGN=Bottom>6086<TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss, as reported</FONT></TD>6087<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6088<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6089<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"><B> (3,507,938</B> </FONT></TD>6090<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6091<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628,399</FONT></TD>6092<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6093<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,978,914</FONT></TD>6094<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6095<TR VALIGN=Bottom>6096<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deduct: Total stock-based employee 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>6097<TR VALIGN=Bottom>6098<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> expense determined under fair-value-based</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6099<TR VALIGN=Bottom>6100<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> method for all awards</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6101<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(1,231,418</B> </FONT></TD>6102<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6103<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(573,355</FONT></TD>6104<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6105<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,340,094</FONT></TD>6106<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6107<TR>6108<TD COLSPAN=3></TD>6109<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6110<TR VALIGN=Bottom>6111<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma net 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>6112<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (4,739,356</B> </FONT></TD>6113<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6114<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (10,201,754</FONT></TD>6115<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6116<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (17,319,008</FONT></TD>6117<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6118<TR>6119<TD COLSPAN=3></TD>6120<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6121<TR><TD> </td></tr>6122<TR VALIGN=Bottom>6123<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss per common share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6124<TR VALIGN=Bottom>6125<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic and diluted - as reported</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6126<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (0.25</B> </FONT></TD>6127<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6128<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>6129<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6130<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>6131<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6132<TR>6133<TD COLSPAN=3></TD>6134<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6135<TR VALIGN=Bottom>6136<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic and diluted - pro forma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6137<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (0.34</B> </FONT></TD>6138<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6139<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.79</FONT></TD>6140<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6141<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.30</FONT></TD>6142<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6143<TR>6144<TD COLSPAN=3></TD>6145<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6146</TABLE>614761486149<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6150<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For purposes of calculating the6151above-required disclosure, the fair value of each option grant is estimated on the date of6152grant using the Black-Scholes option-pricing model. The fair value of the Company’s6153stock options was estimated assuming no expected dividends and the following weighted6154average assumptions: </FONT></P>615561566157<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6158<TR VALIGN=Bottom>6159<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6160<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>6161<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6162<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>6163<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6164<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH></TR>6165<TR>6166<TD COLSPAN=3></TD>6167<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6168<TR VALIGN=Bottom>6169<TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life (years)</FONT></TD>6170<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6171<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6172<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="11%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6.50 </B> </FONT></TD>6173<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6174<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="11%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.38 </FONT></TD>6175<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6176<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="11%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.50 </FONT></TD>6177<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6178<TR VALIGN=Bottom>6179<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>6180<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER" WIDTH="11%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>94% </B> </FONT></TD>6181<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6182<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>98% </FONT></TD>6183<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6184<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>101% </FONT></TD>6185<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>6186<TR VALIGN=Bottom>6187<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>6188<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER" WIDTH="11%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3.85%</B> </FONT></TD>6189<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6190<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.54%</FONT></TD>6191<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6192<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.30%</FONT></TD>6193<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>6194</TABLE>61956196<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6197<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The weighted average fair value of6198options granted with an exercise price equal to the deemed stock price on the date of6199grant during 2004, 2003 and 2002 was $5.77, $0.71 and $1.58, respectively. </FONT></P>62006201<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6202<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Income Taxes</I> </FONT></P>62036204<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6205<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes are accounted for under6206the liability method. Deferred income taxes are provided for temporary differences between6207the financial reporting and the tax bases of assets and liabilities. Deferred tax assets6208are reduced by a valuation allowance to the extent that realization of the related6209deferred tax asset is not assured. </FONT></P>62106211<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6212<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Net Loss Per Common Share</I> </FONT></P>62136214<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6215<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with SFAS No. 128,6216<I>Earnings Per Share</I>, basic net loss per common share is computed by dividing net6217loss by the weighted average common shares outstanding during the periods presented.6218Diluted net loss per common share is computed by dividing net loss by the weighted average6219common and dilutive potential common shares outstanding computed in accordance with the6220treasury stock method. For all periods presented, diluted loss per share is the same as6221basic loss per common share because the effect of outstanding options and warrants is6222antidilutive. </FONT></P>62236224<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6225<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Goodwill and Other6226Intangible Assets </I></FONT></P>62276228<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6229<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2002, the Company adopted6230SFAS No. 142, <I>Goodwill and Other Intangible Assets</I>. Goodwill is tested for6231impairment annually in the fourth quarter or more frequently if changes in circumstances6232or the occurrence of events suggest an impairment exists. The Company has concluded that6233no impairment of goodwill exists as of December 31, 2004. </FONT></P>62346235<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6236<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other intangible assets consist of6237purchased technology. Purchased technology is amortized using the straight-line method6238over its estimated useful life of four years. The Company reviews intangible assets for6239impairment</font></p>624062416242<BR>6243<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51 </FONT></P>6244<HR SIZE=3 COLOR=GRAY NOSHADE>6245<!-- *************************************************************************** -->6246<!-- MARKER PAGE="sheet: 0; page: 0" -->6247<BR><BR>6248624962506251<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6252<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2. Summary of Significant6253Accounting Policies (continued)</B> </FONT></P>62546255<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6256<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>annually or as changes in6257circumstances or the occurrence of events suggest the remaining value is not recoverable. </FONT></P>62586259<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6260<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>New Accounting6261Pronouncements </I></FONT></P>62626263<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6264<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 2004, the Financial6265Accounting Standards Board (FASB) issued Statement No. 123R, <I>Share-Based Payment6266</I>(SFAS 123R), which requires companies to measure and recognize compensation expense6267for all stock-based payments at fair value. SFAS 123R is effective for all interim6268periods beginning after June 15, 2005. Early adoption is encouraged and retroactive6269application of the provisions of SFAS 123R to the beginning of the fiscal year that6270includes the effective date is permitted, but not required. The Company is currently6271evaluating the impact of SFAS 123R on its financial position and results of6272operations. See elsewhere in this Note 2 for information related to the pro forma6273effects on the Company’s reported net loss and net loss per common share of applying6274the fair value recognition provisions of the previous Statement of Financial Accounting6275Standards (SFAS) 123, <I>Accounting for Stock-Based Compensation</I>, to stock-based6276employee compensation. </FONT></P>62776278<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6279<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. Acquisition of6280Certain Assets of Angiosonics, Inc. </FONT></H1>62816282<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6283<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 29, 2002, the Company6284purchased the Acolysis® intravascular ultrasound assets and related patents and6285technologies from the secured creditors of Angiosonics, Inc. in exchange for $1,500,000 in6286cash. The Company allocated the purchase price of $1,500,000 and the related transaction6287fees using the fair market value of the assets. The Company allocated $487,608 to6288inventory and fixed assets, $870,000 to purchased technology, and $192,595 to goodwill. </FONT></P>62896290<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6291<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. Goodwill and Other6292Intangible Assets </FONT></H1>62936294<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6295<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed elsewhere in Note 2, the6296Company adopted SFAS No. 142 in fiscal 2002 and determined that the developed technology6297the Company acquired from Angiosonics, Inc. in April 2002 would be amortized over its6298useful life of four years. The goodwill acquired will not be amortized. The Company6299expects the future annual amortization expense for its acquired purchased development to6300be approximately $217,500 in 2005 and approximately $72,500 in 2006. </FONT></P>63016302<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6303<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balances of acquired intangible6304assets as of December 31, 2004 were as follows: </FONT></P>630563066307<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6308<TR VALIGN=Bottom>6309<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6310<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Carrying<BR>Amount</FONT></TH>6311<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6312<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>6313Amortization</FONT></TH>6314<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6315<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net</FONT></TH></TR>6316<TR>6317<TD COLSPAN=3></TD>6318<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6319<TR VALIGN=Bottom>6320<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortizing intangibles:</FONT></TD>6321<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6322<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6323<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></FONT></TD>6324<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6325<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></FONT></TD>6326<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6327<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></FONT></TD>6328<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6329<TR VALIGN=Bottom>6330<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Purchased technology</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6331<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 870,000</FONT></TD>6332<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6333<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 580,000</FONT></TD>6334<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6335<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 290,000</FONT></TD>6336<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6337<TR VALIGN=Bottom>6338<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-amortizing intangibles:</FONT></TD><TD ALIGN=LEFT><FONT 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>6339<TR VALIGN=Bottom>6340<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Goodwill</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6341<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>192,595</FONT></TD>6342<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6343<TD ALIGN=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>6344<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6345<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>192,595</FONT></TD>6346<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6347<TR>6348<TD COLSPAN=3></TD>6349<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6350<TR VALIGN=Bottom>6351<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6352<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,062,595</FONT></TD>6353<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6354<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 580,000</FONT></TD>6355<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6356<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 482,595</FONT></TD>6357<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6358<TR>6359<TD COLSPAN=3></TD>6360<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6361</TABLE>6362636363646365<BR>6366<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52 </FONT></P>6367<HR SIZE=3 COLOR=GRAY NOSHADE>6368<!-- *************************************************************************** -->6369<!-- MARKER PAGE="sheet: 0; page: 0" -->6370<BR><BR>637163726373<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6374<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. Goodwill and Other Intangible Assets (continued) </FONT></H1>63756376<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6377<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balances of acquired intangible assets as of December 31, 2003 were as6378follows: </FONT></P>637963806381<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6382<TR VALIGN=Bottom>6383<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6384<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Carrying<BR>Amount</FONT></TH>6385<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6386<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>6387Amortization</FONT></TH>6388<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6389<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net</FONT></TH></TR>6390<TR>6391<TD COLSPAN=3></TD>6392<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6393<TR VALIGN=Bottom>6394<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortizing intangibles:</FONT></TD>6395<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6396<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6397<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></FONT></TD>6398<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6399<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></FONT></TD>6400<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6401<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></FONT></TD>6402<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6403<TR VALIGN=Bottom>6404<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Purchased technology</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6405<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 870,000</FONT></TD>6406<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6407<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 362,500</FONT></TD>6408<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6409<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 507,500</FONT></TD>6410<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6411<TR VALIGN=Bottom>6412<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-amortizing intangibles:</FONT></TD><TD ALIGN=LEFT><FONT 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>6413<TR VALIGN=Bottom>6414<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Goodwill</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6415<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>192,595</FONT></TD>6416<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6417<TD ALIGN=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>6418<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6419<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>192,595</FONT></TD>6420<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6421<TR>6422<TD COLSPAN=3></TD>6423<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6424<TR VALIGN=Bottom>6425<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6426<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,062,595</FONT></TD>6427<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6428<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 362,500</FONT></TD>6429<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6430<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 700,095</FONT></TD>6431<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6432<TR>6433<TD COLSPAN=3></TD>6434<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6435</TABLE>64366437<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6438<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. Property and Equipment </FONT></H1>64396440<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6441<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment consists of6442the following at December 31: </FONT></P>644364446445<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6446<TR VALIGN=Bottom>6447<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6448<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>6449<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6450<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>6451<TR>6452<TD COLSPAN=3></TD>6453<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6454<TR VALIGN=Bottom>6455<TD WIDTH=59% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Property and equipment:</FONT></TD>6456<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6457<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6458<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>6459<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6460<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6461<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6462<TR VALIGN=Bottom>6463<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Manufacturing 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>6464<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 1,564,848</B> </FONT></TD>6465<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6466<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,174,787</FONT></TD>6467<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6468<TR VALIGN=Bottom>6469<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Office and computer 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>6470<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>923,374</B> </FONT></TD>6471<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6472<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>875,431</FONT></TD>6473<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6474<TR VALIGN=Bottom>6475<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Furniture and fixtures</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6476<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>241,685</B> </FONT></TD>6477<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6478<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>240,359</FONT></TD>6479<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6480<TR VALIGN=Bottom>6481<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>6482<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>205,514</B> </FONT></TD>6483<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6484<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>123,614</FONT></TD>6485<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6486<TR VALIGN=Bottom>6487<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development 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>6488<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>328,303</B> </FONT></TD>6489<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6490<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>289,014</FONT></TD>6491<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6492<TR>6493<TD COLSPAN=3></TD>6494<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6495<TR VALIGN=Bottom>6496<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6497<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,263,724</B> </FONT></TD>6498<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6499<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,703,205</FONT></TD>6500<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6501<TR VALIGN=Bottom>6502<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>6503<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(1,889,578</B> </FONT></TD>6504<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6505<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,754,603</FONT></TD>6506<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6507<TR>6508<TD COLSPAN=3></TD>6509<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6510<TR VALIGN=Bottom>6511<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net 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>6512<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 1,374,146</B> </FONT></TD>6513<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6514<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 948,602</FONT></TD>6515<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6516<TR>6517<TD COLSPAN=3></TD>6518<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6519</TABLE>65206521<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6522<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. Private Placement </FONT></H1>65236524<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6525<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 9, 2004, we sold 888,9006526shares of our common stock at an offering price of $6.75 per share for net proceeds of6527$5,592,561 in a private placement </FONT></P>65286529<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6530<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. Line of Credit </FONT></H1>65316532<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6533<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 13, 2004, the Company6534modified the secured asset-based loan and security agreement dated December 31, 2003. This6535line of credit is a one-year, $5,000,000 facility with availability based primarily on6536eligible customer receivables and inventory. The interest rate is prime plus 0.5%. As of6537December 31, 2004, the Company had no outstanding loan balance against the facility. Based6538on the Company’s eligible customer receivables, inventory and cash balances,6539$3,069,000 was available for borrowing as of December 31, 2004. The fee for the unused6540portion of the line of credit is $2,125 per quarter. The facility fee of $25,000 is6541payable upon the first advance. This line of credit includes two covenants: minimum6542tangible net worth of $11,000,000 and a liquidity coverage of not less than 1.25 to 1.00.6543The Company was in compliance with these covenants at December 31, 2004. </FONT></P>65446545<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6546<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. Leases </FONT></H1>65476548<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6549<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company leases a 33,0006550square-foot office and manufacturing facility under an operating lease agreement, which6551expires in September 2008. Rent expense related to the operating lease was approximately6552$343,000, $336,000, and $303,100 for the years ended December 31, 2004, 2003, and 2002,6553respectively. </FONT></P>65546555<BR>6556<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53 </FONT></P>6557<HR SIZE=3 COLOR=GRAY NOSHADE>6558<!-- *************************************************************************** -->6559<!-- MARKER PAGE="sheet: 0; page: 0" -->6560<BR><BR>656165626563<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6564<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. Leases (continued) </FONT></H1>65656566<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6567<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future minimum lease commitments6568under this operating lease as of December 31, 2004 are as follows: </FONT></P>656965706571<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=25%>6572<TR VALIGN=Bottom>6573<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6574<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>6575<TR VALIGN=Bottom>6576<TD WIDTH=81% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD>6577<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6578<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6579<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 345,024</FONT></TD>6580<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6581<TR VALIGN=Bottom>6582<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6583<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>359,208</FONT></TD>6584<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6585<TR VALIGN=Bottom>6586<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>6587<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>366,300</FONT></TD>6588<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6589<TR VALIGN=Bottom>6590<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>6591<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>274,725</FONT></TD>6592<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6593<TR>6594<TD COLSPAN=3></TD>6595<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6596<TR VALIGN=Bottom>6597<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6598<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,345,257</FONT></TD>6599<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6600<TR>6601<TD COLSPAN=3></TD>6602<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6603</TABLE>66046605<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6606<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. Income Taxes </FONT></H1>66076608<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6609<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2004, the Company had6610net operating loss carryforwards of approximately $57,865,000 for federal income tax6611purposes that are available to offset future taxable income and begin to expire in the6612year 2013. At December 31, 2004, the Company also had federal and Minnesota research and6613development tax credit carryforwards of approximately $1,598,000, which begin to expire in6614the year 2013. At December 31, 2004, the Company has foreign tax loss carryforwards of6615approximately $2,358,000 that do not expire. No benefit has been recorded for any loss or6616credit carryforwards, and utilization in future years may be limited under6617Sections 382 and 383 of the Internal Revenue Code if significant ownership changes6618have occurred. </FONT></P>66196620<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6621<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of the Company’s6622deferred tax assets and liabilities as of December 31, 2004 and 2003 are as follows: </FONT></P>662366246625<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6626<TR VALIGN=Bottom>6627<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6628<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>6629<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6630<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH></TR>6631<TR>6632<TD COLSPAN=3></TD>6633<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6634<TR VALIGN=Bottom>6635<TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred tax assets:</FONT></TD>6636<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6637<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6638<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"><B></B> </FONT></TD>6639<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6640<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></FONT></TD>6641<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6642<TR VALIGN=Bottom>6643<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net operating loss 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>6644<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 24,089,000</B> </FONT></TD>6645<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6646<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,394,000</FONT></TD>6647<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6648<TR VALIGN=Bottom>6649<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Tax 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>6650<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,598,000</B> </FONT></TD>6651<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6652<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,353,000</FONT></TD>6653<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6654<TR VALIGN=Bottom>6655<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>6656<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>61,000</B> </FONT></TD>6657<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6658<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>183,000</FONT></TD>6659<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6660<TR VALIGN=Bottom>6661<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accrued 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>6662<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>253,000</B> </FONT></TD>6663<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6664<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>131,000</FONT></TD>6665<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6666<TR VALIGN=Bottom>6667<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Inventory reserve</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6668<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>172,000</B> </FONT></TD>6669<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6670<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>96,000</FONT></TD>6671<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6672<TR VALIGN=Bottom>6673<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Other 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>6674<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>244,000</B> </FONT></TD>6675<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6676<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64,000</FONT></TD>6677<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6678<TR>6679<TD COLSPAN=3></TD>6680<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6681<TR VALIGN=Bottom>6682<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6683<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>26,417,000</B> </FONT></TD>6684<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6685<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,221,000</FONT></TD>6686<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6687<TR VALIGN=Bottom>6688<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Less valuation 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>6689<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(26,417,000</B> </FONT></TD>6690<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6691<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(24,221,000</FONT></TD>6692<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6693<TR>6694<TD COLSPAN=3></TD>6695<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6696<TR VALIGN=Bottom>6697<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net deferred 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>6698<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> —</B> </FONT></TD>6699<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6700<TD ALIGN=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>6701<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6702<TR>6703<TD COLSPAN=3></TD>6704<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6705</TABLE>67066707<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6708<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company records a valuation6709allowance to reduce the carrying value of the net deferred taxes to an amount that is more6710likely than not to be realized. The increase in the valuation allowance was $2,196,000,6711$4,150,000 and $5,425,000 for the years ending December 31, 2004, 2003 and 2002,6712respectively. </FONT></P>67136714<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6715<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reconciliation of the statutory6716federal income tax rate to the Company’s effective tax rate is as follows: </FONT></P>6717671867196720<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>6721<TR VALIGN=Bottom>6722<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6723<TH COLSPAN=2 align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>6724<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6725<TH COLSPAN=2 align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>6726<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6727<TH COLSPAN=2 align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH></TR>6728<TR>6729<TD COLSPAN=3></TD>6730<TD COLSPAN=9 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6731<TR VALIGN=Bottom>6732<TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax at statutory rate</FONT></TD>6733<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6734<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6735<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34.0</FONT></TD>6736<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)%</FONT></TD>6737<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34.0</FONT></TD>6738<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)%</FONT></TD>6739<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34.0</FONT></TD>6740<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)%</FONT></TD></TR>6741<TR VALIGN=Bottom>6742<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>State income 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>6743<TD ALIGN=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>6744<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6745<TD ALIGN=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>6746<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6747<TD ALIGN=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>6748<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6749<TR VALIGN=Bottom>6750<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Meals and entertainment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6751<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.0</FONT></TD>6752<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6753<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0</FONT></TD>6754<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6755<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0</FONT></TD>6756<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6757<TR VALIGN=Bottom>6758<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Federal research credits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6759<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3.0</FONT></TD>6760<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6761<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1.0</FONT></TD>6762<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6763<TD ALIGN=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>6764<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6765<TR VALIGN=Bottom>6766<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impact of net operating loss carryforward</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6767<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40.0</FONT></TD>6768<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6769<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40.0</FONT></TD>6770<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6771<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39.0</FONT></TD>6772<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6773<TR>6774<TD COLSPAN=3></TD>6775<TD COLSPAN=9 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6776<TR VALIGN=Bottom>6777<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective income 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>6778<TD ALIGN=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>6779<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>6780<TD ALIGN=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>6781<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>6782<TD ALIGN=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>6783<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>6784<TR>6785<TD COLSPAN=3></TD>6786<TD COLSPAN=9 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>6787</TABLE>678867896790<BR>6791<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54 </FONT></P>6792<HR SIZE=3 COLOR=GRAY NOSHADE>6793<!-- *************************************************************************** -->6794<!-- MARKER PAGE="sheet: 0; page: 0" -->6795<BR><BR>679667976798<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6799<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. Stock Options and6800Warrants </FONT></H1>68016802<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6803<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Stock Option Plan</I></FONT></P>68046805<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6806<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has a stock option and6807stock award plan (the Stock Option Plan) which provides for the granting of incentive6808stock options to employees and nonqualified stock options to employees, directors, and6809consultants. As of December 31, 2004, the Company had reserved 3,400,000 shares of6810common stock under the Stock Option Plan. Under the Stock Option Plan, incentive stock6811options must be granted at an exercise price not less than the fair market value of the6812Company’s common stock on the grant date. The exercise price of a nonqualified option6813granted under the Stock Option Plan must not be less than 50% of the fair market value of6814the Company’s common stock on the grant date. Prior to the initial public offering in6815July 2000, the Board of Directors determined the fair value of the common shares6816underlying options by assessing the business progress of the Company as well as the market6817conditions for medical device companies and other external factors. The options expire on6818the date determined by the Board of Directors but may not extend more than ten years from6819the grant date. The Stock Option Plan also permits the granting of stock appreciation6820rights, restricted stock, and other stock-based awards. The incentive stock options6821generally become exercisable over a four-year period and the nonqualified stock options6822generally become exercisable over a two-year period. Unexercised options are canceled 906823days after termination of employment and become available under the Stock Option Plan. </FONT></P>68246825<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6826<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the third quarter of 2002, the6827Company offered to exchange for its current employees, other than the Chief Executive6828Officer, any outstanding options to purchase shares of the Company’s common stock6829under the Stock Option Plan with an exercise price of at least $3.00 per share for new6830options the Company will grant under the plan. The new options were granted on February683118, 2003, which was six months and two business days after the date the options were6832exchanged. The Company granted 428,570 new options under the Stock Option Plan at an6833exercise price of $0.84. The number of shares granted to each participating option holder6834was the number of shares subject to the eligible options tendered by such option holder. A6835stock option holder had to be employed by the Company through February 18, 2003 in order6836to be eligible to receive the new options. As a result of this exchange of options,6837467,070 options with an average price of $6.80 were canceled. </FONT></P>68386839<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6840<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Option activity is summarized as6841follows: </FONT></P>684268436844<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>6845<TR VALIGN=Bottom>6846<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6847<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares<BR>6848Available<BR>6849for Grant</FONT></TH>6850<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6851<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Plan Options<BR>6852Outstanding</FONT></TH>6853<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6854<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise<BR>6855Price</FONT></TH>6856<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6857<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted Average<BR>6858Exercise<BR>6859Price</FONT></TH></TR>6860<TR>6861<TD COLSPAN=3></TD>6862<TD COLSPAN=11 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6863<TR VALIGN=Bottom>6864<TD WIDTH=37% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2001</FONT></TD>6865<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6866<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6867<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49,789</FONT></TD>6868<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6869<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,574,811</FONT></TD>6870<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6871<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> $1.50-$16.50</FONT></TD>6872<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6873<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5.45</FONT></TD>6874<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6875<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=3% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6876<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6877<TR VALIGN=Bottom>6878<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Shares reserved</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6879<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>500,000</FONT></TD>6880<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6881<TD ALIGN=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>6882<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6883<TD ALIGN=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>6884<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6885<TD ALIGN=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>6886<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6887<TR VALIGN=Bottom>6888<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>6889<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(186,000</FONT></TD>6890<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6891<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>186,000</FONT></TD>6892<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6893<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.81-2.70</FONT></TD>6894<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6895<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.83</FONT></TD>6896<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6897<TR VALIGN=Bottom>6898<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>6899<TD ALIGN=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>6900<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6901<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,000</FONT></TD>6902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6903<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.00</FONT></TD>6904<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6905<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.00</FONT></TD>6906<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>6907<TR VALIGN=Bottom>6908<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>6909<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>849,890</FONT></TD>6910<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6911<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(849,890</FONT></TD>6912<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6913<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.45-16.50</FONT></TD>6914<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6915<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.25</FONT></TD>6916<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6917<TR>6918<TD COLSPAN=3></TD>6919<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6920<TR VALIGN=Bottom>6921<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6922<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,213,679</FONT></TD>6923<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6924<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>900,921</FONT></TD>6925<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6926<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.81-16.50</FONT></TD>6927<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6928<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.94</FONT></TD>6929<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6930<TR VALIGN=Bottom>6931<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Shares reserved</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6932<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>500,000</FONT></TD>6933<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6934<TD ALIGN=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>6935<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6936<TD ALIGN=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>6937<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6938<TD ALIGN=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>6939<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>6940<TR VALIGN=Bottom>6941<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>6942<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(889,070</FONT></TD>6943<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6944<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>889,070</FONT></TD>6945<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6946<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78-5.74</FONT></TD>6947<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6948<TD ALIGN=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>6949<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6950<TR VALIGN=Bottom>6951<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>6952<TD ALIGN=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>6953<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6954<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(65,855</FONT></TD>6955<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6956<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78-2.70</FONT></TD>6957<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6958<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.25</FONT></TD>6959<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6960<TR VALIGN=Bottom>6961<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>6962<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218,965</FONT></TD>6963<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6964<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(218,965</FONT></TD>6965<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6966<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.81-16.50</FONT></TD>6967<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6968<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.49</FONT></TD>6969<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6970<TR>6971<TD COLSPAN=3></TD>6972<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6973<TR VALIGN=Bottom>6974<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 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>6975<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,043,574</FONT></TD>6976<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6977<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,505,171</FONT></TD>6978<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6979<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78-12.00</FONT></TD>6980<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6981<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.50</FONT></TD>6982<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6983<TR VALIGN=Bottom>6984<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Shares reserved</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6985<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>500,000</FONT></TD>6986<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6987<TD ALIGN=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>6988<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6989<TD ALIGN=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>6990<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6991<TD ALIGN=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>6992<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>6993<TR VALIGN=Bottom>6994<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>6995<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(357,000</FONT></TD>6996<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6997<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>357,000</FONT></TD>6998<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6999<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.74-10.89</FONT></TD>7000<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7001<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.75</FONT></TD>7002<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7003<TR VALIGN=Bottom>7004<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>7005<TD ALIGN=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>7006<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7007<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(166,745</FONT></TD>7008<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7009<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78-7.31</FONT></TD>7010<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7011<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.03</FONT></TD>7012<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7013<TR VALIGN=Bottom>7014<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>7015<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50,265</FONT></TD>7016<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7017<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(50,265</FONT></TD>7018<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7019<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84-7.48</FONT></TD>7020<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7021<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.92</FONT></TD>7022<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7023<TR>7024<TD COLSPAN=3></TD>7025<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7026<TR VALIGN=Bottom>7027<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Balance at December 31, 2004</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7028<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,236,839</B> </FONT></TD>7029<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7030<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,645,161</B> </FONT></TD>7031<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7032<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> $0.78-$12.00</B> </FONT></TD>7033<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7034<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 3.68</B> </FONT></TD>7035<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD></TR>7036<TR>7037<TD COLSPAN=3></TD>7038<TD COLSPAN=6 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>7039</TABLE>7040704170427043<BR>7044<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55 </FONT></P>7045<HR SIZE=3 COLOR=GRAY NOSHADE>7046<!-- *************************************************************************** -->7047<!-- MARKER PAGE="sheet: 0; page: 0" -->7048<BR><BR>704970507051<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7052<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. Stock Options and7053Warrants (continued) </FONT></H1>70547055<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7056<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes7057information about stock options outstanding at December 31, 2004: </FONT></P>705870597060<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>7061<TR VALIGN=Bottom>7062<TH COLSPAN="3" WIDTH="19%" STYLE="text-indent:48; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7063<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Outstanding</FONT></TH>7064<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Exercisable</FONT></TH></TR>7065<TR>7066<TD COLSPAN="3" WIDTH="19%" STYLE="text-indent:48; direction:ltr;"></TD>7067<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7068<TD COLSPAN=5 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7069<TR VALIGN=Bottom>7070<TH COLSPAN="3" WIDTH="19%"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Range of<BR>7071Exercise Prices</FONT></TH>7072<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding<BR>7073as of December<BR>707431, 2004</FONT></TH>7075<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7076<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>7077Average<BR>7078Remaining<BR>7079Contractual Life</FONT></TH>7080<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7081<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>7082Average<BR>7083Exercise Price</FONT></TH>7084<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7085<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercisable<BR>7086as of<BR>7087December 31,<BR>70882004</FONT></TH>7089<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7090<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>7091Average<BR>7092Exercise Price</FONT></TH></TR>7093<TR>7094<TD COLSPAN="11" ALIGN="RIGHT" WIDTH="19%" STYLE="text-indent:48; direction:ltr;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7095<TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7096<TR VALIGN=Bottom>7097<TD WIDTH="19%" ALIGN="LEFT" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$0.78-$ 0.83</FONT></TD>7098<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7099<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7100<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="14%" ALIGN="RIGHT" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>80,750</FONT></TD>7101<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7102<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1</FONT></TD>7103<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7104<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD WIDTH="7%" ALIGN="RIGHT" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$0.79</FONT></TD>7105<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7106<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="14%" ALIGN="RIGHT" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>73,055</FONT></TD>7107<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7108<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD WIDTH="7%" ALIGN="RIGHT" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> $0.79</FONT></TD>7109<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7110<TR VALIGN=Bottom>7111<TD ALIGN="LEFT" WIDTH="19%" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.84- 0.84</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7112<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>592,590</FONT></TD>7113<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7114<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1</FONT></TD>7115<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7116<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84</FONT></TD>7117<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7118<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>427,335</FONT></TD>7119<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7120<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84</FONT></TD>7121<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7122<TR VALIGN=Bottom>7123<TD ALIGN="LEFT" WIDTH="19%" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.85- 2.51</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7124<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>260,766</FONT></TD>7125<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7126<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.6</FONT></TD>7127<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7128<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.11</FONT></TD>7129<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7130<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>219,106</FONT></TD>7131<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7132<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.08</FONT></TD>7133<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7134<TR VALIGN=Bottom>7135<TD ALIGN="LEFT" WIDTH="19%" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2.52- 6.00</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7136<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>261,650</FONT></TD>7137<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7138<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.0</FONT></TD>7139<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7140<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.63</FONT></TD>7141<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7142<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>255,590</FONT></TD>7143<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7144<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.67</FONT></TD>7145<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7146<TR VALIGN=Bottom>7147<TD ALIGN="LEFT" WIDTH="19%" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6.01- 7.00</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7148<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>246,835</FONT></TD>7149<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7150<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.7</FONT></TD>7151<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7152<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.73</FONT></TD>7153<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7154<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27,385</FONT></TD>7155<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7156<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.68</FONT></TD>7157<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7158<TR VALIGN=Bottom>7159<TD ALIGN="LEFT" WIDTH="19%" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7.01- 12.00</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7160<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>202,570</FONT></TD>7161<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7162<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.3</FONT></TD>7163<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7164<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.89</FONT></TD>7165<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7166<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>133,780</FONT></TD>7167<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7168<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.14</FONT></TD>7169<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7170<TR>7171<TD COLSPAN="3" WIDTH="19%" STYLE="text-indent:48; direction:ltr;"></TD>7172<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7173<TD COLSPAN=3></TD>7174<TD COLSPAN=3></TD>7175<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7176<TR VALIGN=Bottom>7177<TD ALIGN="LEFT" WIDTH="19%" STYLE="text-indent:68; direction:ltr;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7178<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,645,161</B> </FONT></TD>7179<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7180<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:30; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>7.3</B> </FONT></TD>7181<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7182<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:20; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$3.68</B> </FONT></TD>7183<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7184<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:40; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,136,251</B> </FONT></TD>7185<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7186<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD><TD ALIGN="RIGHT" WIDTH="7%" STYLE="text-indent:24; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$3.28</B> </FONT></TD>7187<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD></TR>7188<TR>7189<TD COLSPAN="3" WIDTH="19%" STYLE="text-indent:48; direction:ltr;"></TD>7190<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>7191<TD COLSPAN=3></TD>7192<TD COLSPAN=3></TD>7193<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>7194</TABLE>71957196<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7197<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Deferred Compensation</I> </FONT></P>71987199<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7200<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2004, 2003, and 2002, the Company7201recorded $53,759, $0 and $1,858, respectively, of deferred compensation in connection with7202certain nonqualified stock options granted to medical advisory board members. The weighted7203average fair value of these options was $4.12. The deferred compensation recorded is7204amortized ratably over the period that the options vest and is adjusted for options which7205have been canceled. Deferred compensation expense was $11,788, $40,545 and $74,668 for the7206years ended December 31, 2004, 2003, and 2002, respectively. </FONT></P>72077208<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7209<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><B>Warrants</b></i></FONT></P>72107211<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7212<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2004, the Company7213had the following warrants outstanding and exercisable: </FONT></P>721472157216<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>7217<TR VALIGN=Bottom>7218<TH COLSPAN="3" WIDTH="14%" STYLE="text-indent:18; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise Price</FONT></TH>7219<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding as of<BR>7220December 31, 2004</FONT></TH>7221<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7222<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Expiration Date</FONT></TH></TR>7223<TR>7224<TD COLSPAN="9" ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:18; direction:rtl;"><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>7225<TR VALIGN=Bottom>7226<TD WIDTH="14%" ALIGN="RIGHT" STYLE="text-indent:18; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.50</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7227<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7228<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="19%" ALIGN="RIGHT" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>70,400</FONT></TD>7229<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7230<TD WIDTH=47% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 31, 2007</FONT></TD>7231<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7232<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7233<TR VALIGN=Bottom>7234<TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:18; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.50</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7235<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7236<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="19%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,500</FONT></TD>7237<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7238<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>February 14, 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></TR>7239<TR VALIGN=Bottom>7240<TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:18; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.00</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7241<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7242<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="19%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68,000</FONT></TD>7243<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7244<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 29, 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></TR>7245<TR>7246<TD COLSPAN="6" ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:18; direction:rtl;"><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>72477248<TR VALIGN=Bottom>7249<TD ALIGN="RIGHT" WIDTH="14%" STYLE="text-indent:18; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$2.13</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7250<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7251<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="19%" STYLE="text-indent:48; direction:rtl;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>162,900</FONT></TD>7252<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7253<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>7254</TABLE>725572567257<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7258<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11. Employee Stock Purchase Plan </FONT></H1>72597260<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7261<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an Employee Stock7262Purchase Plan (the Purchase Plan) under which 1,100,000 shares of common stock have been7263reserved for issuance. Eligible employees may contribute 1% to 10% of their compensation7264to purchase shares of the Company’s common stock at a discount of 15% of the market7265value at certain plan-defined dates up to a maximum of 2,000 shares per purchasing period.7266The Purchase Plan terminates in May 2010. In fiscal 2004, 2003 and 2002, 245,567 shares,7267195,876 shares, and 152,737 shares, respectively, were issued under the Purchase Plan. At7268December 31, 2004, 415,626 shares were available for issuance under the Purchase Plan. </FONT></P>72697270<BR>7271<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56 </FONT></P>7272<HR SIZE=3 COLOR=GRAY NOSHADE>7273<!-- *************************************************************************** -->7274<!-- MARKER PAGE="sheet: 0; page: 0" -->7275<BR><BR>727672777278<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7279<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12. Stock Repurchase Program </FONT></H1>72807281<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7282<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In August 2002, the Board of Directors authorized a stock repurchase program7283to acquire up to 1,000,000 shares of outstanding common stock in the open market, block purchases, or private transactions. In7284fiscal 2003 and 2002, respectively, the Company repurchased and retired 153,400 and 608,900 shares of the Company’s common7285stock for an aggregate purchase price of $139,633 and $547,722, respectively. In October 2003, the Board of Directors terminated7286the stock repurchase program. </FONT></P>72877288<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7289<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13. Employee Retirement7290Savings Plan </FONT></H1>72917292<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7293<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an employee 401(k)7294retirement savings plan (the Plan). The Plan provides eligible employees with an7295opportunity to make tax-deferred contributions into a long-term investment and savings7296program. All employees over the age of 21 are eligible to participate in the Plan7297beginning with the first quarterly open enrollment date following start of employment.7298Through December 31, 2001, the Plan allowed eligible employees to contribute up to 18% of7299their annual compensation. Effective January 1, 2002, the employee contribution limit was7300increased to 50% of their annual compensation, subject to a maximum limit determined by7301the Internal Revenue Service, with the Company contributing an amount equal to 25% of the7302first 5% contributed to the Plan. The Company recorded an expense of $73,056, $74,258, and7303$91,170 for contributions to the Plan for the years ended December 31, 2004, 2003,7304and 2002, respectively. </FONT></P>73057306<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7307<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14. Concentrations of7308Credit and Other Risks </FONT></H1>73097310<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7311<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States and Germany, the7312Company sells its products directly to hospitals and clinics. In all other international7313markets, the Company sells its products to distributors who, in turn, sell to medical7314clinics. Loss, termination, or ineffectiveness of distributors to effectively promote the7315Company’s product could have a material adverse effect on the Company’s7316financial condition and results of operations. </FONT></P>73177318<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7319<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No customers were more than 5% of net7320sales for the years ended December 31, 2004, 2003 and 2002. </FONT></P>73217322<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7323<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With respect to accounts receivable,7324the Company performs credit evaluations of its customers and does not require collateral.7325No customers were more than 5% of gross accounts receivable as of December 31, 2004 and73262003. There have been no material losses on customer receivables. </FONT></P>73277328<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7329<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales by geographic destination as a7330percentage of total net sales were as follows for the years ended December 31: </FONT></P>73317332<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=50%>7333<TR VALIGN=Bottom>7334<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7335<TH COLSPAN=2 align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>7336<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7337<TH COLSPAN=2 align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>7338<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7339<TH COLSPAN=2 align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH></tr>7340<TR>7341<TD colspan=3> </td><TD COLSPAN="9"><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>7342<TR VALIGN=Bottom>7343<TD WIDTH=36% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic</FONT></TD>7344<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7345<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7346<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>89</FONT></TD>7347<TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>7348<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>87</FONT></TD>7349<TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>7350<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>89</FONT></TD>7351<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>7352<TR VALIGN=Bottom>7353<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7354<TD ALIGN=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>7355<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7356<TD ALIGN=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>7357<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7358<TD ALIGN=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>7359<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7360</TABLE>73617362<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7363<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15. Related Party Sales </FONT></H1>73647365<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7366<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2004, 2003 and 2002, the7367Company sold $278,620, $0 and $0 of product to a company in which a board member of the7368Company is a Vice President. As of December 31, 2004 and 2003, the Company had an accounts7369receivable balance due of $57,000 and $0 from this related party company. </FONT></P>73707371<BR>7372<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57 </FONT></P>7373<HR SIZE=3 COLOR=GRAY NOSHADE>7374<!-- *************************************************************************** -->7375<!-- MARKER PAGE="sheet: 0; page: 0" -->7376<BR><BR>737773787379<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7380<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16. Dependence on Key Suppliers </FONT></H1>73817382<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7383<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>King Pharmaceuticals </FONT></P>73847385<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7386<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company purchases certain key7387components from single-source suppliers. Any significant component delay or interruption7388could require the Company to qualify new sources of supply, if available, and could have a7389material adverse effect on the Company’s financial condition and results of7390operations. The Company purchases their requirements for thrombin (a component in the7391Duett and D-Stat products) under a Purchase Agreement dated June 10, 1999 with a7392subsidiary of King Pharmaceuticals, Inc. The agreement provides for a fixed price, with7393adjustments based on the supplier’s manufacturing costs and the supplier’s7394annual percentage increase in the wholesale price of thrombin. The agreement expires on7395May 29, 2005. During the first half of 2005, the Company intends to increase its purchases7396of thrombin to benefit from the pricing provisions of the agreement, which the Company7397expects will substantially increase their inventory of thrombin. The Company believes that7398these purchases will satisfy its thrombin requirements for 2005 and 2006. </FONT></P>73997400<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7401<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sigma </FONT></P>74027403<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7404<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 18, 2004, the Company7405entered into a supply agreement with Sigma-Aldrich Fine Chemicals, an operating division7406of Sigma-Aldrich, Inc. (Sigma) for the supply of thrombin to the Company. Pursuant to the7407terms of the agreement, the Company will be paying for certain development costs of Sigma7408to allow Sigma to produce thrombin. The Company will pay Sigma $570,360 for its7409development and qualification costs, $181,560 for capital equipment and $1,725,000 for the7410first three lots of thrombin. The payments are based on certain milestones over a two year7411period. The contract terminates after ten years and is automatically extended for up to7412five additional successive one year terms unless one party delivers notice of termination7413at least one year prior to the scheduled termination of the agreement. During the term of7414the contract, Sigma has agreed not to sell thrombin of the type developed for the Company7415under the contract in or as a component of a hemostatic product for medical use. The7416Company does not have any minimum purchase requirements under the contract; however, if7417the Company purchases less than three lots of thrombin in any year then (i) Sigma will be7418released from its agreement not to sell thrombin in or as a component of a hemostatic7419product for medical use, and (ii) Sigma will have the right to terminate the contract on742030 days notice. </FONT></P>74217422<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7423<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Sigma contract is the start of7424the Company’s plan to fully qualify a new source of thrombin and to bring the new7425thrombin through the regulatory process over the next two years. The cost associated with7426the Sigma agreement are part of the Company’s total estimated expenditures of $6.17427million (including the payments to Sigma) to complete this project. Approximately $3.37428million of the $6.1 million is for thrombin qualification expenses, $0.3 million is for7429capital equipment and $2.5 million is for the purchase of thrombin. The purchase of the7430$2.5 million in thrombin is expected to be used in the Company’s hemostat products7431starting in 2007. </FONT></P>74327433<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7434<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17. Commitments and Contingencies </FONT></H1>74357436<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7437<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All legal costs related to litigation are charged to operations as incurred.</FONT></P>74387439<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7440<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Datascope Litigation </FONT></P>74417442<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7443<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 26, 2002, the Company7444entered into an agreement that settled all existing intellectual property litigation with7445Datascope Corporation. Under the terms of the settlement agreement, Datascope has granted7446the Company a nonexclusive license to its Janzen patents as they apply to all current7447versions of the Duett sealing device, and to certain permitted future product7448improvements. Datascope also has released the Company from any claim of patent7449infringement based on past or future sales of the Duett sealing device. In exchange, the7450Company paid Datascope a single lump sum of $3,750,000 in the fourth quarter of 2002. </FONT></P>74517452<BR>7453<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>58 </FONT></P>7454<HR SIZE=3 COLOR=GRAY NOSHADE>7455<!-- *************************************************************************** -->7456<!-- MARKER PAGE="sheet: 0; page: 0" -->7457<BR><BR>745874597460<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7461<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17. Commitments and7462Contingencies (continued) </FONT></H1>74637464<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7465<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>St. Jude Medical7466Litigation </FONT></P>74677468<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7469<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 12, 2001, the Company entered7470into an agreement that settled all existing intellectual property litigation with St. Jude7471Medical, Inc. Under the terms of the settlement agreement, the Company agreed to pay a7472royalty of 2.5% of net sales of the Company’s Duett sealing device to St. Jude7473Medical, up to a maximum amount over the remaining life of the St. Jude Medical Fowler7474patents. In exchange, St. Jude Medical granted to the Company a nonexclusive license to7475its Fowler patents and has released it from any claim of patent infringement based on7476sales of the Duett sealing device. The Company granted a nonexclusive cross-license to its7477Gershony patents to St. Jude Medical, subject to a similar royalty payment if St. Jude7478Medical utilizes the Gershony patents in any future device. Beginning on July 1, 2001, a7479royalty expense of 2.5% of net sales is included in the Company’s cost of goods sold7480until the maximum royalty is attained. </FONT></P>74817482<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7483<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diomed Litigation </FONT></P>74847485<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7486<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 11, 2003, the Company and7487a non-officer employee of the Company were named as defendants in a lawsuit brought by7488Diomed, Inc. in the United States District Court for the District of Massachusetts. The7489complaint alleges that in marketing the Company’s Vari-Lase endovenous laser7490procedure kit the Company engaged in false advertising and infringed a registered7491trademark of Diomed. The complaint also alleges that the non-officer employee, who7492previously worked for a company that conducted business with Diomed, improperly utilized7493trade secrets of Diomed in developing the Company’s Vari-Lase procedure kit. The7494complaint requests monetary damages and an injunction on the sale of the Company’s7495Vari-Lase procedure kit. The Company believes that the allegations included in the7496complaint are wholly without merit, have filed their answer to the complaint, and intend7497to defend this litigation vigorously. The Company’s insurance carrier has accepted7498their tender of this claim and is defending this lawsuit. It is not possible to predict7499the timing or outcome of this litigation, including whether it will affect the7500Company’s ability to sell its Vari-Lase procedure kit, or to estimate the amount or7501range of potential loss, if any. </FONT></P>75027503<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7504<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 4, 2004, the Company was7505named as the defendant in an intellectual property lawsuit brought by Diomed, Inc. in the7506United States District Court for the District of Massachusetts. The complaint requested a7507judgment that the Company’s Vari-Lase procedure kit and Vari-Lase laser console7508infringe on a single patent held by Diomed, Inc. and asked for relief in the form of an7509injunction that would prevent the Company from selling their Vari-Lase products,7510compensatory and treble damages caused by the manufacture and sale of the Company’s7511product, and other costs, disbursements and attorneys’ fees. The Company believes7512that the allegations included in the complaint are wholly without merit, have filed their7513answer to the complaint, and intend to defend this litigation vigorously. It is not7514possible to predict the timing or outcome of this litigation, including whether it will7515affect the Company’s ability to sell their Vari-Lase products, or to estimate the7516amount or range of potential loss, if any. </FONT></P>75177518<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7519<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MedArt Purchase Commitment </FONT></P>75207521<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7522<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company signed a purchase7523agreement with MedArt Corporation on September 22, 2003. Under that agreement, the Company7524was obligated to purchase laser consoles with an aggregate purchase price of $1,197,0007525for its Vari-Lase business during the first year of the agreement, which commenced in7526December 2003. The Company fulfilled its laser console purchase requirement of $1,197,0007527during 2004. </FONT></P>75287529<BR>7530<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59 </FONT></P>7531<HR SIZE=3 COLOR=GRAY NOSHADE>7532<!-- *************************************************************************** -->7533<!-- MARKER PAGE="sheet: 0; page: 0" -->7534<BR><BR>753575367537<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7538<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18. Quarterly Financial7539Data (Unaudited, in Thousands, Except per Share Data) </FONT></H1>7540754175427543<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>7544<TR VALIGN=Bottom>7545<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>7546<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fourth<BR>Quarter</FONT></TH>7547<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7548<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Third<BR>7549Quarter</FONT></TH>7550<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7551<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Second<BR>Quarter</FONT></TH>7552<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7553<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>First<BR>7554Quarter</FONT></TH></TR>7555<TR>7556<TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>7557<TR VALIGN=Bottom>7558<TD WIDTH=39% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>7559<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7560<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7561<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,650</FONT></TD>7562<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7563<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,931</FONT></TD>7564<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7565<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,246</FONT></TD>7566<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7567<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> 4,438</FONT></TD>7568<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7569<TR VALIGN=Bottom>7570<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>7571<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,652</FONT></TD>7572<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7573<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,290</FONT></TD>7574<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7575<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,673</FONT></TD>7576<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7577<TD ALIGN=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>7578<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7579<TR VALIGN=Bottom>7580<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating 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>7581<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(599</FONT></TD>7582<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7583<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(445</FONT></TD>7584<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7585<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,021</FONT></TD>7586<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7587<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,511</FONT></TD>7588<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7589<TR VALIGN=Bottom>7590<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net 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>7591<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(573</FONT></TD>7592<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7593<TD ALIGN=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>7594<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7595<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(999</FONT></TD>7596<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7597<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,499</FONT></TD>7598<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7599<TR VALIGN=Bottom>7600<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7601<TR VALIGN=Bottom>7602<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>7603<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.04</FONT></TD>7604<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7605<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.03</FONT></TD>7606<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7607<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.07</FONT></TD>7608<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7609<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.11</FONT></TD>7610<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7611<TR><td> </td></tr>7612<TR VALIGN=Bottom>7613<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1><B> 2003</b></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7614<TR>7615<TD COLSPAN=3 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>7616<TR VALIGN=Bottom>7617<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7618<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,403</FONT></TD>7619<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7620<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,708</FONT></TD>7621<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7622<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,725</FONT></TD>7623<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7624<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,968</FONT></TD>7625<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7626<TR VALIGN=Bottom>7627<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>7628<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,242</FONT></TD>7629<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7630<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,607</FONT></TD>7631<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7632<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,639</FONT></TD>7633<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7634<TD ALIGN=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>7635<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7636<TR VALIGN=Bottom>7637<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating 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>7638<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,981</FONT></TD>7639<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7640<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,415</FONT></TD>7641<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7642<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,724</FONT></TD>7643<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7644<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,659</FONT></TD>7645<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7646<TR VALIGN=Bottom>7647<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net 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>7648<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,963</FONT></TD>7649<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7650<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,385</FONT></TD>7651<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7652<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,683</FONT></TD>7653<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7654<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,597</FONT></TD>7655<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7656<TR VALIGN=Bottom>7657<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7658<TR VALIGN=Bottom>7659<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>7660<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.15</FONT></TD>7661<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7662<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.19</FONT></TD>7663<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7664<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.21</FONT></TD>7665<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7666<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.20</FONT></TD>7667<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7668</TABLE>7669767076717672<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>7673<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60 </FONT></P>7674<HR SIZE=3 COLOR=GRAY NOSHADE>7675<BR><BR>76767677</BODY>7678</HTML>7679</TEXT>7680</DOCUMENT>7681<DOCUMENT>7682<TYPE>EX-10.127683<SEQUENCE>27684<FILENAME>vasc050575_ex10-12.txt7685<TEXT>768676877688EXHIBIT 10.1276897690SUPPLY AGREEMENT7691----------------76927693THIS AGREEMENT is made as of the 18th day of October, 2004, by and7694between Sigma-Aldrich Fine Chemicals, an operating division of Sigma-Aldrich7695Inc., having an office at 3050 Spruce Street, St. Louis, MO 63103 ("Seller"),7696and Vascular Solutions, Inc., having an office at 6464 Sycamore Court,7697Minneapolis, MN 55369 ("Buyer").76987699WHEREAS, Seller has the experience and capability to manufacture and7700supply thrombin solution from bovine plasma as further described in Attachment77011, and77027703WHEREAS, Buyer desires to have available on a coordinated continuing7704basis a supply of said product,77057706NOW, THEREFORE, in consideration of the premises and mutual covenants7707and conditions contained herein, the parties hereto agree as follows:77087709ARTICLE I77107711DEFINITIONS7712-----------77137714For the purposes of this Agreement, the following words and phrases7715shall have the following meanings:771677171.1 "Affiliate" shall mean with respect to any specified Person,7718any other Person that directly or indirectly through one or7719more intermediaries, controls, or is controlled by, or is7720under common control with, the Person specified. For purposes7721of this definition, "control" including, with correlative7722meanings, the terms "controlled by" and "under common control7723with" means ownership directly or indirectly of more than7724fifty percent (50%) of the equity capital having the right to7725vote for election of directors in the case of a corporation7726and more than fifty percent (50%) of the beneficial interest7727in the case of a business entity other than a corporation.772877291.2 "Agreement" shall mean this Supply Agreement.773077311.3 "GMP shall mean that the Product will be manufactured in7732accordance with ICH Q7A to be used in preparation of a "drug7733product" as defined in accordance with 21CFR211.77347735** The appearance of a double asterisk denotes confidential information that has7736been omitted from the exhibit and filed separately, accompanied by a7737confidential treatment request, with the Securities and Exchange Commission7738pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.773977401 of 237741Initials:7742Buyer ______7743Seller ______77447745<PAGE>774677471.4 "Contract Year" shall mean the period of twelve (12) months7748from and including the Effectiveness Date and each subsequent7749consecutive period of twelve (12) months during the7750continuance of this Agreement.775177521.5 "Effectiveness Date" shall mean the earlier of the date that7753Buyer receives approval from the FDA for the inclusion of7754Seller's Product in at least one of Buyer's hemostasis7755products for sale in the United States and January 1, 2007.775677571.6 "FDA" shall mean the United States Food & Drug Administration,7758or any successor organization.775977601.7 "Government Approvals" shall mean any approvals, licenses,7761permits, registrations or authorizations, howsoever called, of7762any United States or foreign regulatory agency, department,7763bureau or other government entity necessary for Seller's7764manufacture, use, storage, transport or sale of the Product.776577661.8 "Lot" shall mean a manufacturing lot of the Product with a7767sufficient quantity of components to result in a final yield7768of at least ** units of the Product.776977701.9 "QSR's" shall mean the Quality System Regulations of the FDA.777177721.10 "Person" shall mean any individual, corporation, company,7773limited liability company, partnership, business trust,7774business association, governmental entity, governmental7775authority or other legal entity.777677771.11 "Product" shall mean thrombin solution from bovine plasma as7778described in Attachment 1 attached hereto and/or alternatively7779termed the API or Active Pharmaceutical Ingredient.778077811.12 "Specifications" shall mean the specifications for the Product7782set out in Attachment 1 attached hereto, as shall be amended7783from time to time by mutual written agreement of the parties.778477851.13 "Term" shall mean from the date of this Agreement to the7786expiration of the Tenth Contract Year, unless extended or7787terminated as provided for herein.77887789ARTICLE II77907791PURCHASE AND DELIVERY7792---------------------779377942.1 During the Term of this Agreement, Seller agrees to7795manufacture and sell and Buyer agrees to purchase the Product7796on the terms and conditions stated in this Agreement779777982 of 237799Initials:7800Buyer ______7801Seller ______7802<PAGE>780378042.2 Purchase orders for the Product will be placed on Buyer's7805standard purchase order form then in effect. All terms and7806conditions of this Agreement shall supersede any terms or7807conditions of Buyer's or Seller's ordering or shipment forms7808which modify or are otherwise inconsistent with the terms and7809conditions of this Agreement. All shipments of Product will be7810supplied by Seller in accordance with the Specifications in7811Attachment 1.781278132.3 All Product sold by Seller to Buyer shall be F.O.B. St. Louis,7814Missouri. Seller shall retain title and bear the risk of loss7815on the Product until such time as a shipment has been7816delivered to the carrier designated by Buyer or, if no such7817designation has occurred, Seller's regular carrier.781878192.4 Seller shall package and ship the Product in a commercially7820reasonable manner in accordance with Buyer's reasonable7821instructions. At Buyer's option, Seller will procure insurance7822on the shipments against damage to or loss of the Product. Any7823such shipping insurance so provided by Seller will be7824subsequently billed to Buyer, and Buyer will reimburse Seller7825for the actual costs of such insurance. No partial shipments7826shall be made without Buyer's written consent.782778282.5 In the event that any portion of the shipment of the Product7829received by Buyer fails to conform to the Specifications,7830Buyer may reject the non-conforming Product shipment by giving7831written notice to Seller within ninety (90) days of Buyer's7832receipt of the Product, which notice shall specify the manner7833in which the Product fails to meet the Specifications. In the7834event a Product defect could not have been ascertained by7835Buyer upon reasonable inspection of the Product and analysis7836thereof, then the ninety (90) day time period referred to7837herein shall not apply provided that (i) Buyer notifies Seller7838promptly upon having reason to know of such Product defect7839(but in any event no later than twelve (12) months from date7840of delivery) and (ii) the limitation on remedy and liability7841set out in Paragraph 2.8 shall apply with respect thereto.784278432.6 In the event Seller does not agree that any such Product7844failed to meet the Specifications and Seller and Buyer cannot7845reach agreement with respect to such Product, Seller will7846submit the question of whether the Product failed to meet the7847Specifications to an independent laboratory selected by Seller7848and approved by Buyer for determination. The findings of such7849laboratory shall be binding upon Seller and Buyer and the cost7850of such determination shall be paid by the party in error.7851785278533 of 237854Initials:7855Buyer ______7856Seller ______7857<PAGE>785878592.7 Subject to Sections 2.5 and 2.6, Seller shall replace any7860Product not conforming to the Specifications forthwith, at its7861expense, or if it is unable to make prompt replacement, Seller7862shall either credit Buyer's account or refund any payment made7863on the nonaccepted Product, depending on Buyer's account7864balance, within forty-five (45) days of Seller's receipt of7865notice of Buyer's non-acceptance. Buyer shall return, at7866Seller's expense, the nonaccepted Product to Seller.786778682.8 Except as provided for under Paragraph 6.5 regarding Seller's7869indemnification obligations for third party claims, the7870remedies described in Section 2.5 and 2.7 shall be Buyer's7871sole remedy and Seller's only liability to Buyer hereunder7872with respect thereto.787378742.9 By the beginning of each calendar quarter (January 1, April 1,7875July 1 and October 1), Buyer shall submit to Seller (i) a7876binding order setting forth the quantities, delivery dates and7877shipping instructions for Product delivery for the calendar7878quarter commencing three months following such date, and (ii)7879a non-binding forecast for delivery of Product for the next7880following twelve (12) months. Binding orders shall be7881considered firm and non-cancelable, however, Buyer may request7882an increase to a binding order and Seller agrees to use7883commercially reasonable efforts to supply such additional7884Product in accordance with the terms and conditions of this7885Agreement. The forecast will be used to determine the volume7886purchase price for the Contract Year, which shall be adjusted7887immediately if the actual amount of purchases during such7888Contract Year exceeds or is less than the forecasted amount.788978902.10 Each purchase order issued by Buyer shall be in full7891increments of one (1) Lot.789278932.11 Seller agrees that during the Term of this Agreement, Seller7894and its Affiliates will not directly or indirectly sell the7895Product or any derivative of the Product in or as a component7896of a hemostatic product for medical use. The foregoing7897restriction shall be conditioned upon and subject to Buyer's7898continuing purchase of at least three (3) Lots of the Product7899each Contract Year during the Term of this Agreement. In the7900event that Buyer fails to purchase at least three (3) Lots of7901Product during any such Contract Year, Seller shall not be7902obligated to the foregoing restriction and at its sole7903discretion may terminate this Agreement upon thirty (30) days7904written notice to Buyer.79057906790779087909791079114 of 237912Initials:7913Buyer ______7914Seller ______7915<PAGE>79167917ARTICLE III79187919QUALITY STANDARDS7920-----------------792179223.1 All raw materials are defined by engineering drawings or7923specifications. Approved vendors must be designated on the7924drawings/specs. Raw materials will be supplied by Seller.7925Seller will use standard operating procedures which define the7926sampling methodology and the analytical methods used to assure7927that the raw materials meet the defined specifications. Seller7928will notify Buyer in writing of any changes to the7929specifications, sampling or test methods of raw materials or7930any changes in approved vendors.793179323.2 Seller shall be responsible for and shall provide all7933packaging materials and printed materials associated with the7934Product. This includes, but is not limited to, container7935labels, container cartons and packaging material. Seller shall7936be responsible for compliance with all Federal, State and7937Local laws and regulations concerning packaging and labeling7938materials, and for obtaining any necessary regulatory7939approvals of printed materials, artwork and copy. Seller shall7940obtain prior approval from Buyer before revising any printed7941packaging components, primary container components and any7942Buyer-supplied packaging components used in the Product.794379443.3 Materials not found to meet Specifications will be considered7945non-conforming. Seller shall determine the future usability of7946non-conforming materials. Actions taken to investigate the7947non-conformance and to justify the release of the batch of7948material must be fully documented. Copies of all documentation7949associated with non-conformance of materials used shall be7950maintained by Seller.795179523.4 The manufacturing process or traveler shall be maintained by7953the Document Control / Quality Control group within Seller.7954These documents shall be reviewed and approved by Buyer7955according to Buyer's requirements. Listed on Buyer's Purchase7956Order will be the types of changes to the manufacturing7957process or traveler that require approval by Buyer prior to7958implementation. Each Lot of product produced must be assigned7959a unique batch or lot number. Any deviation from the specified7960manufacturing process must be documented in the batch record7961or traveler. Seller shall have a system to document the7962deviation, the investigation that was undertaken and the7963conclusion drawn from that investigation. The documentation7964associated with any deviation in the manufacturing process7965shall become part of the batch record.796679673.5 Seller is responsible for ensuring that equipment is routinely7968calibrated, inspected, maintained and qualified for use.7969Calibration must be traceable to national or international7970standards and the calibration status must be clearly7971identified on the equipment.7972797379745 of 237975Initials:7976Buyer ______7977Seller ______7978<PAGE>797979803.6 Buyer must be provided with a copy of the top-level history7981record (traveler/batch record) for the Product manufactured,7982if so requested by Buyer. Seller agrees to maintain all7983records that support this document (e.g.,7984inspection/acceptance records for subassemblies and7985components) for the Term of this Agreement.798679873.7 All in-process and finished Product testing shall be conducted7988by Seller using validated test methods. Upon reasonable7989request, Seller shall provide Buyer with a certificate of7990analysis indicating each test parameter, test method, test7991result and the corresponding acceptance criteria for each7992batch/lot of product manufactured or packaged, as well as a7993statement indicating that all associated documentation has7994been reviewed and approved by the appropriate quality control7995unit.799679973.8 Seller is responsible for obtaining and maintaining file7998samples.799980003.9 Seller will allow GMP audits to be performed by approved8001representatives of Buyer during normal business hours upon8002reasonable advance notice and not to exceed two per year.8003Buyer reserves the right to request additional audits of8004Seller in the event that special circumstances require8005additional investigation, such as product recalls or other8006quality assurance issues.800780083.10 Process/product and cleaning validation shall be performed by8009Seller using protocols developed according to industry8010standards. Seller shall be responsible for conducting the8011validation studies and maintaining validation reports. Seller8012is responsible for operating within validated parameters.801380143.11 Seller agrees to manufacture in a manufacturing environment8015such that the particulate and microbial levels are within the8016Specifications. If no Specifications are defined, then no8017particular manufacturing environment requirements are8018necessary beyond applicable GMP guidelines. Where particulate8019and microbial levels are required for the Product, then the8020facilities and raw materials used during the manufacturing and8021packaging process shall be monitored for these factors. Seller8022shall be responsible for the establishment and institution of8023a monitoring program to assure that the Product will meet the8024required particulate and microbial levels and shall maintain8025the records obtained from this monitoring program.802680273.12 Buyer shall maintain distribution records which contain all of8028the appropriate information as specified in 21 CFR, Section8029211.198. Handling and documentation of returned product from8030end-users is the responsibility of Buyer.803180323.13 Buyer is responsible for investigating and handling complaints8033from end-users. Seller shall cooperate with Buyer's8034investigations, including providing manufacturing-related8035records as they relate to the investigation.803680376 of 238038Initials:8039Buyer ______8040Seller ______804180428043<PAGE>804480453.14 Seller warrants that all federal environmental and safety8046requirements are being and will be followed at its facilities.8047Buyer shall have the right to inspect at reasonable times8048during normal business hours, and on reasonable prior notice,8049the operations, records and facilities of Seller wherein8050Products are manufactured, tested and stored for shipping for8051the purpose of quality assurance auditing and to evaluate8052compliance with applicable environmental and occupational8053health and safety laws and regulations.805480553.15 Seller shall notify Buyer of significant incidents relating to8056production of the Product, including but not limited to the8057following (i) fatalities and/or significant injuries or8058occupations illnesses; (ii) incidents resulting in property8059damage of $50,000 or more; (iii) environmental releases8060reportable to regulatory agencies; (iv) regulatory agency8061inspections alleging non-compliance; and (v) request for8062information, notices of violations or other communication from8063a governmental agency relating to environmental or8064occupational health and safety compliance.806580663.16 At Buyer's request, Seller shall provide copies of all8067relevant environmental licenses and permits pertaining to its8068operation and shall notify Buyer of any change in status.806980703.17 At Buyer's request, Seller will provide Buyer with copies of8071all applicable insurance certificates.807280733.18 Unless otherwise stated in this Agreement, Seller is8074responsible for compliance to all Federal, State and Local8075laws and regulations as they apply to Seller's business.807680773.19 Seller shall cooperate with Buyer's reasonable requests for8078information and assistance in all FDA and international8079regulatory filings, audits and approvals. Seller shall8080promptly notify Buyer of any announced or unannounced FDA or8081foreign authority inspection relating to the manufacture of8082the Product. Seller shall permit a representative of Buyer to8083be present at Seller's facilities during any inspection8084relating to the manufacture of the Product. Seller shall8085immediately provide Buyer with copies of any resulting8086document of action (FDA Form 483 inspectional observation8087report, regulatory letters, etc.) resulting from these audits.8088Should either Seller or Buyer receive any such document of8089action related to the Product, it shall immediately notify the8090other and shall provide to the other an opportunity to the8091extent feasible under the circumstances to provide input to8092any response to any such document of action. Seller shall8093cooperate with Buyer to address any GMP deficiencies noted8094during any FDA audit.809580968097809880997 of 238100Initials:8101Buyer ______8102Seller ______81038104<PAGE>81058106ARTICLE IV81078108PRICING8109-------811081114.1 During the First Contract Year, Buyer will pay Seller the8112purchase price specified in Attachment 2 for each Lot of8113Product ordered and shipped to Buyer. The prices for each8114Contract Year subsequent to the First Contract Year shall be8115adjusted for inflation, effective the first day of such8116Contract Year. The adjusted price will be the price for the8117prior Contract Year plus an inflation factor equal to the811812-month average percentage increase in total compensation for8119private industry workers for the period ending the most recent8120December 31 as indicated on Table 3 of the EMPLOYMENT COST8121INDEX published by the Bureau of Labor Statistics of the8122United States Department of Labor or, if the EMPLOYMENT COST8123INDEX should cease to be published, any comparable category in8124a comparable index agreeable to both parties, in any case8125multiplied by the prior Contract Year's price.812681274.2 Seller shall invoice Buyer on each shipment of the Product,8128and payment shall be made in all cases net 30 days from the8129date of shipment. Any invoiced amounts due but not paid from8130and after the date due shall accrue a service charge of 1% per8131month or the maximum rate allowed by law, whichever is lower.8132Such prices do not include, and Buyer shall pay for, any8133excise, sales, use or like taxes resulting from the sale of8134the Product to Buyer.813581364.3 In addition to the adjustment provided in Section 4.1 of this8137Agreement, Seller may implement an increase to the purchase8138price if (i) Buyer requires a change to the manufacturing8139processes, testing requirements or raw materials for the8140Product, (ii) Seller is required to make a change to the8141manufacturing processes, testing requirements or raw materials8142for the Product, or (iii) the cost of raw materials for the8143Product increases. The amount of increase to the purchase8144price will be equal to the actual amount of increased cost to8145Seller, and will apply to all quantity levels of the purchase8146price as listed on Attachment 2. If Seller increases the8147purchase price pursuant to this Section 4.3, Seller will send8148a price increase notice to Buyer, together with documentation8149of the cost increase, and such price increase shall take8150effect immediately for any future binding orders placed by8151Buyer.81528153ARTICLE V81548155DEVELOPMENT WORK8156----------------815781585.1 Seller and Buyer agree and understand that development work8159will be required to be performed to allow Seller's manufacture8160of the Product, and that successful completion of this8161development work will be required prior to ordering any8162Product under this Agreement.816381648 of 238165Initials:8166Buyer ______8167Seller ______81688169<PAGE>817081715.2 Seller agrees to perform the development or transfer of the8172appropriate analytical methods for raw material, in-process8173and release testing to the GMP facility. This work will8174include reformatting of Standard Operating Procedures to GMP8175quality control format and instrumentation, validation of8176methods and performing raw material acceptance testing and8177final release testing. The development work specified in this8178Section 5.2 will be performed at a total cost of ** to be paid8179by Buyer to Seller upon completion of this phase of8180development work.818181825.3 Seller agrees to conduct development trials to establish8183whether Seller can produce material that meets the8184Specifications by a process that includes the isolation of a8185partially purified intermediate. This development work will8186determine the suitability of the intermediate regarding8187stability and yield and also define critical parameter limits8188for the process. Upon successful completion, a draft batch8189record (Seller's Master Manufacturing Formula) will be8190written, and the process transferred to the GMP facility.8191Progression of the project requires agreement of Seller and8192Buyer of successful completion of the development work8193specified in this Section 5.3. The development work specified8194in this Section 5.3 will be performed at a total cost of ** to8195be paid by Buyer to Seller upon completion of this phase of8196development work.819781985.4 Seller will use its best reasonable efforts to complete the8199development work specified in Sections 5.2 and 5.3 within five8200(5) months from the date of this Agreement. Buyer understands8201that the completion of the work is subject to several8202uncertainties which may extend this planned completion date.820382045.5 Upon completion of the development work specified in Sections82055.2 and 5.3, Seller will undertake the production of one (1)8206batch of ** units of Product in Seller's GMP facility meeting8207the Specifications. The production of one (1) batch of **8208units of Product will be performed by Seller at a total cost8209of ** to be paid by Buyer to Seller upon delivery of the same.8210All work will be performed using controlled documents, and8211Seller's QC group will perform release tests.821282135.6 Upon successful completion of the work outlined in Section82145.5, Seller shall manufacture and sell to Buyer three (3) Lots8215of Product at the pricing set forth in Attachment 2. Seller8216will use its best efforts to manufacture the first Lot in8217accordance with the Specifications in a manner to make the8218Product suitable for use by Buyer; however, no assurance is8219made that the Product from the first Lot will be in full8220accordance with the Specifications. All Lots of Product8221manufactured after the first Lot must be according to the8222Specifications in order to make the Product suitable for use8223by Buyer. During and upon successful completion of8224manufacturing the third Lot of Product, Seller shall validate8225its processes at a cost to Buyer of **. In the event that the8226Seller requires Product manufacturing to be relocated to8227another facility following completion of process validation8228work, Seller agrees to cover the cost of any additional8229validations required as a result of the relocation Upon8230completion of process validations, Seller shall promptly8231perform8232823382349 of 238235Initials:8236Buyer ______8237Seller ______82388239<PAGE>82408241the stability studies outlined in Attachment 3 at Buyer's cost8242as outlined in Attachment 3.824382445.7 Seller will use its best reasonable efforts to complete (i)8245the development work specified in Section 5.5 within two (2)8246months following the completion of the development work8247specified in Sections 5.2 and 5.3, and (ii) the manufacturing8248work specified in Section 5.6 within ten (10) months8249thereafter. Buyer understands that the completion of the work8250is subject to several uncertainties which may extend this8251planned completion date.82528253ARTICLE VI82548255REPRESENTATIONS AND WARRANTIES8256------------------------------825782586.1 Each party represents and warrants to the other that the8259execution of this Agreement and the full performance and8260enjoyment of the rights of Seller and Buyer under this8261Agreement will not breach or in any way be inconsistent with8262the terms and conditions of any license, contract,8263understanding or agreement, whether express, implied, written8264or oral between the warranting party and any third party.826582666.2 Seller represents and warrants that, to the best of its8267knowledge as of the date of this Agreement, no patents, patent8268applications if issued, or any other proprietary rights of any8269third party would be infringed by the manufacture, use or sale8270of the Product.827182726.3 Seller warrants that all Product supplied pursuant to this8273Agreement shall be free from defects in materials and8274workmanship, shall be of merchantable quality, shall conform8275to the requirement of applicable federal and state regulatory8276requirements, shall have all necessary Government Approvals8277and shall meet the Specifications. At Buyer's request, Seller8278shall certify in writing that it is in substantial compliance8279with all applicable environmental and occupational health and8280safety laws and regulations.828182826.4 SELLER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,8283INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF8284MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. BUYER8285IS SOLELY RESPONSIBLE FOR DETERMINING THAT THE PRODUCT8286PROVIDED BY SELLER HEREUNDER IS OF GOOD QUALITY, FREE FROM8287DEFECTS, CONFORMS TO THE SPECIFICATIONS AND IS MERCHANTABLE.828882896.5 Subject to Section 6.6, Seller shall indemnify, defend and8290hold harmless Buyer from all actions, losses, claims, demands,8291damages, costs and liabilities (including reasonable8292attorneys' fees) to which Buyer is or may become subject8293insofar as they arise out of or are alleged or claimed to8294arise out of (i) personal injury, death82958296829710 of 238298Initials:8299Buyer ______8300Seller ______8301<PAGE>83028303or property damage sustained by any person(s) resulting from8304the use of any Product manufactured by Seller, (ii) any breach8305by Seller of any of its obligations under this Agreement or8306warranties of Seller, or (iii) any negligent or willful act or8307omission by Seller or its employee, agents or subcontractors.830883096.6 Subject to Section 6.5, Buyer shall indemnify, defend and hold8310harmless Seller from all actions, losses, claims, demands,8311costs and liabilities (including reasonable attorney's fees)8312to which Seller is or may become subject insofar as they arise8313out of or are alleged or claimed to arise out of (i) any8314breach by Buyer of any of its obligations under this8315Agreement, (ii) any negligent or willful act or omission by8316Buyer or its employees, agents or subcontractors, (iii)8317personal injury, death or property damage sustained by any8318person(s) resulting from the use of Product manufactured by8319Buyer or by a third party at the direction of Buyer, or (iv)8320any labeling, advertising or promotional materials used by8321Buyer.832283236.7 A party entitled to indemnification hereunder agrees to give8324prompt written notice to the indemnifying party after the8325receipt by such party of any written notice of the8326commencement of any action, suit, proceeding or investigation8327or threat thereof made in writing for which such party will8328claim indemnification pursuant to this Agreement and cooperate8329fully with the indemnifying party in conducting such defense.8330Unless, in the reasonable judgment of the indemnified party, a8331conflict of interest may exist between the indemnified party8332and the indemnifying party with respect to a claim, the8333indemnifying party may assume the defense of such claim with8334counsel reasonably satisfactory to the indemnified party. If8335the indemnifying party is not entitled to, or elects not to,8336assume the defense of a claim, it will not be obligated to pay8337the fees and expenses of more than one counsel with respect to8338such claim. The indemnifying party will not be subject to any8339liability for any settlement made without its consent, which8340shall not be unreasonably withheld.834183426.8 The provisions and obligations of this Article VI shall8343survive any termination of this Agreement.834483458346ARTICLE VII83478348RECALLS AND RETURNS8349-------------------835083517.1 In the event of a recall involving any Buyer finished product8352containing Product supplied hereunder is required by a8353governmental agency or authority of competent jurisdiction or8354if recall is deemed advisable by Buyer, such recall shall be8355promptly implemented and administered by Buyer in a manner8356which is appropriate and reasonable under the circumstances8357and conformity with accepted trade practices. Subject to8358Paragraph 7.2, in the event that a recall is required as a8359result of Buyer's breach of its obligations hereunder, all8360costs and expenses incurred in connection therewith will be8361borne by Buyer. Subject to83628363836411 of 238365Initials:8366Buyer ______8367Seller ______8368<PAGE>83698370Paragraph 7.2, in the event that a recall is required as a8371result of Seller's breach of its obligations hereunder, all8372costs and expenses incurred in connection therewith shall be8373borne by Seller.837483757.2 Notwithstanding anything in this Agreement to the contrary, in8376the event of any recall, neither party shall be liable to the8377other party for special, incidental or consequential damages,8378loss of profit or loss of use, whether a claim arises in tort8379or contract. The limitation on liability provided for herein8380shall apply even in the event of the fault, negligence or8381strict liability of the party that may be responsible for the8382liability associated with such recall or the Products8383recalled.838483857.3 The provisions and obligations of this Article VII shall8386survive any termination of this Agreement.838783888389ARTICLE VIII83908391CONFIDENTIALITY8392---------------839383948.1 During the term of this Agreement each party may disclose8395information to the other party that is of a confidential or8396proprietary nature. Information which is designated in writing8397to be confidential or, if disclosed orally, reduced to writing8398and designated as confidential within thirty (30) days of such8399disclosure (Confidential Information) shall be maintained in8400confidence by the receiving party and not disclosed to third8401parties except upon the disclosing party's prior written8402consent. It shall be understood, however, that Confidential8403Information shall not include, and the obligations of8404confidentiality and nondisclosure shall not apply to,8405disclosed information that:8406a) is or becomes publicly available through no fault of8407the receiving party;8408b) is disclosed without restriction to the receiving8409party by a third party entitled to disclose it;8410c) is already known to the receiving party at the time8411of disclosure by the disclosing party as shown by its8412prior written records;8413d) is developed independently by an employee or8414consultant of the receiving party who had no8415knowledge of disclosures made under this Agreement;8416or8417e) is required to be disclosed in compliance with a8418governmental regulation or judicial or administrative8419process.842084218.2 No right or license, either expressed or implied, under any8422patent or other intellectual property right is granted8423hereunder.842484258.3 The obligations of confidentiality and non-disclosure shall8426remain in effect and survive for a period of five (5) years8427from the termination of this Agreement.84288429843012 of 238431Initials:8432Buyer ______8433Seller ______8434<PAGE>84358436ARTICLE IX84378438TERM AND TERMINATION8439--------------------844084419.1 Unless sooner terminated in accordance with its terms, this8442Agreement shall terminate upon the completion of the Tenth8443Contract Year. This Agreement shall be automatically extended8444for up to five (5) additional successive one year terms unless8445one party delivers notice of termination at least one year8446prior to the scheduled termination of this Agreement.844784489.2 If either party defaults in the performance or observation of8449any of its material obligations under this Agreement, the8450non-defaulting party may terminate this Agreement if such8451default is not cured within thirty (30) days after written8452notice thereof, which notice shall contain a specific8453identification of the default. Failure to terminate this8454Agreement for any default or breach shall not constitute a8455waiver by the aggrieved party of its right to sue for damages8456or its right to terminate this Agreement for any other default8457or breach.845884599.3 If Buyer fails to purchase at least three (3) Lots of Product8460in any Contract Year, Seller may terminate this Agreement if8461Buyer has not corrected such deficiency by issuing a8462definitive purchase order to Seller within thirty (30) days8463after written notice thereof.846484659.4 Either party may terminate this Agreement upon written notice8466in the event that the other party files for bankruptcy,8467liquidation, dissolution, or takes similar action seeking8468protection against creditors under insolvency laws, or has8469entered against it involuntarily a decree in bankruptcy or8470similar decree which remains in effect for sixty (60) days.847184729.5 This Agreement may be terminated upon the mutual written8473agreement of the parties.847484759.6 Expiration or earlier termination of this Agreement will not8476extinguish rights or obligations previously accrued or vested.847784789.7 Upon the expiration of this Agreement or its earlier8479termination, Seller will use its best efforts to assist Buyer8480in the transfer of relevant manufacturing technology and8481information not considered to be Seller's proprietary8482information to another qualified manufacturing site and Buyer8483will pay Seller for all such efforts in an amount mutually8484agreed upon by the parties prior to transfer of information.8485848613 of 238487Initials:8488Buyer ______8489Seller ______8490<PAGE>84918492ARTICLE X84938494TRADEMARKS AND TRADE NAMES8495--------------------------8496849710.1 Buyer and Seller hereby acknowledge that neither party now has8498and shall not hereafter acquire, any interest in any of the8499other party's trademarks, trade names, service marks or logos8500appearing on the labels or packaging materials containing the8501Product. No party shall, without the prior written consent of8502the affected party, use in advertising, publicity or8503otherwise, the name, trademark, logo, symbol or other image of8504the other party.8505850610.2 Neither party will issue or disseminate any press release or8507statement, nor initiate any communication of information8508regarding the existence or the terms of this Agreement,8509written or oral, to the communications media or a third party8510without the prior written consent of the other party.8511851210.3 The obligations of this Article shall remain in effect and8513survive the termination of this Agreement.851485158516ARTICLE XI85178518ASSIGNMENT AND AMENDMENT8519------------------------8520852111.1 This Agreement may not be assigned by either party without the8522prior written consent of the other, except that either party8523may assign this Agreement to any corporation with which it may8524merge or consolidate, or to which it may transfer all or8525substantially all of its assets to which this Agreement8526relates, without obtaining the consent of the other party,8527provided the assignee agrees to be bound, in written notice8528sent to the other party, by the terms and conditions of this8529Agreement. Subject to the foregoing, this Agreement shall be8530binding upon and shall inure to the benefit of the parties8531hereto and their respective successors and assigns.8532853311.2 Except as otherwise provided herein, this Agreement may not be8534amended, supplemented or otherwise modified except by an8535instrument in writing signed by both parties.85368537ARTICLE XII85388539NOTICES8540-------85418542854312.1 Any notice provided for under this Agreement shall be in8544writing, shall be deemed to have been sufficiently provided8545and effectively made as of the delivery date if8546854714 of 238548Initials:8549Buyer ______8550Seller ______8551<PAGE>85528553hand-delivered, or as of the date received if sent by courier8554service or mailed by registered or certified mail, postage8555prepaid, and addressed to the receiving party at its8556respective address as follows:85578558If to Buyer:85598560Vascular Solutions, Inc.85616464 Sycamore Court8562Minneapolis, MN 553698563Attn: Chief Executive Officer85648565If to Seller:85668567Sigma-Aldrich Fine Chemicals85683050 Spruce Street8569St. Louis, MO 63103857085718572ARTICLE XIII85738574INDEPENDENT CONTRACTOR8575----------------------8576857713.1 The relationship of the parties under this Agreement is that8578of the independent contractors and not as agents of each other8579or parties or joint venturers, and neither party shall have8580the power to bind the other in any way with respect to any8581obligation to any third party unless a specific power of8582attorney is provided for such purpose. Each party shall be8583solely responsible for its own employees and operations.85848585ARTICLE XIV85868587FORCE MAJEURE8588-------------8589859014.1 Neither party shall be liable to the other for failure to8591perform its obligations under this Agreement where such8592failure is caused by strikes, fires, embargoes, any8593governmental act or regulation, acts of God, acts of war,8594insurrection, riot or civil disturbance, or any other cause8595not under the control of the defaulting party. If any event of8596force majeure should occur, the affected party shall promptly8597give notice thereof to the other party, and the affected party8598shall use its best effort to cure or correct any such event of8599force majeure.8600860115 of 238602Initials:8603Buyer ______8604Seller ______8605<PAGE>86068607ARTICLE XV86088609MISCELLANEOUS8610-------------8611861215.1 Should one of the provisions of this Agreement become or prove8613to be null and void, such will be without effect on the8614validity of this Agreement as a whole. Both parties will,8615however, endeavor to replace the void provision by a valid one8616that in its economic effect is most consistent with the void8617provision. Both parties must agree to any such replacement8618provision in writing.8619862015.2 This Agreement shall be governed by and construed in8621accordance with the laws of the State of Missouri without8622regard to principles of conflicts of laws.8623862415.3 This Agreement constitutes the entire understanding between8625the parties regarding the subject matter hereof and neither8626Buyer nor Seller has relied on any representation not8627expressly set forth or referred to in this Agreement.8628862915.4 Each party hereto agrees to execute, acknowledge and deliver8630such further instruments, and to do all such other acts, as8631may be necessary or appropriate in order to carry out the8632purposes and intent of this Agreement.8633863415.5 The waiver by either party of a breach of any provision8635contained herein shall be in writing and shall in no way be8636construed as a waiver of any succeeding breach of such8637provision or the waiver of the provision itself.863886398640864186428643864486458646864786488649865086518652865386548655865686578658865916 of 238660Initials:8661Buyer ______8662Seller ______8663<PAGE>86648665IN WITNESS WHEREOF, the duly authorized representatives of the parties8666hereto have caused this Agreement to be executed in duplicated originals.866786688669VASCULAR SOLUTIONS, INC. SIGMA-ALDRICH FINE CHEMICALS867086718672By: _______________________ By: ___________________________86738674Name: _______________________ Name: ___________________________86758676Title: _______________________ Title: ___________________________8677867886798680868186828683868486858686868786888689869086918692869386948695869686978698869987008701870287038704870517 of 238706Initials:8707Buyer ______8708Seller ______8709<PAGE>87108711Attachment 1 - Specifications87128713The Product shall consist of one Lot of thrombin solution from bovine8714plasma, with an expected final yield of at least ** units of thrombin per Lot.8715Seller shall attempt to maximize the final yield of each Lot, and Seller shall8716not decrease the amount of source material in any Lot without the approval of8717Buyer. Each Lot shall contain a Certificate of Analysis from Seller in the Form8718attached hereto and a Certificate of U.S. Origin of the bovine material.8719Finished specifications of the Product are as follows:87208721<TABLE>8722<CAPTION>8723---------------------------------------------- ----------------------------------- ------------------- ----------------8724TEST DESCRIPTION [Test Code] SPECIFICATION SPECIFICATION TESTING8725RANGE LABORATORY8726---------------------------------------------- ----------------------------------- ------------------- ----------------8727<S> <C> <C> <C>8728** ** ** **8729---------------------------------------------- ----------------------------------- ------------------- ----------------8730** ** ** **8731---------------------------------------------- ----------------------------------- ------------------- ----------------8732** ** ** **8733---------------------------------------------- ----------------------------------- ------------------- ----------------8734** ** ** **8735---------------------------------------------- ----------------------------------- ------------------- ----------------8736** ** ** **8737---------------------------------------------- ----------------------------------- ------------------- ----------------8738** ** ** **8739---------------------------------------------- ----------------------------------- ------------------- ----------------8740** ** ** **8741---------------------------------------------- ----------------------------------- ------------------- ----------------8742** ** ** **8743---------------------------------------------- ----------------------------------- ------------------- ----------------8744** ** ** **8745---------------------------------------------- ----------------------------------- ------------------- ----------------8746** ** ** **8747-----------------------------------------------------------------------------------------------------------------------8748**8749-----------------------------------------------------------------------------------------------------------------------8750</TABLE>87518752Each Lot shall be stored either as a frozen liquid or lyophilized8753powder at a concentration of ** unit aliquots per container. Lot shall be8754shipped in bulk to Buyer at a monitored temperature of less than ** with8755appropriate protective packaging.87568757**8758875987608761876287638764876587668767876887698770877118 of 238772Initials:8773Buyer ______8774Seller ______8775<PAGE>877687778778CERTIFICATE OF ANALYSIS, TO BE ON COMPANY LETTER HEAD87798780Certificate of Analysis87818782DESCRIPTION __________________________8783PART NUMBER __________________________8784LOT NUMBER __________________________8785QUANTITY ______________________________ EXPIRATION DATE ___________87868787<TABLE>8788<CAPTION>8789- -------------------------------------------------- ----------------------------------- -------------------8790TEST DESCRIPTION SPECIFICATION Result8791- -------------------------------------------------- ----------------------------------- -------------------8792<S> <C> <C>8793** **8794- -------------------------------------------------- ----------------------------------- -------------------8795** **8796- -------------------------------------------------- ----------------------------------- -------------------8797** **8798- -------------------------------------------------- ----------------------------------- -------------------8799** **8800- -------------------------------------------------- ----------------------------------- -------------------8801** **8802- -------------------------------------------------- ----------------------------------- -------------------8803** **8804- -------------------------------------------------- ----------------------------------- -------------------8805** **8806- -------------------------------------------------- ----------------------------------- -------------------8807** **8808- -------------------------------------------------- ----------------------------------- -------------------8809** **8810- -------------------------------------------------- ----------------------------------- -------------------8811** **8812- -------------------------------------------------- ----------------------------------- -------------------8813** **8814- -------------------------------------------------- ----------------------------------- -------------------8815** **8816- -------------------------------------------------- ----------------------------------- -------------------8817</TABLE>88188819Sigma Aldrich certifies that the above test results are correct, and conform to8820the specification requirements defined above.88218822Attached is the material of animal origin certifications for this specific lot8823of Thrombin. These certifications meet the requirements set forth in EN 12442.882488258826- -----------------------------------8827Quality Assurance Date8828Sigma Aldrich Fine Chemicals8829CERTIFICATE OF ANALYSIS, TO BE ON COMPANY LETTER HEAD88308831883219 of 238833Initials:8834Buyer ______8835Seller ______8836<PAGE>88378838CERTIFICATE OF MATERIAL OF ANIMAL ORIGIN88398840Certificate Number _________________884188428843Country in which animal was slaughtered ____________________884488458846Country of Origin ____________________884788488849Approval Number of Slaughterhouse ____________________885088518852Establishment Name and Location ____________________885388548855Material of (Animal Species) ____________________885688578858Age of Animal ____________________885988608861Nature of tissue or Organ ____________________886288638864Packaging Materials used ____________________886588668867Number of Containers/Packages ____________________886888698870Name of Veterinarian ____________________887188728873Collection Dates ____________________8874887588768877- ----------------------------------------------------8878Quality Assurance Date8879Sigma Aldrich Fine Chemicals8880888120 of 238882Initials:8883Buyer ______8884Seller ______8885<PAGE>88868887Attachment 2 - Pricing88888889The price for each of the first three Lots of Product purchased8890pursuant to Section 5.6 shall be **; provided, however, that if the first Lot of8891Product as manufactured is not suitable for Buyer's commercial use, the price of8892the first Lot of Product shall be lowered to an amount equal to Seller's actual8893costs of manufacture of the first Lot of Product and a fourth Lot of Product8894shall be manufactured at a price of **. In addition, with the purchase price of8895the first Lot of Product Buyer shall pay Seller an amount equal to ** for8896one-time equipment expenses for the purchase of equipment dedicated to the8897production of the Product. The equipment purchased with this one-time payment8898shall be as follows:88998900**89018902**89038904890589068907The price for each subsequent Lot of Product purchased under this8908Agreement through the end of the First Contract Year shall be determined8909according to the following table:89108911- ------------------------------------- ----------------------------------8912TOTAL NUMBER OF LOTS PURCHASED IN8913THE CONTRACT YEAR PRICE PER LOT8914- ------------------------------------- ----------------------------------89151 **8916- ------------------------------------- ----------------------------------89172 **8918- ------------------------------------- ----------------------------------89193 **8920- ------------------------------------- ----------------------------------89214 **8922- ------------------------------------- ----------------------------------89235-6 **8924- ------------------------------------- ----------------------------------89257-8 **8926- ------------------------------------- ----------------------------------89279 or more **8928- ------------------------------------- ----------------------------------89298930The price for Product purchased in each Contract Year after the First8931Contract Year shall be adjusted pursuant to Sections 4.1 and 4.3 of this8932Agreement.89338934893589368937893889398940894189428943894421 of 238945Initials:8946Buyer ______8947Seller ______8948<PAGE>89498950Attachment 38951------------8952CORPORATE QUALITY CONTROL8953-------------------------8954Stability Studies8955-----------------89568957STUDY DESIGN89588959o ACCELERATED: 0, 1, 2, 3, AND 6 MONTHS AT 2-8 (DEGREE)C8960o LONG-TERM: 0, 3, 6, 9, 12, 18, AND 24 MONTHS AT -20 (DEGREE)C89618962ASSUMPTIONS89638964o ACCELERATED AND LONG TERM WILL BE RUN CONCURRENTLY.8965o RELEASE TESTING WILL BE USED FOR TIME 0.8966o STABILITY STUDIES BEGIN WITHIN 4 WEEKS OF RELEASE.8967o DOES NOT INCLUDE INTERMEDIATE CONDITION TESTING AND STORING OR8968ADDITIONAL TESTING OF SAMPLE.8969o DEGRADATION STUDIES: PERFORMED PRIOR TO STABILITY STUDIES8970UNLESS OTHERWISE SPECIFIED89718972DELIVERABLES:8973o SUBMISSION AND APPROVAL OF LONG TERM AND ACCELERATED PROTOCOLS8974BEFORE STABILITY STUDIES BEGIN8975o DATA TABLES AVAILABLE AT EACH INTERVAL AS REQUESTED8976o FINAL REPORT AT THE COMPLETION OF EACH PROTOCOL89778978ESTIMATED TIME REQUIREMENTS FOR STABILITY STUDIES FOR 1 LOT89798980- --------------------------------- --------------------- -------------------8981ACCELERATED LONG-TERM8982- --------------------------------- --------------------- -------------------8983** ** **8984- --------------------------------- --------------------- -------------------8985** ** **8986- --------------------------------- --------------------- -------------------8987**8988- --------------------------------- --------------------- -------------------8989**8990- --------------------------------- --------------------- -------------------8991**8992- --------------------------------- --------------------- -------------------8993** ** **8994- --------------------------------- --------------------- -------------------8995HOURS TO COMPLETE STUDY ** **8996- --------------------------------- --------------------- -------------------8997HRS. TO PREPARE PROTOCOL ** **8998- --------------------------------- --------------------- -------------------8999HRS. TO LAUNCH STUDY ** **9000- --------------------------------- --------------------- -------------------9001HRS. TO PREPARE INTERIM REPORTS ** **9002- --------------------------------- --------------------- -------------------9003HRS. TO PREPARE FINAL REPORT ** **9004- --------------------------------- --------------------- -------------------9005TOTAL HRS. FOR ALL PHASES OF ** **9006STUDY9007- --------------------------------- --------------------- -------------------9008**90099010901122 of 239012Initials:9013Buyer ______9014Seller ______9015<PAGE>90169017Summary For Stability Studies9018-----------------------------9019o ESTIMATED COST FOR ACCELERATED STUDY: **9020o ESTIMATED COST LONG-TERM STUDY: **9021o ESTIMATED COST FOR ACCELERATED AND LONG-TERM STUDIES = **90229023DEGRADATION STUDIES - POSSIBLE FORCED DEGRADATION PROCESSES AND TESTING9024**9025902690279028902990309031903290339034903590369037903890399040904190429043904490459046904790489049905090519052905390549055905690579058905923 of 239060Initials:9061Buyer ______9062Seller ______9063</TEXT>9064</DOCUMENT>9065<DOCUMENT>9066<TYPE>EX-10.159067<SEQUENCE>39068<FILENAME>vasc050575_ex10-15.txt9069<TEXT>90709071EXHIBIT 10.1590729073SILICON VALLEY BANK90749075AMENDMENT TO LOAN AGREEMENT907690779078BORROWER: VASCULAR SOLUTIONS, INC.90799080DATE: DECEMBER 9, 2004908190829083THIS AMENDMENT TO LOAN AGREEMENT ("Amendment") is entered into between9084Silicon Valley Bank ("Silicon") and the borrower named above ("Borrower"), with9085reference to the following facts:90869087A. Silicon and Borrower are parties to that certain Loan and Security9088Agreement, with an Effective Date of December 31, 2003 (as amended, the "Loan9089Agreement"). (The Loan Agreement and all other present and future documents,9090instruments and agreements relating thereto are referred to herein collectively9091as the "Loan Documents". Capitalized terms used in this Agreement which are not9092defined herein shall have the meanings set forth in the Loan Agreement.)90939094B. The parties desire to amend the Loan Agreement as set forth in this9095Amendment.90969097The parties agree as follows:909890991. REVOLVING MATURITY DATE. The definition of "Revolving Maturity9100Date," which is contained in Section 13.1 of the Loan Agreement, is hereby9101amended from "December 31, 2004" to "December 29, 2005".910291032. COMMITTED REVOLVING LINE. The amount "$3,000,000" contained in the9104definition of "Committed Revolving Line," which is contained in Section 13.1 of9105the Loan Agreement, is hereby amended from said "$3,000,000" to "$5,000,000.910691073. INTEREST RATE. The first full sentence of Section 2.3(a) of the Loan9108Agreement - Interest Rate - reads as follows:91099110Revolving Advances accrue interest on the outstanding9111principal balance at a PER ANNUM rate equal to the greater of9112(i) 4.50% or (ii) one-half of one percentage point (0.50%)9113above the Prime Rate.91149115Said sentence is hereby amended to read as follows:91169117Revolving Advances accrue interest on the outstanding9118principal balance at a PER ANNUM rate equal to one-half of one9119percentage point (0.50%) above the Prime Rate.9120<PAGE>912191224. FACILITY FEE. The amount "$15,000" contained in the first full9123sentence of Section 2.4(a) of the Loan Agreement is hereby amended to read9124"$25,000."912591265. UNUSED LINE FEE. The amount "$1,250" contained in the first full9127sentence of Section 2.4(c) of the Loan Agreement is hereby amended to read9128"$2,125."912991306. BORROWING BASE. Subpart "B" of the definition of "Borrowing Base"9131contained in Section 13.1 of the Loan Agreement reads as follows:91329133(B) up to 25% of Eligible Inventory, provided that Advances9134hereunder based on Eligible Inventory shall at no time exceed9135the lesser of (i) $1,000,000 or (ii) 33% of the amount from9136clause (A) above, as applicable from time to time.91379138Said subpart "B" is hereby amended to read as follows:91399140(B) up to 25% of Eligible Inventory, provided that Advances9141hereunder based on Eligible Inventory shall at no time exceed9142the lesser of (i) $1,500,000 or (ii) 33% of the amount of9143Eligible Accounts, as applicable from time to time.914491457. TANGIBLE NET WORTH. Section 6.7 of the Loan Agreement reads as9146follows:91479148Borrower will maintain at all times:91499150(i) TANGIBLE NET WORTH. A Tangible Net Worth of at least9151$8,000,000.91529153(ii) LIQUIDITY COVERAGE. A ratio of (A) unrestricted9154domestic cash (and equivalents) plus the product of9155the aggregate amount of Eligible Accounts multiplied9156by the applicable advance rate for the making of9157Revolving Advances hereunder with respect to Eligible9158Accounts, divided by (B) the aggregate amount of9159Obligations outstanding hereunder, of not less than91601.25 to 1.00.91619162Said Section 6.7 is hereby amended to read as follows:91639164Borrower will maintain at all times:91659166(i) TANGIBLE NET WORTH. A Tangible Net Worth of more than9167$11,000,000.91689169(ii) LIQUIDITY COVERAGE. A ratio of (A) unrestricted9170domestic cash (and equivalents) plus the amount of9171Eligible Accounts, divided by (B) the aggregate9172amount of Obligations outstanding hereunder, of not9173less than 1.25 to 1.00.917491758. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon9176that all representations and warranties set forth in the Loan Agreement, as9177amended hereby, are true and correct.91789179-2-9180<PAGE>918191829. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior9183written amendments to the Loan Agreement signed by Silicon and Borrower, and the9184other Loan Documents set forth in full all of the representations and agreements9185of the parties with respect to the subject matter hereof and supersede all prior9186discussions, representations, agreements and understandings between the parties9187with respect to the subject hereof. Except as herein expressly amended, all of9188the terms and provisions of the Loan Agreement, and all other Loan Documents9189shall continue in full force and effect and the same are hereby ratified and9190confirmed. This Amendment is part of the Loan Agreement and its terms are9191incorporated herein.919291939194BORROWER: SILICON:91959196VASCULAR SOLUTIONS, INC. SILICON VALLEY BANK919791989199BY BY9200------------------------------------ ----------------------------------9201President or Vice President TITLE9202--------------------------------920392049205920692079208920992109211921292139214921592169217921892199220922192229223922492259226-3-9227922892299230</TEXT>9231</DOCUMENT>9232<DOCUMENT>9233<TYPE>EX-219234<SEQUENCE>49235<FILENAME>vasc050575_ex21.txt9236<TEXT>923792389239EXHIBIT 21924092419242SUBSIDIARIES92439244Vascular Solutions, GmbH (Germany)92459246</TEXT>9247</DOCUMENT>9248<DOCUMENT>9249<TYPE>EX-23.19250<SEQUENCE>59251<FILENAME>vasc050575_ex23-1.txt9252<TEXT>925392549255EXHIBIT 23.192569257925892599260CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM9261926292639264We consent to the incorporation by reference in the Registration9265Statement (Form S-8 File No. 333-54164) of Vascular Solutions, Inc. of our9266reports dated January 21, 2005 relating to the consolidated financial9267statements, the financial statement schedule, management's assessment of the9268effectiveness of internal control over financial reporting and the effectiveness9269of internal control over financial reporting, which appear in this annual report9270on Form 10-K for the year ended December 31, 2004.927192729273/s/ VIRCHOW, KRAUSE & COMPANY, LLP927492759276Minneapolis, Minnesota9277February 10, 2005927892799280</TEXT>9281</DOCUMENT>9282<DOCUMENT>9283<TYPE>EX-23.29284<SEQUENCE>69285<FILENAME>vasc050575_ex23-2.txt9286<TEXT>928792889289EXHIBIT 23.292909291929292939294Consent of Independent Registered Public Accounting Firm929592969297We consent to the incorporation by reference in the Registration Statement (Form9298S-8 No. 333-54164) of our report dated January 16, 2004, with respect to the9299consolidated financial statements of Vascular Solutions, Inc. included in the9300Annual Report (Form 10-K) for the year ended December 31, 2004.93019302Our audits also included the financial statement schedule of Vascular Solutions,9303Inc. listed in Item 15(a). This schedule is the responsibility of the Company's9304management. Our responsibility is to express an opinion based on our audits. In9305our opinion, the financial statement schedule referred to above, when considered9306in relation to the basic financial statements taken as a whole, presents fairly9307in all material respects the information set forth therein.930893099310/s/ Ernst & Young LLP93119312Minneapolis, Minnesota9313February 3, 200593149315</TEXT>9316</DOCUMENT>9317<DOCUMENT>9318<TYPE>EX-31.19319<SEQUENCE>79320<FILENAME>vasc050575_ex31-1.txt9321<TEXT>932293239324EXHIBIT 31.1932593269327CERTIFICATIONS9328I, Howard Root, certify that:932993301. I have reviewed this annual report on Form 10-K of Vascular Solutions,9331Inc.;933293332. Based on my knowledge, this report does not contain any untrue9334statement of a material fact or omit to state a material fact necessary9335to make the statements made, in light of the circumstances under which9336such statements were made, not misleading with respect to the period9337covered by this report;933893393. Based on my knowledge, the financial statements, and other financial9340information included in this report, fairly present in all material9341respects the financial condition, results of operations and cash flows9342of the registrant as of, and for, the periods presented in this report;934393444. The registrant's other certifying officers and I are responsible for9345establishing and maintaining disclosure controls and procedures (as9346defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal9347control over financial reporting (as defined in Exchange Act Rules934813a-15(f) and 15d-15(f)) for the registrant and have:93499350(a) designed such disclosure controls and procedures or caused9351such disclosure controls and procedures to be designed under9352our supervision, to ensure that material information relating9353to the registrant, including its consolidated subsidiaries, is9354made known to us by others within those entities, particularly9355during the period in which this report is being prepared;93569357(b) designed such internal control over financial reporting, or9358caused such internal control over financial reporting to be9359designed under our supervision, to provide reasonable9360assurance regarding the reliability of financial reporting and9361the preparation of financial statements for external purposes9362in accordance with generally accepted accounting principles;93639364(c) evaluated the effectiveness of the registrant's disclosure9365controls and procedures and presented in this report our9366conclusions about the effectiveness of the disclosure controls9367and procedures as of the end of the period covered by this9368report based on such evaluation; and93699370(d) disclosed in this report any change in the registrant's9371internal control over financial reporting that occurred during9372the registrant's most recent fiscal quarter (the registrant's9373fourth fiscal quarter in the case of an annual report) that9374has materially affected, or is reasonably likely to materially9375affect, the registrant's internal control over financial9376reporting; and937793785. The registrant's other certifying officers and I have disclosed, based9379on our most recent evaluation of internal control over financial9380reporting, to the registrant's auditors and the audit committee of the9381registrant's board of directors (or persons performing the equivalent9382functions):9383<PAGE>93849385(a) all significant deficiencies and material weaknesses in the9386design or operation of internal control over financial9387reporting which are reasonably likely to adversely affect the9388registrant's ability to record, process, summarize and report9389financial information; and93909391(b) any fraud, whether or not material, that involves management9392or other employees who have a significant role in the9393registrant's internal control over financial reporting.9394939593969397Date: February 4, 2005 By: /s/ Howard Root9398-----------------------------9399Howard Root9400CHIEF EXECUTIVE OFFICER940194029403940494059406</TEXT>9407</DOCUMENT>9408<DOCUMENT>9409<TYPE>EX-31.29410<SEQUENCE>89411<FILENAME>vasc050575_ex31-2.txt9412<TEXT>941394149415EXHIBIT 31.2941694179418CERTIFICATIONS9419I, James Hennen, certify that:942094211. I have reviewed this annual report on Form 10-K of Vascular Solutions,9422Inc.;942394242. Based on my knowledge, this report does not contain any untrue9425statement of a material fact or omit to state a material fact necessary9426to make the statements made, in light of the circumstances under which9427such statements were made, not misleading with respect to the period9428covered by this report;942994303. Based on my knowledge, the financial statements, and other financial9431information included in this report, fairly present in all material9432respects the financial condition, results of operations and cash flows9433of the registrant as of, and for, the periods presented in this report;943494354. The registrant's other certifying officers and I are responsible for9436establishing and maintaining disclosure controls and procedures (as9437defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal9438control over financial reporting (as defined in Exchange Act Rules943913a-15(f) and 15d-15(f)) for the registrant and have:94409441(a) designed such disclosure controls and procedures or caused9442such disclosure controls and procedures to be designed under9443our supervision, to ensure that material information relating9444to the registrant, including its consolidated subsidiaries, is9445made known to us by others within those entities, particularly9446during the period in which this report is being prepared;94479448(b) designed such internal control over financial reporting, or9449caused such internal control over financial reporting to be9450designed under our supervision, to provide reasonable9451assurance regarding the reliability of financial reporting and9452the preparation of financial statements for external purposes9453in accordance with generally accepted accounting principles;94549455(c) evaluated the effectiveness of the registrant's disclosure9456controls and procedures and presented in this report our9457conclusions about the effectiveness of the disclosure controls9458and procedures as of the end of the period covered by this9459report based on such evaluation; and94609461(d) disclosed in this report any change in the registrant's9462internal control over financial reporting that occurred during9463the registrant's most recent fiscal quarter (the registrant's9464fourth fiscal quarter in the case of an annual report) that9465has materially affected, or is reasonably likely to materially9466affect, the registrant's internal control over financial9467reporting; and946894695. The registrant's other certifying officers and I have disclosed, based9470on our most recent evaluation of internal control over financial9471reporting, to the registrant's auditors and the audit committee of the9472registrant's board of directors (or persons performing the equivalent9473functions):94749475<PAGE>94769477(a) all significant deficiencies and material weaknesses in the9478design or operation of internal control over financial9479reporting which are reasonably likely to adversely affect the9480registrant's ability to record, process, summarize and report9481financial information; and94829483(b) any fraud, whether or not material, that involves management9484or other employees who have a significant role in the9485registrant's internal control over financial reporting.9486948794889489Date: February 4, 2005 By: /s/ James Hennen9490--------------------------9491James Hennen9492CHIEF FINANCIAL OFFICER949394949495949694979498</TEXT>9499</DOCUMENT>9500<DOCUMENT>9501<TYPE>EX-32.19502<SEQUENCE>99503<FILENAME>vasc050575_ex32-1.txt9504<TEXT>950595069507EXHIBIT 32.195089509CERTIFICATION PURSUANT TO951018 U.S.C. SS.1350,9511AS ADOPTED PURSUANT TO9512SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002951395149515In connection with the Annual Report of Vascular Solutions, Inc. (the "Company")9516on Form 10-K for the period ended December 31, 2004, as filed with the9517Securities and Exchange Commission (the "Report"), I, Howard Root, Chief9518Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as9519adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the9520best of my knowledge:952195221. The Report fully complies with the requirements of Section952313(a) or 15(d) of the Securities Exchange Act of 1934; and952495252. The information contained in the Report fairly presents, in9526all material respects, the financial condition and results of9527operations of the Company.952895299530/s/ Howard Root9531--------------------------------9532Howard Root9533Chief Executive Officer9534February 4, 20059535953695379538</TEXT>9539</DOCUMENT>9540<DOCUMENT>9541<TYPE>EX-32.29542<SEQUENCE>109543<FILENAME>vasc050575_ex32-2.txt9544<TEXT>954595469547EXHIBIT 32.295489549CERTIFICATION PURSUANT TO955018 U.S.C. SS.1350,9551AS ADOPTED PURSUANT TO9552SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002955395549555In connection with the Annual Report of Vascular Solutions, Inc. (the "Company")9556on Form 10-K for the period ended December 31, 2004, as filed with the9557Securities and Exchange Commission (the "Report"), I, James Hennen, Chief9558Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as9559adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the9560best of my knowledge:956195621. The Report fully complies with the requirements of Section956313(a) or 15(d) of the Securities Exchange Act of 1934; and956495652. The information contained in the Report fairly presents, in9566all material respects, the financial condition and results of9567operations of the Company.956895699570/s/ James Hennen9571--------------------------------9572James Hennen9573Chief Financial Officer9574February 4, 20059575957695779578</TEXT>9579</DOCUMENT>9580</SEC-DOCUMENT>9581-----END PRIVACY-ENHANCED MESSAGE-----958295839584