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,7EBocvC/kV0mXrFUK6110cTDv8s5FMQmqjvca4vbxw7cB7Picg6+0fGLog4nAjDzz8EzT3X08dJSDKrfNMEanp8Q==910<SEC-DOCUMENT>0000897101-04-000410.txt : 2004030211<SEC-HEADER>0000897101-04-000410.hdr.sgml : 2004030212<ACCEPTANCE-DATETIME>2004030211524913ACCESSION NUMBER: 0000897101-04-00041014CONFORMED SUBMISSION TYPE: 10-K15PUBLIC DOCUMENT COUNT: 916CONFORMED PERIOD OF REPORT: 2003123117FILED AS OF DATE: 200403021819FILER:2021COMPANY DATA:22COMPANY CONFORMED NAME: VASCULAR SOLUTIONS INC23CENTRAL INDEX KEY: 000103020624STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]25IRS NUMBER: 41185967926STATE OF INCORPORATION: DE27FISCAL YEAR END: 12312829FILING VALUES:30FORM TYPE: 10-K31SEC ACT: 1934 Act32SEC FILE NUMBER: 000-2760533FILM NUMBER: 046415903435BUSINESS ADDRESS:36STREET 1: 6464 SYCAMORE COURT NORTH37CITY: MINNEAPOLIS38STATE: MN39ZIP: 5536940BUSINESS PHONE: 76365643004142MAIL ADDRESS:43STREET 1: 6464 SYCAMORE COURT NORTH44CITY: MINNEAPOLIS45STATE: MN46ZIP: 5536947</SEC-HEADER>48<DOCUMENT>49<TYPE>10-K50<SEQUENCE>151<FILENAME>vasc041035_10k.htm52<TEXT>5354<HTML>55<HEAD>56<TITLE>VASCULAR SOLUTIONS, INC. FORM 10-K FOR YEAR ENDED DECEMBER 31, 2003 Dated: February 27, 2004</TITLE></HEAD>57<BODY>5859<HR SIZE=3 COLOR=GRAY NOSHADE>6061<BR>6263<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->64<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>UNITED STATES65<BR>SECURITIES AND EXCHANGE COMMISSION </FONT> <BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WASHINGTON, D.C. 20549 </FONT></P>6667<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->68<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 10-K </FONT></H1>6970<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->71<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(MARK ONE)</B> </FONT> </P>7273<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->74<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>75<TR VALIGN=TOP>76<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>[X]</B> </FONT> </TD>77<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>78<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ANNUAL79REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF801934</B> </FONT> </TD>81</TR>82</TABLE>83<BR>8485<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->86<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the fiscal year87ended December 31, 2003 </FONT></H1>8889<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->90<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OR </FONT></H1>9192<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->93<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>94<TR VALIGN=TOP>95<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>[ ]</B> </FONT> </TD>96<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>97<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>TRANSITION98REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF991934</B></FONT></TD></TR>100</TABLE>101<BR>102103<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->104<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>For the transition105period from __________________ to ________________</B> </FONT> </P>106107<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->108<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commission File Number:1090-27605 </FONT></P>110111<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->112<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>VASCULAR SOLUTIONS, INC.</B></FONT>113<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Exact name of registrant as specified in its charter) </FONT> </P>114115<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>116<TR VALIGN=Bottom>117<TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>118<TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>119<TR VALIGN=Bottom>120<TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Minnesota</B> </FONT></TD>121<TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>41-1859679</B> </FONT></TD></TR>122<TR VALIGN=Bottom>123<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(State of Incorporation)</FONT></TD>124<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(IRS Employer Identification No.)</FONT></TD></TR>125</TABLE>126127<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->128<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6464 Sycamore Court129</B><BR><B>Minneapolis, Minnesota 55369 </B><BR>(Address of Principal Executive Offices) </FONT> </P>130131<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->132<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(763) 656-4300133</B><BR>(Registrant’s telephone number, including are code) </FONT> </P>134135<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->136<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities registered137pursuant to Section 12(b) of the Act: <B>None </B><BR>Securities138registered pursuant to Section 12(g) of the Act:139<BR><B>Common Stock, par value $.01 per share</B><BR>___________________________ </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 whether the143registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the144Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter145period that the registrant was required to file such reports), and (2) has been subject146to such filing requirements for the past 90 days. Yes [X] No [ ] </FONT></P>147148<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->149<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if disclosure150of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and151will not be contained, to the best of registrant’s knowledge, in definitive proxy or152information statements incorporated by reference in Part III of this Form 10-K or any153amendment to this Form 10-K. [X] </FONT></P>154155156<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->157<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The aggregate market value of voting158and non-voting common equity held by non-affiliates computed by reference to the price at159which the common equity was last sold on June 30, 2003 was $21,638,700. </FONT></P>160161<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->162<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the163registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ]164No [X] </FONT></P>165166<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->167<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of February 13, 2004, the number168of shares outstanding of the registrant’s common stock was 12,998,770. </FONT></P>169170<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->171<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DOCUMENTS INCORPORATED172BY REFERENCE</B> </FONT> </P>173174<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->175<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Portions of the Registrant’s Proxy176Statement for its 2004 Annual Meeting of Shareholders to be held on April 22, 2004 are177incorporated by reference in Part III of this Annual Report on Form 10-K. </FONT></P>178179<BR>180181182<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->183<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></P>184185<HR SIZE=3 COLOR=GRAY NOSHADE>186187<!-- *************************************************************************** -->188<!-- MARKER PAGE="sheet: 0; page: 0" -->189190191<BR>192193<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->194<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART I</B> </FONT> </P>195196<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->197<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 1. BUSINESS</B> </FONT> </P>198199<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->200<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Overview</B> </FONT> </P>201202<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->203<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We204are a medical device company focused on bringing clinically advanced solutions to205interventional cardiologists and interventional radiologists worldwide. Our current206product line consists of the following medical devices: </FONT></P>207208<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->209<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>210<TR VALIGN=TOP>211<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>212<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>213• Duett™sealing device, used to seal the puncture site following214catheterization procedures, <BR>• D-Stat® Flowable hemostat, a thick, yet215flowable, mixture used to control bleeding, <BR>• D-Stat Dry™ hemostatic216bandage, a topical pad with a bandage used to control surface bleeding, <BR>• 217D-Stat Radial™ hemostat band, a topical pad with a compression strap to218control bleeding at the wrist, <BR>• Vari-Lase® endovenous laser system, a219laser and procedure kit used for the treatment of varicose veins, <BR>• 220Pronto™ extraction catheter, a mechanical system for the removal of soft221thrombus from arteries, and <BR>• Acolysis® ultrasound (international only),222a treatment for peripheral occlusive arterial disease. </FONT></TD>223</TR>224</TABLE>225<BR>226227<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->228<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a vertically-integrated medical229device company, we generate ideas and create new interventional medical devices, and then230deliver these products directly to the physician through our direct domestic sales force231and our international distribution network. </FONT></P>232233<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->234<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The235first product we brought to market, the Duett sealing device, is designed to provide a236complete seal of the puncture site following catheterization procedures such as237angiography, angioplasty and stenting. Our Duett sealing device combines an easy-to-use238balloon catheter delivery mechanism with a biological procoagulant mixture, which we239believe offers advantages over both manual compression and competitive vascular sealing240devices. We began selling our Duett sealing device in Europe in February 1998 and in the241United States in June 2000. Over 200,000 Duett sealing devices have been sold and242deployed worldwide. In the fourth quarter of 2001 we introduced the Diagnostic Duett243version of the Duett sealing device, which utilizes a lower dose of progcoagulant for the244less-challenging diagnostic subset of catheterization procedures. In mid-2002 we245introduced the next generation “Pro” line of the Duett sealing device for246improved ease-of-use. In 2003 we made the decision to reduce our focus on growing the247Duett product line in order to focus on increasing sales of our new products. </FONT></P>248249<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->250<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The251second product we developed and commercialized is the D-Stat Flowable hemostat, which we252began selling worldwide in February 2002. The D-Stat Flowable hemostat utilizes the253clinically proven procoagulant components of the Duett sealing device to provide a254powerful stop to active bleeding. The thick, yet flowable procoagulant controls active255bleeding by initiating the body’s own clotting mechanisms in the same manner as the256procoagulant included in our Duett sealing device. The D-Stat Flowable hemostat can be257clinically used in a number of medical procedures, and has substantial extension258market opportunities in other medical practice areas. </FONT></P>259260<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->261<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During262the second quarter of 2002 we acquired the Acolysis ultrasound thrombolysis system. The263Acolysis system uses ultrasound energy generated by the Acolysis controller that is264delivered intravascularly by the disposable Acolysis probe to lyse blood clots and265plaque. The Acolysis controller and probes are sold only in international markets, where266it has been sold principally for the treatment of peripheral vascular disease. Upon267completion of our acquisition and integration of the Acolysis business, we commenced268active international sales of the Acolysis probes through our existing international269distribution network in late 2002. In late 2003 we received CE mark approval to270internally manufacture Acolysis probes, which will allow broader international market271activities starting in 2004. </FONT></P>272273<BR>274275276<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->277<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></P>278279<HR SIZE=3 COLOR=GRAY NOSHADE>280281<!-- *************************************************************************** -->282<!-- MARKER PAGE="sheet: 0; page: 0" -->283284285<BR>286287<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->288<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In289the second half of 2003 we received regulatory clearance in the United States290for four new interventional medical devices: the D-Stat Dry, the D-Stat Radial,291the Vari-Lase and the Pronto. Our D-Stat Dry hemostatic bandage consists of our292proprietary hemostat which is lyohphilized (freeze-dried) into a gauze pad and293applied with an included adhesive bandage. The D-Stat Dry hemostatic bandage is294used to assist in the control of bleeding from vascular access sites in295conjunction with manual compression. Our D-Stat Radial hemostat band is a296version of our D-Stat Dry which includes a compression band for application297around the patient’s wrist. The D-Stat Radial hemostat band is designed to298be used following catheterizations using the radial artery in the wrist. Our299Vari-Lase endovenous laser products consist of a solid state diode laser console300and procedure kit and accessories which are used in the minimally-invasive301treatment of varicose veins. Our Pronto extraction catheter is a catheter and302syringe system for the mechanical removal of blood clots from arteries.303</FONT></P>304305<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->306<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We307also have in development several additional products that leverage our existing308infrastructure to bring additional solutions to the interventional cardiologist and309interventional radiologist. Additional products that we expect to gain regulatory310clearance and market launch before the end of 2004 include several new versions of our311D-Stat Dry hemostatic bandage and a new device for the measurement of stenosis of the312aortic valve of the heart. </FONT></P>313314<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->315<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Interventional Cardiology and316Interventional Radiology Industry Background</B> </FONT> </P>317318<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->319<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Over32060 million Americans have one or more types of cardiovascular disease—diseases of321the heart and blood vessels. Cardiovascular disease is the number one cause of death in322the United States and is replacing infectious disease as the world’s pre-eminent323health risk. Advances in medicine have enabled physicians to perform an increasing number324of diagnostic and therapeutic treatments of cardiovascular disease using minimally325invasive methods, such as catheters placed inside the arteries, instead of highly326invasive open surgery. Cardiologists and radiologists use diagnostic procedures, such as327angiography, to confirm, and interventional procedures, such as angioplasty and stenting,328to treat, diseases of the coronary and peripheral arteries. Based on industry statistics,329we estimate that cardiologists and radiologists performed over 9 million diagnostic and330interventional catheterization procedures worldwide in 2003. Oftentimes, these procedures331are performed to remove blood clots or plaque which have been generated and deposited332inside the patient’s artery and are an impediment to normal blood flow. The number333of catheterization procedures performed is expected to grow by more than 5% each year for334the next three years as the incidence of cardiovascular disease continues to increase.335The overall interventional medical device market in 2003 exceeded $5 billion worldwide. </FONT></P>336337<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->338<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Each339procedure using a catheter requires a puncture in an artery, usually the femoral artery340in the groin area and sometimes the radial artery in the wrist of the patient to gain341access for the catheter. The catheter then is deployed through an introducer sheath and342into the vessel to be diagnosed or treated. Upon completion of the procedure and removal343of the catheter, the physician must seal this puncture in the artery and the tissue tract344that leads from the skin surface to the artery to stop bleeding. The traditional method345for sealing the puncture site has been a manual process whereby a healthcare professional346applies direct pressure to the puncture site, sometimes using a sand bag or a large347C-clamp, for 20 minutes to an hour in order to form a blood clot. The healthcare348professional then monitors the patient, who must remain immobile in order to prevent349dislodging of the clot, for an additional four to 48 hours. </FONT></P>350351<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->352<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Patients353subjected to manual compression generally experience significant pain and discomfort354during compression of the puncture site and during the period in which they are required355to be immobile. Many patients report that this pain is the most uncomfortable aspect of356the catheterization procedure. In addition, patients can develop a substantial coagulated357mass of blood, or hemotoma, around the puncture site, limiting patient mobility for up to358six weeks following the procedure. Finally, the need for healthcare personnel to provide359compression and the use of hospital beds during the recovery period results in360substantial costs to the institution which, under virtually all current healthcare361payment systems, are not separately reimbursed. </FONT></P>362363<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->364<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Until3651996, manual compression was used following virtually all catheterization procedures. In366late 1995, the first vascular sealing device which did not rely on compression was367introduced in the United States. </FONT></P>368369<BR>370371372<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->373<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></P>374375<HR SIZE=3 COLOR=GRAY NOSHADE>376377<!-- *************************************************************************** -->378<!-- MARKER PAGE="sheet: 0; page: 0" -->379380381<BR>382383<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->384<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to the Duett sealing385device, four invasive sealing devices have received FDA approval and are currently being386marketed around the world. In aggregate, over $320 million of the five FDA-approved387invasive sealing devices were sold worldwide in 2003 compared to less than $20 million in3881996. In addition to invasive (below the skin surface) sealing devices, starting in 2000,389non-invasive “patches” have begun to be used as an assistance to manual390compression following catheterizations. Non-invasive patches are used by physicians who391(principally due to cost, complexity or risk of complications) do not wish to use392invasive sealing devices, and for those patients who are contra-indicated for an invasive393sealing device. Based on the number of catheterization procedures performed annually by394cardiologists and radiologists, industry sources report that the total market opportunity395for vascular sealing devices (invasive and non-invasive) is more than $1 billion.396Accordingly, the market opportunity for vascular sealing devices is currently397approximately 20% penetrated. </FONT></P>398399<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->400<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Duett Sealing Device</B> </FONT> </P>401402<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->403<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We404believe our Duett sealing device (1) offers a complete seal of the puncture site with405nothing left behind in the artery, (2) is an easy-to-use system and (3) minimizes patient406discomfort and permits early ambulation. Our product uses a balloon catheter, a device407already familiar to cardiologists and radiologists, which is inserted through the408introducer sheath that is already in the patient. The inflated balloon serves as a409temporary mechanical seal, preventing the flow of blood from the artery. Our biological410procoagulant, which is a proprietary mixture of collagen, thrombin and diluent, is then411delivered to the puncture site, stimulating rapid clotting and creating a complete seal412of both the arterial puncture and the tissue tract from the artery to the skin surface.413The blood-clotting speed and strength of thrombin enables the use of the Duett sealing414device even in the presence of powerful anti-clotting medications, such as ReoPro®,415increasingly used in interventional catheterization procedures. With our Duett sealing416device, nothing is left behind in the artery, so immediate reaccess of the site, if417necessary, is possible, and the potential for infection is minimized. </FONT></P>418419<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->420<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We421commenced sales of a new version of our Duett sealing device, the Diagnostic Duett422sealing device, for a subset of catheterization patients in the fourth quarter of 2001.423The Diagnostic Duett is tailored specifically for treating diagnostic patients. Because424the Duett sealing device is a one-size-fits-all device, the procoagulant is dosed425appropriately for the most challenging catheterization patients. We developed the426Diagnostic Duett with a lower dose of procoagulant that is tailored specifically for the427less-challenging diagnostic patients where substantial blood-thinning drugs are less428frequently used. All other components of the Diagnostic Duett, including the balloon429catheter, are identical to the original Duett sealing device. This results in the430Diagnostic Duett having identical deployment steps, but being less expensive and yet431fully effective for the over 2.5 million diagnostic procedures that occur each year in432the United States. In July 2002 we launched the next generation “Pro” line of433the Duett sealing device. The Pro line enhances the Duett catheter by improving its434robustness and simplifying the device deployment steps. </FONT></P>435436<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->437<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>D-Stat Flowable Hemostat</B> </FONT> </P>438439<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->440<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our441second product, the D-Stat Flowable hemostat, is a blood clotting material that can be442delivered topically and into voids and open spaces to control active bleeding. The443D-Stat Flowable offers the advantage of being thick to maintain its position, yet easily444deliverable. The D-Stat Flowable consists of the same collagen, thrombin and diluent445components as the Duett sealing device, which has been proven effective in controlling446bleeding from aggressive arterial puncture sites. After a simple reconstitution step, the447D-Stat Flowable can be applied directly to a wide variety of bleeding surfaces448included applicator tips. Since the D-Stat Flowable is applied locally, no449special catheter delivery system is required. The D-Stat Flowable is shelf stable and can450be prepared up to three hours before use. </FONT></P>451452<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->453<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The454D-Stat Flowable hemostat can be used in a wide variety of interventional procedures as an455adjunct to hemostasis. An example of these uses includes sealing the access site after the456removal of catheters from A-V access grafts. We believe that the D-Stat Flowable457hemostat is the only hemostat available in the United States that combines </FONT></P>458459<BR>460461462<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->463<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></P>464465<HR SIZE=3 COLOR=GRAY NOSHADE>466467<!-- *************************************************************************** -->468<!-- MARKER PAGE="sheet: 0; page: 0" -->469470471<BR>472473<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->474<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the thick consistency and extremely475flowable delivery that is preferred by the interventional physician in these476opportunities. </FONT></P>477478<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->479<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We480commenced sales of the D-Stat Flowable worldwide in the first quarter of 2002. Currently,481the approved clinical indications for the D-Stat Flowable are limited to topical bleeding482and blood “oozing” following percutaneous procedures. We believe these483indications are but a small fraction of the total potential market for the D-Stat484Flowable. We currently are undertaking a clinical study of the use of the D-Stat Flowable485in the hemostasis of prepectoral pockets created in pacemaker and defribrillator486implantations. We expect that enrollment in this “Pocket Protector” clinical487study will be completed and submitted for FDA approval by the middle of 2004. We estimate488that the U.S. market opportunity for this prepectoral pocket indication is greater than489100,000 procedures (or $10 million) annually. Following completion of the Pocket490Protector clinical study, we expect to perform clinical studies on the use of D-Stat491Flowable to seal following breast biopsy and liver biopsy procedures, each of which we492believe can match or exceed the prepectoral pocket market opportunity for D-Stat493Flowable. </FONT></P>494495<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->496<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Acolysis Ultrasound Thrombolysis497System</B> </FONT> </P>498499<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->500<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our501third product, the Acolysis ultrasound thrombolysis system, uses high energy, low502frequency ultrasound to lyse thrombus into subcapillary particles without damaging vessel503walls. The therapeutic principle of the Acolysis system is to generate ultrasound504thrombolysis by the selective disruption of the fibrin matrix of the thrombus. Cavitation505produces subcapillary-sized particles, resulting in a debulking of the arterial lesion.506The first application of the Acolysis product is to treat chronic occlusions in507peripheral arteries. Peripheral vascular disease currently affects over 8 million people508worldwide, with limited effective treatment options. We believe the Acolysis product509represents a new approach in both therapy and technology, and initial clinical experience510and one-year follow-up with the product has been favorable. </FONT></P>511512<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->513<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our international514sales efforts on the Acolysis product began in 2002 on a limited basis. In the fourth515quarter of 2003 we received CE mark approval for our internal manufacturing of the516Acolysis probe, which will allow us to broaden our international marketing activities in5172004. We are in the process of planning and structuring a clinical study in the U.S. to518study the effectiveness of the use of the Acolysis system to open chronic peripheral519occlusions, with the study not expected to be completed before 2006. </FONT></P>520521<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->522<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>D-Stat Dry and D-Stat Radial523Hemostat Products</B> </FONT> </P>524525<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->526<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In527September 2003 we received regulatory clearance and commenced sales of our D-Stat Dry528hemostatic bandage in the United States and international markets. The D-Stat Dry529hemostatic bandage is a version of our proprietary blood clotting substance that is530lyophilized (freeze-dried) into a gauze pad, combined with an adhesive bandage for531application. The D-Stat Dry is used as an assistance for manual compression to manage532bleeding after catheterization procedures. We believe that the market for a hemostatic533pad in this indication has grown substantially since the first competitive patch was534introduced in 2000, with a market size greater than $30 million in 2003. Like the D-Stat535Flowable, we believe that the D-Stat Dry has many potential uses beyond this initial536application, and we are currently exploring several opportunities and variations of the537D-Stat Dry for use in trauma, dialysis and other medial areas. We are exploring corporate538relationships for most of these opportunities for the D-Stat Dry. </FONT></P>539540<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->541<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The542D-Stat Radial hemostat band is a specially-sized version of the D-Stat Dry that includes543a compression band that allows it to be applied over the radial artery in the wrist. In544approximately 5% of all catheterizations, the radial artery in the wrist instead of the545femoral artery in the groin is used to gain arterial access. In these cases using the546radial artery, the health care professional must control bleeding from the artery after547the procedure. A variety of compression splints and tapes have been used for this548purpose. The D-Stat Radial is the first device that contains an active blood clotting549agent together with the compression collar for this purpose. We received regulatory550clearance for the D-Stat Radial hemostat band in September 2003, and made manufacturing551improvements to the product before launching it in the United States in early 2004. </FONT></P>552553<BR>554555556<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->557<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></P>558559<HR SIZE=3 COLOR=GRAY NOSHADE>560561<!-- *************************************************************************** -->562<!-- MARKER PAGE="sheet: 0; page: 0" -->563564565<BR>566567<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->568<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Vari-Lase Endovenous Laser Products</B> </FONT> </P>569570<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->571<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our572Vari-Lase endovenous laser products consist of a laser console, procedure kits and573accessories used in the treatment of reflux of the great saphenous vein, commonly574referred to as varicose veins. More than one million people in the U.S. seek treatment575each year for varicose veins. Left untreated, varicose veins can result in serious576clinical consequences, including limited mobility and venous ulcers. Historically, an577invasive surgical procedure known as vein stripping was the only treatment for severe578varicose veins. While vein stripping is still performed on over 100,000 patients each579year in the United States, a new non-surgical procedure using endovenous laser energy to580treat and close the diseased vein has emerged since 2002 as a preferred alternative.581Recent clinical data on endovenous laser therapy has demonstrated excellent clinical582results and outstanding patient satisfaction. </FONT></P>583584<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->585<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The586first product we launched in our Vari-Lase product line was our Vari-Lase procedure kit587in July 2003 in the United States. Our procedure kit is custom-designed for the588endovenous procedure, with features supporting ease-of-use and safety, and is compatible589with the competitive laser consoles already in use for this procedure. In December 2003590we received FDA clearance for our laser console, which we have manufactured to our591specifications by MedArt Corporation, a subsidiary of Asah Medico, a leading592Denmark-based medical laser manufacturer. To complete our Vari-Lase product line, we sell593micro-introducers and guidewires which are used as accessory items in the endovenous594laser procedure as well as other interventional medical procedures. </FONT></P>595596<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->597<A NAME=A010></A>598<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Pronto Extraction Catheter</B> </FONT> </P>599600<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->601<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our602Pronto product consists of an extraction catheter with a proprietary distal tip and a603large extraction lumen that can be delivered into arteries to mechanically remove blood604clots. The Pronto extraction catheter was initially developed by Dr. Pedro Silva of Milan, Italy,605who exclusively licensed the design to us in 2002. We received CE mark approval and606commenced international sales of the Pronto in August 2003, and received FDA clearance in607December 2003 and commenced sales in the United States in early 2004. </FONT></P>608609<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->610<A NAME=A011></A>611<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Business Strategy</B> </FONT> </P>612613<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->614<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our615primary objective is to establish ourselves as a leading supplier of clinically superior616medical devices for substantial opportunities within interventional medicine. Starting617with our Duett sealing device in the vascular sealing device market, the key steps in618achieving our primary objective are the following: </FONT></P>619620<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->621<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>622<TR VALIGN=TOP>623<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>624<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>625<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>626<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Maintain627and Improve our Clinically-Oriented Direct Sales Force in the United States. </I>During628the third quarter of 2000 we commenced sales of our Duett sealing device in the United629States through a direct sales force that includes clinical specialists who train630interventional cardiologists, radiologists and catheterization laboratory administrators631on the use of our products. We believe that effective training is a key factor in632promoting use of interventional medical devices, and we have created and will continue to633work to improve an in-the-field training program for the use of our products. </FONT></TD>634</TR>635</TABLE>636<BR>637638<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->639<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>640<TR VALIGN=TOP>641<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>642<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>643<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>644<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Introduce645our New Products to Our Existing Market. </I>In the second half of 2003 we received646clearance for a total of four new products to be sold in the United States through our647existing direct sales force to our existing markets. We believe that each of these648products has the potential to generate a material level of sales during 2004 and expand649in 2005 and beyond. </FONT></TD>650</TR>651</TABLE>652653<BR>654655656<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->657<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></P>658659<HR SIZE=3 COLOR=GRAY NOSHADE>660661<!-- *************************************************************************** -->662<!-- MARKER PAGE="sheet: 0; page: 0" -->663664665<BR>666667<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->668<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>669<TR VALIGN=TOP>670<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>671<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>672<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>673<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Develop674Future Devices through our Direct Sales Force to our Existing Customers. </I>We intend to675continue to leverage our direct sales force by bringing additional products to the676interventional physician. Our research and development team is working on additional677configurations of the D-Stat Dry hemostatic bandage and a new device for the precise678measurement of aortic stenosis which we believe we can bring to the United States market679before the end of 2004. </FONT></TD>680</TR>681</TABLE>682<BR>683684<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->685<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>686<TR VALIGN=TOP>687<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>688<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>689<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>690<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Explore691Corporate Relationships to Augment our Direct Sales Force.</I> For markets for our692products beyond the interventional physician and in other situations where synergistic693sales can result, we intend to enter into corporate relationships to broaden our products’ reach694and increase our revenues. </FONT></TD>695</TR>696</TABLE>697<BR>698699<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->700<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Sales, Marketing and Distribution</B> </FONT> </P>701702<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->703<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In704the third quarter of 2000 we commenced sales of our Duett sealing device in the United705States through our direct sales organization. As of December 31, 2003, our direct sales706force consisted of approximately 40 employees. We believe that the majority of707interventional catheterization procedures in the United States are performed in high708volume catheterization laboratories, and that these institutions can be served by our709focused direct sales force. We also believe that our sales force are able to sell each of710our new products to the same customer base. </FONT></P>711712<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->713<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As714part of our sales force, we have hired clinical specialists to train physicians and other715healthcare personnel on the use of our products. We believe that effective training is a716key factor in encouraging physicians to use interventional medical devices. We have717created, and will continue to work to improve an in-the-field training program for the718use of all of our products. We also develop and maintain close working relationships with719our customers to continue to receive input concerning our product development plans. </FONT></P>720721<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->722<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We723are focused on building market awareness and acceptance of our products. Our marketing724organization provides a wide range of programs, materials and events that support our725sales force. These include product training, conference and trade show appearances and726sales literature and promotional materials. Members of our medical advisory board also727aid in marketing our products by publishing articles and making presentations at728physicians’ meetings and conferences. </FONT></P>729730<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->731<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our732international sales and marketing strategy has been to sell to interventional733cardiologists and radiologists through established independent distributors in major734international markets, subject to required regulatory approvals. In Germany, we735established a direct sales organization by creating Vascular Solutions GmbH and began736selling directly to customers in the German market in the fourth quarter of 2000. Our737products are currently marketed through independent distributors in most of the other738major developed markets. We intend to add independent distributors in other countries as739our sales and marketing efforts are expanded. Under multi-year written distribution740agreements with each of our independent distributors, we ship our products to these741distributors upon receipt of purchase orders. Each of our independent distributors has742the exclusive right to sell our products within a defined territory. These distributors743also market other medical products, although they have agreed not to sell other vascular744sealing devices. Our independent distributors purchase our products from us at a discount745from list price and resell the device to hospitals and clinics. Sales to international746distributors are denominated in United States dollars. The end-user price is determined747by the distributor and varies from country to country. </FONT></P>748749<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->750<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Substantially751all of our revenues from inception until our FDA approval on June 22, 2000 were derived752from sales to international distributors, primarily in Europe, none of which is753affiliated with us. Sales in international markets constituted 13%, 11%, 10%, 33% and 93%754of our net sales for the years ended December 31, 2003, 2002, 2001, 2000 and 1999. </FONT></P>755756<BR>757758759<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->760<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></P>761762<HR SIZE=3 COLOR=GRAY NOSHADE>763764<!-- *************************************************************************** -->765<!-- MARKER PAGE="sheet: 0; page: 0" -->766767768<BR>769770<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->771<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>New Product Development</B> </FONT> </P>772773<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->774<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our775research and development staff is currently focused on developing new products to sell to776our existing customer base through our direct sales force and on developing next777generation versions of our existing products. We incurred expenses of $3,670,935 in 2003,778$3,227,538 in 2002 and $4,123,883 in 2001 for research and development activities. To779further reduce our costs, our research and development group continues to develop780in-house capabilities to manufacture some of the components currently produced by outside781vendors. </FONT></P>782783<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->784<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We785are in the process of developing several new products and product line extensions of our786current products. We currently are developing several new versions of our D-Stat Dry787hemostatic bandage for use in interventional medicine and in other medical areas such as788trauma and dialysis. We also have an active program for the development of a new device789for the precise measurement of aortic stenosis. </FONT></P>790791<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->792<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We793are also working on next generation versions of the Duett sealing device. We have794developed and performed pre-clinical testing of the Mechanical Duett, a concept that795utilizes an immediate and complete mechanical seal of the arterial puncture to obtain796hemostasis. Additional development of this new concept is necessary before it proceeds797into clinical studies. </FONT></P>798799<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->800<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We801expect our research and development activities to continue to expand to include802evaluation of new concepts and products for the interventional cardiology and803interventional radiology field. We believe that there are many potential new804interventional products that would fit within the development, clinical, manufacturing805and distribution network we have created for our existing products. </FONT></P>806807<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->808<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Manufacturing</B> </FONT> </P>809810<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->811<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We812manufacture our products in our facility in a suburb of Minneapolis, Minnesota. The813catheter manufacturing and packaging processes occur under a controlled clean room814environment. Our manufacturing facility and processes were certified in July 1998 as815compliant with the European Community’s EN 46001 standards and were audited in816September 1999 and June 2000 for compliance with the FDA’s quality systems817regulations with no deficiencies noted. Upon expiration of our prior lease, in March 2003818we moved to a new facility, also located in a suburb of Minneapolis, Minnesota. FDA819approved our new facility in May 2003. </FONT></P>820821<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->822<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We823purchase components from various suppliers and rely on single sources for several parts of824the Duett sealing device and D-Stat flowable hemostat. In September 1998, we entered into825a ten year, sole-source, supply agreement with our collagen supplier, Davol Inc., that826provides for a fixed price based on volume purchases which is adjusted annually for827increases in the Department of Labor’s employer’s cost index. In June 1999, we828entered into a five year, sole-source, supply agreement with our thrombin supplier,829GenTrac, Inc., a subsidiary of King Pharmaceuticals, Inc., that provides for a fixed price830with a price adjustment formula based on increased costs and wholesale price increases.831Our agreement with GenTrac, Inc. expires in May 2005. To date, we have not experienced any832significant adverse effects resulting from shortages of components. </FONT></P>833834<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->835<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The836manufacture and sale of our products entail significant risk of product liability claims.837Although we have product liability insurance coverage in an amount which we consider838reasonable, it may not be adequate to cover potential claims. Any product liability claims839asserted against us could result in costly litigation, reduced sales and significant840liabilities and divert the attention of our technical and management personnel away from841the development and marketing of our products for significant periods of time. </FONT></P>842843<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->844<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Competition</B> </FONT> </P>845846<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->847<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Competition848in the interventional medical device industry is intense and dominated by very large and849experienced companies such as Medtronic, Inc., Abbott Laboratories and Boston Scientific.850We compete on</FONT></P>851852<BR>853854855<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->856<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</FONT></P>857858<HR SIZE=3 COLOR=GRAY NOSHADE>859860<!-- *************************************************************************** -->861<!-- MARKER PAGE="sheet: 0; page: 0" -->862863864<BR>865866<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->867<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the basis of our clinically868differentiated products and focused opportunities within this interventional medical869device market. </FONT></P>870871<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->872<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our873Duett sealing device principally competes with three vascular sealing devices and manual874compression. The three principal competitive vascular sealing devices are: </FONT></P>875876<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->877<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>878<TR VALIGN=TOP>879<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>880<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>881<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>882<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The883VasoSeal<SUP>®</SUP> device, manufactured and marketed by Datascope Corp., seals the884tissue tract by placing a dry collagen plug in the tissue tract adjacent to the puncture885in the artery. </FONT></TD>886</TR>887</TABLE>888<BR>889890<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->891<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>892<TR VALIGN=TOP>893<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>894<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>895<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>896<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The897Angio-Seal<SUP>®</SUP> device, sold by the Daig division of St. Jude Medical, Inc.898and developed by Kensey Nash Corporation, seals the puncture site through the use of a899collagen plug on the outside of the artery connected by a suture to a biodegradable900anchor which is inserted into the artery. </FONT></TD>901</TR>902</TABLE>903<BR>904905<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->906<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>907<TR VALIGN=TOP>908<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>909<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>910<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>911<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The912Closer™ device, sold by Perclose, Inc., a subsidiary of Abbott Laboratories, seals913the puncture site through the use of a mechanical device that enables a physician to914perform a minimally invasive replication of open surgery. </FONT></TD>915</TR>916</TABLE>917<BR>918919<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->920<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There921are many companies that are selling or have developed hemostats which compete generally922with our D-Stat Flowable hemostat. Virtually all of these devices, however, are923positioned as hemostats for the surgical market and are not designed specifically for use924in interventional procedures. </FONT></P>925926<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->927<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Topical928patches and pads, which have recently been introduced to the market, are designed to929treat bleeding at arterial puncture sites. Our D-Stat Dry hemostatic bandage competes in930this market segment. These patches are applied directly over the puncture site and held931in place with adjunctive manual compression for a period of 10-20 minutes. These patches932include: </FONT></P>933934<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->935<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>936<TR VALIGN=TOP>937<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>938<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>939• The Syvek(TM)Patch, manufactured and marketed by Marine Polymer Technologies, Inc.940<BR>• The Closur-P.A.D.(TM), manufactured by Scion Cardiovascular and distributed by941Medtronic, Inc. <BR>• The Chito-Seal(TM), distributed by Abbott Vascular, Inc. a942division of Abbott Laboratories </FONT></TD>943</TR>944</TABLE>945<BR>946947948<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->949<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The950Acolysis therapeutic ultrasound system and the Pronto extraction catheter compete, and951are expected to compete, in the highly competitive market segment for removal of thrombus952and plaque from the arterial system. There are many companies that are selling or have953developed products in this segment, including Possis Medical, Medtronic, Boston954Scientific and ev3. </FONT></P>955956<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->957<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We958are aware of four companies that sell a product for the endovenous laser treatment of959varicose veins. These companies are AngioDynamics (a subsidiary of EZ-EM), biolitec,960Dornier MedTech and Diomed. Each of these company’s products contain the same basic961components for the therapy but differ in procedural training, custom-designed features962and support. </FONT></P>963964<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->965<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In966each of our product areas, we believe that several other companies are developing new967devices. The medical device industry is characterized by rapid and significant968technological change as well as the frequent emergence of new technologies. There are969likely to be research and development projects related to these market areas of which we970are currently unaware. A new technology or product may emerge that results in a reduced971need for our products or results in a product that renders our product noncompetitive. </FONT></P>972973<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->974<A NAME=A016></A>975<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Regulatory Requirements</B> </FONT> </P>976977<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->978<A NAME=A017></A>979<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>United States</I></B> </FONT> </P>980981<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->982<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our983products are regulated in the United States as medical devices by the FDA under the984Federal Food, Drug and CosmeticAct. The FDA classifies medical devices into one of three985classes based upon controls the FDA considers necessary to reasonably ensure their safety986and effectiveness. Class I devices are subject to</FONT> </P>987988<BR>989990991<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->992<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></P>993994<HR SIZE=3 COLOR=GRAY NOSHADE>995996<!-- *************************************************************************** -->997<!-- MARKER PAGE="sheet: 0; page: 0" -->9989991000<BR>10011002<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1003<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>general controls such as labeling,1004adherence to good manufacturing practices and maintenance of product complaint records,1005but are usually exempt from premarket notification requirements. Class II devices are1006subject to the same general controls and also are subject to special controls such as1007performance standards, and FDA guidelines, and may also require clinical testing prior to1008approval. Class III devices are subject to the highest level of controls because they are1009used in life-sustaining or life-supporting implantable devices. Class III devices require1010rigorous clinical testing prior to their approval, and generally require a premarket1011approval (PMA) application prior to their sale. </FONT></P>10121013<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1014<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> If1015a medical device manufacturer can establish that a device is “substantially1016equivalent” to a legally marketed Class I or Class II device, or to an unclassified1017device, or to a Class III device for which the FDA has not called for PMAs, the1018manufacturer may seek clearance from the FDA to market the device by filing a 510(k)1019premarket notification. The 510(k) notification must be supported by appropriate data1020establishing the claim of substantial equivalence to the satisfaction of the FDA.1021Following submission of the 510(k) notification, the manufacturer may not place the1022device into commercial distribution in the United States until an order is issued by the1023FDA. </FONT></P>10241025<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1026<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Manufacturers1027must file an investigated device exemption (or IDE) application if human clinical studies1028of a device are required and if the FDA considers experimental use of the device to1029represent significant risk to the patient. The IDE application must be supported by data,1030typically including the results of animal and mechanical testing of the device. If the1031IDE application is approved by the FDA, human clinical studies may begin at a specific1032number of investigational sites with a maximum number of patients, as approved by the1033FDA. The clinical studies must be conducted under the review of an independent1034institutional review board to ensure the protection of the patients’ rights.. </FONT></P>10351036<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1037<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Generally,1038upon completion of these human clinical studies, a manufacturer seeks approval of a Class1039III medical device from the FDA by submitting a PMA application. A PMA application must1040be supported by extensive data, including the results of the clinical studies, as well as1041literature to establish the safety and effectiveness of the device. </FONT></P>10421043<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1044<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our1045Duett sealing device is classified as a Class III device and is subject to the IDE1046requirements. In May 1997, the FDA determined that the review of the Duett sealing device1047would be delegated to the Center for Devices and Radiological Health area of the FDA,1048with a consulting review by the Center for Biologic Evaluation and Research. During 19981049and 1999, we received approval of our IDE application to start our feasibility clinical1050study, filed our IDE Supplement to begin our multi-center clinical study, completed the1051SEAL multi-center clinical study and filed our PMA application with the FDA. In September10521999 our manufacturing facility was audited by the FDA, with no deficiencies or1053non-compliances noted by the inspector. In December 1999, we received the FDA’s1054review letter of our PMA application, and we submitted an amendment to our PMA to the FDA1055in January 2000. On June 22, 2000, we received approval from the FDA of our PMA1056application to sell the Duett sealing device in the United States. </FONT></P>10571058<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1059<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our1060D-Stat Flowable, D-Stat Dry, D-Stat Radial, Pronto and Vari-Lase products also are1061regulated in the United States as medical devices by the FDA and required clearance of1062our 510(k) notification by the FDA prior to being sold in the United States. Each of1063these devices was the subject of a 510(k) notification which was determined to be “substantially1064equivalent” to a legally marketed predicate device by the FDA, thereby allowing1065commercial marketing in the United States. The D-Stat Flowable received clearance in1066February 2002, while the other four products received clearance during the second half of10672003. </FONT></P>10681069<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1070<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We1071also are subject to FDA regulations concerning manufacturing processes and reporting1072obligations. These regulations require that manufacturing steps be performed according to1073FDA standards and in accordance with documentation, control and testing standards. We1074also are subject to inspection by the FDA on an on-going basis. We are required to1075provide information to the FDA on adverse incidents as well as maintain a documentation1076and record keeping system in accordance with FDA guidelines. The advertising of our1077products also is subject to both FDA and Federal Trade Commission jurisdiction. If the1078FDA believes that we are not in compliance with any aspect of the law, it can institute1079proceedings to detain or seize products, </FONT></P>10801081<BR>108210831084<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1085<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></P>10861087<HR SIZE=3 COLOR=GRAY NOSHADE>10881089<!-- *************************************************************************** -->1090<!-- MARKER PAGE="sheet: 0; page: 0" -->109110921093<BR>10941095<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1096<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>issue a recall, stop future1097violations and assess civil and criminal penalties against us, our officers and our1098employees. </FONT></P>10991100<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1101<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>International</I></B> </FONT> </P>11021103<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1104<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1105European Union has adopted rules which require that medical products receive the right to1106affix the CE mark, an international symbol of adherence to quality assurance standards1107and compliance with applicable European medical device directives. As part of the CE1108compliance, manufacturers are required to comply with the ISO series of quality systems1109standards. We received the CE mark approval for our Duett sealing device and1110certification of our quality system in July 1998, and we received the CE mark approval1111for our other products in the following months: </FONT></P>11121113<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->1114<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1115<TR VALIGN=TOP>1116<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1117<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1118• D-Stat Flowable hemostat – November 20011119<BR>• Pronto extraction catheter – June 20031120<BR>• D-Stat Dry and D-Stat Radial – September 20031121<BR>• Vari-Lase endovenous laser procedure kit – December 20031122<BR>• Acolysis probe internal manufacturing – November11232003 </FONT></TD>1124</TR>1125</TABLE>1126<BR>11271128<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1129<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> International1130sales of our products are subject to the regulatory requirements of each country in which1131we sell. These requirements vary from country to country but generally are much less1132stringent than those in the United States. We have obtained regulatory approvals where1133required for us to sell our products in the country. Through our Japanese distributor, we1134are pursuing the regulatory approval of our Duett sealing device and Pronto extraction1135catheter for commercial sale in Japan. </FONT></P>11361137<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1138<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Third Party Reimbursement</B> </FONT> </P>11391140<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1141<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In1142the United States, healthcare providers that purchase medical devices, generally rely on1143third-party payors, principally the Centers for Medicare and Medicaid Services, or CMS,1144(formerly the Health Care Financing Administration, or HCFA) and private health insurance1145plans, to reimburse all or part of the cost of therapeutic and diagnostic catheterization1146procedures. We believe that in the current United States reimbursement system, the cost1147of vascular sealing devices is incorporated into the overall cost of the catheter1148procedure. We have performed analyses to establish the cost benefit of the Duett sealing1149device, relying on shortened hospital stays and decreased use of healthcare1150professionals, to justify the increased cost of using our Duett sealing device in the1151United States. Our other products are subject to reimbursement rules depending on the1152specific medical procedure in which they are utilized. </FONT></P>11531154<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1155<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Market1156acceptance of our products in international markets is dependent in part upon the1157availability of reimbursement from healthcare payment systems. Reimbursement and1158healthcare payment systems in international markets vary significantly by country. The1159main types of healthcare payment systems in international markets are government1160sponsored healthcare and private insurance. Countries with government sponsored1161healthcare, such as the United Kingdom, have a centralized, nationalized healthcare1162system. New devices are brought into the system through negotiations between departments1163at individual hospitals at the time of budgeting. In most foreign countries, there are1164also private insurance systems that may offer payments for alternative therapies. </FONT></P>11651166<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1167<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Patents and Intellectual Property</B> </FONT> </P>11681169<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1170<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We1171file patent applications to protect technology, inventions and improvements that are1172significant to the development of our business, and use trade secrets and trademarks to1173protect other areas of our business. Prior to the formation of our company, Dr. Gary1174Gershony filed a number of patent applications in the United States and other countries1175directed to proprietary technology used in our Duett sealing device. Upon the1176commencement of our operations in February 1997, Dr. Gershony assigned all patents and1177patent applications relating to the Duett sealing device to us on a worldwide, perpetual,1178royalty-free basis. At the time of assignment, there existed one United States patent1179issued that is directed to a balloon catheter sealing device </FONT></P>11801181<BR>118211831184<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1185<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></P>11861187<HR SIZE=3 COLOR=GRAY NOSHADE>11881189<!-- *************************************************************************** -->1190<!-- MARKER PAGE="sheet: 0; page: 0" -->119111921193<BR>11941195<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1196<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>and method and which expires in May11972013, three United States patents pending and an international patent application pending1198which designated numerous foreign countries and regions. </FONT></P>11991200<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1201<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since1202commencing operations, we have continued the prosecution of the pending United States1203patent applications and filed new patent applications. A second United States patent was1204issued that is directed to a balloon catheter and procoagulant sealing device and method1205and which expires in October 2015. A third United States patent was issued that contains1206method claims concerning the use of a balloon catheter and flowable procoagulant and1207which expires in October 2015. A fourth United States patent was issued concerning our1208procoagulant mixture and which expires in October 2015. A fifth United States patent was1209issued concerning a balloon catheter sealing device and which expires in May 2013. A1210sixth United States patent was issued concerning a balloon catheter and procoagulant1211sealing device and which expires in October 2015. A seventh United States patent was1212issued concerning a balloon catheter sealing device and which expires in October 2015. We1213currently have four additional United States patents pending concerning new versions of1214our Duett sealing device, our Pronto catheter, our Vari-Lase procedure kit and our D-Stat1215Dry product. We also have pursued international patent applications, which designate the1216key developed nations with substantive patent protection systems. </FONT></P>12171218<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1219<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1220interventional medical device market in general, and the vascular sealing device and1221endovenous laser therapy fields in particular, are characterized by frequent and1222substantial intellectual property litigation. Each of the vascular sealing products1223currently on the U.S. market, including our Duett sealing device, has been subject to1224infringement litigation. (See “Legal Proceedings” in Item 3 of Part I of this1225Form 10-K) In addition, two of our competitors in the endovenous laser therapy market1226(AngioDynamics and Diomed) are currently involved in intellectual property litigation.1227The interpretation of patents involves complex and evolving legal and factual questions.1228Intellectual property litigation in recent years has proven to be complex and expensive,1229and the outcome of such litigation is difficult to predict. </FONT></P>12301231<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1232<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We1233may become the subject of additional intellectual property claims in the future related1234to our products. Our defense of any intellectual property claims filed in the future,1235regardless of the merits of the complaint, could divert the attention of our technical1236and management personnel away from the development and marketing of our products for1237significant periods of time. The costs incurred to defend future claims could be1238substantial and adversely affect us, even if we are ultimately successful. </FONT></P>12391240<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1241<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We1242also rely on trade secret protection for certain aspects of our technology. We typically1243require our employees, consultants and vendors for major components to execute1244confidentiality agreements upon their commencing services with us or before the1245disclosure of confidential information to them. These agreements generally provide that1246all confidential information developed or made known to the other party during the course1247of that party’s relationship with us is to be kept confidential and not disclosed to1248third parties, except in special circumstances. The agreements with our employees also1249provide that all inventions conceived or developed in the course of providing services to1250us shall be our exclusive property. </FONT></P>12511252<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1253<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We1254also register the trademarks and trade names through which we conduct our business. To1255date, we have registered the trademarks “D-Stat,” and “Vari-Lase,” and1256have applied for registration in the United States of the marks “Vascular Solutions1257Duett,” “Pronto,” and the Duett stylized logo. We acquired the registered1258trademark “Acolysis” in connection with our acquisition of the Acolysis1259therapeutic ultrasound business in 2002. </FONT></P>12601261<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1262<A NAME=A021></A>1263<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Employees</B> </FONT> </P>12641265<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1266<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As1267of December 31, 2003, we had 128 full time employees. Of these employees, 35 were in1268manufacturing activities, 62 were in sales and marketing activities, 8 were in research1269and development activities, 14 were in regulatory, quality assurance and clinical1270research activities and 9 were in general and administrative functions. We have never had1271a work stoppage and none of our employees are covered by collective bargaining1272agreements. We believe our employee relations are good. </FONT></P>12731274<BR>127512761277<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1278<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></P>12791280<HR SIZE=3 COLOR=GRAY NOSHADE>12811282<!-- *************************************************************************** -->1283<!-- MARKER PAGE="sheet: 0; page: 0" -->128412851286<BR>12871288<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1289<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Executive Officers of the Registrant</B> </FONT> </P>12901291<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1292<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1293executive officers of the Company as of February 13, 2004 are as follows: </FONT></P>12941295<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>1296<TR VALIGN=Bottom>1297<TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Name</U> </FONT></TH>1298<TH><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Age</U> </FONT></TH>1299<TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Position</U> </FONT></TH></TR>1300<TR VALIGN=Bottom>1301<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root</FONT></TD>1302<TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43 </FONT></TD>1303<TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer and Director</FONT></TD></TR>1304<TR VALIGN=Bottom>1305<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael Nagel</FONT></TD>1306<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41 </FONT></TD>1307<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Sales & Marketing and Secretary</FONT></TD></TR>1308<TR VALIGN=Bottom>1309<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deborah Neymark</FONT></TD>1310<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47 </FONT></TD>1311<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Regulatory Affairs</FONT></TD></TR>1312<TR VALIGN=Bottom>1313<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Quackenbush</FONT></TD>1314<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45 </FONT></TD>1315<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Manufacturing</FONT></TD></TR>1316<TR VALIGN=Bottom>1317<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen</FONT></TD>1318<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31 </FONT></TD>1319<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer</FONT></TD></TR>1320</TABLE>13211322<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1323<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Howard1324Root </I></B><I></I>has served as our Chief Executive Officer and a director since he1325co-founded Vascular Solutions in February 1997. From 1990 to 1995, Mr. Root was employed1326by ATS Medical, Inc., a mechanical heart valve company, most recently as Vice President1327and General Counsel. Prior to joining ATS Medical, Mr. Root practiced corporate law,1328specializing in representing emerging growth companies, at the law firm of Dorsey &Whitney1329for over five years. Mr. Root received his B.S. in Economics and J.D. degrees from the1330University of Minnesota. </FONT></P>13311332<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1333<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Michael1334Nagel</I></B> has served as our Vice President of Sales & Marketing since June13351997. Prior to joining us, Mr. Nagel was the Director of Sales & Marketing at1336Quantech, Ltd., a developer of point of care medical diagnostic testing products, where1337he worked since July 1996. From 1992 through July 1996, Mr. Nagel was the mid-west1338division sales manager of B. Braun Cardiovascular, a manufacturer of cardiovascular1339devices and catheters. From 1991 through 1992, Mr. Nagel was the Director of Worldwide1340Sales for the Medical Products Division of Angeion Corporation, a manufacturer of1341angioplasty accessories and pediatric catheters. Prior to 1991, Mr. Nagel performed a1342variety of sales and marketing functions with Abbott Labs Diagnostic Division for over1343five years. Mr. Nagel received his B.A. and M.B.A. degrees from the University of St.1344Thomas. </FONT></P>13451346<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1347<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <B><I>Deborah1348Neymark </I></B>has served as our Vice President of Regulatory Affairs, Clinical Affairs and1349Quality Systems since October 2000. Mrs. Neymark served as the Corporate Compliance1350Officer and Vice President of Regulatory Affairs, Clinical Research and Quality Systems1351for Empi, Inc. from October 1995 to October 2000. From May 1993 to October 1995, Mrs.1352Neymark was employed as a Regulatory Affairs Manager for Boston Scientific’s Scimed1353division. Prior to May 1993, Mrs. Neymark held regulatory affairs, clinical research and1354quality assurance positions at Medtronic and Lifecore Biomedical. She received her B.S.1355in Biology from Valparaiso University. </FONT> </P>13561357<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1358<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>James1359Quackenbush</I></B> has served as our Vice President of Manufacturing since March13601999. Prior to joining us, Mr. Quackenbush served as Vice President of Manufacturing and1361Operations with Optical Sensors, Inc., a diagnostic medical device company, where he1362worked since October 1992. From March 1989 through October 1992, Mr. Quackenbush served1363as operations manager with Schneider USA’s stent division. Prior to this time, he1364was an advanced project engineer with the 3M Medical Products Division. Mr. Quackenbush1365received a B.S. in Industrial Engineering from Iowa State University. </FONT></P>13661367<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1368<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>James1369Hennen </I></B> has served as our Chief Financial Officer since January 2004. Mr.1370Hennen served as our Controller & Director of Finance from February 2002 through1371December 2003. Prior to joining us, Mr. Hennen served in accounting positions, most1372recently as International Controller with WAM!NET, Inc., a globally networked information1373technology company for media transfer, where he worked since December 1997. From October13741995 through December 1997, Mr. Hennen was a Senior Auditor for Ernst and Young, LLP. Mr.1375Hennen received a B.S. in Business/Accounting from the University of Minnesota. Mr. Hennen1376is a Certified Public Accountant. </FONT></P>13771378<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1379<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There1380are no family relationships among any of our executive officers. </FONT></P>13811382<BR>138313841385<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1386<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></P>13871388<HR SIZE=3 COLOR=GRAY NOSHADE>13891390<!-- *************************************************************************** -->1391<!-- MARKER PAGE="sheet: 0; page: 0" -->139213931394<BR>13951396<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1397<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Available Information</B> </FONT> </P>13981399<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1400<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We make available free of charge on1401or through our internet website at <U>http://www.vascularsolutions.com</U> our annual1402report on Form 10-K, quarterly reports on Form 10Q, current reports on Form 8-K, and1403amendments to these reports filed or furnished pursuant to Section 13 (a) or 15 (d) of1404the Exchange Act as soon as reasonably practicable after we electronically file such1405material with, or furnish it to, the SEC. </FONT></P>14061407<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1408<A NAME=A024></A>1409<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 2. PROPERTIES </FONT></H1>14101411<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1412<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our1413offices are in approximately 33,000 square feet of leased space in a suburb of1414Minneapolis, Minnesota. These facilities include approximately 11,200 square feet used for1415manufacturing activities, approximately 1,400 square feet used for research and laboratory1416activities, with the remainder used for administrative offices. Our lease for these1417facilities expires in September 2008. We believe that facility will be adequate to meet1418our needs through at least the end of the lease period. </FONT></P>14191420<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1421<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 3. LEGAL PROCEEDINGS</B> </FONT> </P>14221423<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1424<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On1425July 23, 1999, we were named as the defendant in a patent infringement lawsuit brought by1426Datascope Corp. in the United States District Court for the District of Minnesota. The1427complaint requested a judgment that our Duett sealing device infringes and, following FDA1428approval will infringe, a United States patent held by Datascope and asks for relief in1429the form of an injunction that would prevent us from selling our product in the United1430States as well as an award of attorneys’ fees, costs and disbursements. On August143112, 1999, we filed our answer to this lawsuit and brought a counterclaim alleging unfair1432competition and tortious interference. On August 20, 1999, we moved for summary judgement1433to dismiss Datascope’s claims. On March 15, 2000, the court granted summary judgment1434dismissing all of Datascope’s claims, subject to the right of Datascope to1435recommence the litigation after our receipt of FDA approval of our Duett sealing device.1436On July 12, 2000, after our receipt of FDA approval, Datascope recommenced this1437litigation, alleging that the Duett sealing device infringes a United States patent held1438by Datascope and requesting relief in the form of an injunction that would prevent us1439from selling our product in the United States, damages caused by our alleged1440infringement, and other costs, disbursements and attorneys’ fees. On November 26,14412002, we entered into an agreement that settled all existing intellectual property1442litigation with Datascope Corporation. Under the terms of the Settlement Agreement,1443Datascope granted us a non-exclusive license to its Janzen patents as they apply to all1444current versions of the Duett sealing sevice, and to certain permitted future product1445improvements. Datascope also has released us from any claim of patent infringement based1446on past or future sales of the Duett sealing device. In exchange, we paid Datascope a1447single lump sum of $3,750,000 in the fourth quarter of 2002. </FONT></P>14481449<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1450<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On1451July 3, 2000, we were named as the defendant in a patent infringement lawsuit brought by1452the Daig division of St. Jude Medical in the United States District Court for the1453District of Minnesota. The complaint requested a judgment that our Duett sealing device1454infringes a series of four patents known as the Fowler patents held by St. Jude Medical1455and asks for relief in the form of an injunction that would prevent us from selling our1456Duett sealing device in the United States, damages caused by the manufacture and sale of1457our product, and other costs, disbursements and attorneys’ fees. On July 12, 2001,1458we entered into an agreement that settled all existing intellectual property litigation1459with St. Jude Medical. Under the terms of the settlement agreement, we agreed to pay a1460royalty of 2.5% of net sales of our Duett sealing device to St. Jude Medical, up to a1461maximum amount over the remaining life of the St. Jude Fowler patents. In exchange, St.1462Jude Medical granted to us a non-exclusive license to its Fowler patents and has released1463us from any claim of patent infringement based on sales of our Duett sealing device. We1464granted a non-exclusive cross-license to our Gershony patents to St. Jude Medical,1465subject to a similar royalty payment if St. Jude Medical utilizes our Gershony patents in1466any future device. Beginning on July 1, 2001, a royalty expense of 2.5% of net sales is1467included in our cost of goods sold until the maximum royalty is attained. </FONT></P>14681469<BR>147014711472<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1473<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></P>14741475<HR SIZE=3 COLOR=GRAY NOSHADE>14761477<!-- *************************************************************************** -->1478<!-- MARKER PAGE="sheet: 0; page: 0" -->147914801481<BR>14821483<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1484<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On1485December 11, 2003, we and a non-officer employee of Vascular Solutions were named as1486defendants in a lawsuit brought by Diomed, Inc. in the United States District Court for1487the District of Massachusetts. The complaint alleges that in marketing our Vari-Lase1488endovenous laser procedure kit we engaged in false advertising and infringed a registered1489trademark of Diomed. The complaint also alleges that our employee, who previously worked1490for a company that conducted business with Diomed, improperly utilized trade secrets of1491Diomed in developing our Vari-Lase procedure kit. The complaint requests monetary damages1492and an injunction on the sale of our Vari-Lase procedure kit. We believe that the1493allegations included in the complaint are wholly without merit, have filed our answer to1494the complaint, and intend to defend this litigation vigorously. We have tendered this1495claim to our insurance carrier. It is not possible to predict the timing or outcome of1496the Diomed litigation, including whether it will affect our ability to sell our Vari-Lase1497procedure kit, or to estimate the amount or range of potential loss, if any. </FONT></P>14981499<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1500<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> From1501time to time we are involved in legal proceedings arising in the normal course of our1502business. As of the date of this report we are not a party to any legal proceeding not1503described in this section in which an adverse outcome would reasonably be expected1504to have a material adverse effect on our results of operations or financial condition. </FONT></P>15051506<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1507<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 4. SUBMISSION OF MATTERS TO A1508VOTE OF SECURITY HOLDERS</B> </FONT> </P>15091510<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1511<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> No1512matters were submitted to a vote of security holders during the fourth quarter ended1513December 31, 2003. </FONT></P>15141515<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>151615171518<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1519<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></P>15201521<HR SIZE=3 COLOR=GRAY NOSHADE>15221523<!-- *************************************************************************** -->1524<!-- MARKER PAGE="sheet: 0; page: 0" -->152515261527<BR>15281529<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->1530<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II </FONT></H1>15311532<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1533<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 5. MARKET FOR REGISTRANT’S1534COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B> </FONT> </P>15351536<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1537<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On1538July 25, 2000, we sold 3,500,000 shares of our common stock, at an initial public1539offering price of $12.00 per share, pursuant to a Registration Statement on Form S-11540(Registration No. 333-84089), which was declared effective by the Securities and Exchange1541Commission on July 19, 2000. Our net proceeds from the offering were approximately $44.01542million. To date, we have spent approximately $22.7 million of the net proceeds to hire,1543train and deploy a direct sales force in the United States, $4.1 million to settle the1544St. Jude and Datascope litigation, $1.6 million to purchase the Acolysis System, $0.71545million for our stock repurchase program, $7.2 million for research and development of1546new products and $4.8 million for general corporate purposes. </FONT></P>15471548<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1549<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1550Company’s common stock began trading on the NASDAQ National Market under the symbol1551“VASC” on July 20, 2000. The following table sets forth, for the periods1552indicated, the range of high and low last sale prices for the common stock as reported by1553the NASDAQ National Market. </FONT></P>1554155515561557<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>1558<TR VALIGN=Bottom>1559<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1560<TH COLSPAN="3" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>High</U> </FONT></TH>1561<TH COLSPAN="3" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Low</U> </FONT></TH></TR>15621563<TR VALIGN=Bottom>1564<TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>1565<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1566<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>15671568<TR VALIGN=Bottom>1569<TD WIDTH=44% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> First Quarter</FONT></TD>1570<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1571<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1572<TD WIDTH=18% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 3.700</FONT></TD>1573<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1574<TD WIDTH=18% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 2.480</FONT></TD>1575<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1576<TR VALIGN=Bottom>1577<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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1578<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.700</FONT></TD>1579<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1580<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.680</FONT></TD>1581<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1582<TR VALIGN=Bottom>1583<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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1584<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.780</FONT></TD>1585<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1586<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.880</FONT></TD>1587<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1588<TR VALIGN=Bottom>1589<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Fourth Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1590<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>1.200</FONT></TD>1591<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1592<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>.650</FONT></TD>1593<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>15941595<TR VALIGN=Bottom>1596<TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1><BR>2003</FONT></TH>1597<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1598<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>15991600<TR VALIGN=Bottom>1601<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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1602<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.16</FONT></TD>1603<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1604<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.750</FONT></TD>1605<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1606<TR VALIGN=Bottom>1607<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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1608<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.28</FONT></TD>1609<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1610<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.750</FONT></TD>1611<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1612<TR VALIGN=Bottom>1613<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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1614<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.880</FONT></TD>1615<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1616<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.350</FONT></TD>1617<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1618<TR VALIGN=Bottom>1619<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR> Fourth Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1620<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>6.420</FONT></TD>1621<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1622<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>5.100</FONT></TD>1623<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>1624</TABLE>16251626<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1627<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Holders</B> </FONT> </P>16281629<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1630<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As1631of December 31, 2003, the Company had 161 shareholders of record. Such number of record1632holders does not reflect shareholders who beneficially own common stock in nominee or1633street name. </FONT></P>16341635<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1636<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Dividends</B> </FONT> </P>16371638<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1639<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1640Company has paid no cash dividends on its common stock, and it does not intend to pay1641cash dividends on its common stock in the future. </FONT></P>16421643<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1644<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 6. SELECTED FINANCIAL DATA</B> </FONT> </P>16451646<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1647<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1648following selected financial data as of December 31, 2003 and 2002 and for the three1649years ended December 31, 2003, 2002 and 2001 are derived from, and should be read1650together with, our financial statements included elsewhere in this Form 10-K. The1651following selected financial data as of December 31, 2001, 2000 and 1999 and for the1652fiscal years ended December 31, 2000 and 1999 are derived from financial statements not1653included herein. The information set forth below should be read in conjunction with “Management’s1654Discussion and Analysis of Financial Condition and Results of Operations,” the1655Financial Statements and Notes thereto and other financial information included elsewhere1656in this Form 10-K. </FONT></P>16571658<BR>165916601661<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->1662<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></P>16631664<HR SIZE=3 COLOR=GRAY NOSHADE>16651666<!-- *************************************************************************** -->1667<!-- MARKER PAGE="sheet: 0; page: 0" -->166816691670<BR>16711672<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>1673<TR VALIGN=Bottom>1674<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1675<TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31,</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1676</TR>16771678<TR VALIGN=Bottom>1679<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1680<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1681<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1682<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1683<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2000</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1684<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1999</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>16851686<TR VALIGN=Bottom>1687<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1688<TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(In thousands, except per share amounts)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1689</TR>16901691<TR VALIGN=Bottom>1692<TD WIDTH=39% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statements of Operations Data:</FONT></TD>1693<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1694<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1695<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>1696<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1697<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>1698<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1699<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>1700<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1701<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>1702<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1703<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>1704<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1705<TR VALIGN=Bottom>1706<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>1707<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,804</FONT></TD>1708<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1709<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,101</FONT></TD>1710<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1711<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,082</FONT></TD>1712<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1713<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,193</FONT></TD>1714<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1715<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,429</FONT></TD>1716<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1717<TR VALIGN=Bottom>1718<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>1719<TD ALIGN=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>1720<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1721<TD ALIGN=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>1722<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1723<TD ALIGN=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>1724<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1725<TD ALIGN=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>1726<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1727<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,065</FONT></TD>1728<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1729<TR>1730<TD COLSPAN=3></TD>1731<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1732<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1733<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1734<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1735<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>1736<TR VALIGN=Bottom>1737<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>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>7,234</FONT></TD>1739<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1740<TD ALIGN=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>1741<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>7,121</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>3,492</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>364</FONT></TD>1747<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1748<TR VALIGN=Bottom>1749<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>1750<TR VALIGN=Bottom>1751<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>1752<TD ALIGN=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>1753<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>3,227</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>4,124</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>3,117</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>3,068</FONT></TD>1761<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1762<TR VALIGN=Bottom>1763<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>1764<TD ALIGN=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>1765<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>1,348</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>1,288</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>1,082</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>1,324</FONT></TD>1773<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1774<TR VALIGN=Bottom>1775<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>1776<TD ALIGN=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>1777<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1778<TD ALIGN=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>1779<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1780<TD ALIGN=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>1781<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1782<TD ALIGN=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>1783<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1784<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,301</FONT></TD>1785<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1786<TR VALIGN=Bottom>1787<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>1788<TD ALIGN=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>1789<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1790<TD ALIGN=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>1791<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1792<TD ALIGN=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>1793<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1794<TD ALIGN=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>1795<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1796<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,904</FONT></TD>1797<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1798<TR VALIGN=Bottom>1799<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>1800<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1801<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1802<TD ALIGN=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>1803<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1804<TD ALIGN=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>1805<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1806<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1807<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1808<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1809<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1810<TR VALIGN=Bottom>1811<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>1812<TD ALIGN=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>1813<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1814<TD ALIGN=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>1815<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1816<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1817<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1818<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1819<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1820<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1821<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1822<TR>1823<TD COLSPAN=3></TD>1824<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1825<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1826<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1827<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1828<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>18291830<TR VALIGN=Bottom>1831<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>1832<TD ALIGN=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>1833<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1834<TD ALIGN=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>1835<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>21,032</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>13,154</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>8,597</FONT></TD>1841<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1842<TR>1843<TD COLSPAN=3></TD>1844<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1845<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1846<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1847<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1848<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>18491850<TR VALIGN=Bottom>1851<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></TR>1852<TR VALIGN=Bottom>1853<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>1854<TD ALIGN=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>1855<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1856<TD ALIGN=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>1857<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1858<TD ALIGN=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>1859<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1860<TD ALIGN=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>1861<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1862<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>371</FONT></TD>1863<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1864<TR>1865<TD COLSPAN=3></TD>1866<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1867<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1868<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1869<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>1870<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>18711872<TR VALIGN=Bottom>1873<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>1874<TD ALIGN=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>1875<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1876<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,979</FONT></TD>1877<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1878<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,250</FONT></TD>1879<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1880<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (8,209</FONT></TD>1881<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1882<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (7,862</FONT></TD>1883<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>1884<TR>1885<TD COLSPAN=3></TD>1886<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>1887<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>1888<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>1889<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>1890<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>18911892<TR VALIGN=Bottom>1893<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>1894<TR VALIGN=Bottom>1895<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>1896<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>1897<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1898<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>1899<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1900<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.93</FONT></TD>1901<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1902<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.95</FONT></TD>1903<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>1904<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.95</FONT></TD>1905<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>1906<TR VALIGN=Bottom>1907<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>1908<TR VALIGN=Bottom>1909<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>1910<TD ALIGN=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>1911<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1912<TD ALIGN=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>1913<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1914<TD ALIGN=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>1915<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1916<TD ALIGN=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>1917<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1918<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,033</FONT></TD>1919<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1920</TABLE>192119221923<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>19241925<TR VALIGN=Bottom>1926<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1927<TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=1><BR><BR>As of December 31,</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1928</TR>19291930<TR VALIGN=Bottom>1931<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1932<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1933<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1934<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1935<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2000</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1936<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1999</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>19371938<TR VALIGN=Bottom>1939<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>1940<TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(In thousands)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>1941</TR>19421943<TR VALIGN=Bottom>1944<TD WIDTH=48% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance Sheet Data:</FONT></TD>1945<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1946<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1947<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1948<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1949<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1950<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1951<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1952<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1953<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1954<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1955<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>1956<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1957<TR VALIGN=Bottom>1958<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Cash, cash equivalents and available-</FONT></TD><TD ALIGN=LEFT><FONT 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>1959<TR VALIGN=Bottom>1960<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 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>1961<TD ALIGN=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>1962<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1963<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,750</FONT></TD>1964<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1965<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,318</FONT></TD>1966<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1967<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 44,098</FONT></TD>1968<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1969<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,529</FONT></TD>1970<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1971<TR VALIGN=Bottom>1972<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>1973<TD ALIGN=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>1974<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1975<TD ALIGN=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>1976<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1977<TD ALIGN=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>1978<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1979<TD ALIGN=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>1980<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1981<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,487</FONT></TD>1982<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1983<TR VALIGN=Bottom>1984<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>1985<TD ALIGN=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>1986<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1987<TD ALIGN=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>1988<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1989<TD ALIGN=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>1990<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1991<TD ALIGN=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>1992<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1993<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,295</FONT></TD>1994<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1995<TR VALIGN=Bottom>1996<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>1997<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>1998<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1999<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2000<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2001<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2002<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2003<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2004<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2005<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2006<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2007<TR VALIGN=Bottom>2008<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>2009<TD ALIGN=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>2010<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2011<TD ALIGN=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>2012<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2013<TD ALIGN=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>2014<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2015<TD ALIGN=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>2016<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2017<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,172</FONT></TD>2018<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2019</TABLE>20202021<BR>202220232024<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2025<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17</FONT></P>20262027<HR SIZE=3 COLOR=GRAY NOSHADE>20282029<!-- *************************************************************************** -->2030<!-- MARKER PAGE="sheet: 0; page: 0" -->203120322033<BR>20342035<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2036<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 7. MANAGEMENT’S DISCUSSION2037AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B> </FONT> </P>20382039<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2040<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The2041following discussion of the financial condition and results of operations of the Company2042should be read in conjunction with the Company’s Consolidated Financial Statements2043and Notes thereto, and the other financial information included elsewhere in this Form204410-K Report. This Management’s Discussion and Analysis of Financial Condition and2045Results of Operations contains descriptions of the Company’s expectations regarding2046future trends affecting its business. These forward-looking statements and other2047forward-looking statements made elsewhere in this document are made in reliance upon safe2048harbor provisions of the Private Securities Litigation Reform Act of 1995. The following2049discussion sets forth certain factors the Company believes could cause actual results to2050differ materially from those contemplated by the forward looking statements. </FONT></P>20512052<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2053<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Overview</B> </FONT> </P>20542055<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2056<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2057are a medical device company focused on bringing solutions to interventional2058cardiologists and interventional radiologists. As a vertically-integrated medical device2059company, we generate ideas and create new interventional medical devices, and then2060deliver those products directly to the physician through our direct domestic sales force2061and international distribution network. We continue to develop new products and2062applications for our existing products. </FONT></P>20632064<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2065<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During20662003, we received regulatory clearance for sales of four new interventional products: </FONT></P>20672068<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2069<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2070<TR VALIGN=TOP>2071<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2072<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2073<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2074<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Vari-Lase2075endovenous laser procedure kit. </I>We launched this product in the third quarter of20762003. The Vari-Lase product is a treatment for superficial venous reflux, otherwise known2077as varicose veins. </FONT></TD>2078</TR>2079</TABLE>2080<BR>20812082<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2083<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2084<TR VALIGN=TOP>2085<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2086<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2087<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2088<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Pronto2089Extraction Catheter. </I>We launched this product in international markets at the end of2090the third quarter of 2003, and received regulatory clearance for United States sales in2091December 2003. The Pronto extraction catheter consists of a catheter with a proprietary2092atraumatic distal tip and large extraction lumen for the removal of soft thrombus from2093arteries. </FONT></TD>2094</TR>2095</TABLE>2096<BR>20972098<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2099<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2100<TR VALIGN=TOP>2101<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2102<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2103<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2104<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>D-Stat2105Dry Hemostatic Bandage. </I>We launched this product on September 22, 2003. The D-Stat2106Dry hemostatic bandage consists of a freeze-dried pad of our D-Stat procoagulant which2107can be applied to topical bleeding with a custom adhesive bandage. </FONT></TD>2108</TR>2109</TABLE>2110<BR>21112112<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2113<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2114<TR VALIGN=TOP>2115<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2116<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2117<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2118<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>D-Stat2119Radial Hemostatic Band. </I>We received regulatory clearance for this product in2120September 2003 and launched this product in the first quarter of 2004. The D-Stat Radial2121hemostat band is a customized compression device with the power of the D-Stat2122procoagulant for sealing the arterial puncture following catheterization procedures. </FONT></TD>2123</TR>2124</TABLE>2125<BR>21262127<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2128<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2129believe these four new products, together with sales of our existing Duett, D-Stat2130Flowable and Acolysis products, will result in substantial revenue growth in 2004. We2131also believe that these new products will increase our gross margin percent to between213267% and 69% during 2004. </FONT></P>21332134<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2135<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Results of Operations</B> </FONT> </P>21362137<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2138<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Year ended December 31, 20032139compared to year ended December 31, 2002</I></B> </FONT> </P>21402141<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2142<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net2143sales decreased modestly to $11,804,328 for the year ended December 31, 2003 from2144$12,100,526 for the year ended December 31, 2002. Approximately 87% of our net sales for2145the year ended December 31, 2003 were to customers in the United States and 13% of the2146net sales were to customers in international markets. Net sales by product category were2147as follows: </FONT></P>21482149<BR>215021512152<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2153<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18</FONT></P>21542155<HR SIZE=3 COLOR=GRAY NOSHADE>21562157<!-- *************************************************************************** -->2158<!-- MARKER PAGE="sheet: 0; page: 0" -->215921602161<BR>21622163<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2164<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2165<TR VALIGN=TOP>2166<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2167<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2168<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2169<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net2170sales of the D-Stat Dry were $1,085,000 for the year ended December 31, 2003, compared to2171no sales in 2002. Our D-Stat Dry product was launched at the end of the third quarter of21722003. Through December 31, 2003, we have sold our D-Stat Dry to 187 of the estimated21733,000 cardiac and interventional radiology labs in the U.S. We expect to increase our2174D-Stat Dry net sales to between $8,000,000 and $10,000,000 in 2004. </FONT></TD>2175</TR>2176</TABLE>2177<BR>21782179<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2180<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2181<TR VALIGN=TOP>2182<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2183<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2184<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2185<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net2186sales of the Pronto were $97,000 for the year ended December 31, 2003, all from2187international sales, compared to no sales in 2002. Our Pronto product was launched at the2188end of the third quarter of 2003 in international markets, and we received FDA approval2189in December 2003 but did not commence sales in the United States until 2004. We expect to2190increase Pronto net sales to between $2,000,000 and $3,000,000 in 2004. </FONT></TD>2191</TR>2192</TABLE>2193<BR>21942195<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2196<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2197<TR VALIGN=TOP>2198<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2199<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2200<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2201<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net2202sales of Vari-Lase kits and accessories were $255,000 for the year ended December 31,22032003, compared to no sales in 2002. Our Vari-Lase procedure kit was launched during the2204third quarter of 2003. In January 2004 we launched our Vari-Lase laser console, and as a2205result we now offer a full line of endovenous laser products to our customers for the2206treatment of varicose veins. We expect to increase our Vari-Lase console, kits and2207accessory net sales to over $4,000,000 in 2004. </FONT></TD>2208</TR>2209</TABLE>2210<BR>22112212<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2213<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2214<TR VALIGN=TOP>2215<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2216<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2217<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2218<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net2219sales of D-Stat Flowable increased to $1,187,000 for the year ended December 31, 20032220from $764,000 for the year ended 2002, a 55% increase. Our reorder rate for the D-Stat2221Flowable in 2003 compared to 2002 has remained steady at 58%. We expect to modestly2222increase our D-Stat Flowable net sales to $1,500,000 in 2004. </FONT></TD>2223</TR>2224</TABLE>2225<BR>22262227<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2228<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2229<TR VALIGN=TOP>2230<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2231<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2232<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2233<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net2234sales of Acolysis products were $185,000 for the year ended December 31, 2003 compared to2235$102,000 for the year ended December 31, 2002. We received the CE mark approval for our2236own manufacturing activities for the Acolysis probe during the fourth quarter of 2003,2237which will allow us to begin to expand our sales and marketing activities internationally2238in 2004. We expect to modestly increase Acolysis net sales to $300,000 in 2004. </FONT></TD>2239</TR>2240</TABLE>2241<BR>22422243<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2244<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2245<TR VALIGN=TOP>2246<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2247<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2248<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2249<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net2250sales of our Duett sealing device were $8,995,000 for the year ended December 31, 20032251compared to $11,235,000 for the year ended December 31, 2002. Our Duett sales in 20032252were negatively affected by the intense competitive environment in the United States2253invasive sealing device market and our new focus on new products. The 20% decrease, year2254over year, in Duett net sales also was in line with our 19% decrease in sales and2255marketing expenses from the year-prior period. We expect Duett sales to continue to2256decline at a rate of between 20% to 30%, year over year, in 2004 as we continue to focus2257on our new higher margin and more competitive products. </FONT></TD>2258</TR>2259</TABLE>2260<BR>22612262<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2263<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Gross2264profit as a percentage of net sales increased to 61% for the year ended December 31, 20032265from 59% for the year ended December 31, 2002. We added higher margin products to our2266selling mix during 2003, particularly our D-Stat Dry which has gross margins greater than226780%. We expect gross margins to increase in 2004 to 67% to 69% as our selling mix changes2268to favor the higher margin products and we continue to make slight gains in manufacturing2269efficiencies. </FONT></P>22702271<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2272<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research2273and development expenses increased 14% to $3,670,935 for the year ended December 31, 20032274from $3,227,538 for the year ended December 31, 2002. The increase was directly related2275to our increased activity in launching four new products in 2003 and our continued work2276on our long term research and development projects. Research and development expenses2277fluctuate due to outside project spending. We expect our research and development2278expenses to remain relatively steady during 2004 as we continue to pursue additional new2279products at an expected rate of approximately two new products per year and we continue2280to move our longer term development projects forward. </FONT></P>22812282<BR>228322842285<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2286<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19</FONT></P>22872288<HR SIZE=3 COLOR=GRAY NOSHADE>22892290<!-- *************************************************************************** -->2291<!-- MARKER PAGE="sheet: 0; page: 0" -->229222932294<BR>22952296<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2297<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical2298and regulatory expenses increased 14% to $1,535,989 for the year ended December 31, 20032299from $1,347,694 for the year ended December 31, 2002. The expected increase was the2300result of the approval of our four new products in the second half of 2003 as well as our2301“Pocket Protector” clinical study for a new indication of our D-Stat Flowable2302product. Clinical and regulatory expenses fluctuate due to the timing of clinical and2303marketing studies. We expect clinical and regulatory expenses to increase by2304approximately 25% in 2004 as we complete our “Pocket Protector” study, conduct2305clinical/marketing studies related to our existing products and advance new products2306through the regulatory system. </FONT></P>23072308<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2309<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales2310and marketing expenses decreased 19% to $9,645,920 for the year ended December 31, 20032311from $11,963,907 for the year ended December 31, 2002. During 2002 and 2003 we reviewed2312our sales and marketing expenditures and focused our spending in the areas that drive2313sales and provide an adequate financial return. As of December 31, 2003, our direct sales2314force consisted of approximately 40 employees compared to approximately 50 as of December231531, 2002. We expect to add approximately 10 field sales employees during 2004 to advance2316our new products. As a result, we expect our sales and marketing expenses to increase by2317approximately 10% in 2004 compared to 2003. </FONT></P>23182319<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2320<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> General2321and administrative expenses decreased 10% to $1,942,483 for the year ended December 31,23222003 from $2,166,883 for the year ended December 31, 2002. The decrease was primarily the2323result of lower legal fees in 2003 compared to 2002, as we incurred legal fees in 20022324relating to the Datascope litigation which was settled in the fourth quarter of 2002. The2325reduction in legal fees was partially offset by an increase in the cost of business2326insurance. We currently anticipate that general and administrative expenses will remain2327relatively constant in 2004. </FONT></P>23282329<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2330<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Legal2331settlement expenses were $3,750,000 for the year ended December 31, 2002. We entered into2332an agreement that settled all existing intellectual property litigation with Datascope2333Corporation in the fourth quarter of 2002 (see “Legal Proceedings” in Item 3 of2334Part I of this Form 10-K). As part of the settlement, Datascope released us from any claim2335of patent infringement based on past or future sales of the Duett sealing device. In2336exchange, we paid Datascope a single lump sum of $3,750,000 in the fourth quarter of 2002. </FONT></P>23372338<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2339<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization2340of purchased technology was $217,500 for the year ended December 31, 2003 and $145,000 for2341the year ended December 31, 2002. The increase is the result of a full year of2342amortization in 2003 compared to 2002. The amortization resulted from our acquisition of2343the Acolysis assets from the secured creditors of Angiosonics, Inc. We allocated $870,0002344from the acquisition to purchased technology and are amortizing the amount over four2345years. </FONT></P>23462347<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2348<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest2349income decreased to $150,342 for the year ended December 31, 2003 from $507,169 for the2350year ended December 31, 2002 primarily as a result of a reduced cash balance and lower2351interest rates. </FONT></P>23522353<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2354<A NAME=A036></A>2355<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Results of Operations</B> </FONT> </P>23562357<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2358<A NAME=A037></A>2359<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Year ended December 31, 20022360compared to year ended December 31, 2001</I></B> </FONT> </P>23612362<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2363<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net2364sales increased modestly to $12,100,526 for the year ended December 31, 2002 from2365$12,082,379 for the year ended December 31, 2001. Approximately 89% of our net sales for2366the year ended December 31, 2002 were to customers in the United States and 11% of the net2367sales were to customers in international markets. Net sales in 2002 were negatively2368affected by the intense competitive environment for our Duett sealing device in the United2369States market. Net sales during 2002 benefited from the early sales of our D-Stat Flowable2370hemostat, which we launched in February 2002. </FONT></P>23712372<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2373<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Gross2374profit as a percentage of net sales was unchanged at 59% for the year ended December 31,23752002 and 2001. We added the Diagnostic Duett, D-Stat and Acolysis products to our selling2376mix during 2002, which all have gross margins greater than 60%. The introduction of the2377higher margin products in 2002 was offset by a growth in the lower margin international2378sales. </FONT></P>23792380<BR>238123822383<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2384<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20</FONT></P>23852386<HR SIZE=3 COLOR=GRAY NOSHADE>23872388<!-- *************************************************************************** -->2389<!-- MARKER PAGE="sheet: 0; page: 0" -->239023912392<BR>23932394<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2395<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research2396and development expenses decreased 22% to $3,227,538 for the year ended December 31, 20022397from $4,123,883 for the year ended December 31, 2001. The decrease was attributable to2398more focused development work on the product line extensions and new products during 2002.2399Research and development expenses can fluctuate due to outside project spending. </FONT></P>24002401<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2402<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical2403and regulatory expenses increased 5% to $1,347,694 for the year ended December 31, 20022404from $1,288,301 for the year ended December 31, 2001. Clinical and regulatory expenses2405fluctuate due to the timing of clinical and marketing studies. </FONT></P>24062407<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2408<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales2409and marketing expenses decreased 6% to $11,963,907 for the year ended December 31, 20022410from $12,771,901 for the year ended December 31, 2001. We reviewed our sales and marketing2411expenditures and focused our spending in the areas that drove sales and provided an2412adequate financial return. As of December 31, 2002, our direct sales force consisted of2413approximately 50 employees compared to approximately 65 as of December 31, 2001. </FONT></P>24142415<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2416<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> General2417and administrative expenses decreased 13% to $2,166,883 for the year ended December 31,24182002 from $2,498,435 for the year ended December 31, 2001. The decrease was the result of2419lower headcount in 2002 compared to 2001. </FONT></P>24202421<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2422<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Legal2423settlement expenses were $3,750,000 for the year ended December 31, 2002 and $350,000 for2424the year ended December 31, 2001. We entered into an agreement that settled all existing2425intellectual property litigation with Datascope Corporation in 2002 (see “Legal2426Proceedings” in Item 3 of Part I of this Form 10-K). As part of the settlement,2427Datascope released us from any claim of patent infringement based on past or future sales2428of the Duett sealing device. In exchange, we paid Datascope a single lump sum of2429$3,750,000 in the fourth quarter of 2002. We entered into an agreement that settled all2430existing intellectual property litigation with St. Jude Medical in 2001 (see “Legal2431Proceedings” in Item 3 of Part I of this Form 10-K). As a result of the settlement,2432we agreed to pay St. Jude Medical a royalty of 2.5% of our Duett sales up to a maximum2433amount over the remaining life of the St. Jude Medical patents. We paid $350,000 to St.2434Jude Medical in 2001 representing the past royalty on net sales of our Duett device since24351998 under the settlement agreement. </FONT></P>24362437<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2438<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization2439of purchased technology was $145,000 for the year ended December 31, 2002 and $0 for the2440year ended December 31, 2001. The amortization was the result of our acquisition of the2441Acolysis assets from the secured creditors of Angiosonics, Inc. We allocated $870,000 from2442the acquisition to purchased technology and are amortizing the amount over four years. </FONT></P>24432444<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2445<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest2446income decreased to $507,169 for the year ended December 31, 2002 from $1,660,757 for the2447year ended December 31, 2001 primarily as a result of a reduced cash balance and lower2448interest rates. </FONT></P>24492450<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2451<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Income Taxes</B> </FONT> </P>24522453<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2454<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2455have not generated any pre-tax income to date and therefore have not paid any federal2456income taxes since inception in December 1996. No provision or benefit for federal and2457state income taxes has been recorded for net operating losses incurred in any period since2458our inception. </FONT></P>24592460<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2461<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As2462of December 31, 2003, we had net operating loss carryforwards of approximately $54,631,0002463for U.S. federal income tax purposes which begin to expire in the year 2013. As of2464December 31, 2003, we also had federal and state research and development tax credit2465carryforwards of approximately $1,353,000 which begin to expire in the year 2013. As of2466December 31, 2003, we also had a foreign tax loss carryforward of approximately $1,356,0002467which does not expire. Under the Tax Reform Act of 1986, the amounts of and benefits from2468net operating loss carryforwards may be impaired or limited in certain circumstances,2469including significant changes in ownership interests. Future use of our existing net2470operating loss carryforwards may be restricted due to changes in ownership or from future2471tax legislation. </FONT></P>24722473<BR>247424752476<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2477<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></P>24782479<HR SIZE=3 COLOR=GRAY NOSHADE>24802481<!-- *************************************************************************** -->2482<!-- MARKER PAGE="sheet: 0; page: 0" -->248324842485<BR>24862487<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2488<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liquidity and Capital Resources</B> </FONT> </P>24892490<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2491<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2492have financed all of our operations since inception through the issuance of equity2493securities and, to a lesser extent, sales of our products. Through December 31, 2003, we2494have sold common stock and preferred stock generating aggregate net proceeds of2495approximately $70.5 million. At December 31, 2003, we had $5,885,000 in cash, cash2496equivalents and available-for-sale securities on-hand compared to $16,750,000 at December249731, 2002. </FONT></P>24982499<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2500<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During2501the year ended December 31, 2003, we used $10,417,000 to fund operating activities. The2502cash used in operating activities was primarily used to fund our net loss for the period2503of $9,628,000 and an increase in inventory of $1,054,000, which was offset by depreciation2504and amortization of $604,000. The increase in inventory is due to the additon of four new2505products and our preparation for our expected increase in sales in 2004. During 2003 we2506generated proceeds of $11,356,000 in investing activities, primarily from the net sales of2507investment securities of $11,895,000, offset by net equipment purchases of $539,000. Also2508during 2003 we generated $69,000 in financing activities, primarily from $208,000 we2509received through the issuance of common stock under employee stock plans, offset by our2510repurchase of our common stock for $140,000. </FONT></P>25112512<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2513<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In2514August 2002, the Board of Directors adopted a stock repurchase program to acquire up to2515one million shares of our common stock in open market transactions. The Board of Directors2516cancelled the program in July 2003 after purchasing a total of 762,300 shares. During25172003, we repurchased 153,400 shares under this stock repurchase program for $140,000. </FONT></P>25182519<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2520<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During2521the fourth quarter of 2003, we entered into a $3.0 million credit facility with Silicon2522Valley Bank. The line of credit has a 12 month term, bears interest at the rate of prime2523plus 0.5% and is secured by a first security interest on all of our assets. The line of2524credit includes two covenants: minimum tangible net worth of $8,000,000 and a liquidity2525coverage of not less than 1.25 to 1.00. We were in compliance with these covenants at2526December 31, 2003. As of December 31, 2003, we had no outstanding balance on the line of2527credit balance and the availability was $1.2 million. </FONT></P>25282529<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2530<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2531purchase our requirements for thrombin (a component in the Duett and all of the D-Stat2532products) under a Purchase Agreement dated June 10, 1999 with a subsidiary of King2533Pharmaceuticals, Inc. The agreement provides for a fixed price, with adjustments based on2534the supplier’s manufacturing costs and the supplier’s annual percentage increase2535in the wholesale price of thrombin. The agreement expires on May 29, 2005. During 2004 and2536the first five months of 2005, we intend to increase our purchases of thrombin to benefit2537from the pricing provisions of the agreement, which we expect will substantially increase2538our inventory of thrombin. We believe that these purchases will satisfy our thrombin2539requirements for 2004, 2005 and most of 2006. We are currently exploring a new thrombin2540supply agreement and evaluating alternative potential suppliers, although there currently2541is no other source of commercially-available thrombin approved for use in the United2542States. </FONT></P>25432544<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2545<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2546signed a purchase agreement with MedArt Corporation on September 22, 2003 for the2547manufacture of our Vari-Lase laser console. Under that agreement, we are obligated to2548purchase laser consoles with an aggregate purchase price of $1,197,000 for our Vari-Lase2549business during the first year of the agreement, which commenced in December 2003. We do2550not have any other significant cash commitments related to supply agreements, nor do we2551have any significant commitments for capital expenditures. </FONT></P>25522553<BR>255425552556<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2557<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22</FONT></P>25582559<HR SIZE=3 COLOR=GRAY NOSHADE>25602561<!-- *************************************************************************** -->2562<!-- MARKER PAGE="sheet: 0; page: 0" -->256325642565<BR>25662567<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2568<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The2569following table summarizes our contractual cash commitments as of December 31, 2003: </FONT></P>257025712572257325742575<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=100%>2576<TR VALIGN=Bottom>2577<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2578<TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Payments due by Period</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>2579</TR>25802581<TR VALIGN=Bottom>2582<TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Contractual Obligations</FONT></TH>2583<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT></TH>2584<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Less than 1<BR>2585year</FONT></TH>2586<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1-3 years</FONT></TH>2587<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4-5 years</FONT></TH>2588<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>After 5<BR>2589years</FONT></TH></TR>25902591<TR VALIGN=Bottom>2592<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Facility Operating Lease</FONT></TD>2593<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2594<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2595<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> 1,708,920</FONT></TD>2596<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2597<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 348,948</FONT></TD>2598<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2599<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,082,304</FONT></TD>2600<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2601<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 277,668</FONT></TD>2602<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2603<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ —</FONT></TD>2604<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2605<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2606<TR VALIGN=Bottom>2607<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MedArt Purchase Commitment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2608<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,197,000</FONT></TD>2609<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2610<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,197,000</FONT></TD>2611<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2612<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2613<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2614<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2615<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2616<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD><TD ALIGN=LEFT><FONT 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>2617<TR>2618<TD COLSPAN=3></TD>2619<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>2620<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>2621<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>2622<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>2623<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>2624<TR VALIGN=Bottom>2625<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Contractual Cash 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>2626<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,905,920</FONT></TD>2627<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2628<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,545,948</FONT></TD>2629<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2630<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,082,304</FONT></TD>2631<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2632<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 277,668</FONT></TD>2633<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2634<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ —</FONT></TD><TD ALIGN=LEFT><FONT 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>2635<TR>2636<TD COLSPAN=3></TD>2637<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>2638<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>2639<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>2640<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>2641<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>2642</TABLE>26432644<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2645<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2646currently anticipate that we will continue to experience a negative cash flow until at2647least the fourth quarter of 2004 at which time we project that we will become cash flow2648neutral. We currently believe that our working capital of $9.2 million and anticipated2649cash from product sales will be sufficient to meet our operating and capital requirements2650until we reach cash flow neutral in the fourth quarter of 2004. However, our actual2651liquidity and capital requirements will depend upon numerous factors, including the costs2652and timing of expansion of sales and marketing activities; the amount of revenues from2653sales of our existing and new products; the cost of maintaining, enforcing and defending2654patents and other intellectual property rights; competing technological and market2655developments; developments related to regulatory and third party reimbursement matters;2656the cost and progress of our research and development efforts; and other factors. </FONT></P>26572658<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2659<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In2660the event that additional financing is needed and depending on market conditions, we may2661seek to raise additional funds for working capital purposes at any time through the sale2662of equity or debt securities. If cash generated from operations is insufficient to satisfy2663our cash needs, we may be required to raise additional funds. We currently have no2664commitments for additional funding and so our ability to meet our long-term liquidity2665needs is uncertain. If we raise additional funds through the issuance of equity2666securities, our shareholders may experience significant dilution. Furthermore, additional2667financing may not be available when needed or, if available, financing may not be on terms2668favorable to us or our shareholders. If financing is not available when required or is not2669available on acceptable terms, we may be unable to develop or market our products or take2670advantage of business opportunities or may be required to significantly curtail our2671business operations. </FONT></P>26722673<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2674<A NAME=A040></A>2675<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Critical Accounting Policies:</B> </FONT> </P>26762677<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2678<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Management’s2679Discussion and Analysis of Financial Condition and Results of Operations addresses our2680financial statements, which have been prepared in accordance with accounting principles2681generally accepted in the United States. The preparation of our financial statements2682requires that we make estimates and assumptions that affect the reported amounts of assets2683and liabilities and the disclosure of contingent assets and liabilities at the date of the2684financial statements and the reported amounts of revenues and expenses during the2685reporting period. On an on-going basis, we evaluate these estimates and judgments. We base2686our estimates and judgments on historical experience and on various other factors that are2687believed to be reasonable under the circumstances, the results of which form the basis for2688making judgments about the carrying value of assets and liabilities that are not readily2689apparent from other sources. Actual results may differ from these estimates under2690different assumptions or conditions. </FONT></P>26912692<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2693<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our2694accounting policies are described in Note 2 to the financial statements. We set forth2695below those material accounting policies that we believe are the most critical to an2696investor’s understanding of our financial results and condition, and require complex2697management judgment. </FONT></P>26982699<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2700<A NAME=A041></A>2701<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Inventory</B> </FONT> </P>27022703<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2704<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2705state our inventory at the lower of cost (first-in, first-out method) or market. We record2706reserves for inventory shrinkage and for potentially excess, obsolete and slow moving2707inventory based upon historical </FONT></P>27082709<BR>271027112712<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2713<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></P>27142715<HR SIZE=3 COLOR=GRAY NOSHADE>27162717<!-- *************************************************************************** -->2718<!-- MARKER PAGE="sheet: 0; page: 0" -->271927202721<BR>27222723<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2724<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>experience and forecasted demand. At2725December 31, 2003, this reserve was $240,000 compared to $260,000 at December 31, 2002.2726Our reserve requirements could be materially different if demand for our products2727decreased because of competitive conditions or market acceptance, or if products become2728obsolete because of advancements in the industry. </FONT></P>27292730<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2731<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Revenue Recognition</B> </FONT> </P>27322733<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2734<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2735recognize revenue upon shipment of products to customers, net of estimated returns. We2736analyze the rate of historical returns when evaluating the adequacy of the allowance for2737sales returns, which is included with the allowance for doubtful accounts on our balance2738sheet. At December 31, 2003, this reserve was $20,000 compared to $40,000 at December 31,27392002. If the historical data we use to calculate these estimates does not properly reflect2740future returns, revenue could be overstated. </FONT></P>27412742<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2743<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Allowance for Doubtful Accounts</B> </FONT> </P>27442745<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2746<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2747maintain allowances for doubtful accounts for estimated losses resulting from the2748inability of our customers to make required payments. This allowance is regularly2749evaluated by us for adequacy by taking into consideration factors such as past experience,2750credit quality of the customer base, age of the receivable balances, both individually and2751in the aggregate, and current economic conditions that may affect a customer’s2752ability to pay. At December 31, 2003, this reserve was $140,000 compared to $90,000 at2753December 31, 2002. If the financial condition of our customers were to deteriorate,2754resulting in an impairment of their ability to make payments, additional allowances may be2755required. </FONT></P>27562757<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2758<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Income Taxes</B> </FONT> </P>27592760<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2761<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The2762carrying value of our net deferred tax assets assumes that we will be able to generate2763sufficient taxable income in the United States and to a lesser extent Germany, based on2764estimates and assumptions. We record a valuation allowance to reduce the carrying value of2765our net deferred tax asset to the amount that is more likely than not to be realized. For2766the year ended December 31, 2003, we recorded a $24.2 million valuation allowance related2767to our net deferred tax assets of $24.2 million. In the event we were to determine that we2768would be able to realize our deferred tax assets in the future, an adjustment to the2769deferred tax asset would increase net income in the period such determination is made. On2770a quarterly basis, we evaluate the realizability of our deferred tax assets and assess the2771requirement for a valuation allowance. </FONT></P>27722773<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2774<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>New Accounting Pronouncements</B> </FONT> </P>27752776<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2777<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In2778January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46,2779<I>Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,</I> or FIN No. 46.2780FIN No. 46 requires certain variable interest entities to be consolidated by the primary2781beneficiary of the entity if the equity investors in the entity do not have the2782characteristics of a controlling financial interest or do not have sufficient equity at2783risk for the entity to finance its activities without additional subordinated financial2784support from other parties. FIN No. 46 is effective immediately for all new variable2785interest entities created or acquired after January 31, 2003. For variable interest2786entities created or acquired prior to February 1, 2003, the provisions of FIN No. 46 must2787be applied for the first interim or annual period beginning after December 15, 2003. The2788adoption of FIN No. 46 did not have a material impact on our financial statements. </FONT></P>27892790<BR>279127922793<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2794<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</FONT></P>27952796<HR SIZE=3 COLOR=GRAY NOSHADE>27972798<!-- *************************************************************************** -->2799<!-- MARKER PAGE="sheet: 0; page: 0" -->280028012802<BR>28032804<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->2805<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RISK FACTORS </FONT></H1>28062807<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->2808<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>The2809risks and uncertainties described below are not the only ones facing our company.2810Additional risks and uncertainties not presently known to us or that we currently deem2811immaterial may also impair our business operations. If any of the following risks occur,2812our business, financial condition or results of operations could be seriously harmed.</I> </FONT></P>28132814<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2815<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We will not be successful if the2816interventional medical device community does not adopt our new products</B> </FONT></P>28172818<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2819<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During2820the third quarter of 2000 we commenced sales of our first product, the Duett sealing2821device, in the United States, which we believe represents the largest market for2822interventional medical devices. We have not become profitable with our sales of the Duett.2823In the second half of 2003, we received clearance to commence sales of four new2824interventional products in the United States. Our success will depend on the medical2825community’s acceptance of our new products. We cannot predict how quickly, if at all,2826the medical community will accept our new products, or, if accepted, the extent of their2827use. Our potential customers must: </FONT></P>28282829<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2830<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2831<TR VALIGN=TOP>2832<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2833<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2834<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2835<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>believe2836that our products offer benefits compared to the methodologies and/or devices that they2837are currently using; </FONT></TD>2838</TR>2839</TABLE>2840<BR>28412842<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2843<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2844<TR VALIGN=TOP>2845<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2846<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2847<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2848<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>use2849our products and obtain acceptable clinical outcomes; </FONT></TD>2850</TR>2851</TABLE>2852<BR>28532854<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2855<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2856<TR VALIGN=TOP>2857<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2858<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD>2859<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2860<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>believe2861that our products are worth the price that they will be asked to pay; and </FONT></TD>2862</TR>2863</TABLE>2864<BR>28652866<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2867<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2868<TR VALIGN=TOP>2869<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2870<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2871<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2872<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be2873willing to commit the time and resources required to change their current methodology. </FONT></TD>2874</TR>2875</TABLE>2876<BR>28772878<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2879<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Because2880we have only very recently commenced sales of our D-Stat Dry hemostatic bandage, Pronto2881extraction catheter, Vari-Lase endovenous laser and D-Stat Radial hemostat band products,2882we have no ability to predict the level of sales of these products. If we encounter2883difficulties in growing our sales of our new medical devices in the United States, our2884business will be seriously harmed. </FONT></P>28852886<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2887<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>We have limited working capital to2888pursue our business</B> </FONT> </P>28892890<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2891<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On2892December 31, 2003, we had $5.9 million in cash, cash equivalents and marketable securities2893and a working capital of $9.2 million. During 2003, our operating activities resulted in2894the use of $10.9 million of cash. While we believe that during 2004 our working capital2895requirements will decrease due to sales of our new products, there can be no assurance2896that our existing working capital will be sufficient to satisfy our working capital needs.2897If our sales do not increase, or if we encounter unexpected expenses, we will need to2898raise additional working capital. We have no commitments for additional funding and so our2899ability to meet our long-term liquidity needs is uncertain. If we raise additional funds2900through the issuance of equity securities, our shareholders may experience significant2901dilution. Furthermore, additional financing may not be available when needed or, if2902available, financing may not be on terms favorable to us or our shareholders. If financing2903is not available when required or is not available on acceptable terms, we may be unable2904to develop or market our products or take advantage of business opportunities or may be2905required to significantly curtail our business operations. </FONT></P>29062907<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2908<A NAME=A048></A>2909<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>We have incurred losses and we may2910not be profitable in the future</B> </FONT> </P>29112912<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->2913<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since2914we commenced operations in February 1997, we have incurred net losses primarily from costs2915relating to the development and commercialization of our Duett sealing device and new2916products. At December 31, 2003, we had an accumulated deficit of $59.7 million. We expect2917to continue to significantly invest in our sales and marketing, and research and2918development activities. Because of our plans to introduce new products and expand our2919commercialization, we expect to incur significant net losses through at least the </FONT> </P>29202921<BR>292229232924<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->2925<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></P>29262927<HR SIZE=3 COLOR=GRAY NOSHADE>29282929<!-- *************************************************************************** -->2930<!-- MARKER PAGE="sheet: 0; page: 0" -->293129322933<BR>29342935<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2936<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>first half of 2004. Our business2937strategies may not be successful, and we may not become profitable in any future period2938or at all. If we do become profitable, we cannot be certain that we can sustain or2939increase profitability on a quarterly or annual basis. </FONT></P>29402941<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2942<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We may face additional2943intellectual property claims in the future which could prevent us from manufacturing and2944selling our products or result in our incurring substantial costs and liabilities</B> </FONT></P>29452946<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2947<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The2948interventional medical device industry is characterized by numerous patent filings and2949frequent and substantial intellectual property litigation. Companies in the interventional2950medical device industry have employed intellectual property litigation in an attempt to2951gain a competitive advantage. We have been subject to two intellectual property lawsuits2952concerning our Duett sealing device. Although we have settled both of these intellectual2953property lawsuits, it is possible that additional claims relating to the Duett could be2954brought in the future. In addition, while we do not believe that any of our new products2955infringes any existing patent, it is highly likely that we will become subject to2956intellectual property claims with respect to our new products in the future. Intellectual2957property litigation in recent years has proven to be very complex, and the outcome of such2958litigation is difficult to predict. </FONT></P>29592960<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2961<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> An2962adverse determination in any intellectual property litigation or interference proceedings2963could prohibit us from selling a product, subject us to significant liabilities to third2964parties or require us to seek licenses from third parties. The costs associated with these2965license arrangements may be substantial and could include ongoing royalties. Furthermore,2966the necessary licenses may not be available to us on satisfactory terms, if at all.2967Adverse determinations in a judicial or administrative proceeding or failure to obtain2968necessary licenses could prevent us from manufacturing and selling a product. </FONT></P>29692970<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->2971<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our2972defense of intellectual property claims filed in the future, regardless of the merits of2973the complaint, could divert the attention of our technical and management personnel away2974from the development and marketing of our products for significant periods of time. The2975costs incurred to future claims could be substantial and seriously harm us, even if our2976defense is ultimately successful. </FONT></P>29772978<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2979<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The loss of, or interruption of2980supply from, key vendors, including our single source supplier of thrombin, could limit2981our ability to manufacture our products</B> </FONT></P>29822983<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->2984<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We2985purchase components used in our products from various suppliers and rely on a single2986source for the thrombin component of our Duett sealing device and D-Stat products. There2987are currently no FDA-approved alternative suppliers of thrombin. Our current supply2988agreement with our thrombin vendor extends through May 2005, and there are no assurances2989that a future agreement can be negotiated, or that any future agreement would be on2990similar terms. Because it requires FDA approval, establishing additional or replacement2991suppliers for thrombin would require a lead-time of at least two years and would involve2992significant additional costs. Any supply interruption from our vendor of thrombin or from2993any other key vendor, or the failure by us to engage alternative vendors may limit our2994ability to manufacture our Duett and D-Stat products and could therefore seriously harm2995our business. </FONT></P>29962997<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2998<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our future operating results are2999difficult to predict and may vary significantly from quarter to quarter, which may3000adversely affect the price of our common stock</B> </FONT></P>30013002<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3003<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The3004limited history of our sales and our history of losses make prediction of future operating3005results difficult. You should not rely on our past revenue growth as any indication of3006future growth rates or operating results. The price of our common stock will likely fall3007in the event that our operating results do not meet the expectations of analysts and3008investors. Comparisons of our quarterly operating results are an unreliable indication of3009our future performance because they are likely to vary significantly based on many3010factors, including: </FONT></P>30113012<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3013<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3014<TR VALIGN=TOP>3015<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3016<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3017<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3018<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3019level of sales of our products in the United States market; </FONT></TD>3020</TR>3021</TABLE>30223023<BR>302430253026<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3027<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26</FONT></P>30283029<HR SIZE=3 COLOR=GRAY NOSHADE>30303031<!-- *************************************************************************** -->3032<!-- MARKER PAGE="sheet: 0; page: 0" -->303330343035<BR>30363037<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3038<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3039<TR VALIGN=TOP>3040<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3041<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3042<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3043<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our3044ability to introduce new products and enhancements in a timely manner; </FONT></TD>3045</TR>3046</TABLE>3047<BR>30483049<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3050<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3051<TR VALIGN=TOP>3052<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3053<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3054<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3055<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3056demand for and acceptance of our products; </FONT></TD>3057</TR>3058</TABLE>3059<BR>30603061<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3062<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3063<TR VALIGN=TOP>3064<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3065<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> •</FONT></TD>3066<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3067<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3068success of our competition and the introduction of alternative products; </FONT></TD>3069</TR>3070</TABLE>3071<BR>30723073<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3074<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3075<TR VALIGN=TOP>3076<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3077<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3078<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3079<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our3080ability to command favorable pricing for our products; </FONT></TD>3081</TR>3082</TABLE>3083<BR>30843085<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3086<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3087<TR VALIGN=TOP>3088<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3089<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3090<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3091<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3092growth of the market for our devices; </FONT></TD>3093</TR>3094</TABLE>3095<BR>30963097<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3098<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3099<TR VALIGN=TOP>3100<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3101<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>3102<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3103<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3104expansion and rate of success of our direct sales force in the United States and our3105independent distributors internationally; </FONT></TD>3106</TR>3107</TABLE>3108<BR>31093110<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3111<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3112<TR VALIGN=TOP>3113<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3114<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3115<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3116<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actions3117relating to ongoing FDA compliance; </FONT></TD>3118</TR>3119</TABLE>3120<BR>31213122<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3123<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3124<TR VALIGN=TOP>3125<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3126<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3127<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3128<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3129effect of intellectual property disputes; </FONT></TD>3130</TR>3131</TABLE>3132<BR>31333134<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3135<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3136<TR VALIGN=TOP>3137<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3138<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3139<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3140<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3141size and timing of orders from independent distributors or customers; </FONT></TD>3142</TR>3143</TABLE>3144<BR>31453146<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3147<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3148<TR VALIGN=TOP>3149<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3150<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3151<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3152<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3153attraction and retention of key personnel, particularly in sales and marketing,3154regulatory, manufacturing and research and development; </FONT></TD>3155</TR>3156</TABLE>3157<BR>31583159<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3160<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3161<TR VALIGN=TOP>3162<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3163<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3164<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3165<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unanticipated3166delays or an inability to control costs; </FONT></TD>3167</TR>3168</TABLE>3169<BR>31703171<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3172<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3173<TR VALIGN=TOP>3174<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3175<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3176<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3177<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>general3178economic conditions as well as those specific to our customers and markets; and </FONT></TD>3179</TR>3180</TABLE>3181<BR>31823183<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3184<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3185<TR VALIGN=TOP>3186<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3187<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3188<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3189<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>seasonal3190fluctuations in revenue due to the elective nature of some procedures. </FONT></TD>3191</TR>3192</TABLE>3193<BR>31943195<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3196<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We may face product liability3197claims that could result in costly litigation and significant liabilities</B> </FONT></P>31983199<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->3200<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The3201manufacture and sale of medical products entail significant risk of product liability3202claims. The medical device industry in general has been subject to significant medical3203malpractice litigation. Any product liability claims, with or without merit, could result3204in costly litigation, reduced sales, cause us to incur significant liabilities and divert3205our management’s time, attention and resources. Because of our limited operating3206history and lack of experience with these claims, we cannot be sure that our product3207liability insurance coverage is adequate or that it will continue to be available to us on3208acceptable terms, if at all. </FONT></P>32093210<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3211<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The market for interventional3212medical devices is highly competitive and will likely become more competitive, and our3213competitors may be able to respond more quickly to new or emerging technologies and3214changes in customer requirements that may render our products obsolete</B> </FONT></P>32153216<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3217<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The3218existing market for interventional medical devices is intensely competitive. We expect3219competition to increase further as companies develop new products and/or modify their3220existing products to compete directly with ours. The primary competitors for our Duett3221sealing device are Abbott Laboratories (through its subsidiary Abbott Vascular), Datascope3222Corp. and St. Jude Medical, Inc., which sells a product developed by Kensey Nash3223Corporation. Each of our new products encounters competition from at least several medical3224device companies, including Medtronic Inc. and AngioDynamics Corporation. Each of these3225companies has: </FONT></P>32263227<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3228<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3229<TR VALIGN=TOP>3230<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3231<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3232<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3233<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>better3234name recognition; </FONT></TD>3235</TR>3236</TABLE>3237<BR>32383239<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3240<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3241<TR VALIGN=TOP>3242<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3243<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3244<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3245<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>broader3246product lines; </FONT></TD>3247</TR>3248</TABLE>3249<BR>32503251<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3252<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3253<TR VALIGN=TOP>3254<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3255<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3256<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3257<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>greater3258sales, marketing and distribution capabilities; </FONT></TD>3259</TR>3260</TABLE>32613262<BR>326332643265<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3266<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27</FONT></P>32673268<HR SIZE=3 COLOR=GRAY NOSHADE>32693270<!-- *************************************************************************** -->3271<!-- MARKER PAGE="sheet: 0; page: 0" -->327232733274<BR>32753276<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3277<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3278<TR VALIGN=TOP>3279<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3280<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3281<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3282<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>significantly3283greater financial resources; </FONT></TD>3284</TR>3285</TABLE>3286<BR>32873288<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3289<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3290<TR VALIGN=TOP>3291<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3292<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3293<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3294<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>larger3295research and development staffs and facilities; and </FONT></TD>3296</TR>3297</TABLE>3298<BR>32993300<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3301<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3302<TR VALIGN=TOP>3303<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3304<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3305<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3306<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>existing3307relationships with some of our potential customers. </FONT></TD>3308</TR>3309</TABLE>3310<BR>33113312<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->3313<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We3314may not be able to effectively compete with these companies. In addition, broad product3315lines may allow our competitors to negotiate exclusive, long-term supply contracts and3316offer comprehensive pricing for their products. Broader product lines may also provide our3317competitors with a significant advantage in marketing competing products to group3318purchasing organizations and other managed care organizations that are increasingly3319seeking to reduce costs through centralized purchasing. Greater financial resources and3320product development capabilities may allow our competitors to respond more quickly to new3321or emerging technologies and changes in customer requirements that may render our products3322obsolete. </FONT></P>33233324<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3325<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our international sales are3326subject to a number of risks that could seriously harm our ability to successfully3327commercialize our products in any international market</B> </FONT></P>33283329<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3330<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our3331international sales are subject to several risks, including: </FONT></P>33323333<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3334<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3335<TR VALIGN=TOP>3336<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3337<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3338<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3339<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3340ability of our independent distributors to sell our products; </FONT></TD>3341</TR>3342</TABLE>3343<BR>33443345<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3346<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3347<TR VALIGN=TOP>3348<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3349<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3350<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3351<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the3352impact of recessions in economies outside the United States; </FONT></TD>3353</TR>3354</TABLE>3355<BR>33563357<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3358<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3359<TR VALIGN=TOP>3360<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3361<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3362<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3363<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>greater3364difficulty in collecting accounts receivable and longer collection periods; </FONT></TD>3365</TR>3366</TABLE>3367<BR>33683369<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3370<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3371<TR VALIGN=TOP>3372<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3373<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3374<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3375<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unexpected3376changes in regulatory requirements, tariffs or other trade barriers; </FONT></TD>3377</TR>3378</TABLE>3379<BR>33803381<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3382<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3383<TR VALIGN=TOP>3384<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3385<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3386<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3387<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>weaker3388intellectual property rights protection in some countries; </FONT></TD>3389</TR>3390</TABLE>3391<BR>33923393<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3394<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3395<TR VALIGN=TOP>3396<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3397<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3398<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3399<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>potentially3400adverse tax consequences; and </FONT></TD>3401</TR>3402</TABLE>3403<BR>34043405<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3406<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3407<TR VALIGN=TOP>3408<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3409<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3410<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3411<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>political3412and economic instability. </FONT></TD>3413</TR>3414</TABLE>3415<BR>34163417<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->3418<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The3419occurrence of any of these events could seriously harm our future international sales and3420our ability to successfully commercialize our products in any international market. </FONT></P>34213422<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3423<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We have limited manufacturing3424experience and may encounter difficulties in our manufacturing operations which could3425seriously harm our business</B> </FONT></P>34263427<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->3428<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We3429have limited experience in manufacturing our products. In particular, we have very limited3430experience in lyophilization, which is a key manufacturing step for our D-Stat Dry3431hemostatic bandage. We believe our facilities are adequate for our projected production of3432our products for the foreseeable future, but future facility requirements will depend3433largely on future sales of our products in the United States. We may encounter unforeseen3434difficulties in expanding our production of our new products, including problems involving3435production yields, quality control and assurance, component supply and shortages of3436qualified personnel, compliance with FDA regulations and requirements regarding good3437manufacturing practices, and the need for further regulatory approval of new manufacturing3438processes. Difficulties encountered by us in expanding and maintaining our manufacturing3439capabilities could seriously harm our business. </FONT></P>34403441<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3442<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our business and results of3443operations may be seriously harmed by changes in third-party reimbursement policies</B> </FONT></P>34443445<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3446<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We3447could be seriously harmed by changes in reimbursement policies of governmental or private3448healthcare payors, particularly to the extent any changes affect reimbursement for3449catheterization procedures </FONT></P>34503451<BR>345234533454<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3455<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28</FONT></P>34563457<HR SIZE=3 COLOR=GRAY NOSHADE>34583459<!-- *************************************************************************** -->3460<!-- MARKER PAGE="sheet: 0; page: 0" -->346134623463<BR>34643465<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3466<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>in which our products are used.3467Failure by physicians, hospitals and other users of our products to obtain sufficient3468reimbursement from healthcare payors for procedures in which our products are used or3469adverse changes in governmental and private third-party payors’ policies toward3470reimbursement for such procedures would seriously harm our business. </FONT></P>34713472<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3473<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In3474the United States, healthcare providers, including hospitals and clinics that purchase3475medical devices such as our products, generally rely on third-party payors, principally3476federal Medicare, state Medicaid and private health insurance plans, to reimburse all or3477part of the cost of catheterization procedures. Any changes in this reimbursement system3478could seriously harm our business. </FONT></P>34793480<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->3481<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In3482international markets, acceptance of our products is dependent in part upon the3483availability of reimbursement within prevailing healthcare payment systems. Reimbursement3484and healthcare payment systems in international markets vary significantly by country. Our3485failure to receive international reimbursement approvals could have a negative impact on3486market acceptance of our products in the markets in which these approvals are sought. </FONT></P>34873488<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3489<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our products and our3490manufacturing activities are subject to extensive governmental regulation that could3491prevent us from selling our products in the United States or introducing new and improved3492products</B> </FONT></P>34933494<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3495<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our3496products and our manufacturing activities are subject to extensive regulation by a number3497of governmental agencies, including the FDA and comparable international agencies. We are3498required to: </FONT></P>34993500<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3501<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3502<TR VALIGN=TOP>3503<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3504<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3505<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3506<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>obtain3507the clearance of the FDA and international agencies before we can market and sell our3508products; </FONT></TD>3509</TR>3510</TABLE>3511<BR>35123513<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3514<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3515<TR VALIGN=TOP>3516<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3517<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3518<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3519<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>satisfy3520these agencies’ content requirements for all of our labeling, sales and promotional3521materials; and </FONT></TD>3522</TR>3523</TABLE>3524<BR>35253526<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3527<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3528<TR VALIGN=TOP>3529<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3530<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3531<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3532<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>undergo3533rigorous inspections by these agencies. </FONT></TD>3534</TR>3535</TABLE>3536<BR>35373538<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3539<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Compliance3540with the regulations of these agencies may delay or prevent us from introducing any new3541model of our existing products or other new products. Furthermore, we may be subject to3542sanctions, including temporary or permanent suspension of operations, product recalls and3543marketing restrictions if we fail to comply with the laws and regulations pertaining to3544our business. </FONT></P>35453546<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3547<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We3548are also required to demonstrate compliance with the FDA’s quality system3549regulations. The FDA enforces its quality system regulations through pre-approval and3550periodic post-approval inspections. These regulations relate to product testing, vendor3551qualification, design control and quality assurance, as well as the maintenance of records3552and documentation. If we are unable to conform to these regulations, the FDA may take3553actions which could seriously harm our business. In addition, government regulation may be3554established that could prevent, delay, modify or rescind regulatory clearance or approval3555of our products. </FONT></P>35563557<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3558<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 7A. QUANTITATIVE AND3559QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B> </FONT> </P>35603561<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3562<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Financial3563instruments that potentially subject us to concentrations of credit risk consist primarily3564of cash and cash equivalents, available-for-sale securities and accounts receivables. We3565maintain our accounts for cash and cash equivalents and available-for-sale securities3566principally at one major bank and one investment firm in the United States. We have a3567formal written investment policy that restricts the placement of investments to issuers3568evaluated as creditworthy. We have not experienced any losses on our deposits of our cash3569and cash equivalents. </FONT></P>35703571<BR>357235733574<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3575<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29</FONT></P>35763577<HR SIZE=3 COLOR=GRAY NOSHADE>35783579<!-- *************************************************************************** -->3580<!-- MARKER PAGE="sheet: 0; page: 0" -->358135823583<BR>35843585<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3586<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> With3587respect to accounts receivable, we perform credit evaluations of our customers and do not3588require collateral. There have been no material losses on accounts receivables. </FONT></P>35893590<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3591<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In3592the United States and Germany, we sell our products directly to hospitals and clinics in3593the local currency. Revenue is recognized upon shipment of products to customers. </FONT></P>35943595<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3596<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In3597all other international markets, we sell our products to independent distributors who, in3598turn, sell to medical clinics. We sell our product in these countries through independent3599distributors denominated in United States dollars. Loss, termination or ineffectiveness of3600distributors to effectively promote our product would have a material adverse effect on3601our financial condition and results of operations. </FONT></P>36023603<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3604<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We3605do not believe our operations are currently subject to significant market risks for3606interest rates, foreign currency exchange rates, commodity prices or other relevant3607market price risks of a material nature. </FONT></P>36083609<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3610<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 8. CONSOLIDATED FINANCIAL3611STATEMENTS AND SUPPLEMENTARY DATA</B> </FONT> </P>36123613<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3614<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The3615Consolidated Financial Statements and Notes thereto required pursuant to this Item begin3616on page 36 of this Annual Report on Form 10-K. </FONT></P>36173618<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3619<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 9. CHANGES IN AND3620DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</B> </FONT> </P>36213622<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3623<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>36243625<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3626<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 9A. CONTROLS AND PROCEDURES</B> </FONT> </P>36273628<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3629<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Evaluation3630of disclosure controls and procedures. </FONT></P>36313632<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3633<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Under3634the supervision and with the participation of our management, including our Chief3635Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the3636design and operation of our disclosure controls and procedures (as defined in Rule363713a-15(f) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer3638and Chief Financial Officer concluded that, as of the end of the period covered by this3639report, our disclosure controls and procedures were effective in timely alerting them to3640the material information relating to us (or our consolidated subsidiaries) required to be3641included in the reports we file or submit under the Exchange Act. </FONT></P>36423643<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3644<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Changes3645in internal controls. </FONT></P>36463647<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3648<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During3649the fiscal quarter ended December 31, 2003, there has been no change in our internal3650control over financial reporting (as defined in Rule 13 a-15(f) under the Exchange Act)3651that has materially affected, or is reasonably likely to materially affect, our internal3652control over financial reporting. </FONT></P>36533654<BR><BR><BR><BR><BR><BR>365536563657<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3658<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30</FONT></P>36593660<HR SIZE=3 COLOR=GRAY NOSHADE>36613662<!-- *************************************************************************** -->3663<!-- MARKER PAGE="sheet: 0; page: 0" -->366436653666<BR>36673668<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->3669<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PART III</B> </FONT></H1>36703671<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3672<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 10. DIRECTORS AND EXECUTIVE3673OFFICERS OF THE REGISTRANT</B> </FONT> </P>36743675<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3676<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated3677herein by reference to the Sections under the headings “Election of Directors”3678and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the3679Proxy Statement for our Annual Meeting of Shareholders to be filed with the Securities and3680Exchange Commission within 120 days of the close of the year ended December 31, 2003. </FONT></P>36813682<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3683<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> See3684Item 1 of Part I hereof for information regarding our Executive Officers. </FONT></P>36853686<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3687<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 11. EXECUTIVE COMPENSATION</B> </FONT> </P>36883689<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3690<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated3691herein by reference to the Sections under the headings “Director Compensation”3692and “Executive Compensation and Other Information” contained in the Proxy3693Statement for our Annual Meeting of Shareholders to be filed with the Securities and3694Exchange Commission within 120 days of the close of the year ended December 31, 2003. </FONT></P>36953696<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3697<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 12. SECURITY OWNERSHIP OF3698CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS</B> </FONT> </P>36993700<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3701<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated3702herein by reference to the Section under the heading “Security Ownership of Certain3703Beneficial Owners and Management” and “Equity Compensation Plan3704Information” contained in the Proxy Statement for our Annual Meeting of Shareholders3705to be filed with the Securities and Exchange Commission within 120 days of the close of3706the year ended December 31, 2003. </FONT></P>37073708<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3709<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 13. CERTAIN RELATIONSHIPS AND3710RELATED TRANSACTIONS</B> </FONT> </P>37113712<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3713<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>37143715<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3716<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 14. PRINCIPAL ACCOUNTING FEES3717AND SERVICES</B> </FONT> </P>37183719<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3720<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated3721herein by reference to the Section under the heading “Additional Information about3722our Independent Auditor” contained in the Proxy Statement for our Annual Meeting of3723Shareholders to be filed with the Securities and Exchange Commission within 120 days of3724the close of the year ended December 31, 2003. </FONT></P>37253726<BR><BR><BR><BR><BR>372737283729<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3730<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31</FONT></P>37313732<HR SIZE=3 COLOR=GRAY NOSHADE>37333734<!-- *************************************************************************** -->3735<!-- MARKER PAGE="sheet: 0; page: 0" -->373637373738<BR>37393740<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->3741<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART IV </FONT></H1>37423743<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->3744<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ITEM 15. EXHIBITS, FINANCIAL3745STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K</B> </FONT> </P>37463747<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->3748<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3749<TR VALIGN=TOP>3750<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>3751<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3752<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Documents3753filed as part of this Report. </FONT></TD>3754</TR>3755</TABLE>3756<BR>37573758<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3759<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3760<TR VALIGN=TOP>3761<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3762<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>3763<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3764<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The3765following financial statements are filed herewith in Item 8 in Part II. </FONT></TD>3766</TR>3767</TABLE>3768<BR>37693770<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3771<A NAME=A059></A>3772<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3773<TR VALIGN=TOP>3774<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3775<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3776<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>3777<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3778<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report3779of Independent Auditors </FONT></TD>3780</TR>3781</TABLE>3782<BR>37833784<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3785<A NAME=A060></A>3786<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3787<TR VALIGN=TOP>3788<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3789<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3790<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>3791<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3792<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated3793Balance Sheets </FONT></TD>3794</TR>3795</TABLE>3796<BR>37973798<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3799<A NAME=A061></A>3800<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3801<TR VALIGN=TOP>3802<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3803<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3804<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) </FONT></TD>3805<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3806<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated3807Statements of Operations </FONT></TD>3808</TR>3809</TABLE>3810<BR>38113812<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3813<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3814<TR VALIGN=TOP>3815<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3816<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3817<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv) </FONT></TD>3818<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3819<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated3820Statement of Changes in Shareholders’ Equity </FONT></TD>3821</TR>3822</TABLE>3823<BR>38243825<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3826<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3827<TR VALIGN=TOP>3828<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3829<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3830<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v) </FONT></TD>3831<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3832<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated3833Statements of Cash Flows </FONT></TD>3834</TR>3835</TABLE>3836<BR>38373838<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3839<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3840<TR VALIGN=TOP>3841<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3842<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3843<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi) </FONT></TD>3844<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3845<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes3846to Consolidated Financial Statements </FONT></TD>3847</TR>3848</TABLE>3849<BR>38503851<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3852<A NAME=A062></A>3853<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3854<TR VALIGN=TOP>3855<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3856<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>3857<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3858<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial3859Statement Schedules </FONT></TD>3860</TR>3861</TABLE>3862<BR>38633864<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3865<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Schedule3866II – Valuation and Qualifying Accounts. Such schedule should be read in conjunction3867with the consolidated financial statements. All other supplemental schedules are omitted3868because of the absence of conditions under which they are required. </FONT></P>38693870<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3871<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3872<TR VALIGN=TOP>3873<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3874<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>3875<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3876<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits</FONT></TD>3877</TR>3878</TABLE>3879<BR>38803881<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>3882<TR VALIGN=Bottom>3883<TH COLSPAN="2" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exhibit<BR>3884Number</FONT></TH>3885<TH COLSPAN="2" WIDTH="90%"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Description</FONT></TH></TR>3886<tr><td colspan=8><hr color=black size=1></td></TR>3887<TR VALIGN=Top>3888<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>3889<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>3890<TD WIDTH="90%" 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>3891<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3892<TR VALIGN=Top>3893<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3894<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3895<TR VALIGN=Top>3896<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>3897<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>3898<TD ALIGN="LEFT" WIDTH="90%"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3899<TR VALIGN=Top>3900<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3901<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3902<TR VALIGN=Top>3903<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>3904<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>3905<TD ALIGN="LEFT" WIDTH="90%"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3906<TR VALIGN=Top>3907<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3908<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3909<TR VALIGN=Top>3910<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>3911<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>3912<TD ALIGN="LEFT" WIDTH="90%"><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 333</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3913<TR VALIGN=Top>3914<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3915<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3916<TR VALIGN=Top>3917<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>3918<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD>3919<TD ALIGN="LEFT" WIDTH="90%"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3920<TR VALIGN=Top>3921<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3922<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3923<TR VALIGN=Top>3924<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>3925<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.4</FONT></TD>3926<TD ALIGN="LEFT" WIDTH="90%"><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 Solution</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3927<TR VALIGN=Top>3928<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3929<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3930<TR VALIGN=Top>3931<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>3932<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5</FONT></TD>3933<TD ALIGN="LEFT" WIDTH="90%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Purchase Warrant dated June 10, 1999 by and between Vascular Solutions, Inc. and Jones Pharma, Incorporated (incorporated by reference to Exhibit 4.7 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089))</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3934<TR VALIGN=Top>3935<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3936<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3937<TR VALIGN=Top>3938<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>3939<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>3940<TD ALIGN="LEFT" WIDTH="90%"><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</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3941</TABLE>3942394339443945<BR>394639473948<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->3949<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></P>39503951<HR SIZE=3 COLOR=GRAY NOSHADE>39523953<!-- *************************************************************************** -->3954<!-- MARKER PAGE="sheet: 0; page: 0" -->395539563957<BR>3958395939603961<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>3962<TR valign=top>3963<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>3964<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>3965<TD WIDTH="90%" ALIGN="LEFT" STYLE="padding-left:12pt;"><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-</FONT></TD>3966<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3967<TR valign=top>3968<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3969<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3970<TR valign=top>3971<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>3972<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD>3973<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3974<TR valign=top>3975<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3976<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3977<TR valign=top>3978<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>3979<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.4</FONT></TD>3980<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3981<TR valign=top>3982<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3983<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3984<TR valign=top>3985<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>3986<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5*</FONT></TD>3987<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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 10.11 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)).</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3988<TR valign=top>3989<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3990<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3991<TR valign=top>3992<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>3993<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6</FONT></TD>3994<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3995<TR valign=top>3996<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>3997<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3998<TR valign=top>3999<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4000<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7*</FONT></TD>4001<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4002<TR valign=top>4003<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4004<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4005<TR valign=top>4006<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4007<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8</FONT></TD>4008<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4009<TR valign=top>4010<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4011<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4012<TR valign=top>4013<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4014<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD>4015<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4016<TR valign=top>4017<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4018<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4019<TR valign=top>4020<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4021<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.10*</FONT></TD>4022<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4023<TR valign=top>4024<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>10</FONT></TD>4025<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>.11</FONT></TD>4026<TD WIDTH="90%" ALIGN="LEFT" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>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>4027<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4028<TR valign=top>4029<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4030<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4031<TR valign=top>4032<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4033<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.12**</FONT></TD>4034<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License and Supply Agreement dated December 17, 2002 by and between Vascular Solutions and Tepha, Inc. (incorporated by reference to Exhibit 10.17 of Vascular Solutions’ Form 10-K for the year ended December 31, 2002).</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4035<TR valign=top>4036<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4037<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4038<TR valign=top>4039<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4040<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.13**</FONT></TD>4041<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Private Label Purchase Agreement dated September 22, 2003 by and between Vascular Solutions and MedArt Corportation (incorporated by reference to Exhibit 10.18 of Vascular Solutions’ Form 10-Q for the quarter ended September 30, 3003).</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4042<TR valign=top>4043<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4044<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4045<TR valign=top>4046<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>4047<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.14</FONT></TD>4048<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4049<TR valign=top>4050<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4051<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4052<TR valign=top>4053<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></TD>4054<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4055<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Code of Ethics</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4056<TR valign=top>4057<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4058<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4059<TR valign=top>4060<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></TD>4061<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4062<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>List of Subsidiaries</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4063<TR valign=top>4064<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4065<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4066<TR valign=top>4067<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD>4068<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>4069<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Ernst & Young LLP.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4070<TR valign=top>4071<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4072<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4073<TR valign=top>4074<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</FONT></TD>4075<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>4076<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Power of Attorney (included on signature page).</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4077<TR valign=top>4078<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4079<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4080<TR valign=top>4081<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31</FONT></TD>4082<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>4083<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4084<TR valign=top>4085<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4086<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4087<TR valign=top>4088<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31</FONT></TD>4089<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>4090<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Financial Officer pursuant to Section 302 of the Sabanes-Oxley Act of 2002.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4091<TR valign=top>4092<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4093<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4094<TR valign=top>4095<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></TD>4096<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>4097<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><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><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4098<TR valign=top>4099<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4100<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4101<TR valign=top>4102<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></TD>4103<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>4104<TD ALIGN="LEFT" WIDTH="90%" STYLE="padding-left:12pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4105</TABLE>4106410741084109<BR>411041114112<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4113<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></P>41144115<HR SIZE=3 COLOR=GRAY NOSHADE>41164117<!-- *************************************************************************** -->4118<!-- MARKER PAGE="sheet: 0; page: 0" -->41194120412141224123<BR>41244125<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4126<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>_________________ <BR>* Management contract or4127compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K. <BR>** Certain portions of this exhibit have been omitted pending a request for4128confidential treatment from the SEC.</FONT></P>412941304131<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4132<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) Reports4133on Form 8-K: </FONT></P>41344135<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4136<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We furnished a Form 8-K on October413715, 2003 to report our press release dated October 15, 2003 on our third quarter results. </FONT></P>41384139<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4140<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) See4141Item 15(a)(3) above. </FONT></P>41424143<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4144<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) See4145Item 15(a)(2) above. </FONT></P>41464147<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>414841494150<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4151<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></P>41524153<HR SIZE=3 COLOR=GRAY NOSHADE>41544155<!-- *************************************************************************** -->4156<!-- MARKER PAGE="sheet: 0; page: 0" -->415741584159<BR>41604161<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->4162<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1>41634164<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->4165<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant4166to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the4167registrant has duly caused this report to be signed on its behalf by the undersigned,4168thereunto duly authorized, on the 27th day of February, 2004. </FONT></P>41694170<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=700>41714172<TR VALIGN=top>4173<TD WIDTH=75% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4174<TD WIDTH=25% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>VASCULAR SOLUTIONS, INC.</b></FONT></TD></TR>41754176<TR VALIGN=top>4177<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br> </FONT></TD>4178<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><br>By: <U>/s/ Howard Root </U> </FONT></TD></TR>41794180<TR VALIGN=top>4181<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4182<TD ALIGN="LEFT" NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root<BR>4183Chief Executive Officer and Director</FONT></TD></TR>4184</TABLE>41854186<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->4187<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> KNOW4188ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes4189and appoints Howard Root and James Hennen (with full power to act alone), as his or her4190true and lawful attorneys-in-fact and agents, with full powers of substitution and4191resubstitution, for him or her and in his or her name, place and stead, in any and all4192capacities, to sign any and all amendments to the Annual Report on Form 10-K of Vascular4193Solutions, Inc., and to file the same, with all exhibits thereto, and other documents in4194connection therewith, with the Securities and Exchange Commission, granting unto said4195attorneys-in-fact and agents full power and authority to do and perform each and every4196act and thing requisite or necessary to be done in and about the premises, as fully to4197all intents and purposes as he or she might or could do in person, hereby ratifying and4198confirming all that said attorneys-in-fact and agents, or their substitute or4199substitutes, lawfully do or cause to be done by virtue hereof. </FONT></P>42004201<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->4202<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant4203to the requirements of the Securities Exchange Act of 1934, this report has been signed4204on the 19th day of February, 2004, by the following persons in the capacities indicated. </FONT></P>4205420642074208<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>4209<TR VALIGN=Bottom>4210<TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <U>Signature</U> </FONT></TH>4211<TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <U>Title</U> </FONT></TH></TR>4212<TR VALIGN=Bottom>4213<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR> <U>/s/ Howard Root</U> </FONT></TD>4214<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Chief Executive Officer and Director</FONT></TD></TR>4215<TR VALIGN=Bottom>4216<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Howard Root </FONT></TD>4217<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>(Principal Executive Officer)</I> </FONT></TD></TR>4218<TR VALIGN=Bottom>4219<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ James Hennen</U> </FONT></TD>4220<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Chief Financial Officer</FONT></TD></TR>4221<TR VALIGN=Bottom>4222<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> James Hennen</FONT></TD>4223<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>(Principal Financial and Accounting Officer)</I> </FONT></TD></TR>4224<TR VALIGN=Bottom>4225<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ James Jacoby, Jr.</U> </FONT></TD>4226<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Director</FONT></TD></TR>4227<TR VALIGN=Bottom>4228<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> James Jacoby, Jr.</FONT></TD></TR>4229<TR VALIGN=Bottom>4230<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ Richard Nigon</U> </FONT></TD>4231<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Director</FONT></TD></TR>4232<TR VALIGN=Bottom>4233<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Richard Nigon</FONT></TD></TR>4234<TR VALIGN=Bottom>4235<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ Michael Kopp</U> </FONT></TD>4236<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Director</FONT></TD></TR>4237<TR VALIGN=Bottom>4238<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Michael Kopp</FONT></TD></TR>4239<TR VALIGN=Bottom>4240<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ Paul O’Connell</U> </FONT></TD>4241<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Director</FONT></TD></TR>4242<TR VALIGN=Bottom>4243<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Paul O’Connell</FONT></TD></TR>4244<TR VALIGN=Bottom>4245<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ John Erb</U> </FONT></TD>4246<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Director</FONT></TD></TR>4247<TR VALIGN=Bottom>4248<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> John Erb</FONT></TD></TR>4249<TR VALIGN=Bottom>4250<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><U>/s/ Dr. Gary Dorfman</U> </FONT></TD>4251<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Director</FONT></TD></TR>4252<TR VALIGN=Bottom>4253<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Dr. Gary Dorfman</FONT></TD></TR>4254</TABLE>42554256<BR>425742584259<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4260<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35</FONT></P>42614262<HR SIZE=3 COLOR=GRAY NOSHADE>42634264<!-- *************************************************************************** -->4265<!-- MARKER PAGE="sheet: 0; page: 0" -->426642674268<BR>42694270<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->4271<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SCHEDULE II </FONT></H1>42724273<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->4274<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VALUATION AND4275QUALIFYING ACCOUNTS <BR>YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 </FONT></H1>42764277<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->4278<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4> </FONT></H1>42794280<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>4281<TR VALIGN=Bottom>4282<TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Description</FONT></TH>4283<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<BR>4284Beginning<BR>4285of Year</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4286<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additions<BR>4287Charged<BR>4288to Costs<BR>4289and<BR>4290Expenses</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4291<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Less<BR>4292Deductions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4293<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<BR>4294End of Year</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>4295<TR VALIGN=Bottom>4296<TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>YEAR ENDED DECEMBER 31, 2003:</FONT></TD>4297<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4298<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4299<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>4300<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4301<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>4302<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4303<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>4304<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4305<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>4306<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4307<TR VALIGN=Bottom>4308<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>4309<TD ALIGN=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>4310<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4311<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,708</FONT></TD>4312<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4313<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,292</FONT></TD>4314<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4315<TD ALIGN=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>4316<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4317<TR VALIGN=Bottom>4318<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>4319<TD ALIGN=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>4320<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4321<TD ALIGN=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>4322<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4323<TD ALIGN=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>4324<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4325<TD ALIGN=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>4326<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4327<TR>4328<TD COLSPAN=3></TD>4329<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4330<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4331<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4332<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>4333<TR VALIGN=Bottom>4334<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>4335<TD ALIGN=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>4336<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4337<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,391</FONT></TD>4338<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4339<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,391</FONT></TD>4340<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4341<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 160,000</FONT></TD>4342<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4343<TR>4344<TD COLSPAN=3></TD>4345<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4346<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4347<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4348<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>4349<TR VALIGN=Bottom>4350<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2002:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4351<TR VALIGN=Bottom>4352<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales return allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4353<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64,526</FONT></TD>4354<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4355<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 174,642</FONT></TD>4356<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4357<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 199,168</FONT></TD>4358<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4359<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,000</FONT></TD>4360<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4361<TR VALIGN=Bottom>4362<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>4363<TD ALIGN=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>4364<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4365<TD ALIGN=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>4366<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4367<TD ALIGN=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>4368<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4369<TD ALIGN=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>4370<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4371<TR>4372<TD COLSPAN=3></TD>4373<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4374<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4375<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4376<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>4377<TR VALIGN=Bottom>4378<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>4379<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 174,526</FONT></TD>4380<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4381<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 198,234</FONT></TD>4382<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4383<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 242,760</FONT></TD>4384<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4385<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 130,000</FONT></TD>4386<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4387<TR>4388<TD COLSPAN=3></TD>4389<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4390<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4391<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4392<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>4393<TR VALIGN=Bottom>4394<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended December 31, 2001:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4395<TR VALIGN=Bottom>4396<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>4397<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>4398<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4399<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>401,733</FONT></TD>4400<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4401<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>337,207</FONT></TD>4402<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4403<TD ALIGN=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>4404<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4405<TR VALIGN=Bottom>4406<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>4407<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>80,000</FONT></TD>4408<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4409<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35,304</FONT></TD>4410<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4411<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,304</FONT></TD>4412<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4413<TD ALIGN=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>4414<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4415<TR>4416<TD COLSPAN=3></TD>4417<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4418<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4419<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD>4420<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>4421<TR VALIGN=Bottom>4422<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>4423<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 80,000</FONT></TD>4424<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4425<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 437,037</FONT></TD>4426<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4427<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>342,511</FONT></TD>4428<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4429<TD ALIGN=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>4430<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4431<TR>4432<TD COLSPAN=3></TD>4433<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4434<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4435<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD>4436<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>4437</TABLE>44384439<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>444044414442<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4443<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36</FONT></P>44444445<HR SIZE=3 COLOR=GRAY NOSHADE>44464447<!-- *************************************************************************** -->4448<!-- MARKER PAGE="sheet: 0; page: 0" -->444944504451<BR>44524453<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4454<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent4455Auditors </FONT></P>44564457<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4458<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and4459Shareholders<BR>Vascular Solutions, Inc. </FONT></P>44604461<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4462<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the consolidated4463balance sheets of Vascular Solutions, Inc. as of December 31, 2003 and 2002, and the4464related statements of operations, changes in shareholders’ equity, and cash flows4465for each of the three years in the period ended December 31, 2003. These financial4466statements are the responsibility of the Company’s management. Our responsibility is4467to express an opinion on these financial statements based on our audits. </FONT></P>44684469<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4470<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in4471accordance with auditing standards generally accepted in the United States. Those4472standards require that we plan and perform the audit to obtain reasonable assurance about4473whether the financial statements are free of material misstatement. An audit includes4474examining, on a test basis, evidence supporting the amounts and disclosures in the4475financial statements. An audit also includes assessing the accounting principles used and4476significant estimates made by management, as well as evaluating the overall financial4477statement presentation. We believe that our audits provide a reasonable basis for our4478opinion. </FONT></P>44794480<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4481<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the financial4482statements referred to above present fairly, in all material respects, the consolidated4483financial position of Vascular Solutions, Inc. at December 31, 2003 and 2002, and the4484consolidated results of its operations and its cash flows for each of the three years in4485the period ended December 31, 2003 in conformity with accounting principles generally4486accepted in the United States. </FONT></P>44874488<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->4489<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ernst & Young LLP </FONT></P>44904491<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4492<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>January 16,44932004 </FONT></P>44944495<BR><BR><BR><BR><BR><BR><BR><BR>449644974498<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4499<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37</FONT></P>45004501<HR SIZE=3 COLOR=GRAY NOSHADE>45024503<!-- *************************************************************************** -->4504<!-- MARKER PAGE="sheet: 0; page: 0" -->450545064507<BR>45084509<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4510<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions,4511Inc. </FONT></P>45124513<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4514<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Balance4515Sheets </FONT></P>45164517<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>45184519<TR VALIGN=Bottom>4520<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4521<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>December 31</B> </FONT></TH>4522</TR>45234524<TR VALIGN=Bottom>4525<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4526<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>2003</B> </FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>4527<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>45284529<TR VALIGN=Bottom>4530<TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Assets</B> </FONT></TD>4531<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4532<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4533<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>4534<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4535<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></FONT></TD>4536<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4537<TR VALIGN=Bottom>4538<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>4539<TR VALIGN=Bottom>4540<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>4541<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> 2,864,913</B> </FONT></TD>4542<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4543<TD ALIGN=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>4544<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4545<TR VALIGN=Bottom>4546<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>4547<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>3,019,693</B> </FONT></TD>4548<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4549<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,914,444</FONT></TD>4550<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4551<TR VALIGN=Bottom>4552<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts receivable, net of reserves of $160,000 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>4553<TR VALIGN=Bottom>4554<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> $130,000 in 2003 and 2002, 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>4555<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>1,810,443</B> </FONT></TD>4556<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4557<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,357,946</FONT></TD>4558<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4559<TR VALIGN=Bottom>4560<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>4561<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>3,186,274</B> </FONT></TD>4562<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4563<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,132,516</FONT></TD>4564<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4565<TR VALIGN=Bottom>4566<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>4567<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>462,154</B> </FONT></TD>4568<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4569<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>326,773</FONT></TD>4570<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4571<TR>4572<TD COLSPAN=3></TD>4573<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4574<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>45754576<TR VALIGN=Bottom>4577<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>4578<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>11,343,477</B> </FONT></TD>4579<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4580<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,566,738</FONT></TD>4581<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4582<TR VALIGN=Bottom>4583<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>4584<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>948,602</B> </FONT></TD>4585<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4586<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>795,885</FONT></TD>4587<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4588<TR VALIGN=Bottom>4589<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>4590<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>700,095</B> </FONT></TD>4591<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4592<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>917,595</FONT></TD>4593<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>45944595<TR>4596<TD COLSPAN=3></TD>4597<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4598<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>45994600<TR VALIGN=Bottom>4601<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>4602<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> 12,992,174</B> </FONT></TD>4603<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4604<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,280,218</FONT></TD>4605<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>46064607<TR>4608<TD COLSPAN=3></TD>4609<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4610<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>46114612<TR VALIGN=Bottom>4613<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liabilities and Shareholders’ Equity</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4614<TR VALIGN=Bottom>4615<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4616<TR VALIGN=Bottom>4617<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4618<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 750,762</B> </FONT></TD>4619<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4620<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 771,078</FONT></TD>4621<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4622<TR VALIGN=Bottom>4623<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>4624<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>1,111,049</B> </FONT></TD>4625<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4626<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>886,130</FONT></TD>4627<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4628<TR VALIGN=Bottom>4629<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>4630<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>258,228</B> </FONT></TD>4631<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4632<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>253,777</FONT></TD>4633<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4634<TR>4635<TD COLSPAN=3></TD>4636<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4637<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>4638<TR VALIGN=Bottom>4639<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>4640<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>2,120,039</B> </FONT></TD>4641<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4642<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,910,985</FONT></TD>4643<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4644<TR VALIGN=Bottom>4645<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Commitments</FONT></TD><TD ALIGN=LEFT><FONT 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>4646<TR VALIGN=Bottom>4647<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>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>4648<TR VALIGN=Bottom>4649<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Common stock, $0.01 par value:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4650<TR VALIGN=Bottom>4651<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>4652<TR VALIGN=Bottom>4653<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issued and outstanding shares - 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></TR>4654<TR VALIGN=Bottom>4655<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,880,839 - 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>4656<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>129,892</B> </FONT></TD>4657<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4658<TD ALIGN=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>4659<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4660<TR VALIGN=Bottom>4661<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>4662<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>70,422,926</B> </FONT></TD>4663<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4664<TD ALIGN=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>4665<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4666<TR VALIGN=Bottom>4667<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>4668<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>(41,356</B> </FONT></TD>4669<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>4670<TD ALIGN=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>4671<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4672<TR VALIGN=Bottom>4673<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>4674<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>(59,722,039</B> </FONT></TD>4675<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>4676<TD ALIGN=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>4677<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>46784679<TR>4680<TD COLSPAN=3></TD>4681<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4682<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>4683<TR VALIGN=Bottom>4684<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>4685<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>10,872,135</B> </FONT></TD>4686<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4687<TD ALIGN=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>4688<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>46894690<TR>4691<TD COLSPAN=3></TD>4692<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4693<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>46944695<TR VALIGN=Bottom>4696<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>4697<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> 12,992,174</B> </FONT></TD>4698<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>4699<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,280,218</FONT></TD>4700<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>47014702<TR>4703<TD COLSPAN=3></TD>4704<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4705<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>4706</TABLE>47074708<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4709<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>47104711<BR><BR><BR>471247134714<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4715<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38</FONT></P>47164717<HR SIZE=3 COLOR=GRAY NOSHADE>47184719<!-- *************************************************************************** -->4720<!-- MARKER PAGE="sheet: 0; page: 0" -->472147224723<BR>47244725<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4726<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions,4727Inc. </FONT></P>47284729<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4730<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements4731of Operations </FONT></P>47324733<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>47344735<TR VALIGN=Bottom>4736<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4737<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31</FONT></TH>4738</TR>47394740<TR VALIGN=Bottom>4741<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4742<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4743<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4744<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>47454746<TR VALIGN=Bottom>4747<TD WIDTH=48% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>4748<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4749<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4750<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=12% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>11,804,328</B> </FONT></TD>4751<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4752<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,100,526</FONT></TD>4753<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4754<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,082,379</FONT></TD>4755<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4756<TR VALIGN=Bottom>4757<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>4758<TD ALIGN=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>4,570,242</B> </FONT></TD>4759<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4760<TD ALIGN=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>4761<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4762<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,961,014</FONT></TD>4763<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>47644765<TR>4766<TD COLSPAN=3></TD>4767<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4768<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4769<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>47704771<TR VALIGN=Bottom>4772<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>4773<TD ALIGN=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>7,234,086</B> </FONT></TD>4774<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4775<TD ALIGN=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>4776<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4777<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,121,365</FONT></TD>4778<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4779<TR VALIGN=Bottom>4780<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>4781<TR VALIGN=Bottom>4782<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>4783<TD ALIGN=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>3,670,935</B> </FONT></TD>4784<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4785<TD ALIGN=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>4786<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4787<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,123,883</FONT></TD>4788<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4789<TR VALIGN=Bottom>4790<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>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>1,535,989</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>1,347,694</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>1,288,301</FONT></TD>4796<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4797<TR VALIGN=Bottom>4798<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>4799<TD ALIGN=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>9,645,920</B> </FONT></TD>4800<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4801<TD ALIGN=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>4802<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4803<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,771,901</FONT></TD>4804<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4805<TR VALIGN=Bottom>4806<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>4807<TD ALIGN=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>1,942,483</B> </FONT></TD>4808<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4809<TD ALIGN=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>4810<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4811<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,498,435</FONT></TD>4812<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4813<TR VALIGN=Bottom>4814<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>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>—</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>3,750,000</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>350,000</FONT></TD>4820<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4821<TR VALIGN=Bottom>4822<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>4823<TD ALIGN=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>4824<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4825<TD ALIGN=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>4826<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4827<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>4828<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4829<TR>4830<TD COLSPAN=3></TD>4831<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4832<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4833<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>48344835<TR VALIGN=Bottom>4836<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>4837<TD ALIGN=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>17,012,827</B> </FONT></TD>4838<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4839<TD ALIGN=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>4840<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4841<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,032,520</FONT></TD>4842<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4843<TR>4844<TD COLSPAN=3></TD>4845<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4846<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4847<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>48484849<TR VALIGN=Bottom>4850<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>4851<TD ALIGN=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>(9,778,741</B> </FONT></TD>4852<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>4853<TD ALIGN=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>4854<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4855<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13,911,155</FONT></TD>4856<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4857<TR VALIGN=Bottom>4858<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>4859<TD ALIGN=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>150,342</B> </FONT></TD>4860<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4861<TD ALIGN=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>4862<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4863<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,660,757</FONT></TD>4864<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4865<TR>4866<TD COLSPAN=3></TD>4867<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4868<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>4869<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>48704871<TR VALIGN=Bottom>4872<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>4873<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(9,628,399</B> </FONT></TD>4874<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4875<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,978,914</FONT></TD>4876<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4877<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,250,398</FONT></TD>4878<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4879<TR>4880<TD COLSPAN=3></TD>4881<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4882<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4883<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>48844885<TR VALIGN=Bottom>4886<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4887<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.75</B> </FONT></TD>4888<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>4889<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>4890<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4891<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.93</FONT></TD>4892<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4893<TR>4894<TD COLSPAN=3></TD>4895<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4896<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4897<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>48984899<TR VALIGN=Bottom>4900<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares used in computing 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></TR>4901<TR VALIGN=Bottom>4902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> net loss per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4903<TD ALIGN=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>12,858,765</B> </FONT></TD>4904<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4905<TD ALIGN=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>4906<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>13,216,773</FONT></TD>4908<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4909<TR>4910<TD COLSPAN=3></TD>4911<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4912<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>4913<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>49144915</TABLE>49164917<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4918<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>491949204921<BR><BR><BR>492249234924<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->4925<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</FONT></P>49264927<HR SIZE=3 COLOR=GRAY NOSHADE>49284929<!-- *************************************************************************** -->4930<!-- MARKER PAGE="sheet: 0; page: 0" -->493149324933<BR>49344935<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4936<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions,4937Inc. </FONT></P>49384939<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4940<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statement4941of Changes in Shareholders’ Equity </FONT></P>49424943<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=100%>49444945<TR VALIGN=Bottom>4946<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4947<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Common Stock</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4948<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4949<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4950<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4951<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>49524953<TR VALIGN=Bottom>4954<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>4955<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4956<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4957<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional<BR>4958Paid-in<BR>4959Capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4960<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Other</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4961<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>4962Deficit</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>4963<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>TOTAL</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>49644965<TR VALIGN=Bottom>4966<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2000</FONT></TD>4967<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4968<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4969<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>13,116,008</FONT></TD>4970<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4971<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>131,160</FONT></TD>4972<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4973<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>69,965,240</FONT></TD>4974<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4975<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(38,182</FONT></TD>4976<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4977<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(22,864,328</FONT></TD>4978<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4979<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>47,193,890</FONT></TD>4980<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4981<TR VALIGN=Bottom>4982<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>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>120,800</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>1,208</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>304,096</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>—</FONT></TD>4992<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4993<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>305,304</FONT></TD>4994<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4995<TR VALIGN=Bottom>4996<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>4997<TR VALIGN=Bottom>4998<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>4999<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>90,194</FONT></TD>5000<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5001<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>902</FONT></TD>5002<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5003<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>308,660</FONT></TD>5004<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5005<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5006<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5007<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5008<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5009<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>309,562</FONT></TD>5010<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5011<TR VALIGN=Bottom>5012<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Value of stock options granted for</FONT></TD><TD ALIGN=LEFT><FONT 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>5013<TR VALIGN=Bottom>5014<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> services</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5015<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5016<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5017<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5018<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5019<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,398</FONT></TD>5020<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5021<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5022<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5023<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5024<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5025<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,398</FONT></TD>5026<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5027<TR VALIGN=Bottom>5028<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>5029<TR VALIGN=Bottom>5030<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>5031<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5032<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5033<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5034<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5035<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>123,780</FONT></TD>5036<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5037<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(123,780</FONT></TD>5038<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5039<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5040<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5041<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5042<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5043<TR VALIGN=Bottom>5044<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>5045<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5046<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5047<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5048<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5049<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5050<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5051<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62,850</FONT></TD>5052<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5053<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5054<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5055<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62,850</FONT></TD>5056<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5057<TR VALIGN=Bottom>5058<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>5059<TR VALIGN=Bottom>5060<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>5061<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5062<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5063<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5064<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5065<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5066<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5067<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5068<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5069<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(12,250,398</FONT></TD>5070<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5071<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(12,250,398</FONT></TD>5072<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5073<TR VALIGN=Bottom>5074<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>5075<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5076<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5077<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5078<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5079<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5080<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5081<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,722</FONT></TD>5082<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5083<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5084<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5085<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,722</FONT></TD>5086<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5087<TR>5088<TD COLSPAN=3></TD>5089<TD COLSPAN=3></TD>5090<TD COLSPAN=3></TD>5091<TD COLSPAN=3></TD>5092<TD COLSPAN=3></TD>5093<TD COLSPAN=3></TD>5094<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>50955096<TR VALIGN=Bottom>5097<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>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> </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>(12,252,120</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><HR NOSHADE COLOR=Black SIZE=1></TD>5113<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5114<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5115<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5116<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5117<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>51185119<TR VALIGN=Bottom>5120<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5121<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,327,002</FONT></TD>5122<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5123<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>133,270</FONT></TD>5124<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5125<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>70,712,174</FONT></TD>5126<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>(100,834</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>(35,114,726</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>35,629,884</FONT></TD>5132<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5133<TR VALIGN=Bottom>5134<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>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>10,000</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>100</FONT></TD>5138<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5139<TD ALIGN=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>5140<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>—</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>—</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>20,000</FONT></TD>5146<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5147<TR VALIGN=Bottom>5148<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>5149<TR VALIGN=Bottom>5150<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>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>152,737</FONT></TD>5152<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5153<TD ALIGN=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>5154<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5155<TD ALIGN=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>5156<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>—</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>—</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>164,571</FONT></TD>5162<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5163<TR VALIGN=Bottom>5164<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>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>(608,900</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>(6,090</FONT></TD>5168<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5169<TD ALIGN=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>5170<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5171<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5172<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5173<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5174<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>(547,722</FONT></TD>5176<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5177<TR VALIGN=Bottom>5178<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>5179<TR VALIGN=Bottom>5180<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>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>1,858</FONT></TD>5186<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5187<TD ALIGN=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>5188<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5189<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5190<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></TR>5193<TR VALIGN=Bottom>5194<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>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>—</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>—</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>74,668</FONT></TD>5202<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5203<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5204<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>74,668</FONT></TD>5206<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5207<TR VALIGN=Bottom>5208<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>5209<TR VALIGN=Bottom>5210<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>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>—</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>—</FONT></TD>5216<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5217<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5218<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5219<TD ALIGN=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>5220<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>(14,978,914</FONT></TD>5222<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5223<TR VALIGN=Bottom>5224<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>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>—</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>6,746</FONT></TD>5232<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5233<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5234<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>6,746</FONT></TD>5236<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5237<TR>5238<TD COLSPAN=3></TD>5239<TD COLSPAN=3></TD>5240<TD COLSPAN=3></TD>5241<TD COLSPAN=3></TD>5242<TD COLSPAN=3></TD>5243<TD COLSPAN=3></TD>5244<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>5245<TR VALIGN=Bottom>5246<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>5247<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5248<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5249<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5250<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5251<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5252<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5253<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5254<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5255<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5256<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5257<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(14,972,168</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=3><HR NOSHADE COLOR=Black SIZE=1></TD>5262<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5263<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5264<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5265<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5266<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>52675268<TR VALIGN=Bottom>5269<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>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>12,880,839</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 128,808</FONT></TD>5273<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5274<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 70,355,343</FONT></TD>5275<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5276<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (21,278</FONT></TD>5277<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5278<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (50,093,640</FONT></TD>5279<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5280<TD ALIGN=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>5281<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5282<TR VALIGN=Bottom>5283<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>5284<TD ALIGN=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>65,855</B> </FONT></TD>5285<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5286<TD ALIGN=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>659</B> </FONT></TD>5287<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5288<TD ALIGN=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>81,710</B> </FONT></TD>5289<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5290<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5291<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5292<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5293<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5294<TD ALIGN=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>82,369</B> </FONT></TD>5295<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5296<TR VALIGN=Bottom>5297<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>5298<TR VALIGN=Bottom>5299<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>5300<TD ALIGN=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>195,876</B> </FONT></TD>5301<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5302<TD ALIGN=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>1,959</B> </FONT></TD>5303<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5304<TD ALIGN=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>123,972</B> </FONT></TD>5305<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5306<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5307<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5308<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5309<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5310<TD ALIGN=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>125,931</B> </FONT></TD>5311<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5312<TR VALIGN=Bottom>5313<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>5314<TD ALIGN=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>(153,400</B> </FONT></TD>5315<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5316<TD ALIGN=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>(1,534</B> </FONT></TD>5317<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5318<TD ALIGN=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>(138,099</B> </FONT></TD>5319<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5320<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5321<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5322<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5323<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5324<TD ALIGN=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>(139,633</B> </FONT></TD>5325<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>5326<TR VALIGN=Bottom>5327<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>5328<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5329<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5330<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5331<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5332<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5333<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5334<TD ALIGN=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>40,545</B> </FONT></TD>5335<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5336<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5337<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5338<TD ALIGN=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>40,545</B> </FONT></TD>5339<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5340<TR VALIGN=Bottom>5341<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>5342<TR VALIGN=Bottom>5343<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>5344<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5345<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5346<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5347<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5348<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5349<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5350<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5351<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5352<TD ALIGN=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>(9,628,399</B> </FONT></TD>5353<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5354<TD ALIGN=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>(9,628,399</B> </FONT></TD>5355<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>5356<TR VALIGN=Bottom>5357<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>5358<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5359<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5360<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5361<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5362<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5363<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5364<TD ALIGN=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>22,089</B> </FONT></TD>5365<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5366<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5367<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5368<TD ALIGN=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>22,089</B> </FONT></TD>5369<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5370<TR>5371<TD COLSPAN=3></TD>5372<TD COLSPAN=3></TD>5373<TD COLSPAN=3></TD>5374<TD COLSPAN=3></TD>5375<TD COLSPAN=3></TD>5376<TD COLSPAN=3></TD>5377<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>5378<TR VALIGN=Bottom>5379<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>5380<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5381<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5382<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5383<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5384<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5385<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5386<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5387<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5388<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5389<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5390<TD ALIGN=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>(9,606,310</B> </FONT></TD>5391<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>5392<TR>5393<TD COLSPAN=3></TD>5394<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5395<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5396<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5397<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5398<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5399<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>54005401<TR VALIGN=Bottom>5402<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>5403<TD ALIGN=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>12,989,170</B> </FONT></TD>5404<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5405<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>129,892</B> </FONT></TD>5406<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5407<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>70,422,926</B> </FONT></TD>5408<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5409<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(41,356</B> </FONT></TD>5410<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5411<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(59,722,039</B> </FONT></TD>5412<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5413<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10,872,135</B> </FONT></TD>5414<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5415<TR>5416<TD COLSPAN=3></TD>5417<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5418<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5419<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5420<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5421<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5422<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>5423</TABLE>54245425<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5426<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes.</I> </FONT> </P>54275428<BR><BR><BR><BR><BR>542954305431<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->5432<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></P>54335434<HR SIZE=3 COLOR=GRAY NOSHADE>54355436<!-- *************************************************************************** -->5437<!-- MARKER PAGE="sheet: 0; page: 0" -->543854395440<BR>54415442<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5443<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. </FONT></P>54445445<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5446<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements5447of Cash Flows </FONT></P>54485449<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>5450<TR VALIGN=Bottom>5451<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5452<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>5453</TR>54545455<TR VALIGN=Bottom>5456<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5457<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>5458<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>5459<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>54605461<TR VALIGN=Bottom>5462<TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating activities</FONT></TD>5463<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5464<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5465<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>5466<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5467<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>5468<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5469<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>5470<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5471<TR VALIGN=Bottom>5472<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>5473<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(9,628,399</B> </FONT></TD>5474<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5475<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,978,914</FONT></TD>5476<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> (12,250,398</FONT></TD>5478<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5479<TR VALIGN=Bottom>5480<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adjustments to reconcile net loss to net cash used</FONT></TD><TD ALIGN=LEFT><FONT 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>5481<TR VALIGN=Bottom>5482<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>5483<TR VALIGN=Bottom>5484<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>5485<TD ALIGN=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>386,196</B> </FONT></TD>5486<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5487<TD ALIGN=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>5488<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5489<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>432,721</FONT></TD>5490<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5491<TR VALIGN=Bottom>5492<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>5493<TD ALIGN=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>5494<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5495<TD ALIGN=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>5496<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5497<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5498<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5499<TR VALIGN=Bottom>5500<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Value of options granted for services</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5501<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5502<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5503<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5504<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5505<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,398</FONT></TD>5506<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5507<TR VALIGN=Bottom>5508<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>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>40,545</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>74,668</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>62,850</FONT></TD>5514<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5515<TR VALIGN=Bottom>5516<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>5517<TR VALIGN=Bottom>5518<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>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"><B>(452,497</B> </FONT></TD>5520<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </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>(72,935</FONT></TD>5522<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5523<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>686,372</FONT></TD>5524<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5525<TR VALIGN=Bottom>5526<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>5527<TD ALIGN=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>(1,053,758</B> </FONT></TD>5528<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5529<TD ALIGN=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>5530<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5531<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>684,082</FONT></TD>5532<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5533<TR VALIGN=Bottom>5534<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>5535<TD ALIGN=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>(135,381</B> </FONT></TD>5536<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5537<TD ALIGN=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>5538<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5539<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(58,637</FONT></TD>5540<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5541<TR VALIGN=Bottom>5542<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>5543<TD ALIGN=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>(20,316</B> </FONT></TD>5544<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5545<TD ALIGN=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>5546<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5547<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(22,191</FONT></TD>5548<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5549<TR VALIGN=Bottom>5550<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>5551<TD ALIGN=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>229,370</B> </FONT></TD>5552<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5553<TD ALIGN=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>5554<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5555<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(481,583</FONT></TD>5556<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5557<TR>5558<TD COLSPAN=3></TD>5559<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5560<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5561<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>55625563<TR VALIGN=Bottom>5564<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>5565<TD ALIGN=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>(10,416,740</B> </FONT></TD>5566<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5567<TD ALIGN=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>5568<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5569<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,936,386</FONT></TD>5570<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5571<TR VALIGN=Bottom>5572<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><B>Investing Activities</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>5573<TR VALIGN=Bottom>5574<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>5575<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5576<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5577<TD ALIGN=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>5578<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5579<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5580<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5581<TR VALIGN=Bottom>5582<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase of property and equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5583<TD ALIGN=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>(538,913</B> </FONT></TD>5584<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5585<TD ALIGN=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>5586<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5587<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(456,206</FONT></TD>5588<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5589<TR VALIGN=Bottom>5590<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>5591<TD ALIGN=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>(10,695,249</B> </FONT></TD>5592<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5593<TD ALIGN=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>5594<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5595<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(25,300,530</FONT></TD>5596<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5597<TR VALIGN=Bottom>5598<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>5599<TD ALIGN=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>22,590,000</B> </FONT></TD>5600<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5601<TD ALIGN=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>5602<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5603<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,423,770</FONT></TD>5604<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5605<TR>5606<TD COLSPAN=3></TD>5607<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5608<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5609<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>56105611<TR VALIGN=Bottom>5612<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash provided by (used in) investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5613<TD ALIGN=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>11,355,838</B> </FONT></TD>5614<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5615<TD ALIGN=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>5616<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5617<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,332,966</FONT></TD>5618<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5619<TR VALIGN=Bottom>5620<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><B>Financing Activities</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>5621<TR VALIGN=Bottom>5622<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>5623<TD ALIGN=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>82,369</B> </FONT></TD>5624<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5625<TD ALIGN=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>5626<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5627<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>305,304</FONT></TD>5628<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5629<TR VALIGN=Bottom>5630<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>5631<TD ALIGN=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>125,931</B> </FONT></TD>5632<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5633<TD ALIGN=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>5634<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5635<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>309,562</FONT></TD>5636<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5637<TR VALIGN=Bottom>5638<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>5639<TD ALIGN=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>(139,633</B> </FONT></TD>5640<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5641<TD ALIGN=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>5642<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5643<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5644<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5645<TR>5646<TD COLSPAN=3></TD>5647<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5648<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5649<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>56505651<TR VALIGN=Bottom>5652<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash provided (used in) by 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>5653<TD ALIGN=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>68,667</B> </FONT></TD>5654<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5655<TD ALIGN=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>5656<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5657<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>614,866</FONT></TD>5658<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5659<TR VALIGN=Bottom>5660<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>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>5661<TR VALIGN=Bottom>5662<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>5663<TD ALIGN=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>22,089</B> </FONT></TD>5664<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5665<TD ALIGN=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>5666<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5667<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,722</FONT></TD>5668<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5669<TR>5670<TD COLSPAN=3></TD>5671<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5672<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5673<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>56745675<TR VALIGN=Bottom>5676<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>5677<TD ALIGN=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>1,029,854</B> </FONT></TD>5678<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5679<TD ALIGN=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>5680<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5681<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(11,656,208</FONT></TD>5682<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5683<TR VALIGN=Bottom>5684<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>5685<TD ALIGN=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>1,835,059</B> </FONT></TD>5686<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5687<TD ALIGN=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>5688<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5689<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,747,848</FONT></TD>5690<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5691<TR>5692<TD COLSPAN=3></TD>5693<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5694<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>5695<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>56965697<TR VALIGN=Bottom>5698<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>5699<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>2,864,913</B> </FONT></TD>5700<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5701<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,835,059</FONT></TD>5702<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5703<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9,091,640</FONT></TD>5704<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5705<TR>5706<TD COLSPAN=3></TD>5707<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5708<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>5709<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>5710</TABLE>5711571257135714<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5715<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes.</I> </FONT> </P>57165717<BR><BR><BR>571857195720<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->5721<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41</FONT></P>57225723<HR SIZE=3 COLOR=GRAY NOSHADE>57245725<!-- *************************************************************************** -->5726<!-- MARKER PAGE="sheet: 0; page: 0" -->572757285729<BR>57305731<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5732<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1. Description of Business</B> </FONT> </P>57335734<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5735<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. (the5736Company) is a medical device company focused on bringing solutions to interventional5737cardiologists and interventional radiologists. The Company’s product line includes5738the Duett™ sealing device, the D-Stat™ flowable hemostat, the D-Stat Dry5739bangage, the D-Stat Radial hemostat band, the Vari-Lase endovenous laser procedure kit5740& laser, the Pronto extraction catheter and the Acolysis®therapeutic ultrasound5741system. As a vertically-intergrated medical device company, the Company generates ideas5742and creates new interventional medical devices, and then delivers those products directly5743to the physician through its direct domestic sales force and international distribution5744network. The Duett sealing device is designed to provide a complete seal of the puncture5745site following catheterization procedures such as angiography, angioplasty and stenting.5746The D-Stat flowable hemostat is a thick, yet flowable blood clotting material that is5747used in a wide variety of interventional medical procedures for the local control of5748bleeding. The D-Stat Dry bandage consists of a freeze-dried pad of the D-Stat5749procoagulant which can be applied to topical bleeding with a custom adhesive bandage. The5750D-Stat Radial is a customized compression device containing a freeze-dried pad of the5751D-Stat procoagulant for sealing the arterial puncture following catheterization5752procedures utilizing the radial artery in the wrist. The Vari-Lase product is a treatment5753for superficial venous reflux, otherwise known as varicose veins. The Pronto extraction5754catheter consists of a catheter with a proprietary atraumatic distal tip and large5755extraction lumen for the removal of soft thrombus from arteries. The Acolysis5756intravascular therapeutic ultrasound system delivers ultrasound waves to lyse blood clots5757and plaque in arteries. The Acolysis system is not available for sale in the United5758States. The Company was incorporated in December 1996 and began operations in February57591997. </FONT></P>57605761<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5762<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2. Summary of Significant Accounting5763Policies</B> </FONT> </P>57645765<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5766<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Basis of Consolidation</I> </FONT> </P>57675768<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5769<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated financial5770statements include the accounts of Vascular Solutions, Inc. and its wholly owned5771subsidiary, Vascular Solutions GmbH, after elimination of intercompany accounts and5772transactions. </FONT></P>57735774<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5775<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Foreign Currency Translation and5776Transactions</I> </FONT> </P>57775778<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5779<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign assets and liabilities are5780translated using the year-end exchange rates. Results of operations are translated using5781the average exchange rates throughout the year. Translation gains or losses are5782accumulated as a separate component of shareholders’ equity. </FONT></P>57835784<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5785<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Comprehensive Loss</I> </FONT> </P>57865787<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5788<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of comprehensive loss5789are net loss and the effects of foreign currency translation adjustments. </FONT></P>57905791<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5792<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Use of Estimates</I> </FONT> </P>57935794<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5795<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The preparation of financial5796statements in conformity with accounting principles generally accepted in the United5797States requires management to make estimates and assumptions that affect the amounts5798reported in the financial statements and accompanying notes. Actual results could differ5799from those estimates. </FONT></P>58005801<BR>580258035804<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->5805<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42</FONT></P>58065807<HR SIZE=3 COLOR=GRAY NOSHADE>58085809<!-- *************************************************************************** -->5810<!-- MARKER PAGE="sheet: 0; page: 0" -->581158125813<BR>58145815<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5816<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2. Summary of Significant Accounting5817Policies (continued)</B> </FONT> </P>58185819<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5820<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Cash and Cash Equivalents</I> </FONT> </P>58215822<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5823<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company classifies all highly5824liquid investments with initial maturities of three months or less as cash equivalents.5825Cash equivalents consist of cash and money market funds and are stated at cost, which5826approximates market value. </FONT></P>58275828<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5829<A NAME=A091></A>5830<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Available-for-Sale Securities</I> </FONT> </P>58315832<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5833<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company classifies investments5834as available-for-sale securities. Available-for-sale securities consist of U.S.5835Government obligations and investment-grade corporate debt with maturities of up to one5836year. These investments are stated at amortized cost, which approximates market value. </FONT></P>58375838<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5839<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2003 and 2002, the5840Company had the following available for sale securities with carrying values equal to5841fair values: </FONT></P>58425843<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>5844<TR VALIGN=Bottom>5845<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5846<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>5847<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>5848<TR VALIGN=Bottom>5849<TD WIDTH=48% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Corporate Debt</FONT></TD>5850<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5851<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5852<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=19% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,021,567</B> </FONT></TD>5853<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5854<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=19% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,383,681</FONT></TD>5855<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5856<TR VALIGN=Bottom>5857<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>5858<TD ALIGN=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>998,126</B> </FONT></TD>5859<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5860<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,530,763</FONT></TD>5861<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5862<TR>5863<TD COLSPAN=3></TD>5864<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>5865<TR VALIGN=Bottom>5866<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5867<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,019,693</B> </FONT></TD>5868<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5869<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 14,914,444</FONT></TD>5870<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5871<TR>5872<TD COLSPAN=3></TD>5873<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>5874</TABLE>58755876<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5877<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Inventories</I> </FONT> </P>58785879<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5880<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories are stated at the lower5881of cost (first-in, first-out method) or market and are comprised of the following at5882December 31: </FONT></P>58835884<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>5885<TR VALIGN=Bottom>5886<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>5887<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>5888<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>5889<TR VALIGN=Bottom>5890<TD WIDTH=36% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw materials</FONT></TD>5891<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5892<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5893<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=23% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,100,775</B> </FONT></TD>5894<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5895<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=23% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,561,943</FONT></TD>5896<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5897<TR VALIGN=Bottom>5898<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>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>260,887</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>138,134</FONT></TD>5902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5903<TR VALIGN=Bottom>5904<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>5905<TD ALIGN=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>824,612</B> </FONT></TD>5906<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5907<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>432,439</FONT></TD>5908<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5909<TR>5910<TD COLSPAN=3></TD>5911<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>5912<TR VALIGN=Bottom>5913<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5914<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,186,274</B> </FONT></TD>5915<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5916<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,132,516</FONT></TD>5917<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5918<TR>5919<TD COLSPAN=3></TD>5920<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>5921</TABLE>59225923<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5924<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Property and Equipment</I> </FONT> </P>59255926<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5927<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment are stated at5928cost. Depreciation is provided on a straight-line basis over the estimated useful lives5929of the assets as follows: </FONT></P>59305931<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>5932<TR VALIGN=Bottom>5933<TD WIDTH=66% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing equipment</FONT></TD>5934<TD WIDTH=34% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 to 5 years</FONT></TD></TR>5935<TR VALIGN=Bottom>5936<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office and computer equipment</FONT></TD>5937<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 years</FONT></TD></TR>5938<TR VALIGN=Bottom>5939<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Furniture and fixtures</FONT></TD>5940<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 to 5 years</FONT></TD></TR>5941<TR VALIGN=Bottom>5942<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leasehold improvements</FONT></TD>5943<TD ALIGN="LEFT" NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Remaining term of the lease</FONT></TD></TR>5944<TR VALIGN=Bottom>5945<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development equipment</FONT></TD>5946<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 to 5 years</FONT></TD></TR>5947</TABLE>59485949<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5950<A NAME=A094></A>5951<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Impairment of Long-Lived Assets</I> </FONT> </P>59525953<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5954<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company will record impairment5955losses on long-lived assets used in operations when indicators of impairment are present5956and the undiscounted cash flows estimated to be generated by those assets are less than5957the assets’ carrying amount. The amount of impairment loss recorded will be measured5958as the amount by which the carrying value of the assets exceeds the fair value of the5959assets. </FONT></P>59605961<BR>596259635964<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->5965<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43</FONT></P>59665967<HR SIZE=3 COLOR=GRAY NOSHADE>59685969<!-- *************************************************************************** -->5970<!-- MARKER PAGE="sheet: 0; page: 0" -->597159725973<BR>59745975<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5976<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2. Summary of Significant Accounting5977Policies (continued)</B> </FONT> </P>59785979<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5980<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Revenue Recognition</I> </FONT> </P>59815982<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5983<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States and Germany,5984the Company sells its products directly to hospitals and clinics. Revenue is recognized5985upon shipment of products to customers, net of estimated returns. </FONT></P>59865987<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5988<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In all other international markets,5989the Company sells its products to international distributors which subsequently resell5990the products to hospitals and clinics. The Company has agreements with each of its5991distributors which provide that title and risk of loss pass to the distributor upon5992shipment of the products to the distributor. The Company warrants that its products are5993free from manufacturing defects at the time of shipment to the distributor. Revenue is5994recognized upon shipment of products to distributors following the receipt and acceptance5995of a distributor’s purchase order. Allowances are provided for estimated returns and5996warranty costs at the time of shipment. To date, warranty costs have been insignificant. </FONT></P>59975998<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5999<A NAME=A097></A>6000<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Research and Development Costs</I> </FONT> </P>60016002<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6003<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All research and development costs6004are charged to operations as incurred. </FONT></P>60056006<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6007<A NAME=A098></A>6008<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Stock-Based Compensation</I> </FONT> </P>60096010<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6011<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2003, the Company6012had a stock-based employee compensation plan, which is described more fully in Note 9.6013The Company accounts for those plans under the recognition and measurement principles of6014Accounting Principles Board (APB) Opinion No. 25, <I>Accounting for Stock Issued to6015Employees</I>, and related interpretations. No stock-based employee compensation cost is6016reflected in net loss, as all options granted under those plans had an exercise price6017equal to the market value of the underlying common stock on the date of grant. The6018following table illustrates the effect on net loss and loss per share if the Company had6019applied the fair value recognition provisions of Financial Accounting Standards Board6020(FASB) Statement of Financial Accounting Standards (SFAS) No. 123, <I>Accounting for6021Stock-Based Compensation</I>, to stock-based employer compensation. </FONT></P>60226023<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=600>6024<TR VALIGN=Bottom>6025<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6026<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6027</TR>60286029<TR VALIGN=Bottom>6030<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6031<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6032<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6033<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>60346035<TR VALIGN=Bottom>6036<TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss, as reported</FONT></TD>6037<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6038<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6039<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=11% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(9,628,399</B> </FONT></TD>6040<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6041<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,978,914</FONT></TD>6042<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6043<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> (12,250,398</FONT></TD>6044<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6045<TR VALIGN=Bottom>6046<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>6047<TR VALIGN=Bottom>6048<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>6049<TR VALIGN=Bottom>6050<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>6051<TD ALIGN=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>(573,355</B> </FONT></TD>6052<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6053<TD ALIGN=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>6054<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6055<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,631,693</FONT></TD>6056<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6057<TR>6058<TD COLSPAN=3></TD>6059<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>60606061<TR VALIGN=Bottom>6062<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>6063<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>(10,201,754</B> </FONT></TD>6064<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6065<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (17,319,008</FONT></TD>6066<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6067<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,882,091</FONT></TD>6068<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6069<TR>6070<TD COLSPAN=3></TD>6071<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>60726073<TR VALIGN=Bottom>6074<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss per share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6075<TR VALIGN=Bottom>6076<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>6077<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.75</B> </FONT></TD>6078<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6079<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>6080<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6081<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.93</FONT></TD>6082<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6083<TR>6084<TD COLSPAN=3></TD>6085<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=2></TD></TR>60866087<TR VALIGN=Bottom>6088<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic and diluted - pro forma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6089<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.79</B> </FONT></TD>6090<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6091<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.30</FONT></TD>6092<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6093<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>6094<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6095<TR>6096<TD COLSPAN=3></TD>6097<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=2></TD></TR>6098</TABLE>60996100<BR>610161026103<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->6104<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44</FONT></P>61056106<HR SIZE=3 COLOR=GRAY NOSHADE>61076108<!-- *************************************************************************** -->6109<!-- MARKER PAGE="sheet: 0; page: 0" -->611061116112<BR>61136114<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6115<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2. Summary of Significant Accounting6116Policies (continued)</B> </FONT> </P>61176118<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6119<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For purposes of calculating the6120above-required disclosure, the fair value of each option grant is estimated on the date6121of grant using the Black-Scholes option-pricing model. The fair value of the Company’s6122stock options was estimated assuming no expected dividends and the following weighted6123average assumptions: </FONT></P>61246125<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>6126<TR VALIGN=Bottom>6127<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6128<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6129<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6130<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6131<TR VALIGN=Bottom>6132<TD WIDTH=52% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life (years)</FONT></TD>6133<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6134<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6135<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6</B> </FONT></TD>6136<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.38</B> </FONT></TD>6137<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>6138<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.50</FONT></TD>6139<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>6140<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD></TR>6141<TR VALIGN=Bottom>6142<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>6143<TD ALIGN=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</B> </FONT></TD>6144<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.98</B> </FONT></TD>6145<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>6146<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.01</FONT></TD>6147<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>6148<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.21</FONT></TD></TR>6149<TR VALIGN=Bottom>6150<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>6151<TD ALIGN=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</B> </FONT></TD>6152<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.54%</B> </FONT></TD>6153<TD ALIGN=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</FONT></TD>6154<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.30%</FONT></TD>6155<TD ALIGN=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</FONT></TD>6156<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.88%</FONT></TD></TR>6157</TABLE>61586159<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6160<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The weighted average fair value of6161options granted with an exercise price equal to the deemed stock price on the date of6162grant during 2003, 2002, and 2001 was $0.71, $1.58, and $5.31, respectively. </FONT></P>61636164<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6165<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Income Taxes</I> </FONT> </P>61666167<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6168<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes are accounted for under6169the liability method. Deferred income taxes are provided for temporary differences6170between the financial reporting and the tax bases of assets and liabilities. </FONT></P>61716172<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6173<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Concentrations of Credit Risk</I> </FONT> </P>61746175<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6176<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial instruments that6177potentially subject the Company to concentrations of credit risk consist primarily of6178cash and cash equivalents, investments, and accounts receivable. The Company maintains6179its accounts for cash and cash equivalents and investments principally at one major bank6180and two investment firms in the United States. The Company has a formal written6181investment policy that restricts the placement of investments to issuers evaluated as6182creditworthy. The Company has not experienced any losses on its deposits of its cash and6183cash equivalents. </FONT></P>61846185<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6186<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With respect to accounts receivable,6187the Company performs credit evaluations of its customers and does not require collateral.6188One customer accounted for 4% of gross accounts receivable as of December 31, 2003 and6189one customer accounted for 5% of gross accounts receivable as of December 31, 2002. There6190have been no material losses on customer receivables. </FONT></P>61916192<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6193<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Net Loss Per Share</I> </FONT> </P>61946195<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6196<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with SFAS No. 128, <I>Earnings6197Per Share</I>, basic net loss per share is computed by dividing net loss by the weighted6198average common shares outstanding during the periods presented. Diluted net loss per6199share is computed by dividing net loss by the weighted average common and dilutive6200potential common shares outstanding computed in accordance with the treasury stock6201method. For all periods presented, diluted loss per share is the same as basic loss per6202share, because the effect of outstanding options, warrants, and convertible preferred6203stock is antidilutive. </FONT></P>62046205<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6206<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Reclassifications</I> </FONT> </P>62076208<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6209<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain prior year balances were6210reclassified to conform to the current year presentation. </FONT></P>62116212<BR>621362146215<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->6216<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45</FONT></P>62176218<HR SIZE=3 COLOR=GRAY NOSHADE>62196220<!-- *************************************************************************** -->6221<!-- MARKER PAGE="sheet: 0; page: 0" -->622262236224<BR>62256226<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6227<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2. Summary of Significant Accounting6228Policies (continued)</B> </FONT> </P>62296230<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6231<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Goodwill and Other Intangible Assets</I> </FONT> </P>62326233<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6234<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2002, the Company adopted6235SFAS No. 142, <I>Goodwill and Other Intangible Assets</I>. Goodwill is tested for6236impairment annually in the fourth quarter or more frequently if changes in circumstances6237or the occurrence of events suggest an impairment exists. The Company has concluded that6238no impairment of goodwill exists as of December 31, 2003. </FONT></P>62396240<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6241<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other intangible assets consist of6242purchased technology. Purchased technology is amortized using the straight-line method6243over its estimated useful life of four years. The Company reviews intangible assets for6244impairment annually or as changes in circumstances or the occurrence of events suggests6245the remaining value is not recoverable. </FONT></P>62466247<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6248<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>New Accounting Pronouncements</I> </FONT> </P>62496250<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6251<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In January 2003, the Financial6252Accounting Standards Board issued FASB Interpretation No. 46, <I>Consolidation of Variable6253Interest Entities, an Interpretation of ARB No. 51,</I> or FIN No. 46. FIN No. 46 requires6254certain variable interest entities to be consolidated by the primary beneficiary of the6255entity if the equity investors in the entity do not have the characteristics of a6256controlling financial interest or do not have sufficient equity at risk for the entity to6257finance its activities without additional subordinated financial support from other6258parties. FIN No. 46 is effective immediately for all new variable interest entities6259created or acquired after January 31, 2003. For variable interest entities created or6260acquired prior to February 1, 2003, the provisions of FIN No. 46 must be applied for the6261first interim or annual period beginning after December 15, 2003. The adoption of FIN No.626246 did not have a material impact on the Company’s financial statements. </FONT></P>62636264<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6265<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3. Acquisition of Certain Assets of6266Angiosonics, Inc.</B> </FONT> </P>62676268<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6269<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 29, 2002, the Company6270purchased the Acolysis® intravascular ultrasound assets and related patents and6271technologies from the secured creditors of Angiosonics, Inc. in exchange for $1,500,0006272in cash. The Company allocated the purchase price of $1,500,000 and the related6273transaction fees using the fair market value of the assets. The Company allocated6274$487,608 to inventory and fixed assets, $870,000 to purchased technology, and $192,595 to6275goodwill. </FONT></P>62766277<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6278<A NAME=A108></A>6279<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4. Goodwill and Other Intangible6280Assets</B> </FONT> </P>62816282<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6283<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed in Note 2, the Company6284adopted SFAS No. 142 in fiscal 2002, and determined that the developed technology the6285Company acquired from Angiosonics, Inc. in April 2002 would be amortized over its useful6286life of four years. The goodwill acquired will not be amortized. The Company expects the6287future annual amortization expense for its acquired purchased development to be6288approximately $217,500 for each of the next two fiscal years and approximately $72,500 in6289the third fiscal year. </FONT></P>62906291<BR><BR>629262936294<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->6295<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46</FONT></P>62966297<HR SIZE=3 COLOR=GRAY NOSHADE>62986299<!-- *************************************************************************** -->6300<!-- MARKER PAGE="sheet: 0; page: 0" -->630163026303<BR>63046305<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6306<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4. Goodwill and Other Intangible6307Assets (continued)</B> </FONT> </P>63086309<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6310<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balances of acquired intangible6311assets as of December 31, 2003 were as follows: </FONT></P>63126313<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=500>63146315<TR VALIGN=Bottom>6316<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6317<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Carrying<BR>6318Amount</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6319<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>6320Amortization</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6321<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>63226323<TR VALIGN=Bottom>6324<TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortizing intangibles:</FONT></TD>6325<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6326<TD WIDTH=3% 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=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6328<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6329<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>6330<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6331<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>6332<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6333<TR VALIGN=Bottom>6334<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>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> 870,000</FONT></TD>6336<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6337<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 362,500</FONT></TD>6338<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6339<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 507,500</FONT></TD>6340<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6341<TR VALIGN=Bottom>6342<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>6343<TR VALIGN=Bottom>6344<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>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>6347<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6348<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6349<TD ALIGN=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>6350<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6351<TR>6352<TD COLSPAN=3></TD>6353<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>63546355<TR VALIGN=Bottom>6356<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6357<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,062,595</FONT></TD>6358<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6359<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 362,500</FONT></TD>6360<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6361<TD ALIGN=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>6362<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6363<TR>6364<TD COLSPAN=3></TD>6365<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=2></TD></TR>6366</TABLE>63676368<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6369<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5. Property and Equipment</B> </FONT> </P>63706371<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6372<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment consists of6373the following at December 31: </FONT></P>63746375<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>6376<TR VALIGN=Bottom>6377<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6378<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6379<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6380<TR VALIGN=Bottom>6381<TD WIDTH=56% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment:</FONT></TD>6382<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6383<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6384<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6385<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6386<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6387<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6388<TR VALIGN=Bottom>6389<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>6390<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>1,174,787</B> </FONT></TD>6391<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6392<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,017,283</FONT></TD>6393<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6394<TR VALIGN=Bottom>6395<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>6396<TD ALIGN=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>875,431</B> </FONT></TD>6397<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6398<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>817,143</FONT></TD>6399<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6400<TR VALIGN=Bottom>6401<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>6402<TD ALIGN=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>240,359</B> </FONT></TD>6403<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6404<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>242,694</FONT></TD>6405<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6406<TR VALIGN=Bottom>6407<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>6408<TD ALIGN=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>123,614</B> </FONT></TD>6409<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6410<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>143,079</FONT></TD>6411<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6412<TR VALIGN=Bottom>6413<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>6414<TD ALIGN=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>289,014</B> </FONT></TD>6415<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6416<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>287,964</FONT></TD>6417<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6418<TR>6419<TD COLSPAN=3></TD>6420<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>64216422<TR VALIGN=Bottom>6423<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6424<TD ALIGN=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>2,703,205</B> </FONT></TD>6425<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>2,508,163</FONT></TD>6427<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6428<TR VALIGN=Bottom>6429<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>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"><B>(1,754,603</B> </FONT></TD>6431<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6432<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,712,278</FONT></TD>6433<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6434<TR>6435<TD COLSPAN=3></TD>6436<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>64376438<TR VALIGN=Bottom>6439<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>6440<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>948,602</B> </FONT></TD>6441<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6442<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 795,885</FONT></TD>6443<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6444<TR>6445<TD COLSPAN=3></TD>6446<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>6447</TABLE>64486449<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6450<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6. Line of Credit</B> </FONT> </P>64516452<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6453<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 31, 2003, the Company6454entered into a secured asset-based loan and security agreement. This new line of credit6455is a one-year, $3,000,000 facility with availability based primarily on eligible customer6456receivables and inventory. The interest rate is Prime plus 0.5% with a floor of 4.5%. As6457of December 31, 2003, the Company had no outstanding loan balance against the facility.6458Based on the Company’s eligible customer receivables, inventory and cash balances,6459$1,164,000 was available for borrowing as of December 31, 2003. The fee for the unused6460portion of the line of credit is $1,250 per each quarter. The facility fee of $15,000 is6461payable upon the first advance. This line of credit includes two covenants: minimum6462tangible net worth of $8,000,000 and a liquidity coverage of not less than 1.25 to 1.00.6463The Company was in compliance with these covenants at December 31, 2003. </FONT></P>64646465<BR><BR><BR><BR>646664676468<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->6469<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47</FONT></P>64706471<HR SIZE=3 COLOR=GRAY NOSHADE>64726473<!-- *************************************************************************** -->6474<!-- MARKER PAGE="sheet: 0; page: 0" -->647564766477<BR>64786479<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6480<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>7. Leases</B> </FONT> </P>64816482<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6483<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company leases a 33,0006484square-foot office and manufacturing facility under an operating lease agreement, which6485expires in September 2008. Rent expense related to the operating leases was approximately6486$336,000, $303,100, and $306,600 for the years ended December 31, 2003, 2002, and 2001,6487respectively. </FONT></P>64886489<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6490<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future minimum lease commitments6491under these operating leases as of December 31, 2003 are as follows: </FONT></P>64926493<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=300>6494<TR VALIGN=Bottom>6495<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT></TD>6496<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6497<TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6498<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=30% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>348,948</FONT></TD>6499<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6500<TR VALIGN=Bottom>6501<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6502<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>348,948</FONT></TD>6503<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6504<TR VALIGN=Bottom>6505<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>6506<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>363,132</FONT></TD>6507<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6508<TR VALIGN=Bottom>6509<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>6510<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>370,224</FONT></TD>6511<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6512<TR VALIGN=Bottom>6513<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>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>277,668</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=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=1></TD><TD></TD></TR>6519<TR VALIGN=Bottom>6520<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6521<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,708,920</FONT></TD>6522<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6523<TR>6524<TD COLSPAN=3></TD>6525<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=Black SIZE=2></TD><TD></TD></TR>6526</TABLE>65276528<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6529<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8. Income Taxes</B> </FONT> </P>65306531<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6532<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2003, the Company6533had net operating loss carryforwards of approximately $54,631,000 for federal income tax6534purposes that are available to offset future taxable income and begin to expire in the6535year 2013. At December 31, 2003, the Company also had federal and Minnesota research and6536development tax credit carryforwards of approximately $1,353,000 which begin to expire in6537the year 2013. At December 31, 2003, the Company has foreign tax loss carryforwards of6538approximately $1,356,000 that do not expire. No benefit has been recorded for any loss6539carryforwards, and utilization in future years may be limited under Sections 382 and6540383 of the Internal Revenue Code if significant ownership changes have occurred. </FONT></P>65416542<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6543<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of the Company’s6544deferred tax assets and liabilities as of December 31, 2003 and 2002 are as follows: </FONT></P>65456546<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>6547<TR VALIGN=Bottom>6548<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6549<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6550<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6551<TR VALIGN=Bottom>6552<TD WIDTH=52% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred tax assets:</FONT></TD>6553<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6554<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6555<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=17% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6556<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6557<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=17% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>6558<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6559<TR VALIGN=Bottom>6560<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>6561<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>22,394,000</B> </FONT></TD>6562<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6563<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 18,452,000</FONT></TD>6564<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6565<TR VALIGN=Bottom>6566<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>6567<TD ALIGN=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>1,353,000</B> </FONT></TD>6568<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6569<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,206,000</FONT></TD>6570<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6571<TR VALIGN=Bottom>6572<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>6573<TD ALIGN=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>183,000</B> </FONT></TD>6574<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6575<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>129,000</FONT></TD>6576<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6577<TR VALIGN=Bottom>6578<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>6579<TD ALIGN=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>131,000</B> </FONT></TD>6580<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6581<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>88,000</FONT></TD>6582<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6583<TR VALIGN=Bottom>6584<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>6585<TD ALIGN=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>64,000</B> </FONT></TD>6586<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>94,000</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> 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>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"><B>96,000</B> </FONT></TD>6592<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6593<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>104,000</FONT></TD>6594<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6595<TR>6596<TD COLSPAN=3></TD>6597<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>65986599<TR VALIGN=Bottom>6600<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6601<TD ALIGN=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>24,223,000</B> </FONT></TD>6602<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6603<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,073,000</FONT></TD>6604<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6605<TR VALIGN=Bottom>6606<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>6607<TD ALIGN=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>(24,223,000</B> </FONT></TD>6608<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6609<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(20,073,000</FONT></TD>6610<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6611<TR>6612<TD COLSPAN=3></TD>6613<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>66146615<TR VALIGN=Bottom>6616<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>6617<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> —</FONT></TD>6618<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6619<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> —</FONT></TD>6620<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6621<TR>6622<TD COLSPAN=3></TD>6623<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>6624</TABLE>66256626<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6627<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company records a valuation6628allowance to reduce the carrying value of the net deferred taxes to an amount that is6629more likely than not to be realized. </FONT></P>66306631<BR><BR>663266336634<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->6635<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48</FONT></P>66366637<HR SIZE=3 COLOR=GRAY NOSHADE>66386639<!-- *************************************************************************** -->6640<!-- MARKER PAGE="sheet: 0; page: 0" -->664166426643<BR>66446645<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6646<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8. Income Taxes (continued)</B> </FONT> </P>66476648<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6649<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reconciliation of the statutory6650federal income tax rate to the Company’s effective tax rate is as follows: </FONT></P>66516652<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=500>6653<TR VALIGN=Bottom>6654<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6655<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6656<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6657<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6658<TR VALIGN=Bottom>6659<TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax at statutory rate</FONT></TD>6660<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6661<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6662<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>34</B> </FONT></TD>6663<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.0%</B> </FONT></TD>6664<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>6665<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0%</FONT></TD>6666<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>6667<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0%</FONT></TD></TR>6668<TR VALIGN=Bottom>6669<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>State income taxes, net of federal bendfit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><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"><B>6</B> </FONT></TD>6671<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.0</B> </FONT></TD>6672<TD ALIGN=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</FONT></TD>6673<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</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>6</FONT></TD>6675<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD></TR>6676<TR VALIGN=Bottom>6677<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>6678<TD ALIGN=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</B> </FONT></TD>6679<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.0</B> </FONT></TD>6680<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>6681<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD>6682<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>6683<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD></TR>6684<TR VALIGN=Bottom>6685<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>6686<TD ALIGN=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</B> </FONT></TD>6687<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.0</B> </FONT></TD>6688<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6689<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6690<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6691<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>66926693<TR VALIGN=Bottom>6694<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>6695<TD ALIGN=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>(42</B> </FONT></TD>6696<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.0)</B> </FONT></TD>6697<TD ALIGN=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</FONT></TD>6698<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0)</FONT></TD>6699<TD ALIGN=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</FONT></TD>6700<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0)</FONT></TD></TR>6701<TR>6702<TD COLSPAN=3></TD>6703<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=1></TD></TR>67046705<TR VALIGN=Bottom>6706<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>6707<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER" NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>—</B> </FONT></TD>6708<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>%</B> </FONT></TD>6709<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER" NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6710<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>6711<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="CENTER" NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6712<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>6713<TR>6714<TD COLSPAN=3></TD>6715<TD COLSPAN=9><HR NOSHADE COLOR=Black SIZE=2></TD></TR>6716</TABLE>67176718<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6719<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9. Stock Options and Warrants</B> </FONT> </P>67206721<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6722<A NAME=A115></A>6723<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Stock Option Plan</I> </FONT> </P>67246725<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6726<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has a stock option and6727stock award plan (the Stock Option Plan) which provides for the granting of incentive6728stock options to employees and nonqualified stock options to employees, directors, and6729consultants. As of December 31, 2003, the Company had reserved 2,900,000 shares of6730common stock under the Stock Option Plan. Under the Stock Option Plan, incentive stock6731options must be granted at an exercise price not less than the fair market value of the6732Company’s common stock on the grant date. The exercise price of a nonqualified6733option granted under the Stock Option Plan must not be less than 50% of the fair market6734value of the Company’s common stock on the grant date. Prior to the initial public6735offering in July 2000, the Board of Directors determined the fair value of the common6736shares underlying options by assessing the business progress of the Company as well as6737the market conditions for medical device companies and other external factors. The6738options expire on the date determined by the Board of Directors but may not extend more6739than ten years from the grant date. The Stock Option Plan also permits the granting of6740stock appreciation rights, restricted stock, and other stock-based awards. The incentive6741stock options generally become exercisable over a four-year period and the nonqualified6742stock options generally become exercisable over a two-year period. Unexercised options6743are canceled 90 days after termination of employment and become available under the Stock6744Option Plan. </FONT></P>67456746<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6747<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the third quarter of 2002, the6748Company offered to exchange for its current employees, other than the Chief Executive6749Officer, any outstanding options to purchase shares of the Company’s common stock6750under the Stock Option Plan with an exercise price of at least $3.00 per share for new6751options the Company will grant under the plan. The new options were granted on February675218, 2003, which was six months and two business days after the date the options were6753exchanged. The Company granted 428,570 new options under the Stock Option Plan at an6754exercise price of $0.84. The number of shares granted to each participating option holder6755was the number of shares subject to the eligible options tendered by such option holder.6756A stock option holder had to be employed by the Company through February 18, 2003 in6757order to be eligible to receive the new options. As a result of this exchange of options,6758467,070 options with an average price of $6.80 were canceled. </FONT></P>67596760<BR><BR>676167626763<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->6764<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></P>67656766<HR SIZE=3 COLOR=GRAY NOSHADE>67676768<!-- *************************************************************************** -->6769<!-- MARKER PAGE="sheet: 0; page: 0" -->677067716772<BR>67736774<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6775<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9. Stock Options and Warrants6776(continued)</B> </FONT> </P>67776778<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6779<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Option activity is summarized as6780follows: </FONT></P>67816782<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">6783<TR VALIGN=Bottom>6784<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6785<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares<BR>6786Available<BR>6787for Grant</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6788<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Plan Options<BR>6789Outstanding</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6790<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise<BR>6791Price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6792<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>6793Average<BR>6794Exercise<BR>6795Price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6796<TR VALIGN=Bottom>6797<TD WIDTH="35%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2000</FONT></TD>6798<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6799<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6800<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>174,629</FONT></TD>6801<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6802<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>1,070,771</FONT></TD>6803<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6804<TD WIDTH="18%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 1.50 - $16.50</FONT></TD>6805<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6806<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6807<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5</FONT></TD>6808<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.85</FONT></TD></TR>6809<TR VALIGN=Bottom>6810<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>6811<TD ALIGN=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>6812<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6813<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6814<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6815<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6816<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6817<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6818<TR VALIGN=Bottom>6819<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>6820<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(972,000</FONT></TD>6821<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6822<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>972,000</FONT></TD>6823<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6824<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2.51 - 7.48</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6825<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 05</FONT></TD>6826<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.35</FONT></TD></TR>6827<TR VALIGN=Bottom>6828<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>6829<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6830<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6831<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(120,800</FONT></TD>6832<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6833<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.50 - 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>6834<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2</FONT></TD>6835<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.53</FONT></TD></TR>6836<TR VALIGN=Bottom>6837<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>6838<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>347,160</FONT></TD>6839<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6840<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(347,160</FONT></TD>6841<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6842<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.50 - 6.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6843<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7</FONT></TD>6844<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.41</FONT></TD></TR>6845<TR>6846<TD COLSPAN=3></TD>6847<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD>6848<TD COLSPAN=3></TD>6849<TD COLSPAN=3 ALIGN=RIGHT></TD><TD></TD></TR>6850<TR VALIGN=Bottom>6851<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6852<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49,789</FONT></TD>6853<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6854<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,574,811</FONT></TD>6855<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6856<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.50 - 16.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6857<TD ALIGN=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</FONT></TD>6858<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.45</FONT></TD></TR>6859<TR VALIGN=Bottom>6860<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>6861<TD ALIGN=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>6862<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6863<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6864<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6865<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6866<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6867<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6868<TR VALIGN=Bottom>6869<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>6870<TD ALIGN=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>6871<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6872<TD ALIGN=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>6873<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6874<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.81 - 2.70</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6875<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1</FONT></TD>6876<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.83</FONT></TD></TR>6877<TR VALIGN=Bottom>6878<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>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>—</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>(10,000</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> $ 2.00</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>6884<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2</FONT></TD>6885<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD></TR>6886<TR VALIGN=Bottom>6887<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>6888<TD ALIGN=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>6889<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6890<TD ALIGN=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>6891<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6892<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.45 - 16.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>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> 6</FONT></TD>6894<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.25</FONT></TD></TR>6895<TR>6896<TD COLSPAN=3></TD>6897<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD>6898<TD COLSPAN=3></TD>6899<TD COLSPAN=3 ALIGN=RIGHT></TD><TD></TD></TR>69006901<TR VALIGN=Bottom>6902<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>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>1,213,679</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>900,921</FONT></TD>6906<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6907<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.81 - 16.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6908<TD ALIGN=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</FONT></TD>6909<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.94</FONT></TD></TR>6910<TR VALIGN=Bottom>6911<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>6912<TD ALIGN=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>6913<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6914<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6915<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6916<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6917<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6918<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6919<TR VALIGN=Bottom>6920<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>6921<TD ALIGN=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>6922<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6923<TD ALIGN=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>6924<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6925<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.78 - 5.74</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>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</FONT></TD>6927<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.89</FONT></TD></TR>6928<TR VALIGN=Bottom>6929<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>6930<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6931<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>(65,855</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> 0.78 - 2.70</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6935<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1</FONT></TD>6936<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.25</FONT></TD></TR>6937<TR VALIGN=Bottom>6938<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>6939<TD ALIGN=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>6940<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6941<TD ALIGN=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>6942<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6943<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.81 - 16.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>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> 2</FONT></TD>6945<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.49</FONT></TD></TR>6946<TR>6947<TD COLSPAN=3></TD>6948<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD>6949<TD COLSPAN=3></TD>6950<TD COLSPAN=3 ALIGN=RIGHT></TD><TD></TD></TR>69516952<TR VALIGN=Bottom>6953<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>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"><B>1,043,574</B> </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"><B>1,505,171</B> </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"><B>$ 0.78 - $12.00</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6959<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 2</B> </FONT></TD>6960<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>.50</B> </FONT></TD></TR>6961<TR>6962<TD COLSPAN=3></TD>6963<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD>6964<TD COLSPAN=3></TD>6965<TD COLSPAN=3 ALIGN=RIGHT></TD><TD></TD></TR>6966</TABLE>69676968<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6969<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes6970information about stock options outstanding at December 31, 2003: </FONT></P>69716972<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=700>69736974<TR VALIGN=Bottom>6975<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6976<TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Outstanding</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6977<TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Exercisable</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>6978</TR>69796980<TR VALIGN=Bottom>6981<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Range of<BR>6982Exercise Prices</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6983<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding<BR>6984as of December<BR>698531, 2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6986<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>6987Average<BR>6988Remaining<BR>6989Contractual Life</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6990<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>6991Average<BR>6992Exercise Price</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6993<TH COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercisable<BR>6994as of<BR>6995December 31,<BR>69962003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>6997<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>6998Average<BR>6999Exercise Price</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7000<TR VALIGN=Bottom>7001<TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 0.78 - $ 0.83</FONT></TD>7002<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7003<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7004<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>90,750</FONT></TD>7005<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7006<TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>7007<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>7008<TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>7009<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.79</FONT></TD>7010<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>76,600</FONT></TD>7011<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7012<TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>7013<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.79</FONT></TD></TR>7014<TR VALIGN=Bottom>7015<TD ALIGN="CENTER"><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>7016<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>686,860</FONT></TD>7017<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7018<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>7019<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>7020<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> $</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>7021<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.84</FONT></TD>7022<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>290,140</FONT></TD>7023<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7024<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0</FONT></TD>7025<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.84</FONT></TD></TR>7026<TR VALIGN=Bottom>7027<TD ALIGN="CENTER"><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>7028<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>328,211</FONT></TD>7029<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7030<TD ALIGN=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</FONT></TD>7031<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6</FONT></TD>7032<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> $</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2</FONT></TD>7033<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.10</FONT></TD>7034<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>237,311</FONT></TD>7035<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7036<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2</FONT></TD>7037<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.02</FONT></TD></TR>7038<TR VALIGN=Bottom>7039<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2.52 - 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>7040<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>310,650</FONT></TD>7041<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7042<TD ALIGN=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</FONT></TD>7043<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>7044<TD ALIGN=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</FONT></TD>7045<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.61</FONT></TD>7046<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>293,870</FONT></TD>7047<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7048<TD ALIGN=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</FONT></TD>7049<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.68</FONT></TD></TR>7050<TR VALIGN=Bottom>7051<TD ALIGN="CENTER"><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>7052<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>88,700</FONT></TD>7053<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7054<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>7055<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>7056<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7</FONT></TD>7057<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.65</FONT></TD>7058<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61,430</FONT></TD>7059<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7060<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7</FONT></TD>7061<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.78</FONT></TD></TR>7062<TR>7063<TD COLSPAN=3></TD>7064<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>7065<TD COLSPAN=3></TD>7066<TD COLSPAN=3></TD>7067<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=1></TD>7068<TD COLSPAN=3></TD><TD></TD></TR>7069<TR VALIGN=Bottom>7070<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7071<TD ALIGN=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>7072<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7073<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>7074<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD>7075<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2</FONT></TD>7076<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.50</FONT></TD>7077<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>959,351</FONT></TD>7078<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7079<TD ALIGN=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</FONT></TD>7080<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.05</FONT></TD></TR>7081<TR>7082<TD COLSPAN=3></TD>7083<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>7084<TD COLSPAN=3></TD>7085<TD COLSPAN=3></TD>7086<TD COLSPAN=3><HR NOSHADE COLOR=Black SIZE=2></TD>7087<TD COLSPAN=3></TD><TD></TD></TR>7088</TABLE>70897090<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7091<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the year ended December 31,70922001, the Company recorded compensation expense of $10,398 in connection with7093nonqualified stock options granted to outside consultants. </FONT></P>70947095<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7096<A NAME=A117></A>7097<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Deferred Compensation</I> </FONT> </P>70987099<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7100<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2003, 2002, and 2001, the Company7101recorded $0, $1,858, and $123,780 of deferred compensation in connection with certain7102nonqualified stock options granted to medical advisory board members, respectively. The7103weighted average fair value of these options was $2.79. The deferred compensation7104recorded is amortized ratably over the period that the options vest and is adjusted for7105options which have been canceled. Deferred compensation expense was $40,545, $74,668 ,7106and $62,850 for the years ended December 31, 2003, 2002, and 2001, respectively. </FONT></P>71077108<BR>710971107111<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->7112<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50</FONT></P>71137114<HR SIZE=3 COLOR=GRAY NOSHADE>71157116<!-- *************************************************************************** -->7117<!-- MARKER PAGE="sheet: 0; page: 0" -->711871197120<BR>71217122<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7123<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9. Stock Options and Warrants7124(continued)</B> </FONT> </P>71257126<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7127<A NAME=A119></A>7128<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Warrants</I> </FONT> </P>71297130<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7131<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2003, the Company7132had the following warrants outstanding and exercisable: </FONT></P>71337134<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=500>7135<TR VALIGN=Bottom>7136<TH COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise Price</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7137<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding as of<BR>7138December 31, 2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7139<TH COLSPAN="3" NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Expiration Date</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7140<TR VALIGN=Bottom>7141<TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5</FONT></TD>7142<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD>7143<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=19% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100,000</FONT></TD>7144<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7145<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="47%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June 10, 2004</FONT></TD>7146<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7147<TR VALIGN=Bottom>7148<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>7149<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.50</FONT></TD>7150<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>75,500</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 31, 2007</FONT></TD>7153<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7154<TR VALIGN=Bottom>7155<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>7156<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.50</FONT></TD>7157<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,500</FONT></TD>7158<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7159<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>February 14, 2007</FONT></TD>7160<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7161<TR VALIGN=Bottom>7162<TD ALIGN=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</FONT></TD>7163<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD>7164<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68,000</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="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 29, 2007</FONT></TD>7167<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>71687169<TR>7170<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD>7171<TD COLSPAN=3></TD></TR>71727173<TR VALIGN=Bottom>7174<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3</FONT></TD>7175<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.19</FONT></TD>7176<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=19% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>268,000</FONT></TD>7177<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7178<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=47% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7179<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>71807181<TR>7182<TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD>7183<TD COLSPAN=3></TD></TR>7184</TABLE>71857186<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7187<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10. Employee Stock Purchase Plan</B> </FONT> </P>71887189<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7190<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an Employee Stock7191Purchase Plan (the Purchase Plan) under which 900,000 shares of common stock have been7192reserved for issuance. Eligible employees may contribute 1% to 10% of their compensation7193to purchase shares of the Company’s common stock at a discount of 15% of the market7194value at certain plan-defined dates up to a maximum of 2,000 shares per purchasing7195period. The Purchase Plan terminates in May 2010. In fiscal 2003, 2002, and 2001, 195,8767196shares, 152,737 shares, and 90,194 shares, respectively, were issued under the Purchase7197Plan. At December 31, 2003, 461,193 shares were available for issuance under the Purchase7198Plan. </FONT></P>71997200<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7201<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>11. Stock Repurchase Program</B> </FONT> </P>72027203<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7204<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In August 2002, the Board of7205Directors authorized a stock repurchase program to acquire up to 1,000,000 shares of7206outstanding common stock in the open market, block purchases, or private transactions. In7207fiscal 2003 and 2002, respectively, the Company repurchased and retired 153,400 and7208608,900 shares of the Company’s common stock for an aggregate purchase price of7209$139,633 and $547,722. In October 2003, the Board of Directors terminated the stock7210repurchase program. </FONT></P>72117212<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7213<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>12. Employee Retirement Savings Plan</B> </FONT> </P>72147215<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7216<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an employee 401(k)7217retirement savings plan (the Plan). The Plan provides eligible employees with an7218opportunity to make tax-deferred contributions into a long-term investment and savings7219program. All employees over the age of 21 are eligible to participate in the Plan7220beginning with the first quarterly open enrollment date following start of employment.7221Through December 31, 2001, the Plan allowed eligible employees to contribute up to 18% of7222their annual compensation. Effective January 1, 2002, the employee contribution limit was7223increased to 50% of their annual compensation, subject to a maximum limit determined by7224the Internal Revenue Service, with the Company contributing an amount equal to 25% of the7225first 5% contributed to the Plan. The Company recorded an expense of $74,258, $91,170,7226and $112,084 for contributions to the Plan for the years ended December 31, 2003,72272002, and 2001, respectively. </FONT></P>72287229<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7230<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>13. Concentrations of Credit and7231Other Risks</B> </FONT> </P>72327233<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7234<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States and Germany,7235the Company sells its products directly to hospitals and clinics. In all other7236international markets, the Company sells its products to distributors who, in turn, sell7237to medical clinics. Loss, termination, or ineffectiveness of distributors to effectively7238promote the Company’s product could have a material adverse effect on the Company’s7239financial condition and results of operations. </FONT></P>72407241<BR>724272437244<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->7245<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51</FONT></P>72467247<HR SIZE=3 COLOR=GRAY NOSHADE>72487249<!-- *************************************************************************** -->7250<!-- MARKER PAGE="sheet: 0; page: 0" -->725172527253<BR>72547255<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7256<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>13. Concentrations of Credit and7257Other Risks (continued)</B> </FONT></P>72587259<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7260<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No customers were more than 5% of7261net sales for the years ended December 31, 2003, 2002 and 2001. </FONT></P>72627263<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7264<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company performs ongoing credit7265evaluations of its customers but does not require collateral. There have been no material7266losses on customer receivables. </FONT></P>72677268<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7269<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales by geographic destination as a7270percentage of total net sales were as follows for the years ended December 31: </FONT></P>72717272<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=400>7273<TR VALIGN=Bottom>7274<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7275<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7276<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7277<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7278<TR VALIGN=Bottom>7279<TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic</FONT></TD>7280<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7281<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7282<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"><B>87</B> </FONT></TD>7283<TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>%</B> </FONT></TD>7284<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>7285<TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>7286<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>90</FONT></TD>7287<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>7288<TR VALIGN=Bottom>7289<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>7290<TD ALIGN=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</B> </FONT></TD>7291<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7292<TD ALIGN=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>7293<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7294<TD ALIGN=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</FONT></TD>7295<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7296</TABLE>72977298<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7299<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>14. Dependence on Key Suppliers</B> </FONT> </P>73007301<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7302<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company purchases certain key7303components from single-source suppliers. Any significant component delay or interruption7304could require the Company to qualify new sources of supply, if available, and could have7305a material adverse effect on the Company’s financial condition and results of7306operations. The Company purchases their requirements for thrombin (a component in the7307Duett and D-Stat products) under a Purchase Agreement dated June 10, 1999 with a7308subsidiary of King Pharmaceuticals, Inc. The agreement provides for a fixed price, with7309adjustments based on the supplier’s manufacturing costs and the supplier’s7310annual percentage increase in the wholesale price of thrombin. The agreement expires on7311May 29, 2005. During 2004 and the first half of 2005, the Company intends to increase its7312purchases of thrombin to benefit from the pricing provisions of the agreement, which the7313Company expects will substantially increase their inventory of thrombin. The Company7314believes that these purchases will satisfy its thrombin requirements for 2004, 2005 and7315most of 2006. The Company is currently exploring a new thrombin supply agreement and7316evaluating alternative potential suppliers, although there currently is no other source7317of commercially-available thrombin approved for use in the United States. </FONT></P>73187319<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7320<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>15. Commitments and Contingencies</B> </FONT> </P>73217322<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7323<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Datascope Litigation </FONT></P>73247325<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7326<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 1999, the Company was named7327as a defendant in a patent infringement lawsuit brought by Datascope Corporation7328(Datascope), a competitor, in the United States District Court of the District of7329Minnesota. The complaint requested a judgment that the Company’s device infringes7330and, following FDA approval, will infringe, a United States patent held by Datascope and7331asks for relief in the form of an injunction that would prevent the Company from selling7332its product in the United States as well as an award of attorney’s fees, costs, and7333disbursements. On August 12, 1999, the Company filed its answer to this lawsuit and7334brought a counterclaim alleging unfair competition and tortious interference against7335Datascope. On August 20, 1999, the Company moved for summary judgment to dismiss Datascope’s7336claims. On March 15, 2000, the court granted summary judgment dismissing all of Datascope’s7337claims, subject to the right of Datascope to recommence the litigation after the Company’s7338receipt of FDA approval of the Duett sealing device. On July 12, 2000, after the Company7339received FDA approval, Datascope recommenced this litigation, alleging that the Duett7340sealing device infringes a United States patent held by Datascope and requesting relief7341in the form of an injunction that would prevent the Company from selling its product in7342the United States, damages caused by the alleged infringement, and other costs,7343disbursements, and attorneys’ fees. </FONT></P>73447345<BR>734673477348<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->7349<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52</FONT></P>73507351<HR SIZE=3 COLOR=GRAY NOSHADE>73527353<!-- *************************************************************************** -->7354<!-- MARKER PAGE="sheet: 0; page: 0" -->735573567357<BR>73587359<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7360<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>15. Commitments and Contingencies7361(continued)</B> </FONT> </P>73627363<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7364<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 26, 2002, the Company7365entered into an agreement that settled all existing intellectual property litigation with7366Datascope Corporation. Under the terms of the settlement agreement, Datascope has granted7367the Company a nonexclusive license to its Janzen patents as they apply to all current7368versions of the Duett sealing device, and to certain permitted future product7369improvements. Datascope also has released the Company from any claim of patent7370infringement based on past or future sales of the Duett sealing device. In exchange, the7371Company paid Datascope a single lump sum of $3,750,000 in the fourth quarter of 2002. </FONT></P>73727373<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7374<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>St. Jude Medical Litigation </FONT></P>73757376<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7377<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 3, 2000, the Company was7378named as the defendant in a patent infringement lawsuit brought by the Daig division of7379St. Jude Medical, Inc. (St. Jude Medical), a competitor, in the United States7380District Court of the District of Minnesota. The complaint requests a judgment that the7381Company’s Duett sealing device infringes a series of four patents held by St. Jude7382Medical and asks for relief in the form of an injunction that would prevent the Company7383from selling its product in the United States, damages caused by the manufacture and sale7384of the Company’s product, and other costs, disbursements, and attorneys’ fees. </FONT></P>73857386<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7387<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 12, 2001, the Company7388entered into an agreement that settled all existing intellectual property litigation with7389St. Jude Medical, Inc. Under the terms of the settlement agreement, the Company agreed to7390pay a royalty of 2.5% of net sales of the Company’s Duett sealing device to St. Jude7391Medical, up to a maximum amount over the remaining life of the St. Jude Medical Fowler7392patents. In exchange, St. Jude Medical granted to the Company a nonexclusive license to7393its Fowler patents and has released it from any claim of patent infringement based on7394sales of the Duett sealing device. The Company granted a nonexclusive cross-license to7395its Gershony patents to St. Jude Medical, subject to a similar royalty payment if St.7396Jude Medical utilizes the Gershony patents in any future device. Beginning on July 1,73972001, a royalty expense of 2.5% of net sales is included in the Company’s cost of7398goods sold until the maximum royalty is attained. </FONT></P>73997400<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7401<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diomed Litigation </FONT></P>74027403<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7404<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 11, 2003, the Company7405and a non-officer employee of the Company were named as defendants in a lawsuit brought7406by Diomed, Inc. in the United States District Court for the District of Massachusetts.7407The complaint alleges that in marketing the Vari-Lase endovenous laser procedure kit the7408Comany engaged in false advertising and infringed a registered trademark of Diomed. The7409complaint also alleges that the non-officer employee, who previously worked for a company7410that conducted business with Diomed, improperly utilized trade secrets of Diomed in7411developing the Vari-Lase procedure kit. The complaint requests monetary damages and an7412injunction on the sale of the Vari-Lase procedure kit. The Company believes that the7413allegations included in the complaint are wholly without merit, the Copany has filed7414their answer to the complaint, and intends to defend this litigation vigorously. We have7415tendered this claim to our insurance carrier. It is not possible to predict the timing or7416outcome of the Diomed litigation, including whether it will affect the Company’s7417ability to sell the Vari-Lase procedure kit, or to estimate the amount or range of7418potential loss, if any. </FONT></P>74197420<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7421<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MedArt Purchase Commitment </FONT></P>74227423<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7424<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company signed a purchase7425agreement with MedArt Corporation on September 22, 2003. Under that agreement, the7426Company is obligated to purchase laser consoles with an aggregate purchase price of7427$1,197,000 for their Vari-Lase business during the first year of the agreement, which7428commenced in December 2003. The Company plans to start selling its laser consoles during7429the first quarter of 2004. </FONT></P>74307431<BR>743274337434<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->7435<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53</FONT></P>74367437<HR SIZE=3 COLOR=GRAY NOSHADE>74387439<!-- *************************************************************************** -->7440<!-- MARKER PAGE="sheet: 0; page: 0" -->744174427443<BR>74447445<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7446<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>16. Quarterly Financial Data7447(Unaudited, in Thousands, Except per Share Data)</B> </FONT> </P>74487449<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>7450<TR VALIGN=Bottom>7451<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7452<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>First<BR>7453Quarter</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7454<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Second<BR>7455Quarter</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7456<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Third<BR>7457Quarter</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7458<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fourth<BR>7459Quarter</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7460<TR VALIGN=Bottom>7461<TD WIDTH=39% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>7462<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7463<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7464<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=9% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,968</B> </FONT></TD>7465<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7466<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=9% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,725</B> </FONT></TD>7467<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7468<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=9% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,708</B> </FONT></TD>7469<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7470<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD WIDTH=9% ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,403</B> </FONT></TD>7471<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7472<TR VALIGN=Bottom>7473<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>7474<TD ALIGN=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>1,746</B> </FONT></TD>7475<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7476<TD ALIGN=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>1,639</B> </FONT></TD>7477<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7478<TD ALIGN=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>1,607</B> </FONT></TD>7479<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7480<TD ALIGN=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>2,242</B> </FONT></TD>7481<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7482<TR VALIGN=Bottom>7483<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>7484<TD ALIGN=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>(2,659</B> </FONT></TD>7485<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7486<TD ALIGN=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>(2,724</B> </FONT></TD>7487<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7488<TD ALIGN=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>(2,415</B> </FONT></TD>7489<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7490<TD ALIGN=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>(1,981</B> </FONT></TD>7491<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>7492<TR VALIGN=Bottom>7493<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>7494<TD ALIGN=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>(2,597</B> </FONT></TD>7495<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7496<TD ALIGN=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>(2,68</B>3 </FONT></TD>7497<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7498<TD ALIGN=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>(2,385</B> </FONT></TD>7499<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7500<TD ALIGN=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>(1,963</B> </FONT></TD>7501<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>7502<TR VALIGN=Bottom>7503<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>7504<TR VALIGN=Bottom>7505<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>7506<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>(0.20</B> </FONT></TD>7507<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7508<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.2</B>1 </FONT></TD>7509<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7510<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.19</B> </FONT></TD>7511<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7512<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.15</B> </FONT></TD>7513<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>75147515<TR VALIGN=Bottom>7516<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1><BR>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>7517<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7518<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7519<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7520<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>75217522<TR VALIGN=Bottom>7523<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7524<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,803</FONT></TD>7525<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7526<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,329</FONT></TD>7527<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7528<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,041</FONT></TD>7529<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7530<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,928</FONT></TD>7531<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7532<TR VALIGN=Bottom>7533<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>7534<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,597</FONT></TD>7535<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7536<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,002</FONT></TD>7537<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7538<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,817</FONT></TD>7539<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7540<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,699</FONT></TD>7541<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7542<TR VALIGN=Bottom>7543<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>7544<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,689</FONT></TD>7545<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7546<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,871</FONT></TD>7547<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7548<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,777</FONT></TD>7549<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7550<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6,149</FONT></TD>7551<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7552<TR VALIGN=Bottom>7553<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>7554<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,551</FONT></TD>7555<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7556<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,743</FONT></TD>7557<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7558<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,634</FONT></TD>7559<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7560<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6,051</FONT></TD>7561<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7562<TR VALIGN=Bottom>7563<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>7564<TR VALIGN=Bottom>7565<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>7566<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.27</FONT></TD>7567<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7568<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.20</FONT></TD>7569<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7570<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.20</FONT></TD>7571<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7572<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.46</FONT></TD>7573<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7574</TABLE>75757576<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7577<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The results of the fourth quarter of75782002 include a $3,750,000 settlement of litigation which the Company expensed in that7579period. (See Note 15.) </FONT></P>75807581<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>758275837584<!-- MARKER FORMAT-SHEET="Para Center" FSL="Workstation" -->7585<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></P>75867587<HR SIZE=3 COLOR=GRAY NOSHADE>75887589</BODY>7590</HTML>75917592</TEXT>7593</DOCUMENT>7594<DOCUMENT>7595<TYPE>EX-10.147596<SEQUENCE>37597<FILENAME>vasc041035_ex10-14.txt7598<TEXT>75997600EXHIBIT 10.14760176027603This LOAN AND SECURITY AGREEMENT dated as of the Effective Date,7604between SILICON VALLEY BANK ("Bank"), whose address is 5775 Wayzata Boulevard,7605Suite 700, Minneapolis, Minnesota 55416 and VASCULAR SOLUTIONS, INC., a7606Minnesota corporation ("Borrower"), whose address is 6464 Sycamore Court,7607Minneapolis, Minnesota 55369, provides the terms on which Bank will lend to7608Borrower and Borrower will repay Bank. The parties agree as follows:760976101. ACCOUNTING AND OTHER TERMS76117612Accounting terms not determined in this Agreement will be construed7613following GAAP. Calculations and determinations must be made following GAAP. The7614term "financial statements" includes the notes and schedules, if any. The terms7615"including" and "includes" always mean "including (or includes) without7616limitation," in this or any Loan Document.761776182. LOAN AND TERMS OF PAYMENT761976202.1 PROMISE TO PAY.76217622Borrower promises to pay Bank the unpaid principal amount of all Credit7623Extensions and interest on the unpaid principal amount of the Credit Extensions.762476252.1.1 REVOLVING ADVANCES.76267627(a) Bank will make Revolving Advances not exceeding the lesser of (A)7628the Committed Revolving Line and (B) the Borrowing Base. Amounts borrowed under7629this Section may be repaid and reborrowed during the term of this Agreement.76307631(b) To obtain a Revolving Advance, Borrower must notify Bank by7632facsimile or telephone by 12:00 p.m. Pacific time on the Business Day the7633Revolving Advance is proposed to be made. Borrower must promptly confirm the7634notification by delivering to Bank the Payment/Advance Form, in the form7635attached hereto as Exhibit B. Bank will credit Revolving Advances to Borrower's7636deposit account. Bank may make Revolving Advances under this Agreement based on7637instructions from a Responsible Officer or his or her designee or without7638instructions if any such Revolving Advances are necessary to meet Obligations7639which have become due. Bank may rely on any telephonic notice given by a person7640whom Bank in its good faith business judgment believes is a Responsible Officer7641or such Person's designee (with the status of a designee derived from written7642instructions from Borrower to Bank or specific verbal instructions from a7643Responsible Officer), and Borrower hereby indemnifies Bank for any loss Bank7644suffers due to any such reliance.76457646(c) The Committed Revolving Line terminates on the Revolving Maturity7647Date, when all Revolving Advances and related Obligations are immediately7648payable.76497650(d) Bank's obligation to lend the undisbursed portion of the7651Obligations will terminate if, in Bank's sole discretion, there has been a7652material adverse change in the general affairs, management, results of7653operation, condition (financial or otherwise) or the prospect of repayment of7654the Obligations, or there has been any material adverse deviation by Borrower7655from the most recent business plan of Borrower presented to and accepted by Bank7656prior to the execution of this Agreement.765776587659<PAGE>7660766176622.2 OVERADVANCES.76637664If Borrower's Obligations under Section 2.1.1 exceed any of the7665applicable lending limitations set forth therein, Borrower must immediately pay7666Bank the excess. Bank, under its ordinary practices, will be in contact with the7667Borrower concerning any such excess, provided that Borrower understands and7668agrees that Borrower's obligation to repay any such excess is not conditioned on7669the giving of any notice or communication of any type by Bank to Borrower .767076712.3 INTEREST RATE, PAYMENTS.76727673(a) Interest Rate. Revolving Advances accrue interest on the7674outstanding principal balance at a PER ANNUM rate equal to the greater of (i)76754.50% or (ii) one-half of one percentage point (0.50%) above the Prime Rate.7676After an Event of Default has occurred and is continuing, Obligations accrue7677interest at five (5) percentage points above the rate effective immediately7678before such Event of Default occurred. The interest rate increases or decreases7679when the Prime Rate changes. Interest is computed on a 360 day year for the7680actual number of days elapsed.76817682(b) Payments. Interest due on the Committed Revolving Line is payable7683on the 25th day of each month for the period ending at the end of the day7684preceding such 25th day. Bank may debit any of Borrower's deposit accounts at7685Bank for principal and interest payments owing or any amounts Borrower owes7686Bank. Bank will promptly notify Borrower when it debits Borrower's accounts.7687These debits are not a set-off. Payments received after 12:00 noon Pacific time7688are considered received at the opening of business on the next Business Day.7689When a payment is due on a day that is not a Business Day, the payment is due7690the next Business Day and additional fees or interest accrue.769176922.4 FEES.76937694(a) Facility Fee. Borrower shall pay to Bank a fee of $15,0007695concurrently with the making of the first Revolving Advance hereunder, which7696shall be in addition to interest and to all other amounts payable hereunder and7697which shall not be refundable.76987699(b) Bank Expenses. Borrower shall pay to the Bank all Bank Expenses7700(including reasonable attorneys' fees and expenses) incurred through and after7701the Closing Date when due.77027703(c) Unused Line Fee. Borrower shall pay to the Bank $1,250 per each7704quarter (or partial quarter) during the term hereof as long as no Advances have7705been made during such quarter, with such fee due and payable, if applicable, on7706the fir st day of each quarter with respect to the then immediately preceding7707quarter or partial quarter period, with the first of such payments due on April77081, 2004. However, on and after such time that the facility fee as described in77092.4(a) is payable by the Borrower, any and all unused line fees paid hereunder7710prior to such date shall be applied and credited to the such facility fee and7711Borrower shall thereupon only be responsible for the payment of such facility7712fee less the aggregate amount of such unused line fees so credited.771377143. CONDITIONS OF LOANS771577163.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.77177718Bank's obligation to make the initial Credit Extension is subject to7719the condition precedent that it receive the agreements, documents and fees it7720requires in its good faith business judgment, and shall include, without7721limitation, the satisfaction of the audit condition set forth in Section 6.2(d)7722hereof.772377247725-2-7726<PAGE>7727772877293.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.77307731Bank's obligations to make each Credit Extension, including the initial7732Credit Extension, is subject to the following:77337734(a) timely receipt of any Payment/Advance Form; and77357736(b) the representations and warranties in Section 5 must be materially7737true on the date of the Payment/Advance Form and on the effective date of each7738Credit Extension (each a "Bring Down Date") (except to the extent they related7739specifically to an earlier date, in which case such representations and7740warranties shall remain materially true and accurate as of such specific date on7741the Bring Down Date) and no Default or Event of Default may have occurred and be7742continuing, or result from the Credit Extension. Each Credit Extension is7743Borrower's representation and warranty on that date that the representations and7744warranties of Section 5 remain true (except to the extent they related7745specifically to an earlier date, in which case such representations and7746warranties shall remain materially true and accurate as of such specific date on7747the Bring Down Date).774877494. CREATION OF SECURITY INTEREST775077514.1 GRANT OF SECURITY INTEREST.77527753Borrower grants Bank a continuing security interest in all7754presently existing and later acquired Collateral to secure all Obligations and7755performance of each of Borrower's duties under the Loan Documents. Except for7756Permitted Liens, any security interest will be a first priority security7757interest in the Collateral. If this Agreement is terminated, Bank's lien and7758security interest in the Collateral will continue until Borrower fully satisfies7759its Obligations, other than for Inchoate Indemnities.776077614.2 AUTHORIZATION TO FILE.77627763Borrower authorizes Bank to file financing statements without notice to7764Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in7765order to perfect or protect Bank's interest in the Collateral.776677675. REPRESENTATIONS AND WARRANTIES77687769Borrower represents and warrants as follows:777077715.1 DUE ORGANIZATION AND AUTHORIZATION.77727773Each of Borrower and each Subsidiary is duly existing and in good7774standing in its state of formation and qualified and licensed to do business in,7775and in good standing in, any state in which the conduct of its business or its7776ownership of property requires that it be qualified, except where the failure to7777do so could not reasonably be expected to cause a Material Adverse Change.77787779The execution, delivery and performance of the Loan Documents have been7780duly authorized, and do not conflict with Borrower's formation documents, nor7781constitute an event of default under any material agreement by which Borrower is7782bound. Borrower is not in default under any agreement to which or by which it is7783bound in which the default could reasonably be expected to cause a Material7784Adverse Change.778577867787-3-7788<PAGE>7789779077915.2 COLLATERAL.77927793Borrower has good title to the Collateral and the Intellectual7794Property, free of Liens except Permitted Liens and Borrower has Rights to each7795asset that is Collateral. Borrower has no other deposit account, other than the7796deposit accounts described in the Schedule. The Accounts are bona fide, existing7797obligations, and the service or property has been performed or delivered to the7798account debtor or its agent for immediate shipment to and unconditional7799acceptance by the account debtor. The Collateral is not in the possession of any7800third party bailee (such as at a warehouse), except to the extent that purchased7801components of inventory are located, in the ordinary course of business, at the7802sites of contract manufacturers and with the further understanding that no7803inventory that is located at such a third party site shall be considered7804Eligible Inventory hereunder. In the event that Borrower, after the date hereof,7805intends to store or otherwise deliver the Collateral to such a bailee, then7806Borrower will receive the prior written consent of Bank and such bailee must7807acknowledge in writing that the bailee is holding such Collateral for the7808benefit of Bank. Borrower has no notice of any actual or imminent Insolvency7809Proceeding of any account debtor whose accounts are an Eligible Account in any7810Borrowing Base Certificate. All Inventory is in all material respects of good7811and marketable quality, free from material defects. Borrower is the sole owner7812of, or a licensee of, the Intellectual Property, except for non-exclusive7813licenses granted to its customers in the ordinary course of business. Each7814Patent is valid and enforceable (subject to the ability of the Borrower to7815abandon rights to certain Intellectual Property as set forth in Section 6.87816hereof) and no part of the Intellectual Property has been judged invalid or7817unenforceable, in whole or in part, and no claim has been made that any part of7818the Intellectual Property violates the rights of any third party, except to the7819extent such claim could not reasonably be expected to cause a Material Adverse7820Change.782178225.3 LITIGATION.78237824Except as shown in the Schedule, there are no actions or proceedings7825pending or, to the knowledge of Borrower's Responsible Officers, threatened by7826or against Borrower or any Subsidiary in which a likely adverse decision could7827reasonably be expected to cause a Material Adverse Change. With respect to the7828litigation identified on the Schedule, Borrower shall supply to Bank all current7829pleadings and other applicable information for Bank's review and evaluation;7830Borrower shall assist Bank in its evaluation thereof, with the specific7831understanding that no loans are to be made hereunder until such time as the Bank7832determines, in its good faith business judgment, that the litigation and the7833matters pertaining thereto are acceptable to Bank.783478355.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.78367837All consolidated financial statements for Borrower, and any Subsidiary,7838delivered to Bank fairly present in all material respects Borrower's7839consolidated financial condition and Borrower's consolidated results of7840operations, subject to normal year end audit adjustments for interim financial7841statements. There has not been any material deterioration in Borrower's7842consolidated financial condition since the date of the most recent financial7843statements submitted to Bank.784478455.5 SOLVENCY.78467847The fair salable value of Borrower's assets as a going concern7848(including goodwill minus disposition costs) exceeds the fair value of its7849liabilities; the Borrower is not left with unreasonably small capital after the7850transactions in this Agreement; and Borrower is able to pay its debts (including7851trade debts) as they mature.785278537854-4-7855<PAGE>7856785778585.6 REGULATORY COMPLIANCE.78597860Borrower is not an "investment company" or a company "controlled" by an7861"investment company" under the Investment Company Act. Borrower is not engaged7862as one of its important activities in extending credit for margin stock (under7863Regulations T and U of the Federal Reserve Board of Governors). Borrower has7864complied in all material respects with the Federal Fair Labor Standards Act.7865Borrower has not violated any laws, ordinances or rules, the violation of which7866could reasonably be expected to cause a Material Adverse Change. None of7867Borrower's or any Subsidiary's properties or assets has been used by Borrower or7868any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in7869disposing, producing, storing, treating, or transporting any hazardous substance7870other than legally. Borrower and each Subsidiary has timely filed all required7871tax returns and paid, or made adequate provision to pay, all material taxes,7872except those being contested in good faith with adequate reserves under GAAP.7873Borrower and each Subsidiary has obtained all consents, approvals and7874authorizations of, made all declarations or filings with, and given all notices7875to, all government authorities that are necessary to continue its business as7876currently conducted, except where the failure to do so could not reasonably be7877expected to cause a Material Adverse Change.787878795.7 SUBSIDIARIES.78807881Borrower does not own any stock, partnership interest or other equity7882securities except for Permitted Investments.788378845.8 FULL DISCLOSURE.78857886No written representation, warranty or other statement of Borrower in7887any certificate or written statement given to Bank (taken together with all such7888writ ten certificates and written statements to Bank) contains any untrue7889statement of a material fact or, when taken as a whole, omits to state a7890material fact necessary to make the statements contained in the certificates or7891statements not misleading in light of the circumstances in which they were made,7892with it being recognized by Bank that the projections and forecasts provided by7893Borrower in good faith and based upon reasonable assumptions are not viewed as7894facts and that actual results during the period or periods covered by such7895projections and forecasts may differ from the projected and forecasted results.789678975.9 LIEN STATUS OF CERTAIN PURCHASED ASSETS.78987899All assets purchased pursuant to that certain Asset Purchase Agreement7900dated as of April 29, 2002 by and between Borrower and the secured creditors7901parties thereto with respect to certain assets of Angiosonics, Inc., which were7902subject to UCC lien filings in favor of such secured creditors as of the date of7903Borrower's purchase of such assets, were listed on the UCC amendments evidencing7904the full release of such assets from such UCC lien filings and which amendments7905were filed with the Delaware Secretary of State on May 31, 2002, and bearing UCC7906amendment filing numbers 2134515 and 2134520.790779086. AFFIRMATIVE COVENANTS79097910Borrower will do all of the following for so long as Bank has an7911obligation to lend or there are outstanding Obligations (other than for Inchoate7912Indemnities):791379146.1 GOVERNMENT COMPLIANCE.79157916Borrower will maintain its and its Subsidiaries' (if any) legal7917existence and good standing in the jurisdiction of formation of each and will7918maintain qualification of all such entities in each791979207921-5-7922<PAGE>792379247925applicable jurisdiction in which the failure to so qualify would reasonably be7926expected to cause a material adverse effect on Borrower's business or7927operations. Borrower will comply, and will cause each Subsidiary to comply, with7928all laws, ordinances and regulations to which such party is subject to the7929extent that noncompliance therewith could have a material adverse effect on7930Borrower's business or operations or could reasonably be expected to cause a7931Material Adverse Change.793279336.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.79347935(a) Borrower will deliver to Bank: (i) as soon as available, but no7936later than 30 days after the last day of each month, a company prepared7937consolidated balance sheet and income statement covering Borrower's consolidated7938operations during the period certified by a Responsible Officer and in a form7939acceptable to Bank and, Borrower shall concurrently therewith provide to Bank a7940description regarding any material variances that have occurred with respect to7941Borrower's financial projections during such period (with the understanding that7942Borrower may from time to time modify such projections and agrees to provide7943Bank with copies of any such modifications); (ii) as soon as available, but no7944later than 90 days after the last day of Borrower's fiscal year, audited7945consolidated financial statements prepared under GAAP, consistently applied,7946together with an unqualified opinion on the financial statements from an7947independent certified public accounting firm reasonably acceptable to Bank;7948(iii) a prompt report of any legal actions pending or threatened against7949Borrower or any Subsidiary that could result in damages or costs to Borrower or7950any Subsidiary of $100,000 or more; and (iv) budgets, sales projections,7951operating plans or other financial information Bank reasonably requests,7952including, without limitation, financial projections (covering such matters and7953in such form as Bank shall reasonably request) for each fiscal year, and which7954are to be delivered to Bank prior the start of such fiscal year.79557956(b) Within 30 days after the last day of each month while any7957Revolving Advances are outstanding (and in any event delivered in conjunction7958with a request for a Revolving Advance when no such Revolving Advances are then7959outstanding), Borrower will deliver to Bank a Borrowing Base Certificate signed7960by a Responsible Officer in the form of Exhibit C hereto, with aged listings of7961accounts receivable and accounts payable, in each case by invoice date, and7962together with an inventory report in form and substance acceptable to Bank.7963Further, when no Revolving Advances are outstanding Borrower shall deliver to7964Bank the foregoing Borrowing Base Certificate, and together with aged listings7965of accounts receivable and accounts payable, together with an inventory report7966in form and substance acceptable to Bank all within 30 days after the end of7967each quarter.79687969(c) Within 30 days after the last day of each month, Borrower will7970deliver to Bank with the monthly financial statements a Compliance Certificate7971signed by a Responsible Officer in the form of Exhibit D.79727973(d) Allow Bank to audit Borrower's Collateral at Borrower's expense.7974Such audits will be conducted no more often than every 12 months unless a7975Default or Event of Default has occurred and is continuing. Further, as a7976condition to the making of any Advances hereunder, Bank shall conduct a7977Collateral audit and general field examination which shall produce results that7978are acceptable to Bank in its good faith business judgment.797979806.3 INVENTORY; RETURNS.79817982Borrower will keep all Inventory in good and marketable condition, free7983from material defects. Returns and allowances between Borrower and its account7984debtors will follow Borrower's customary practices as they exist at execution of7985this Agreement. Borrower must798679877988-6-7989<PAGE>799079917992promptly notify Bank of all returns, recoveries, disputes and claims, that7993involve more than $50,000.799479956.4 TAXES.79967997Borrower will make, and cause each Subsidiary to make, timely payment7998of all material federal, state, and local taxes or assessments (other than taxes7999and assessments which Borrower is contesting in good faith, with adequate8000reserves maintained in accordance with GAAP) and will deliver to Bank, on8001demand, appropriate certificates attesting to the payment.800280036.5 INSURANCE.80048005Borrower will keep its business and the Collateral insured for risks8006and in amounts standard for Borrower's industry, and as Bank may reasonably8007request. Insurance policies will be in a form, with companies, and in amounts8008that are satisfactory to Bank in Bank's reasonable discretion. All property8009policies will have a lender's loss payable endorsement showing Bank as an8010additional loss payee and all liability policies will show the Bank as an8011additional insured and provide that the insurer must give Bank at least 20 days8012notice before canceling its policy. At Bank's request, Borrower will deliver8013certified copies of policies and evidence of all premium payments. Proceeds8014payable under any policy will, at Bank's option, be payable to Bank on account8015of the Obligations.801680176.6 PRIMARY ACCOUNTS.80188019Borrower will maintain (A) its operating bank accounts with Bank and8020(B) 80% of all excess cash and investments balances at or through Bank. Further,8021as to any amounts that are on deposit at institutions other than at the Bank,8022Borrower shall cause such other institutions to enter into account control8023agreements in favor of Bank in order to allow the Bank perfect its lien therein8024and with such agreements and provisions as are reasonably acceptable to Bank.802580266.7 FINANCIAL COVENANTS.80278028Borrower will maintain at all times:80298030(i) TANGIBLE NET WORTH. A Tangible Net Worth of at least8031$8,000,000.80328033(ii) LIQUIDITY COVERAGE. A ratio of (A) unrestricted domestic8034cash (and equivalents) plus the product of the aggregate amount of Eligible8035Accounts multiplied by the applicable advance rate for the making of Revolving8036Advances hereunder with respect to Eligible Accounts, divided by (B) the8037aggregate amount of Obligations outstanding hereunder, of not less than 1.25 to80381.00.803980406.8 INTELLECTUAL PROPERTY.80418042Borrower will (i) protect, defend and maintain the validity and8043enforceability of all material Intellectual Property and promptly advise Bank in8044writing of material infringements and (ii) not allow any Intellectual Property8045material to Borrower's business to be abandoned, forfeited or dedicated to the8046public without Bank's written consent.804780486.9 FURTHER ASSURANCES.80498050Borrower will execute any further instruments and take further action8051as Bank reasonably requests to perfect or continue Bank's security interest in8052the Collateral or to effect the purposes of this Agreement.805380548055-7-8056<PAGE>8057805880597. NEGATIVE COVENANTS80608061Borrower will not do any of the following without Bank's prior written8062consent, which will not be unreasonably withheld, for so long as Bank has an8063obligation to lend or there are any outstanding Obligations other than for8064Inchoate Indemnities:806580667.1 DISPOSITIONS.80678068Convey, sell, lease, transfer or otherwise dispose of (collectively8069"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of8070its business or property, except for Transfers (i) of Inventory in the ordinary8071course of business; (ii) of non-exclusive licenses and similar arrangements for8072the use of the property of Borrower or any Subsidiary in the ordinary course of8073business; (iii) of worn-out or obsolete Equipment; or (iv) that arise from the8074making of Permitted Investments. Further, Bank agrees to facilitate the8075dispositions in clause (iii) above with respect to a release of the Bank's lien8076therein on terms acceptable to Bank, subject, in all cases, to the first8077priority lien right in any and all proceeds arising therefrom.807880797.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.80808081Engage in or permit any Subsidiary to engage in any business other than8082the businesses currently engaged in by Borrower or reasonably related thereto or8083have a material change in its management or its ownership of greater than 25%8084(other than by the sale of Borrower's equity securities in a public offering or8085to venture capital investors so long as Borrower identifies the venture capital8086investors prior to the closing of the investment). Borrower will not, without at8087least 30 days prior written notice, relocate its chief executive office or add8088any new offices or business locations in which Borrower maintains or stores over8089$15,000 in Borrower's assets or property.809080917.3 MERGERS OR ACQUISITIONS.80928093Merge or consolidate, or permit any Subsidiary to merge or consolidate,8094with any other Person, or acquire, or permit any Subsidiary to acquire, all or8095substantially all of the capital stock or property of another Person, except8096where: (i) no Default or Event of Default has occurred and is continuing or8097would result from such action during the term of this Agreement; (ii) such8098transaction would not result in a decrease of more than 25% of Tangible Net8099Worth; and (iii) upon the acquisition of any other Person as otherwise permitted8100pursuant to the terms of this Section, such Person become an appropriate obligor8101relating to the Obligations hereunder, as the Bank may determine, and shall8102execute such agreements, documents and instruments as are reasonably necessary8103or appropriate, as the Bank may determine, in order to evidence such debt8104obligations and to establish a first priority security interest in the personal8105property assets of such Person in favor of Bank, subject to Permitted Liens. A8106Subsidiary may merge or consolidate into another Subsidiary or into Borrower as8107long as no Default or Event of Default has occurred and is continuing prior to8108the proposed transaction or would otherwise arise thereafter as a direct or8109indirect result thereof.811081117.4 INDEBTEDNESS.81128113Create, incur, assume, or be liable for any Indebtedness, or permit any8114Subsidiary to do so, other than Permitted Indebtedness.811581167.5 ENCUMBRANCE.81178118Create, incur, or allow any Lien on any of its property, or assign or8119convey any right to receive income, including the sale of any Accounts, or8120permit any Subsidiary to do so, except for812181228123-8-8124<PAGE>812581268127Permitted Liens, or permit the Bank's first priority lien in the Collateral to8128change, subject only to Permitted Liens as may be applicable and subject to the8129provisions of Section 7.1 hereof regarding the Transfer of wornout or obsolete8130equipment as more specifically set forth in Section 7.1, provided, further, with8131respect to Inventory, it is understood that under Section 9320(a) of the Code, a8132buyer thereof in the ordinary course of business shall take such Inventory free8133of the Lien of Bank hereunder, subject to the Lien of the Bank in any and all8134proceeds thereof.813581367.6 DISTRIBUTIONS; INVESTMENTS.81378138Directly or indirectly acquire or own any Person, or make any8139Investment in any Person, other than Permitted Investments, or permit any8140Subsidiary to do so. Pay any dividends or make any distribution or other8141payment, redemption, retirement or re-purchase of any of its capital stock,8142provided that Borrower may redeem or repurchase for cash, at fair value, the8143capital stock of Borrower (or options to purchase capital stock) from any8144employee of Borrower upon the death, disability, retirement or other termination8145of such employee, if (i) no Default or Event of Default shall have occurred and8146be continuing or shall result from the same, and (ii) the total amount paid in8147all of the foregoing transactions shall not exceed $50,000 in any fiscal year of8148Borrower.814981507.7 TRANSACTIONS WITH AFFILIATES.81518152Directly or indirectly enter into or permit to exist any material8153transaction with any Affiliate of Borrower except for transactions that are in8154the ordinary course of Borrower's business, upon fair and reasonable terms that8155are no less favorable to Borrower than would be obtained in an arm's length8156transaction with a nonaffiliated Person, provided that the foregoing8157restrictions shall not apply to (i) redemptions or repurchases of Borrower's8158stock otherwise permitted under Section 7.6, or (ii) employment arrangements8159(including arrangements made with respect to bonuses) entered into in the8160ordinary course of business consistent with past business practices with members8161of the Board of Directors and officers of Borrower, provided that no Default or8162Event of Default has occurred and is continuing or that no Default or Event of8163Default would arise upon the the making of any such employment arrangement or8164upon the effectiveness thereof.816581667.8 SUBORDINATED DEBT.81678168Make or permit any payment on any Subordinated Debt, except under the8169terms of the Subordinated Debt, or amend any provision in any document relating8170to the Subordinated Debt without Bank's prior written consent.817181727.9 COMPLIANCE.81738174Become an "investment company" or a company controlled by an8175"investment company," under the Investment Company Act of 1940 or undertake as8176one of its important activities extending credit to purchase or carry margin8177stock, or use the proceeds of any Credit Extension for that purpose; fail to8178meet the minimum funding requirements of ERISA, permit a Reportable Event or8179Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the8180Federal Fair Labor Standards Act or violate any other law or regulation, if the8181violation could reasonably be expected to have a material adverse effect on8182Borrower's business or operations or would reasonably be expected to cause a8183Material Adverse Change, or permit any of its Subsidiaries to do so.818481858. EVENTS OF DEFAULT81868187Any one of the following is an "Event of Default" hereunder:818881898190-9-8191<PAGE>8192819381948.1 PAYMENT DEFAULT.81958196If Borrower fails to pay any of the Obligations within 3 days after8197their due date. During such additional 3 day period the failure to cure such8198payment default is not an Event of Default hereunder (but no Credit Extension8199will be made during the cure period);820082018.2 COVENANT DEFAULT.82028203(A) If Borrower does not perform any obligation in Sections 6.1, 6.2,82046.5, 6.6, and 6.7 or violates any covenant in Section 7; or82058206(B) If Borrower does not perform or observe any other material term,8207condition or covenant in this Agreement (other than as referenced in the Section82088.1 or 8.2(A)), any Loan Documents, or in any agreement between Borrower and8209Bank and as to any default under a term, condition or covenant that can be8210cured, has not cured the default within 10 days after it occurs, or if the8211default cannot be cured within 10 days or cannot be cured after Borrower's8212attempts within 10 day period, and the default may be cured within a reasonable8213time, then Borrower has an additional period (of not more than 30 days) to8214attempt to cure the default. During the additional time, the failure to cure the8215default is not an Event of Default (but no Credit Extensions will be made during8216the cure period);821782188.3 MATERIAL ADVERSE CHANGE.82198220If there (i) occurs a material adverse change in the business,8221operations, or condition (financial or otherwise) of the Borrower, or (ii) is a8222material impairment of the prospect of repayment of any portion of the8223Obligations or (iii) is a material impairment of the value or priority of Bank's8224security interests in the Collateral (any of the foregoing is referred to herein8225as a "Material Adverse Change").822682278.4 ATTACHMENT.82288229If any material portion of Borrower's assets is attached, seized,8230levied on, or comes into possession of a trustee or receiver and the attachment,8231seizure or levy is not removed in 10 days, or if Borrower is enjoined,8232restrained, or prevented by court order from conducting a material part of its8233business or if a judgment or other claim becomes a Lien on a material portion of8234Borrower's assets, or if a notice of lien, levy, or assessment is filed against8235any of Borrower's assets by any government agency and not paid within 10 days8236after Borrower receives notice. These are not Events of Default if stayed or if8237a bond is posted pending contest by Borrower (but no Credit Extensions will be8238made during the cure period prior to obtaining a stay or posting a bond);823982408.5 INSOLVENCY.82418242If Borrower becomes insolvent or if Borrower begins an Insolvency8243Proceeding or an Insolvency Proceeding is begun against Borrower and not8244dismissed or stayed within 30 days (but no Credit Extensions will be made before8245any Insolvency Proceeding is dismissed);824682478.6 OTHER AGREEMENTS.82488249If there is a default in any agreement between Borrower and a third8250party that gives the third party the right to accelerate any Indebtedness8251exceeding $100,000 or that could reasonably be expected to cause a Material8252Adverse Change;825382548255-10-8256<PAGE>8257825882598.7 JUDGMENTS.82608261If a money judgment(s) in the aggregate of at least $50,000 is rendered8262against Borrower and is unsatisfied and unstayed for 10 days (but no Credit8263Extensions will be made before the judgment is stayed or satisfied);826482658.8 MISREPRESENTATIONS.82668267If Borrower or any Person acting for Borrower makes any material8268misrepresentation or material misstatement now or later in any warranty or8269representation in this Agreement or in any writing delivered to Bank or to8270induce Bank to enter this Agreement or any Loan Document; or827182728.9 GUARANTY.82738274Any guaranty of any Obligations ceases for any reason to be in full8275force or any Guarantor does not perform any obligation under any guaranty of the8276Obligations, or any material misrepresentation or material misstatement exists8277now or later in any warranty or representation in any guaranty of the8278Obligations or in any certificate delivered to Bank in connection with the8279guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to8280any Guarantor.828182829. BANK'S RIGHTS AND REMEDIES828382849.1 RIGHTS AND REMEDIES.82858286When an Event of Default occurs and continues Bank may, without notice8287or demand, do any or all of the following:82888289(a) Declare all Obligations immediately due and payable (but if an8290Event of Default described in Section 8.5 occurs all Obligations are immediately8291due and payable without any action by Bank);82928293(b) Stop advancing money or extending credit for Borrower's benefit8294under this Agreement or under any other agreement between Borrower and Bank;82958296(c) Settle or adjust disputes and claims directly with account debtors8297for amounts, on terms and in any order that Bank considers advisable;82988299(d) Make any payments and do any acts it considers necessary or8300reasonable to protect its security interest in the Collateral. Borrower will8301assemble the Collateral if Bank requires and make it available as Bank8302designates. Bank may enter premises where the Collateral is located, take and8303maintain possession of any part of the Collateral, and pay, purchase, contest,8304or compromise any Lien which appears to be prior or superior to its security8305interest and pay all expenses incurred. Borrower grants Bank a license to enter8306and occupy any of its premises, without charge, to exercise any of Bank's rights8307or remedies;83088309(e) Apply to the Obligations any (i) balances and deposits of Borrower8310it holds, or (ii) any amount held by Bank owing to or for the credit or the8311account of Borrower;83128313(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare8314for sale, advertise for sale, and sell the Collateral. Bank is granted a8315non-exclusive, royalty-free license or other right to use, without charge,8316Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,8317trade secrets, trade names, Trademarks, service marks, and advertising matter,8318or any similar property as it pertains to the Collateral, in completing8319production of, advertising for sale,832083218322-11-8323<PAGE>832483258326and selling any Collateral and, in connection with Bank's exercise of its rights8327under this Section, Borrower's rights under all licenses and all franchise8328agreements inure to Bank's benefit (to the extent permitted thereby or as8329otherwise may be permitted under law); and83308331(g) Dispose of the Collateral according to the Code.833283339.2 POWER OF ATTORNEY.83348335Effective only when an Event of Default occurs and continues, Borrower8336irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name8337on any checks or other forms of payment or security; (ii) sign Borrower's name8338on any invoice or bill of lading for any Account or drafts against account8339debtors, (iii) make, settle, and adjust all claims under Borrower's insurance8340policies; (iv) settle and adjust disputes and claims about the Accounts directly8341with account debtors, for amounts and on terms Bank determines reasonable; and8342(v) transfer the Collateral into the name of Bank or a third party as the Code8343permits. Bank may exercise the power of attorney to sign Borrower's name on any8344documents necessary to perfect or continue the perfection of any security8345interest regardless of whether an Event of Default has occurred. Bank's8346appointment as Borrower's attorney in fact, and all of Bank's rights and powers8347under this Section 9.2, coupled with an interest, are irrevocable until all8348Obligations (other than for Inchoate Indemnities) have been fully repaid and8349performed and Bank's obligation to provide Credit Extensions terminates.835083519.3 ACCOUNTS COLLECTION.83528353When an Event of Default occurs and continues, Bank may notify any8354Person owing Borrower money of Bank's security interest in the funds and verify8355the amount of the Account. While any Obligations are outstanding, Borrower shall8356be deemed to collect all payments in trust for Bank and, if requested by Bank in8357its good faith business judgment, immediately deliver the payments to Bank in8358the form received from the account debtor, with proper endorsements for deposit.835983609.4 BANK EXPENSES.83618362If Borrower fails to pay any amount or furnish any required proof of8363payment to third persons, Bank may make all or part of the payment or obtain8364insurance policies required in Section 6.5, and take any action under the8365policies Bank deems prudent and Bank will apprise Borrower of any such actions8366in accordance with its customary procedures. Any amounts paid by Bank are Bank8367Expenses and immediately due and payable, bearing interest at the then8368applicable rate and secured by the Collateral. No payments by Bank are deemed an8369agreement to make similar payments in the future or Bank's waiver of any Event8370of Default.837183729.5 BANK'S LIABILITY FOR COLLATERAL.83738374If Bank complies with reasonable banking practices and the Code, it is8375not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to8376the Collateral; (c) any diminution in the value of the Collateral; or (d) any8377act or default of any carrier, warehouseman, bailee, or other person. Except as8378provided in the preceding sentence, Borrower bears all risk of loss, damage or8379destruction of the Collateral.838083819.6 REMEDIES CUMULATIVE.83828383Bank's rights and remedies under this Agreement, the Loan Documents,8384and all other agreements are cumulative. Bank has all rights and remedies8385provided under the Code, by law, or in equity. Bank's exercise of one right or8386remedy is not an election, and Bank's waiver of any838783888389-12-8390<PAGE>839183928393Event of Default is not a continuing waiver. Bank's delay is not a waiver,8394election, or acquiescence. No waiver is effective unless signed by Bank and then8395is only effective for the specific instance and purpose for which it was given.839683979.7 DEMAND WAIVER.83988399Borrower waives demand, notice of default or dishonor, notice of8400payment and nonpayment, notice of any default, nonpayment at maturity, release,8401compromise, settlement, extension, or renewal of accounts, documents,8402instruments, chattel paper, and guarantees held by Bank on which Borrower is8403liable.8404840510. NOTICES84068407All notices or demands by any party about this Agreement or any other8408related agreement must be in writing and be personally delivered or sent by an8409overnight delivery service, by certified mail, postage prepaid, return receipt8410requested, or by telefacsimile to the addresses set forth at the beginning of8411this Agreement. A party may change its notice address by giving the other party8412written notice.8413841411. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER84158416California law governs the Loan Documents without regard to principles8417of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction8418of the State and Federal courts in Santa Clara County, California.84198420BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE8421OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED8422TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS8423WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.8424EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.8425842612. GENERAL PROVISIONS8427842812.1 SUCCESSORS AND ASSIGNS.84298430This Agreement binds and is for the benefit of the successors and8431permitted assigns of each party. Borrower may not assign this Agreement or any8432rights under it without Bank's prior written consent which may be granted or8433withheld in Bank's discretion. Bank has the right, without the consent of or8434notice to Borrower, to sell, transfer, negotiate, or grant participation in all8435or any part of, or any interest in, Bank's obligations, rights and benefits8436under this Agreement.8437843812.2 INDEMNIFICATION.84398440Borrower will indemnify, defend and hold harmless Bank and its8441officers, employees, and agents against: (a) all obligations, demands, claims,8442and liabilities asserted by any other party in connection with the transactions8443contemplated by the Loan Documents; and (b) all losses or Bank Expenses8444incurred, or paid by Bank from, following, or consequential to transactions8445between Bank and Borrower (including reasonable attorneys fees and expenses),8446except for losses caused by Bank's gross negligence or willful misconduct.84478448A Person seeking to be indemnified under this Section shall notify8449Borrower of any event requiring indemnification within a reasonable time8450following such Person's receipt of notice of845184528453-13-8454<PAGE>845584568457commencement of any action or proceeding giving rise to a claim for8458indemnification hereunder, provided that (i) there shall be no obligation to so8459notify Borrower if an Event of Default has occurred and is continuing, (ii)8460neither Bank nor any such Person shall have any liability or obligation for any8461inadvertent failure to provide such notice, (iii) no failure to provide such8462notice shall affect Borrower's obligation to provide indemnity hereunder and8463(iv) in any event, nothing herein shall impose on Bank any duty or obligation to8464impair the confidentiality or sanctity of its attorney client relationship. In8465such proceeding, such Person shall use commercially reasonable efforts to keep8466Borrower reasonably informed of its defense and any settlement of any such8467action or proceeding and negotiations to settle or otherwise resolve any claim,8468provided that (i) such Person shall have the exclusive right to decide to accept8469or reject any settlement offer, (ii) there shall be no obligation to keep8470Borrower so informed if an Event of Default has occurred and is continuing,8471(iii) neither Bank nor any such Person shall have any liability or obligation8472for any inadvertent failure to keep Borrower so informed, (iv) no failure to8473keep Borrower so informed shall affect Borrower's obligation to provide8474indemnity hereunder and (v) in any event, nothing herein shall impose on Bank8475any duty or obligation to impair the confidentiality or sanctity of its attorney8476client relationship. Notwithstanding any provision in this Agreement to the8477contrary, the indemnity agreement set forth in this Section shall survive any8478termination of this Agreement and shall for all purposes continue in full force8479and effect.8480848112.3 TIME OF ESSENCE.84828483Time is of the essence for the performance of all obligations in this8484Agreement.8485848612.4 SEVERABILITY OF PROVISION.84878488Each provision of this Agreement is severable from every other8489provision in determining the enforceability of any provision.8490849112.5 AMENDMENTS IN WRITING, INTEGRATION.84928493All amendments to this Agreement must be in writing and signed by8494Borrower and Bank. This Agreement represents the entire agreement about this8495subject matter, and supersedes prior negotiations or agreements. All prior8496agreements, understandings, representations, warranties, and negotiations8497between the parties about the subject matter of this Agreement merge into this8498Agreement and the Loan Documents.8499850012.6 COUNTERPARTS.85018502This Agreement may be executed in any number of counterparts and by8503different parties on separate counterparts, each of which, when executed and8504delivered, are an original, and all taken together, constitute one Agreement.8505850612.7 SURVIVAL.85078508All covenants, representation s and warranties made in this Agreement8509continue in full force while any Obligations remain outstanding (other than for8510Inchoate Indemnities). The obligations of Borrower in Section 12.2 to indemnify8511Bank will survive until all statutes of limitations for actions that may be8512brought against Bank have run.8513851412.8 CONFIDENTIALITY.85158516In handling any confidential information, Bank will exercise the same8517degree of care that it exercises for its own proprietary information, but8518disclosure of information may be made (i) to Bank's subsidiaries or affiliates8519in connection with their business with Borrower, (ii) to852085218522-14-8523<PAGE>852485258526prospective transferees or purchasers of any interest in the loans (provided,8527however, Bank shall use commercially reasonable efforts in obtaining such8528prospective transferee or purchasers written agreement to the terms of this8529provision), (iii) as required by law, regulation, subpoena, or other order, (iv)8530as required in connection with Bank's examination or audit and (v) as Bank8531considers appropriate exercising remedies under this Agreement. Confidential8532information does not include information that either: (a) is in the public8533domain or in Bank's possession when disclosed to Bank, or becomes part of the8534public domain after disclosure to Bank; or (b) is disclosed to Bank by a third8535party, if Bank does not know that the third party is prohibited from disclosing8536the information.8537853812.9 ATTORNEYS' FEES, COSTS AND EXPENSES.85398540In any action or proceeding between Borrower and Bank arising out of8541the Loan Documents, the prevailing party will be entitled to recover its8542reasonable attorneys' fees and other reasonable costs and expenses incurred, in8543addition to any other relief to which it may be entitled.8544854513. DEFINITIONS8546854713.1 DEFINITIONS.85488549In this Agreement:85508551"ACCOUNTS" are all existing and later arising accounts, contract8552rights, and other obligations owed Borrower in connection with its sale or lease8553of goods (including licensing software and other technology) or provision of8554services, all credit insurance, guaranties, other security and all merchandise8555returned or reclaimed by Borrower and Borrower's Books relating to any of the8556foregoing.85578558"AFFILIATE" of a Person is a Person that owns or controls directly or8559indirectly the Person, any Person that controls or is controlled by or is under8560common control with the Person, and each of that Person's senior executive8561officers, directors, partners and, for any Person that is a limited liability8562company, that Person's managers and members.85638564"BANK EXPENSES" are all audit fees and expenses and reasonable costs8565and expenses (including reasonable attorneys' fees and expenses) for preparing,8566negotiating, administering, defending and enforcing the Loan Documents8567(including appeals or Insolvency Proceedings).85688569"BORROWER'S BOOKS" are all Borrower's books and records including8570ledgers, records regarding Borrower's assets or liabilities, the Collateral,8571business operations or financial condition and all computer programs or discs or8572any equipment containing the information.85738574"BORROWING BASE" shall mean:85758576(A) up to 75% of Eligible Accounts as determined and confirmed by Bank8577from Borrower's most recent Borrowing Base Certificate; provided, however, that8578Bank may lower the percentage of the Borrowing Base after performing an audit of8579Borrower's Collateral in Bank's good faith business judgment; and85808581(B) up to 25% of Eligible Inventory, provided that Advances hereunder8582based on Eligible Inventory shall at no time exceed the lesser of (i) $1,000,0008583or (ii) 33% of the amount from clause (A) above, as applicable from time to8584time.858585868587-15-8588<PAGE>858985908591"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on8592which the Bank is closed.85938594"CLOSING DATE" is the date of this Agreement.85958596"CODE" is the Uniform Commercial Code, as applicable.85978598"COLLATERAL" is the property described on Exhibit A.85998600"COMMITTED REVOLVING LINE" shall mean a credit facility for the making8601of Revolving Advances in the aggregate principal amount of $3,000,000.86028603"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect8604liability, contingent or not, of that Person for (i) any indebtedness, lease,8605dividend, letter of credit or other obligation of another such as an obligation8606directly or indirectly guaranteed, endorsed, co-made, discounted or sold with8607recourse by that Person, or for which that Person is directly or indirectly8608liable; (ii) any obligations for undrawn letters of credit for the account of8609that Person; and (iii) all obligations from any interest rate, currency or8610commodity swap agreement, interest rate cap or collar agreement, or other8611agreement or arrangement designated to protect a Person against fluctuation in8612interest rates, currency exchange rates or commodity prices; but "Contingent8613Obligation" does not include endorsements in the ordinary course of business.8614The amount of a Contingent Obligation is the stated or determined amount of the8615primary obligation for which the Contingent Obligation is made or, if not8616determinable, the maximum reasonably anticipated liability for it determined by8617the Person in good faith; but the amount may not exceed the maximum of the8618obligations under the guarantee or other support arrangement.86198620"COPYRIGHTS" are all copyright rights, applications or registrations8621and like protections in each work or authorship or derivative work, whether8622published or not (whether or not it is a trade secret) now or later existing,8623created, acquired or held.86248625"CREDIT EXTENSION" is each Revolving Advance and each other extension8626of credit or credit accommodation by Bank for Borrower's benefit.86278628"DEFAULT" shall mean any event or occurrence which with the passing of8629time or the giving of notice or both would become an Event of Default hereunder.86308631"EFFECTIVE DATE" is the date Bank executes this Agreement.86328633"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's8634business that meet all Borrower's representations and warranties in Section 5.2;8635but Bank may change eligibility standards by giving Borrower notice. Unless Bank8636agrees otherwise in writing, Eligible Accounts will not include:86378638(a) Accounts that the account debtor has not paid within 908639days of invoice date;86408641(b) Accounts for an account debtor, 50% or more of whose8642Accounts have not been paid within 90 days of invoice date;86438644(c) Credit balances over 90 days from invoice date;86458646(d) Accounts for an account debtor, including Affiliates,8647whose total obligations to Borrower exceed 25% of all Accounts, for the amounts8648that exceed that percentage, unless the Bank approves in writing;864986508651-16-8652<PAGE>865386548655(e) Accounts for which the account debtor does not have its8656principal place of business in the United States;86578658(f) Accounts for which the account debtor is a federal, state8659or local government entity or any department, agency, or instrumentality, other8660than for account debtor consisting of a hospital, as long as the Bank is able to8661perfect its Lien therein through the filing of a UCC-1 financing statement in8662the appropriate governmental filing office, provided Bank reserves the right to8663make an Assignment of Claims filing, or other equivalent filing under any other8664applicable filing or registration scheme, which Bank in its discretion may do;86658666(g) Accounts for which Borrower owes the account debtor, but8667only up to the amount owed (sometimes called "contra" accounts, accounts8668payable, customer deposits or credit accounts);86698670(h) Accounts for demonstration or promotional equipment, or in8671which goods are consigned, sales guaranteed, sale or return, sale on approval,8672bill and hold, or other terms if account debtor's payment may be conditional;86738674(i) Accounts for which the account debtor is Borrower's8675Affiliate, officer, employee, or agent;86768677(j) Accounts in which the account debtor disputes liability or8678makes any claim and Bank believes there may be a basis for dispute (but only up8679to the disputed or claimed amount), or if the Account Debtor is subject to an8680Insolvency Proceeding, or becomes insolvent, or goes out of business; and86818682(k) Accounts for which Bank reasonably determines collection8683to be doubtful.86848685"ELIGIBLE INVENTORY" means Inventory that Bank deems acceptable, in its8686discretion, for the purpose of making of Advances hereunder.86878688"EQUIPMENT" is all present and future machinery, equipment, tenant8689improvements, furniture, fixtures, vehicles, tools, parts and attachments in8690which Borrower has any interest.86918692"ERISA" is the Employment Retirement Income Security Act of 1974, and8693its regulations.86948695"GAAP" is generally accepted accounting principles, consistently8696applied.86978698"GUARANTOR" is any present or future guarantor of the Obligations.86998700"INCHOATE INDEMNITIES" shall mean indemnity obligations of the Borrower8701hereunder for which no claim or applicable covered occurrence or event under any8702applicable indemnity provision hereof has yet arisen, to the knowledge of Bank,8703even though the indemnity provisions hereof shall continue to remain enforceable8704contractual provisions with respect to any such potential claims or otherwise8705regarding any such occurrences or events.87068707"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred8708price of property or services, such as reimbursement and other obligations for8709surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,8710debentures or similar instruments, (c) capital lease obligations and (d)8711Contingent Obligations.871287138714-17-8715<PAGE>871687178718"INSOLVENCY PROCEEDING" are proceedings by or against any Person under8719the United States Bankruptcy Code, or any other bankruptcy or insolvency law,8720including assignments for the benefit of creditors, compositions, extensions8721generally with its creditors, or proceedings seeking reorganization,8722arrangement, or other relief.87238724"INTELLECTUAL PROPERTY" is:87258726(a) Copyrights, Trademarks, Patents, and Mask Works including8727amendments, renewals, extensions, and all licenses or other rights to use and8728all license fees and royalties from the use;87298730(b) Any trade secrets and any intellectual property rights in computer8731software and computer software products now or later existing, created, acquired8732or held;87338734(c) All design rights which may be available to Borrower now or later8735created, acquired or held;87368737(d) Any claims for damages (past, present or future) for infringement8738of any of the rights above, with the right, but not the obligation, to sue and8739collect damages for use or infringement of the intellectual property rights8740above;87418742All proceeds and products of the foregoing, including all insurance,8743indemnity or warranty payments.87448745"INVENTORY" is present and future inventory in which Borrower has any8746interest, including merchandise, raw materials, parts, supplies, packing and8747shipping materials, work in process and finished products intended for sale or8748lease or to be furnished under a contract of service, of every kind and8749description now or later owned by or in the custody or possession, actual or8750constructive, of Borrower, including inventory temporarily out of its custody or8751possession or in transit and including returns on any accounts or other proceeds8752(including insurance proceeds) from the sale or disposition of any of the8753foregoing and any documents of title.87548755"INVESTMENT" is any beneficial ownership of (including stock,8756partnership interest or other securities) any Person, or any loan, advance or8757capital contribution to any Person.87588759"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security8760interest or other encumbrance.87618762"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes8763or guaranties or third party suretyship obligations in favor of Bank executed by8764Borrower or other Persons, as applicable, and any other present or future8765agreement between Borrower and/or for the benefit of Bank in connection with8766this Agreement, all as amended, extended or restated.87678768"MASK WORKS" are all mask works or similar rights available for the8769protection of semiconductor chips, now owned or later acquired.87708771"MATERIAL ADVERSE CHANGE" is described in Section 8.3.87728773"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other8774amounts Borrower owes Bank now or later, including cash management services,8775letters of credit and foreign exchange contracts, if any and including interest8776accruing after Insolvency Proceedings begin and debts, liabilities, or8777obligations of Borrower assigned to Bank.877887798780-18-8781<PAGE>878287838784"PATENTS" are patents, patent applications and like protections,8785including improvements, divisions, continuations, renewals, reissues, extensions8786and continuations-in-part of the same.87878788"PERMITTED INDEBTEDNESS" is:87898790(a) Borrower's indebtedness to Bank under this Agreement or any other8791Loan Document;87928793(b) Indebtedness existing on the Closing Date and shown on the8794Schedule;87958796(c) Subordinated Debt;87978798(d) Indebtedness to trade creditors incurred in the ordinary course of8799business; and88008801(e) Indebtedness secured by Permitted Liens.88028803"PERMITTED INVESTMENTS" are:88048805(a) Investments shown on the Schedule and existing on the Closing Date,8806provided that Investments in a Subsidiary shall be allowed in the ordinary8807course of business and shall be consistent in manner, scope and magnitude as8808made on and prior to the date hereof;88098810(b) (i) marketable direct obligations issued or unconditionally8811guaranteed by the United States or its agency or any State maturing within 18812year from its acquisition, (ii) commercial paper maturing no more than 1 year8813after its creation and having the highest rating from either Standard & Poor's8814Corporation or Moody's Investors Service, Inc., and (iii) Bank's certificates of8815deposit issued maturing no more than 1 year after issue;88168817(c) extensions of trade credit by Borrower or by any Subsidiary in the8818ordinary course of business consistent with past business practices of Borrower8819or Subsidiary, as applicable (provided that trade credit that Borrower supplies8820to its Subsidiary shall in all cases be consistent with the standards set forth8821in clause (a) hereof).88228823(d) Investments (including debt obligations) received in connection8824with the bankruptcy or reorganization of suppliers and customers and in8825settlement of delinquent obligations of and other disputes with, customers and8826suppliers arising in the ordinary course of business;88278828(e) promissory notes acquired in connection with the disposition of8829assets permitted under Sect ion 7.1; and88308831(f) Additional Investments in an aggregate amount not to exceed $50,0008832at any time outstanding, provided that any such Investment may not be made while8833a Default or an Event of Default has occurred and is continuing or would8834otherwise arise upon the making thereof.88358836"PERMITTED LIENS" are:88378838(a) Liens existing on the Closing Date and shown on the Schedule or8839arising under this Agreement or other Loan Documents;88408841(b) Liens for taxes, fees, assessments or other government charges or8842levies, either not delinquent or being contested in good faith and for which8843Borrower maintains adequate reserves on its Books, if they have no priority over8844any of Bank's security interests;884588468847-19-8848<PAGE>884988508851(c) Purchase money Liens (i) on Equipment acquired or held by Borrower8852or its Subsidiaries incurred for financing the acquisition of the Equipment, or8853(ii) existing on equipment when acquired, if the Lien is confined to the8854property and improvements and the proceeds of the equipment;88558856(d) Non-exclusive licenses or non-exclusive sublicenses granted in the8857ordinary course of Borrower's business and, with respect to any licenses where8858Borrower is the licensee, any interest or title of a licensor or under any such8859license or sublicense, if the licenses and sublicenses permit granting Bank a8860security interest;88618862(e) Leases or subleases entered into in the ordinary course of8863Borrower's business, including in connection with Borrower's leased premises or8864leased property;88658866(f) Liens incurred in the extension, renewal or refinancing of the8867indebtedness secured by Liens described in (a) through (c), but any extension,8868renewal or replacement Lien must be limited to the property encumbered by the8869existing Lien and the principal amount of the indebtedness may not increase;88708871(g) carriers', warehousemen's, mechanics', materialmen's, repairmen's,8872worker's compensation, employment insurance, social security or other similar8873Liens relating to statutory obligations arising in the ordinary course of8874business which are not delinquent or remain payable without penalty or which are8875being contested in good faith and by appropriate proceedings (provided, however,8876that such appropriate proceedings do not involve any substantial danger of the8877sale, forfeiture or loss of any material item of Collateral or Collateral which8878in the aggregate is material to Borrower and that Borrower has adequately bonded8879such Lien or reserves sufficient to discharge such Lien have been provided on8880the books of Borrower)88818882(h) Liens arising from judgments, decrees or attachments which do not8883constitute an Event of Default;88848885(i) easements, rights-of-way, restrictions, minor defects or8886irregularities in title and other similar charges or encumbrances not8887interfering in any material respect with the ordinary conduct of the business of8888Borrower; and88898890(j) banker's Liens, rights of setoff and similar Liens incurred on8891deposits made in the ordinary course of business, subject, however, in each case8892to the provisions of any account control agreement entered into by and between8893Bank and the depository institution with respect to any such deposits and8894accounts.88958896"PERSON" is any individual, sole proprietorship, partnership, limited8897liability company, joint venture, company association, trust, unincorporated8898organization, association, corporation, institution, public benefit corporation,8899firm, joint stock company, estate, entity or government agency.89008901"PRIME RATE" is Bank's most recently announced "prime rate," even if it8902is not Bank's lowest rate.89038904"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the8905President, the Chief Financial Officer and the Controller of Borrower.89068907"REVOLVING ADVANCE" or "REVOLVING ADVANCES" is a loan advance (or8908advances) under the Committed Revolving Line.89098910"REVOLVING MATURITY DATE" is December 31, 2004.891189128913-20-8914<PAGE>891589168917"RIGHTS", as applied to the Collateral, means the Borrower's rights and8918interests in, and powers with respect to, that Collateral, whatever the nature8919of those rights, interests and powers and, in any event, including Borrower's8920power to transfer rights in such Collateral to Bank.89218922"SCHEDULE" is any attached schedule of exceptions.89238924"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to8925Borrower's indebtedness owed to Bank and which is reflected in a written8926agreement in a manner and form acceptable to Bank and approved by Bank in8927writing.89288929"SUBSIDIARY" is for any Person, or any other business entity of which8930more than 50% of the voting stock or other equity interests is owned or8931controlled, directly or indirectly, by the Person or one or more Affiliates of8932the Person. As used herein, Subsidiary shall mean a Subsidiary of the Borrower.89338934"TANGIBLE NET WORTH" is, on any date, the book value of Borrower minus8935the aggregate amounts attributable to intangible items plus Subordinated Debt.89368937"TRADEMARKS" are trademark and servicemark rights, registered or not,8938applications to register and registrations and like protections, and the entire8939goodwill of the business of Assignor connected with the trademarks.89408941IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be8942executed by their duly authorized representatives as of the date first above8943written.89448945BORROWER:89468947VASCULAR SOLUTIONS, INC.8948894989508951By:8952--------------------------------89538954Title:8955-----------------------------8956895789588959BANK:89608961SILICON VALLEY BANK8962896389648965By:8966--------------------------------89678968Title:8969-----------------------------897089718972Effective Date: __________________________897389748975-21-8976<PAGE>89778978EXHIBIT A89798980The Collateral consists of all of Borrower's right, title and interest8981in and to the following personal property of Borrower:89828983All goods and equipment now owned or hereafter acquired, including,8984without limitation, all machinery, fixtures, vehicles (including motor vehicles8985and trailers), and any interest in any of the foregoing, and all attachments,8986accessories, accessions, replacements, substitutions, additions, and8987improvements to any of the foregoing, wherever located;89888989All inventory, now owned or hereafter acquired, including, without8990limitation, all merchandise, raw materials, parts, supplies, packing and8991shipping materials, work in process and finished products including such8992inventory as is temporarily out of Borrower's custody or possession or in8993transit and including any returns upon any accounts or other proceeds, including8994insurance proceeds, resulting from the sale or disposition of any of the8995foregoing and any documents of title representing any of the above;89968997All contract rights and general intangibles now owned or hereafter8998acquired, including the Intellectual Property (as defined below) only, however,8999to the extent and subject to the limitations set forth in the Exclusion Clause9000(as defined below);90019002All now existing and hereafter arising accounts, contract rights,9003payment intangibles, royalties, license rights and all other forms of9004obligations owing to Borrower arising out of the sale or lease of goods, the9005licensing of technology or the rendering of services by Borrower, whether or not9006earned by performance, and any and all credit insurance, guaranties, and other9007security therefor, as well as all merchandise returned to or reclaimed by9008Borrower;90099010All documents, cash, deposit accounts, securities, securities9011entitlements, securities accounts, investment property, financial assets,9012letters of credit, letter-of-credit rights, commercial tort claims, certificates9013of deposit, instruments and chattel paper now owned or hereafter acquired and9014Borrower's Books relating to the foregoing; and90159016All Borrower's Books relating to the foregoing and any and all claims,9017rights and interests in any of the above and all substitutions for, additions9018and accessions to and proceeds thereof.90199020Notwithstanding the foregoing, the Collateral shall not include any9021Intellectual Property, provided that if a judicial authority (including a U.S.9022Bankruptcy Court) holds that a security interest in the underlying Intellectual9023Property is necessary to have a security interest in such items that are9024proceeds of the Intellectual Property consisting of payment intangibles,9025accounts, license revenues, or general intangibles relating to rights to payment9026arising therefrom or relating thereto, then in such circumstance, the Collateral9027shall automatically, and effective as of the Closing Date, include the9028Intellectual Property only to the extent necessary to permit perfection of9029Bank's security interest in such proceeds, including, without limitation,9030payment intangibles, accounts, license revenues, or general intangibles relating9031to rights to payment (the foregoing is referred to herein collectively as the9032"Exclusion Clause").90339034Further, Borrower and Bank are parties to that certain Negative Pledge9035Agreement, whereby Borrower, in connection with Bank's loans, has agreed, among9036other things, not to sell, transfer, assign, mortgage, pledge, lease, grant a9037security interest in, or encumber, any of its Intellectual Property, without the9038Bank's prior written consent, other than as may be permitted thereunder or9039hereunder.904090419042<PAGE>904390449045The term "Intellectual Property" as used herein shall mean the9046following: Borrower's right, title or interest, whether now owned or hereafter9047acquired, in and to any intellectual property rights of Borrower of any nature9048or character, including without limitation, and whether domestic or foreign, the9049following: (i) any copyrights and copyright applications, whether registered or9050unregistered, copyright registration and like protection in each work of9051authorship and derivative work thereof, whether published or unpublished, and9052whether said copyrights are statutory or arise under common law, and all rights,9053claims and demands in any way related to any such copyrights or works, including9054any rights to sue for past, present or future infringement, and any rights of9055renewal and extension of copyrights; (ii) any patents, patent applications,9056patent rights and like protections and any licenses relating to any of the9057foregoing, and any improvements, divisions, continuations, renewals, reissues,9058extensions and continuations-in-part thereof and any rights to sue for past9059present or future infringement thereof and any rights arising therefrom and9060pertaining thereto; (iii) any state (including common law), federal and foreign9061trademarks, service marks and trade names, and applications for registration of9062such trademarks, service marks and trade names, and any licenses relating to any9063of the foregoing, whether registered or unregistered and wherever registered,9064any rights to sue for past, present or future infringement of unconsented use9065thereof, all rights arising therefrom and pertaining and any reissues,9066extensions and renewals thereof and the goodwill of the business of Borrower9067connected with and symbolized by any of the foregoing; (iv) any trade secrets,9068trade dress, trade styles, logos, other source of business identifiers,9069mask-works, mask-work registrations or mask-work applications, integrated9070circuit masks, software, circuit designs and documentation relating thereto, and9071the goodwill of the business of Borrower connected with and symbolized by any of9072the foregoing, including, without limitation, any rights to unpatented9073inventions, know-how, and operating manuals, including any rights to sue for9074past, present or future infringement or unconsented use thereof, all rights9075arising therefrom and pertaining thereto, provided that with respect to any and9076all of the foregoing, the term "Intellectual Property" shall not include any9077proceeds thereof (other than proceeds in the direct form of Intellectual9078Property) and specifically, without limitation, and regardless of any of the9079foregoing, the term "Intellectual Property" shall NOT include any payment9080intangibles, accounts, license revenues, or general intangibles relating to9081rights to payment arising therefrom or relating thereto90829083908490859086908790889089909090919092909329094<PAGE>909590969097EXHIBIT B90989099LOAN PAYMENT/ADVANCE REQUEST FORM9100DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.91019102<TABLE>9103<CAPTION>9104FAX TO: 952-593-9248 DATE: _____________________________9105<S> <C>9106* LOAN PAYMENT:9107From Account #__________________________ To Account #________________________________9108(Deposit Account #) (Loan Account #)9109Principal $_____________________________ and/or Interest $____________________________________________91109111All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material9112respects to on the date of the telephone transfer request for and advance, but those representations and warranties expressly9113referring to another date shall be true, correct and complete in all material respects as of such date:91149115AUTHORIZED SIGNATURE: _____________________________________________ Phone Number: ____________________________________________9116* LOAN ADVANCE:9117COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.9118From Account #__________________________ To Account #________________________________9119(Loan Account #) (Deposit Account #)9120Amount of Advance $ ____________________91219122All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material9123respects to on the date of the telephone transfer request for and advance, but those representations and warranties expressly9124referring to another date shall be true, correct and complete in all material respects as of such date:91259126AUTHORIZED SIGNATURE: _____________________________________________ Phone Number: _____________________________________________9127* OUTGOING WIRE REQUEST9128COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE WIRED.91299130Deadline for same day processing is 12:00pm, P.S.T.9131Beneficiary Name: ________________________________ Amount of Wire: $___________________________9132Beneficiary Bank: ________________________________ Account Number: ____________________________9133City and Sate: ___________________________________9134Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __ Beneficiary Bank Code (Swift, Sort, Chip, etc.): ____9135(FOR INTERNATIONAL WIRE ONLY)9136Intermediary Bank: _______________________________ Transit (ABA) #: ____________________________________9137For Further Credit to: _________________________________________________________________________________________9138Special Instruction: ___________________________________________________________________________________________91399140BY SIGNING BELOW, I (WE) ACKNOWLEDGE AND AGREE THAT MY (OUR) FUNDS TRANSFER REQUEST SHALL BE PROCESSED IN ACCORDANCE WITH AND9141SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE AGREEMENTS(S) COVERING FUNDS TRANSFER SERVICE(S), WHICH AGREEMENTS(S) WERE9142PREVIOUSLY RECEIVED AND EXECUTED BY ME (US).91439144Authorized Signature: ____________________________ 2nd Signature (If Required): _______________________________________9145Print Name/Title: ________________________________ Print Name/Title:___________________________________________________9146Telephone # ______________________________________ Telephone # ________________________________________________________9147</TABLE>914891499150<PAGE>915191529153EXHIBIT C91549155BORROWING BASE CERTIFICATE91569157<TABLE>9158<CAPTION>9159- ------------------------------------------------------------------------------------------------------------------------------------9160Borrower: Vascular Solutions, Inc. Bank: Silicon Valley Bank9161------------------------ 3003 Tasman Drive9162Santa Clara, CA 950549163Commitment Amount: $3,000,0009164- ------------------------------------------------------------------------------------------------------------------------------------9165<S> <C> <C>9166ACCOUNTS RECEIVABLE91671. Accounts Receivable Book Value as of____ $_______________91682. Additions (please explain on reverse) $_______________91693. TOTAL ACCOUNTS RECEIVABLE $_______________91709171ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)91724. Amounts over 90 days due $_______________91735. Balance of 50% over 90 day accounts $_______________91746. Credit balances over 90 days $_______________91757. Concentration Limits $_______________91768. Foreign Accounts $_______________91779. Governmental Accounts $_______________917810. Contra Accounts $917911. Promotion or Demo Accounts $_______________918012. Intercompany/Employee Accounts $_______________918113. Other (please explain on reverse) $_______________918214. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________918315. Eligible Accounts (#3 minus #14) $_______________918416. LOAN VALUE OF ACCOUNTS (75% of #15) $_______________91859186INVENTORY918716a TOTAL INVENTORY $_______________918816b Inventory Deductions $_______________918916c Eligible Inventory (16a minus 16b) $_______________919016d LOAN VALUE OF INVENTORY $_______________9191(25% of #16c, not to exceed the lesser of 33% of #16 or $1MM)91929193BALANCES919417. Maximum Loan Amount $_______________919518. Total Funds Available [Lesser of #17 or (#16 plus #16d)] $_______________919619. Present balance owing on Line of Credit $_______________919720. Outstanding under Sublimits, if any Sublimits are in effect $_______________919821. RESERVE POSITION (#18 minus #19 and #20) $_______________91999200THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT, AND THAT THE INFORMATION IN THIS BORROWING BASE9201CERTIFICATE COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES IN THE LOAN AND SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON9202VALLEY BANK.9203------------------------9204COMMENTS: | BANK USE ONLY |9205| ------------- |9206Vascular Solutions, Inc. | Rec'd By: ____________ |9207| Auth. Signer |9208| Date: ________________ |9209By: _________________________ | Verified: ____________ |9210Title: | Auth. Signer |9211| Date: ________________ |9212| |9213------------------------9214</TABLE>921592169217<PAGE>921892199220EXHIBIT D92219222COMPLIANCE CERTIFICATE92239224<TABLE>9225<CAPTION>9226TO: SILICON VALLEY BANK92273003 Tasman Drive9228Santa Clara, CA 9505492299230FROM: VASCULAR SOLUTIONS, INC.92319232The undersigned authorized officer of VASCULAR SOLUTIONS, INC. ("Borrower") certifies that under the terms and conditions9233of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the9234period ending _______________ with all required reporting and financial covenants as set forth in Section 6.2 and 6.7 of the9235Agreement, respectively, except as noted below and (ii) all representations and warranties as set forth in the Agreement are true9236and correct in all material respects on this date. Attached are the required documents supporting the certification. The Officer9237certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one9238period to the next e xcept as explained in an accompanying letter or footnotes and subject to normal year end audit adjustments for9239interim financial statements. The Officer acknowledges that no borrowings may be requested at any time or date of determination that9240Borrower is not in compliance with any of the terms of the Agreement regarding the making of loans as more fully set forth in9241Sections 3.1 and 3.2 thereof, as applicable, and that compliance is determined on an ongoing basis and not just at the date this9242certificate is delivered.92439244PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.9245<S> <C> <C>9246REPORTING COVENANT REQUIRED COMPLIES9247- ------------------ -------- --------9248Monthly financial statements + CC Monthly within 30 days Yes No9249Annual (Audited) FYE within 90 days Yes No9250A/R & A/P Agings (by invoice date) Monthly * within 30 days Yes No9251Inventory Report Monthly * within 30 days Yes No9252A/R Audit Initial and Annually Yes No9253Borrowing Base Certificate Monthly * within 30 days Yes No9254Annual Projections Prior to start of new fiscal year Yes No9255* Quarterly when not borrowing92569257FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES9258- ------------------ -------- ------ --------9259As of month end:9260ss. 6.7(i): Minimum Tangible Net Worth $8,000,000 $_________ Yes No9261ss. 6.7(ii): Minimum Liquidity Coverage 1.25:1.00 _____:1.00 Yes No92629263------------------------------------9264COMMENTS REGARDING EXCEPTIONS: See Attached. | BANK USE ONLY |9265Sincerely, | Receivedd By: ____________________ |9266| AUTHORIZED SIGNER |9267Vascular Solutions, Inc. | Date: ________________ |9268| Verified: ____________ |9269By: _________________________ | AUTHORIZED SIGNER |9270Title: | Date: ________________ |9271Date: | Compliance Status: Yes No |9272| |9273| |9274| |9275------------------------------------9276</TABLE>927792789279<PAGE>928092819282Schedule to Loan and Security Agreement9283---------------------------------------92849285The exact correct corporate name of Borrower is (attach a copy of the formation9286documents, E.G., articles, partnership agreement): Vascular Solutions, Inc.92879288Borrower's State of formation: Minnesota92899290Borrower has operated under only the following other names (if none, so state):9291None92929293All other address at which the Borrower does business are as follows (attach9294additional sheets if necessary and include all warehouse addresses): See9295Representations and Warranties dated December 10, 2003.92969297Borrower has deposit accounts and/or investment accounts located only at the9298following institutions: See Representations and Warranties dated December 10,92992003.93009301List Acct. Numbers: See Representations and Warranties dated December 10, 2003.93029303Liens existing on the Closing Date and disclosed to and accepted by Bank in9304writing:93059306None.93079308Investments existing on the Closing Date and disclosed to and accepted by Bank9309in writing:93109311Vascular Solutions, GmbH - Balances as of Novemer 30, 2003 - Investment in9312Subsidiary $21,347, Intercompany receivable $1,429,955, Intercompany Note9313Receivable $154,35093149315Subordinated Debt:93169317Indebtedness on the Closing Date and disclosed to and consented to by Bank in9318writing:93199320None.93219322The following is a list of the Borrower's copyrights (including copyrights of9323software) which are registered with the United States Copyright Office. (Please9324include name of the copyright and registration number and attach a copy of the9325registration): No list. We copyright all marketing materials in the normal9326course of business.93279328The following is a list of all software which the Borrower sells, distributes or9329licenses to others, which is not registered with the United States Copyright9330Office. (Please include versions which are not registered:93319332None.93339334The following is a list of all of the Borrower's patents which are registered9335with the United States Patent Office. (Please include name of the patent and9336registration number and attach a copy of the registration.): _See patent and9337trademark sheet.93389339The following is a list of all of the Borrower's patents which are pending with9340the United States Patent Office. (Please include name of the patent and a copy9341of the application.): See patent and trademark sheet.93429343The following is a list of all of the Borrower's registered trademarks. (Please9344include name of the trademark and a copy of the registration.): See patent and9345trademark sheet.93469347Borrower is not subject to litigation which would have a material adverse effect9348on the Borrower's financial condition, except the following (attach additional9349comments, if needed): See Diomed suit.93509351Tax ID Number: 41-185967993529353Organizational Number, if any: 9L-42193549355</TEXT>9356</DOCUMENT>9357<DOCUMENT>9358<TYPE>EX-149359<SEQUENCE>49360<FILENAME>vasc041035_ex14.txt9361<TEXT>93629363EXHIBIT 14936493659366VASCULAR SOLUTIONS, INC.9367CODE OF BUSINESS CONDUCT AND ETHICS936893699370Vascular Solutions is committed to high standards of legal and ethical9371business conduct. This Code of Business Conduct and Ethics summarizes the legal,9372ethical and regulatory standards that Vascular Solutions imposes upon its9373business conduct and is a reminder to our directors, officers and employees, of9374the seriousness of that commitment. Compliance with this Code is required for9375every Vascular Solutions employee. While this Code imposes additional and9376specific internal requirements on the Company and the directors, officers and9377employees of Vascular Solutions, in no manner is this Code intended to create9378any additional legal obligations for either the company or its employees. The9379Company reserves the right to amend this Code at any time.93809381INTRODUCTION93829383Our business is becoming increasingly complex, both in terms of the9384geographies in which we function and the laws with which we must comply. To help9385you understand what is expected of you and to carry out your responsibilities,9386we have created this Code of Business Conduct and Ethics. Additionally, we have9387designated the Vice President of Regulatory Affairs as the Company's Ethics9388Officer to oversee adherence to the Code.93899390This Code is not intended to be a comprehensive guide to all of our9391policies or to all your responsibilities under law or regulation. It provides9392general parameters to help you resolve the ethical and legal issues you9393encounter in conducting our business. Think of this Code as a guideline, or a9394minimum requirement, that must always be followed. If you have any questions9395about anything in the Code or appropriate actions in light of the Code, you may9396contact the Ethics Officer or the Chair of the Audit Committee.93979398We expect each of our directors, officers and employees to read and9399become familiar with the ethical standards described in this Code and to affirm9400your agreement to adhere to these standards by signing the Compliance9401Certificate that appears at the end of this Code. Violations of the law, our9402corporate policies, or this Code may lead to disciplinary action, including9403immediate dismissal.94049405I. WE INSIST ON HONEST AND ETHICAL CONDUCT BY ALL OF OUR DIRECTORS,9406OFFICERS, EMPLOYEES AND OTHER REPRESENTATIVES94079408We have built our business based on a commitment to delivering9409excellence in vascular medical products -- not only quality vascular products9410for physicians that improve the lives of patients, but also quality employees9411and representatives who adhere to high standards of honesty, ethics and fairness9412in our dealings with all of our business contacts. We place a high value on the9413integrity of our directors, our officers and our employees and demand this level9414of integrity in941594169417<PAGE>941894199420all our dealings. We insist on not only ethical dealings with others, but on the9421ethical handling of actual or apparent conflicts of interest between personal9422and professional relationships.942394249425FAIR DEALING94269427You are required to deal honestly and fairly with our customers,9428suppliers, competitors and other third parties.94299430We market our products fairly and vigorously based on our honesty,9431creativity and ingenuity and the proven quality and reliability of the products.9432Serving our customers effectively is our most important goal--in the eyes of the9433customer you are Vascular Solutions. In our dealings with customers, suppliers,9434and governmental regulatory bodies we:94359436o prohibit bribes, kickbacks or any other form of improper9437payment, direct or indirect, to any representative of9438government, labor union, customer or supplier in order to9439obtain a contract, some other commercial benefit or government9440action;94419442o prohibit our directors, officers and employees from accepting9443any bribe, kickback or improper payment from anyone;94449445o prohibit gifts or favors of more than nominal value to or from9446our customers or suppliers;94479448o limit marketing and client entertainment expenditures to those9449that are necessary, prudent, job-related and consistent with9450our policies;94519452o require clear and precise communication in our contracts, our9453advertising, our literature, our public statements, and our9454statements to government officials and seek to eliminate9455misstatement of fact or misleading impressions;94569457o reflect accurately on all invoices to customers the sale price9458and terms of sales for products sold;94599460o protect all proprietary data our customers or suppliers9461provide to us as reflected in our agreements with them;94629463o prohibit our representatives from otherwise taking unfair9464advantage of our customers or suppliers, or other third9465parties, through manipulation, concealment, abuse of9466privileged information or any other unfair-dealing practice.94679468CONFLICTS OF INTEREST; CORPORATE OPPORTUNITIES94699470Our directors, officers and employees should not be involved in any9471activity that creates or gives the appearance of a conflict of interest between9472their personal interests and the interests94739474947529476<PAGE>947794789479of Vascular Solutions. In particular, without the specific permission of our9480Ethics Officer or the Board of Directors, no director, officer or employee9481shall:94829483o be a consultant to, or a director, officer or employee of, or9484otherwise operate an outside business that:94859486>> markets products in competition with our current or9487potential products;94889489>> supplies products or services to Vascular Solutions;9490or94919492>> purchases products from Vascular Solutions;94939494o have any financial interest, including significant stock9495ownership, in any entity with which we do business that might9496create or give the appearance of a conflict of interest;94979498o seek or accept any personal loan or services from any entity9499with which we do business, except from financial institutions9500or service providers offering similar loans or services to9501third parties under similar terms in the ordinary course of9502their respective businesses;95039504o be a consultant to, or a director, officer or employee of, or9505otherwise operate an outside business if the demands of the9506outside business would interfere with the director's,9507officer's or employee's responsibilities to us, (if in doubt,9508consult your supervisor or the Ethics Officer);95099510o accept any personal loan or guarantee of obligations from9511Vascular Solutions, except to the extent such arrangements are9512legally permissible; or95139514o conduct business on behalf of Vascular Solutions with9515immediate family members, which include spouses, children,9516parents, siblings and persons sharing the same home whether or9517not legal relatives.95189519Directors, officers, and employees must notify the Ethics Officer or the Chair9520of our Audit Committee of the existence of any actual or potential conflict of9521interest.95229523CONFIDENTIALITY AND CORPORATE ASSETS95249525Our directors, officers and employees are entrusted with our9526confidential information and with the confidential information of our suppliers,9527customers or other business partners. This information may include (1) technical9528or scientific information about current and future products, services or9529research, (2) business or marketing plans or projections, (3) earnings and other9530internal financial data, (4) personnel information, (5) supply and customer9531lists and (6) other non-public information that, if disclosed, might be of use9532to our competitors, or harmful to our suppliers, customers or other business9533partners. This information is our property, or the property of our suppliers,9534customers or business partners and in many cases was developed at great expense.9535Our directors, officers and employees shall:95369537953839539<PAGE>954095419542o Not discuss confidential information with or in the presence9543of any unauthorized persons, including family members and9544friends;95459546o Use confidential information only for our legitimate business9547purposes and not for personal gain;95489549o Not disclose confidential information to third parties.95509551o Not use Vascular Solutions property or resources for any9552personal benefit or the personal benefit of anyone else.9553Vascular Solutions property includes the Vascular Solutions9554internet, email, and voicemail services, which should be used9555only for business related activities, and which may be9556monitored by Vascular Solutions at any time without notice.95579558Please see your employment agreement or confidentiality agreement to review all9559responsibilities in this area.95609561II. WE PROVIDE FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE95629563We are committed to providing our shareholders and investors with full,9564fair, accurate, timely and understandable disclosure in the reports that we file9565with the Securities and Exchange Commission. To this end, our directors,9566officers and employees shall:95679568o not make false or misleading entries in our books and records9569for any reason;95709571o not condone any undisclosed or unrecorded bank accounts or9572assets established for any purpose;95739574o comply with generally accepted accounting principles at all9575times;95769577o notify our Director of Finance if there is an unreported9578transaction;95799580o maintain a system of internal accounting controls that will9581provide reasonable assurances to management that all9582transactions are properly recorded;95839584o maintain books and records that accurately and fairly reflect9585our transactions;95869587o prohibit the establishment of any undisclosed or unrecorded9588funds or assets;95899590o maintain a system of internal controls that will provide9591reasonable assurances to our management that material9592information about Vascular Solutions is made known to9593management, particularly during the periods in which our9594periodic reports are being prepared;95959596o present information in a clear and orderly manner and avoid9597the use of unnecessary legal and financial language in our9598periodic reports; and95999600960149602<PAGE>960396049605o not communicate to the public any nonpublic information except9606through our Director of Finance or Chief Executive Officer.96079608III. WE COMPLY WITH ALL LAWS, RULES AND REGULATIONS96099610We will comply with all laws and governmental regulations that are9611applicable to our activities, and expect all our directors, officers and9612employees to obey the law. Specifically, we are committed to:96139614o complying with all applicable state and federal securities9615laws;96169617o complying with all applicable state, federal and international9618laws concerning the manufacture, distribution and sale of9619medical device including those concerning:96209621* reporting and investigating complaints and adverse9622events which may be associated with our products96239624* the design, manufacture and evaluation of our9625products96269627o complying with all applicable laws designed to protect the9628confidentiality of patient records and health information;96299630o maintaining a safe and healthy work environment;96319632o promoting a workplace that is free from discrimination,9633intimidation, or harassment based on race, color, religion,9634sex, age, national origin or disability;96359636o the principles of fair competition and laws prohibiting9637restraints of trade and other unfair trade practices by9638prohibiting inaccurate or misleading representation of9639competitors' operations or products or obtaining, through9640improper means, confidential commercial information concerning9641our competitors;96429643o conducting our activities in full compliance with all9644applicable environmental laws;96459646o keeping the political activities of our directors, officers9647and employees separate from our business;96489649o prohibiting any illegal payments, gifts, or gratuities to any9650government officials or political party;96519652o prohibiting the unauthorized use, reproduction, or9653distribution of any third party's trade secrets, copyrighted9654information or confidential information; and96559656o prohibiting the sale or export, either directly or through our9657representatives, of our products to countries where our9658products are not approved for sale.96599660966159662<PAGE>966396649665Our directors, officers and employees are prohibited from trading our9666securities while in possession of material, nonpublic ("INSIDE") information9667about Vascular Solutions. Our Insider Trading Policy describes the nature of9668inside information and the related restrictions on trading.96699670REPORTING AND EFFECT OF VIOLATIONS96719672Compliance with this code of conduct is, first and foremost, the9673individual responsibility of every director, officer and employee. We attempt to9674foster a work environment in which ethical issues and concerns may be raised and9675discussed with supervisors or with others without the fear of retribution. It is9676our responsibility to provide a system of reporting and access when you wish to9677report a suspected violation, or to seek counseling, and the normal chain of9678command cannot, for whatever reason, be used.96799680ADMINISTRATION96819682Our Board of Directors and Audit Committee have established the9683standards of business conduct contained in this Code and oversees compliance9684with this Code. They have also designated the Vice President of Regulatory9685Affairs to the position of Ethics Officer to ensure adherence to the Code. While9686serving in this capacity, the Ethics Officer reports directly to the Board of9687Directors.96889689Training on this code will be included in the orientation of new9690employees and provided to existing directors, officers, and employees on an9691on-going basis. To ensure familiarity with the Code, directors, officers, and9692employees may be asked to read the Code and sign a Compliance Certificate9693periodically.96949695REPORTING VIOLATIONS AND QUESTIONS96969697Directors, officers, and employees must report, in person or in9698writing, any known or suspected violations of laws, governmental regulations or9699this Code to either the Ethics Officer or the Chair of the Audit Committee of9700our Board of Directors. Additionally, directors, officers, and employees may9701contact the Ethics Officer or the Chair of the Audit Committee with a question9702or concern about this Code or a business practice. Any questions or violation9703reports will be addressed immediately and seriously, and can be made9704anonymously. If you feel uncomfortable reporting suspected violations to these9705individuals, you may report matters to Dorsey & Whitney LLP, our outside legal9706counsel. The names, addresses and telephone numbers of these individuals are9707listed in the attachment to this Code.97089709WE WILL NOT ALLOW ANY RETALIATION AGAINST A DIRECTOR, OFFICER OR9710EMPLOYEE WHO ACTS IN GOOD FAITH IN REPORTING ANY VIOLATION.97119712Our Ethics Officer will investigate any reported violations and will9713determine an appropriate response, including corrective action and preventative9714measures, involving the Chair of the Audit Committee or Chief Executive Officer9715when required. All reports will be treated confidentially to every extent9716possible.97179718971969720<PAGE>97219722CONSEQUENCES OF A VIOLATION.97239724Directors, officers and employees that violate any laws, governmental9725regulations or this Code will face appropriate, case specific disciplinary9726action, which may include demotion or immediate discharge.9727972897299730973197329733973497359736973797389739974097419742974397449745974697479748974997509751975297539754975597569757975897599760976197629763976479765<PAGE>976697679768NAMES AND ADDRESSES (AS OF JULY 1, 2003)97699770REPORTING CONTACTS:9771ETHICS OFFICER: THE CHAIR OF OUR AUDIT COMMITTEE:9772Name: Deborah Jensen Name: Richard Nigon9773Address: 6464 Sycamore Court Address: 920 Second Avenue South9774Minneapolis, MN 55369 Minneapolis, MN 554029775Phone: (763) 656-4349 Phone: (612) 341-62509776E-mail: [email protected] E-mail: [email protected]977797789779ADDITIONAL REPORTING CONTACT:97809781OUR OUTSIDE COUNSEL:9782DORSEY & WHITNEY LLP9783Name: Tim Hearn9784Address: 50 South Sixth Street9785Suite 15009786Minneapolis, MN 554029787Phone: (612) 340-78029788E-mail: [email protected]97899790979197929793979497959796979797989799980098019802980398049805980689807<PAGE>980898099810COMPLIANCE CERTIFICATE981198129813I have read and understand the Vascular Solutions Code of Business9814Conduct and Ethics (the "CODE") and agree to adhere in all respects to the9815ethical standards described in the Code. I understand that this Code does not9816contain all of Vascular Solutions' policies and that I understand that any9817violation of the Code will subject me to appropriate disciplinary action, which9818may include demotion or immediate discharge.98199820I certify to Vascular Solutions that I am not in violation of the Code,9821unless I have noted such violation in a signed Statement of Exceptions attached9822to this Compliance Certificate.98239824Date: __________________________________ ___________________________________9825Name: _____________________________9826Title/Position:____________________9827982898299830CHECK ONE OF THE FOLLOWING:98319832|_| A Statement of Exceptions is attached.98339834|_| No Statement of Exceptions is attached.9835983698379838983998409841984298439844984598469847984899849<PAGE>985098519852VASCULAR SOLUTIONS9853CORPORATE COMPLIANCE PROGRAM9854REPORTING FORM98559856Date of Report: ___________________________98579858Please state the nature of your concern and describe the event or circumstance9859giving rise to this compliance report. Please be as specific as possible.9860Attach extra sheets if more space is required.986198629863986498659866986798689869987098719872987398749875987698779878987998809881This form may be submitted anonymously. While supplying your name may assist in9882the investigation of your report, you are under no obligation to disclose your9883identity. It is an explicit violation of Vascular Solutions policies to9884retaliate in any way against an employee or officer who in good faith reports9885any actual or potential violation of applicable laws, rules, regulations, or9886corporate policies and procedures. Please submit the completed form to either9887the Ethics Officer or the Chairman of the Ethics Committee. If you wish to9888provide your name, please do so below.988998909891________________________________________________________________________________9892Name Phone Number98939894</TEXT>9895</DOCUMENT>9896<DOCUMENT>9897<TYPE>EX-219898<SEQUENCE>59899<FILENAME>vasc041035_ex21.txt9900<TEXT>99019902EXHIBIT 21990399049905SUBSIDIARIES99069907Vascular Solutions, GmbH (Germany)99089909</TEXT>9910</DOCUMENT>9911<DOCUMENT>9912<TYPE>EX-23.19913<SEQUENCE>69914<FILENAME>vasc041035_ex23-1.txt9915<TEXT>99169917EXHIBIT 23.199189919992099219922Consent of Independent Auditors992399249925We consent to the incorporation by reference in the Registration Statement (Form9926S-8 No. 333-54164) of our report dated January 16, 2004, with respect to the9927consolidated financial statements of Vascular Solutions, Inc. included in the9928Annual Report (Form 10-K) for the year ended December 31, 2003.99299930Our audits also included the financial statement schedule of Vascular Solutions,9931Inc. listed in Item 15(a). This schedule is the responsibility of the Company's9932management. Our responsibility is to express an opinion based on our audits. In9933our opinion, the financial statement schedule referred to above, when considered9934in relation to the basic financial statements taken as a whole, presents fairly9935in all material respects the information set forth therein.99369937Ernst & Young LLP9938993999409941Minneapolis, Minnesota9942February 26, 200499439944</TEXT>9945</DOCUMENT>9946<DOCUMENT>9947<TYPE>EX-319948<SEQUENCE>79949<FILENAME>vasc041035_ex31-1.txt9950<TEXT>99519952EXHIBIT 31.1995399549955CERTIFICATIONS99569957I, Howard Root, certify that:995899591. I have reviewed this annual report on Form 10-K of Vascular Solutions,9960Inc.;996199622. Based on my knowledge, this report does not contain any untrue statement of9963a material fact or omit to state a material fact necessary to make the9964statements made, in light of the circumstances under which such statements9965were made, not misleading with respect to the period covered by this9966report;996799683. Based on my knowledge, the financial statements, and other financial9969information included in this report, fairly present in all material9970respects the financial condition, results of operations and cash flows of9971the registrant as of, and for, the periods presented in this report;997299734. The registrant's other certifying officers and I are responsible for9974establishing and maintaining disclosure controls and procedures (as defined9975in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:99769977(a) designed such disclosure controls and procedures or caused such9978disclosure controls and procedures to be designed under our9979supervision, to ensure that material information relating to the9980registrant, including its consolidated subsidiaries, is made known to9981us by others within those entities, particularly during the period in9982which this report is being prepared;99839984(b) evaluated the effectiveness of the registrant's disclosure controls9985and procedures and presented in this report our conclusions about the9986effectiveness of the disclosure controls and procedures as of the end9987of the period covered by this report based on such evaluation; and99889989(c) disclosed in this report any change in the registrant's internal9990control over financial reporting that occurred during the registrant's9991most recent fiscal quarter (the registrant's fourth fiscal quarter in9992the case of an annual report) that has materially affected, or is9993reasonably likely to materially affect, the registrant's internal9994control over financial reporting; and999599965. The registrant's other certifying officers and I have disclosed, based on9997our most recent evaluation of internal control over financial reporting, to9998the registrant's auditors and the audit committee of the registrant's board9999of directors (or persons performing the equivalent functions):1000010001(a) all significant deficiencies and material weaknesses in the design or10002operation of internal control over financial reporting which are10003reasonably likely to adversely affect the registrant's ability to10004record, process, summarize and report financial information; and100051000610007<PAGE>100081000910010(b) any fraud, whether or not material, that involves management or other10011employees who have a significant role in the registrant's internal10012control over financial reporting.100131001410015Date: February 19, 2004 By: /s/ Howard Root10016-----------------------10017Howard Root10018CHIEF EXECUTIVE OFFICER1001910020</TEXT>10021</DOCUMENT>10022<DOCUMENT>10023<TYPE>EX-3110024<SEQUENCE>810025<FILENAME>vasc041035_ex31-2.txt10026<TEXT>1002710028EXHIBIT 31.2100291003010031CERTIFICATIONS1003210033I, James Hennen, certify that:10034100351. I have reviewed this annual report on Form 10-K of Vascular Solutions,10036Inc.;10037100382. Based on my knowledge, this report does not contain any untrue statement of10039a material fact or omit to state a material fact necessary to make the10040statements made, in light of the circumstances under which such statements10041were made, not misleading with respect to the period covered by this10042report;10043100443. Based on my knowledge, the financial statements, and other financial10045information included in this report, fairly present in all material10046respects the financial condition, results of operations and cash flows of10047the registrant as of, and for, the periods presented in this report;10048100494. The registrant's other certifying officers and I are responsible for10050establishing and maintaining disclosure controls and procedures (as defined10051in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:1005210053(a) designed such disclosure controls and procedures or caused such10054disclosure controls and procedures to be designed under our10055supervision, to ensure that material information relating to the10056registrant, including its consolidated subsidiaries, is made known to10057us by others within those entities, particularly during the period in10058which this report is being prepared;1005910060(b) evaluated the effectiveness of the registrant's disclosure controls10061and procedures and presented in this report our conclusions about the10062effectiveness of the disclosure controls and procedures as of the end10063of the period covered by this report based on such evaluation; and1006410065(c) disclosed in this report any change in the registrant's internal10066control over financial reporting that occurred during the registrant's10067most recent fiscal quarter (the registrant's fourth fiscal quarter in10068the case of an annual report) that has materially affected, or is10069reasonably likely to materially affect, the registrant's internal10070control over financial reporting; and10071100725. The registrant's other certifying officers and I have disclosed, based on10073our most recent evaluation of internal control over financial reporting, to10074the registrant's auditors and the audit committee of the registrant's board10075of directors (or persons performing the equivalent functions):1007610077(a) all significant deficiencies and material weaknesses in the design or10078operation of internal control over financial reporting which are10079reasonably likely to adversely affect the registrant's ability to10080record, process, summarize and report financial information; and100811008210083<PAGE>100841008510086(b) any fraud, whether or not material, that involves management or other10087employees who have a significant role in the registrant's internal10088control over financial reporting.100891009010091Date: February 19, 2004 By: /s/ James Hennen10092-----------------------10093James Hennen10094CHIEF FINANCIAL OFFICER1009510096</TEXT>10097</DOCUMENT>10098<DOCUMENT>10099<TYPE>EX-3210100<SEQUENCE>910101<FILENAME>vasc041035_ex32-1.txt10102<TEXT>1010310104EXHIBIT 32.1101051010610107CERTIFICATION PURSUANT TO1010818 U.S.C. ss. 1350,10109AS ADOPTED PURSUANT TO10110SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002101111011210113In connection with the Annual Report of Vascular Solutions, Inc. (the "Company")10114on Form 10-K for the period ended December 31, 2003, as filed with the10115Securities and Exchange Commission on the date hereof (the "Report"), I, Howard10116Root, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.10117ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,10118that, to the best of my knowledge:10119101201. The Report fully complies with the requirements of Section 13(a) or1012115(d) of the Securities Exchange Act of 1934; and10122101232. The information contained in the Report fairly presents, in all10124material respects, the financial condition and results of operations10125of the Company.101261012710128/s/ Howard Root10129------------------------------------------10130Howard Root10131Chief Executive Officer10132February 19, 20041013310134</TEXT>10135</DOCUMENT>10136<DOCUMENT>10137<TYPE>EX-3210138<SEQUENCE>1010139<FILENAME>vasc041035_ex32-2.txt10140<TEXT>1014110142EXHIBIT 32.2101431014410145CERTIFICATION PURSUANT TO1014618 U.S.C. ss. 1350,10147AS ADOPTED PURSUANT TO10148SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002101491015010151In connection with the Annual Report of Vascular Solutions, Inc. (the "Company")10152on Form 10-K for the period ended December 31, 2003, as filed with the10153Securities and Exchange Commission on the date hereof (the "Report"), I, James10154Hennen, Chief Financial Officerr of the Company, certify, pursuant to 18 U.S.C.10155ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,10156that, to the best of my knowledge:10157101581. The Report fully complies with the requirements of Section 13(a) or1015915(d) of the Securities Exchange Act of 1934; and10160101612. The information contained in the Report fairly presents, in all10162material respects, the financial condition and results of operations10163of the Company.101641016510166/s/ James Hennen10167------------------------------------------10168James Hennen10169Chief Financial Officer10170February 19, 20041017110172</TEXT>10173</DOCUMENT>10174</SEC-DOCUMENT>10175-----END PRIVACY-ENHANCED MESSAGE-----101761017710178