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,7RruS2uVDSGXVCg1diznNOKSRU1nJB3cEqqp4bhRTKRx4zFH4tgS2jp1SO17IBSJT8GE3NScyt9vUfNZBwYseEzw==910<SEC-DOCUMENT>0000897101-06-000227.txt : 2006013111<SEC-HEADER>0000897101-06-000227.hdr.sgml : 2006013112<ACCEPTANCE-DATETIME>2006013116291813ACCESSION NUMBER: 0000897101-06-00022714CONFORMED SUBMISSION TYPE: 10-K15PUBLIC DOCUMENT COUNT: 916CONFORMED PERIOD OF REPORT: 2005123117FILED AS OF DATE: 2006013118DATE AS OF CHANGE: 200601311920FILER:2122COMPANY DATA:23COMPANY CONFORMED NAME: VASCULAR SOLUTIONS INC24CENTRAL INDEX KEY: 000103020625STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]26IRS NUMBER: 41185967927STATE OF INCORPORATION: DE28FISCAL YEAR END: 12312930FILING VALUES:31FORM TYPE: 10-K32SEC ACT: 1934 Act33SEC FILE NUMBER: 000-2760534FILM NUMBER: 065663113536BUSINESS ADDRESS:37STREET 1: 6464 SYCAMORE COURT NORTH38CITY: MINNEAPOLIS39STATE: MN40ZIP: 5536941BUSINESS PHONE: 76365643004243MAIL ADDRESS:44STREET 1: 6464 SYCAMORE COURT NORTH45CITY: MINNEAPOLIS46STATE: MN47ZIP: 5536948</SEC-HEADER>49<DOCUMENT>50<TYPE>10-K51<SEQUENCE>152<FILENAME>vasc060361_10k.htm53<DESCRIPTION>FORM 10-K FOR FISCAL YEAR ENDED 12-31-200554<TEXT>55<HTML>56<HEAD>57<TITLE>Vascular Soluations, Inc. Form 10-K dated December 31, 2005 </TITLE>58</HEAD>59<BODY>60<BR><BR>6162<DIV STYLE="width: 100%; border-bottom: 2pt solid black; font-size: 1pt"> </DIV>63<DIV STYLE="width: 100%; border-bottom: 1pt solid black; font-size: 1pt"> </DIV>64<BR><BR>65666768<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>UNITED STATES69<BR>SECURITIES AND EXCHANGE COMMISSION </FONT>70<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WASHINGTON, D.C. 20549 </FONT></H1>717273<HR ALIGN=CENTER WIDTH=20% NOSHADE COLOR=BLACK>74<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=6>FORM 10-K </FONT></H1>75<HR ALIGN=CENTER WIDTH=20% NOSHADE COLOR=BLACK>76<BR>77787980<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->81<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Mark One)<BR> </FONT>82<FONT FACE="WingDings" SIZE="3"><B>x</B> </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Annual Report Pursuant to Section 13 or 15(d) of the83</B><BR><B>Securities Exchange Act of 1934</B> </FONT> </P>8485<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->86<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>For the Fiscal Year Ended December 31, 2005 </FONT></P>8788<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->89<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3">or90<BR> </FONT><FONT FACE="WingDings" SIZE="3"><B>o</B> </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Transition Report Pursuant to Section 13 or 15(d) of the91<BR>Securities Exchange Act of 1934</B> </FONT> </P>9293<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->94<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>For the transition period from ____________ to ____________</B> </FONT> </P>9596<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->97<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Commission file number: 0-27605</B> </FONT> </P>9899100<HR ALIGN=CENTER WIDTH=20% NOSHADE COLOR=BLACK>101102<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=6><B>VASCULAR SOLUTIONS, INC. </B></FONT>103<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Exact name of registrant as specified in its charter) </FONT></P>104105<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>106<TR VALIGN=Bottom>107<TD WIDTH=48% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Minnesota</B> </FONT></TD>108<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>109<TD WIDTH=48% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>41-1859679</B> </FONT></TD>110<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>111<TR VALIGN=Bottom>112<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(State or other jurisdiction of incorporation or organization)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>113<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(IRS Employer Identification No.)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>114</TABLE>115<BR>116117<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->118<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>6464 Sycamore Court, Minneapolis, Minnesota 55369 </B></FONT>119<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Address of principal executive offices, including zip code) </FONT></P>120121<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->122<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>(763) 656-4300 </B></FONT>123<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Registrant’s telephone number, including area code) </FONT></P>124125<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->126<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Securities registered pursuant to Section 12(b) of the Act: None127<BR><BR>Securities registered pursuant to Section 12(g) of the Act:128<BR><B>Common Stock, par value $.01 per share</B> </FONT></P>129130<HR ALIGN=CENTER WIDTH=20% NOSHADE COLOR=BLACK>131132<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Indicate by check mark if the registrant is a well-known seasoned issuer, as133defined in Rule 405 of the Securities Act. Yes </FONT> <FONT FACE="wingdings" SIZE=2>o </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE=3>No134</FONT> <FONT FACE="wingdings" SIZE=2>x </FONT></P>135136<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Indicate by check mark if the registrant is not required to file reports137pursuant to Section 13 or Section 15(d) of the Act. Yes </FONT> <FONT FACE="wingdings" SIZE=2>o </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE=3>No138</FONT> <FONT FACE="wingdings" SIZE=2>x </FONT></P>139140<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Indicate by check mark whether the registrant (1) has filed all reports141required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such142shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for143the past 90 days. Yes </FONT> <FONT FACE="wingdings" SIZE=2>x </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE=3>No144</FONT> <FONT FACE="wingdings" SIZE=2>o </FONT></P>145146147<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->148<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Indicate by check mark if disclosure of delinquent filers pursuant to Item149405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in150definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form15110-K. </FONT> <FONT FACE="wingdings" SIZE=2>x </FONT></P>152153<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Indicate by check mark whether the registrant is a large accelerated filer,154an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in155Rule 12b-2 of the Exchange Act. (Check one): </FONT></P>156157<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->158<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Large accelerated filer </FONT> <FONT FACE="wingdings" SIZE=2>o </FONT>159<FONT FACE="Times New Roman, Times, Serif" SIZE=3> Accelerated filer160</FONT> <FONT FACE="wingdings" SIZE=2>x </FONT> 161<FONT FACE="Times New Roman, Times, Serif" SIZE=3>Non-accelerated filer </FONT> <FONT FACE="wingdings" SIZE=2>o </FONT></P>162163<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->164<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Indicate by check mark whether the registrant is a shell company (as defined165in Rule 12b-2 of the Act). Yes </FONT> <FONT FACE="wingdings" SIZE=2>o </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE=3>No166</FONT> <FONT FACE="wingdings" SIZE=2>x </FONT></P>167168169<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The aggregate market value of voting and non-voting common equity held by170non-affiliates computed by reference to the price at which the common equity was last sold on June 30, 2005 was $165,065,551.171</FONT></P>172173<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->174<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>As of January 27, 2006, the number of shares outstanding of the175registrant’s common stock was 14,933,995. </FONT></P>176177178<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>DOCUMENTS INCORPORATED BY REFERENCE </FONT></H1>179180<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Portions of the Registrant’s Proxy Statement for its 2006 Annual Meeting181of Shareholders to be held on April 18, 2006 are incorporated by reference in Part III of this Annual Report on Form 10-K.182</FONT></P>183184185<BR><BR>186<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1 </FONT></P>187<HR SIZE=3 COLOR=GRAY NOSHADE>188<!-- *************************************************************************** -->189<!-- MARKER PAGE="sheet: 0; page: 0" -->190<BR>191192193194<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->195<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART I </FONT></H1>196197<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->198<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 1. BUSINESS </FONT></H1>199200<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->201<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overview </FONT></H1>202203<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->204<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Vascular Solutions, Inc. (we,205us or Vascular) is a medical device company focused on bringing clinically advanced solutions to interventional cardiologists and206interventional radiologists worldwide. We were incorporated in the state of Minnesota in December 1996, and we began operations in207February 1997. Our current product line consists of the following medical devices: </FONT></P>208209<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->210<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>211<TR VALIGN=TOP>212<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>213<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>214<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>215<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry™ hemostatic bandage, a topical pad with a bandage216used to control surface bleeding, </FONT></TD>217</TR>218</TABLE>219220<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->221<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>222<TR VALIGN=TOP>223<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>224<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>225<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>226<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto™ extraction catheter, a mechanical system for the227removal of soft thrombus from arteries, </FONT></TD>228</TR>229</TABLE>230231<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->232<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>233<TR VALIGN=TOP>234<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>235<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>236<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>237<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase® endovenous laser, a laser and procedure kit used238for the treatment of varicose veins, </FONT></TD>239</TR>240</TABLE>241242<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->243<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>244<TR VALIGN=TOP>245<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>246<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>247<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>248<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Duett™ sealing device, used to seal the puncture site249following catheterization procedures, </FONT></TD>250</TR>251</TABLE>252253<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->254<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>255<TR VALIGN=TOP>256<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>257<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>258<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>259<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat® Flowable hemostat, a thick, yet flowable, mixture used260to control bleeding, </FONT></TD>261</TR>262</TABLE>263264<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->265<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>266<TR VALIGN=TOP>267<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>268<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>269<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>270<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ThrombiGel™ hemostatic foam, a unique gelatin/thrombin foam271hemostat, </FONT></TD>272</TR>273</TABLE>274275<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->276<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>277<TR VALIGN=TOP>278<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>279<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>280<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>281<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Langston™ dual lumen catheters, used to measure intravascular282pressure gradients, </FONT></TD>283</TR>284</TABLE>285286<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->287<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>288<TR VALIGN=TOP>289<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>290<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>291<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>292<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAX-Support™ abdominal retraction belt, used to allow femoral293access in obese patients, and </FONT></TD>294</TR>295</TABLE>296297<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->298<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>299<TR VALIGN=TOP>300<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>301<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>302<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>303<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis® ultrasound (international only), a treatment for304peripheral occlusive arterial disease. </FONT></TD>305</TR>306</TABLE>307<BR>308309<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->310<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a vertically-integrated medical device company, we generate ideas and311create new interventional medical devices, and then deliver these products directly to the physician through our direct domestic312sales force and our international distribution network. </FONT></P>313314<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->315<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We currently have in316development several additional products that leverage our existing infrastructure to bring additional solutions to the317interventional cardiologist and interventional radiologist. Additional products that we expect to gain regulatory clearance and318market launch before the end of 2006 in the United States include the following medical devices, each of which we believe319addresses an annual market opportunity of between $1 million and $20 million: </FONT></P>320321<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->322<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>323<TR VALIGN=TOP>324<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>325<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>326<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>327<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Skyway™ exchange catheter, a specialty-purpose catheter328designed for guidewire support and exchange in interventional cardiology procedures, </FONT></TD>329</TR>330</TABLE>331332<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->333<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>334<TR VALIGN=TOP>335<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>336<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>337<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>338<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Twin-Pass™ dual access catheter, specialty-purpose catheter339designed for dual wire access in interventional cardiology procedures, </FONT></TD>340</TR>341</TABLE>342343<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->344<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>345<TR VALIGN=TOP>346<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>347<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>348<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>349<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GuideLiner catheter, a specialty-purpose catheter designed to350provide back-up support to the guide catheter in chronic total occlusion procedures, </FONT></TD>351</TR>352</TABLE>353354<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->355<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>356<TR VALIGN=TOP>357<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>358<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>359<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>360<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gopher catheter, a low profile metal catheter used principally in361chronic total occlusion cases to provide improved passage for the balloon catheter and stent, and </FONT></TD>362</TR>363</TABLE>364365<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->366<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>367<TR VALIGN=TOP>368<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>369<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>370<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>371<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Micro-Introducer Catheter, a series of catheters that combine both372a diagnostic catheter and a micro-introducer kit into a single product that will be used principally by Interventional373Radiologists. </FONT></TD>374</TR>375</TABLE>376<BR>377378<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->379<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interventional Cardiology and Interventional Radiology Industry Background </FONT></H1>380381<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->382<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Over 60 million Americans383have one or more types of cardiovascular disease—diseases of the heart and blood vessels. Cardiovascular disease is the384number one cause of death in the United States and is replacing infectious disease as the world’s pre-eminent health risk.385Advances in medicine have enabled physicians to perform an increasing number of diagnostic and therapeutic treatments of386cardiovascular disease using minimally invasive methods, such as catheters placed inside the arteries, instead of highly invasive387open surgery. Cardiologists and radiologists use diagnostic procedures, such as angiography, to confirm, and interventional388procedures, such as angioplasty and stenting, to treat diseases of the coronary and peripheral arteries. Based on industry389statistics, we estimate that cardiologists and radiologists performed over nine million diagnostic and interventional390catheterization procedures worldwide in 2005. Often times, these procedures are performed to remove blood clots or plaque which391have been generated and deposited inside the patient’s artery and are an impediment to normal blood flow. The number of392catheterization procedures performed is expected to grow by more than 5% each year for the next three years as the incidence of393cardiovascular disease continues to increase. The overall interventional medical device market in 2005 exceeded $5 billion394worldwide. </FONT></P>395396<BR>397<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>398<HR SIZE=3 COLOR=GRAY NOSHADE>399<!-- *************************************************************************** -->400<!-- MARKER PAGE="sheet: 0; page: 0" -->401<BR>402403404<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->405<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Each procedure using a406catheter requires a puncture in an artery, usually the femoral artery in the groin area and sometimes the radial artery in the407wrist of the patient to gain access for the catheter. The catheter then is deployed through an introducer sheath and into the408vessel to be diagnosed or treated. Upon completion of the procedure and removal of the catheter, the physician must seal this409puncture in the artery and the tissue tract that leads from the skin surface to the artery to stop bleeding. The traditional410method for sealing the puncture site has been a manual process whereby a healthcare professional applies direct pressure to the411puncture site, sometimes using a sand bag or a large C-clamp, for 20 minutes to an hour in order to form a blood clot. The412healthcare professional then monitors the patient, who must remain immobile in order to prevent dislodging of the clot, for an413additional four to 48 hours. </FONT></P>414415<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->416<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Patients subjected to manual417compression generally experience significant pain and discomfort during compression of the puncture site and during the period in418which they are required to be immobile. Many patients report that this pain is the most uncomfortable aspect of the419catheterization procedure. In addition, patients can develop a substantial coagulated mass of blood, or hemotoma, around the420puncture site, limiting patient mobility for up to six weeks following the procedure. Finally, the need for healthcare personnel421to provide compression and the use of hospital beds during the recovery period results in substantial costs to the institution,422which, under virtually all current healthcare payment systems, are not separately reimbursed. </FONT></P>423424<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->425<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Until 1996, manual426compression was used following virtually all catheterization procedures. In late 1995, the first vascular sealing device which did427not rely on compression was introduced in the United States. In addition to our Duett sealing device, five other invasive sealing428devices have received approval from the Federal Drug Administration (FDA) and are currently being marketed around the world. In429the aggregate, over $400 million of the four FDA-approved invasive sealing devices were sold worldwide in 2005, compared to less430than $20 million in 1996. In addition to invasive (below the skin surface) sealing devices, starting in 2000, non-invasive431“patches” had begun to be used as an assist to manual compression following catheterizations. Non-invasive patches are432used by physicians who (principally due to cost, complexity or risk of complications) do not wish to use invasive sealing devices,433and for those patients who are contra-indicated for an invasive sealing device. Based on the number of catheterization procedures434performed annually by cardiologists and radiologists, industry sources report that the total market opportunity for vascular435sealing devices (invasive and non-invasive) is more than $1 billion annually. </FONT></P>436437<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->438<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry Product Line </FONT></H1>439440<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->441<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In September 2003 we received442regulatory clearance and commenced sales of our D-Stat Dry hemostatic bandage in the United States and international markets. The443D-Stat Dry hemostatic bandage is a version of our proprietary blood clotting substance that is lyophilized (freeze-dried) into a444gauze pad and combined with an adhesive bandage for application. The D-Stat Dry is used as an assistant for manual compression to445manage bleeding after catheterization procedures. We believe that the market for a hemostatic pad in this indication has grown446substantially since the first competitive patch was introduced in 2000, with a market size greater than $50 million in 2005.447</FONT></P>448449<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->450<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe that the D-Stat451Dry has many potential uses beyond this initial application, and to date, we have developed four variations of our D-Stat Dry452— the D-Stat 2Dry, the D-Stat Clamp Accessory, the D-Stat Radial and Thrombix 3x3 trauma bandage. The D-Stat 2Dry is a453convenient 2-bandage version of the D-Stat Dry used in the dialysis market. The D-Stat Clamp Accessory utilizes our D-Stat Dry pad454and is configured for attachment to standard compression devices. </FONT></P>455456<BR>457<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>458<HR SIZE=3 COLOR=GRAY NOSHADE>459<!-- *************************************************************************** -->460<!-- MARKER PAGE="sheet: 0; page: 0" -->461<BR>462463464465<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The D-Stat Radial hemostat466band is a specially-sized version of the D-Stat Dry that includes a compression band that allows it to be applied over the radial467artery in the wrist. In approximately 5% of all catheterizations, the radial artery is used to gain arterial access in the wrist468instead of the femoral artery in the groin. In these cases using the radial artery, the health care professional must control469bleeding from the artery after the procedure. A variety of compression splints and tapes have been used for this purpose. The470D-Stat Radial is the first device that contains an active blood clotting agent together with the compression collar for this471purpose. We received regulatory clearance for the D-Stat Radial hemostat band in September 2003, and made manufacturing472improvements to the product before launching it in the United States in early 2004. </FONT></P>473474<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->475<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At the end of the first476quarter of 2004 we received regulatory clearance in the United States for the Thrombix 3x3 trauma bandage. The Thrombix bandage is477designed for use in trauma indications, does not require mixing or special storage requirements and it can be quickly applied to478even severely bleeding wounds. We continue our search for a potential corporate distribution partner. We also have conducted479clinical evaluations at U.S. trauma centers and we have received feedback on several successful deployments, with no adverse480events reported. We continue to believe that with the right partner, the Thrombix trauma bandage can be a substantial revenue481generator for us in the trauma market and potentially in the military market, however until we find a suitable distribution482partner the Thrombix bandage will not generate substantial revenues. </FONT></P>483484<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->485<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the second quarter of4862005 we received regulatory clearance in the United States for ThrombiGel hemostatic foam. ThrombiGel version contains a gelatin487foam pad (replacing the gauze pad in the original D-Stat Dry) to provide a unique, premixed, sterile, gelatin/thrombin hemostat.488ThrombiGel can be used in a variety of medical procedures for the control of bleeding. </FONT></P>489490<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->491<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto Extraction Catheter Product Line </FONT></H1>492493<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->494<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Pronto product consists495of an extraction catheter with a proprietary distal tip and large extraction lumen that can be delivered into arteries to496mechanically remove blood clots using simple vacuum suction. The Pronto extraction catheter was initially developed by Dr. Pedro497Silva of Milan, Italy, who exclusively licensed the design to us in 2002. We received CE mark approval and commenced international498sales of the Pronto in August 2003, and received FDA clearance in December 2003 and commenced sales in the United States in early4992004. In the fourth quarter of 2005 we launched the third generation design of the Pronto, called the Pronto V3. We believe this500new version of the Pronto incorporates several improvements that physicians have requested, and we believe there will be a501substantial boost to our Pronto sales in 2006. We believe that the market size for the removal of soft thrombus is greater than502$100 million per year worldwide. </FONT></P>503504<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->505<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In October 2005 we announced506the results of the DEAR-MI (Dethrombosis to Enhance Acute Reperfusion in Myocardial Infarction) clinical study by Dr. Pedro Silva.507The DEAR-MI clinical study was a randomized evaluation of the use of the Pronto extraction for the removal of thrombus from508patients presenting with ST elevated acute myocardial infarction admitted within 12 hours of symptom onset. The primary endpoints509of the DEAR-MI study were a comparison of myocardial reperfusion according to ST-segment resolution and myocardial blush grade.510The results showed thrombus aspiration with the Pronto was determined to be an independent predictor of myocardial reperfusion as511measured by both ST resolution and mean blush grade. </FONT></P>512513<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->514<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe that the Pronto515has many potential uses beyond this initial application, and to date, we have developed one additional variation of the Pronto516called Pronto-Short. The Pronto-Short is designed for use in clotted dialysis grafts and was launched in August 2005. We estimate517the Pronto-Short addresses a market opportunity of at least $10 million. </FONT></P>518519<BR>520<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>521<HR SIZE=3 COLOR=GRAY NOSHADE>522<!-- *************************************************************************** -->523<!-- MARKER PAGE="sheet: 0; page: 0" -->524<BR>525526527<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->528<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase Endovenous Laser Product Line </FONT></H1>529530<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->531<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Vari-Lase endovenous532laser products consist of a laser console, procedure kits and accessories used in the treatment of reflux of the great saphenous533vein, commonly referred to as varicose veins. More than one million people in the United States seek treatment each year for534varicose veins. Left untreated, varicose veins can result in serious clinical consequences, including limited mobility and venous535stasis ulcers. Historically, an invasive surgical procedure known as vein stripping was the only treatment for severe varicose536veins. While vein stripping is still performed on over 100,000 patients each year in the United States, since 2002 a non-surgical537procedure using endovenous laser energy to treat and close the diseased vein has become the preferred alternative. Recent clinical538data on endovenous laser therapy has demonstrated excellent clinical results and outstanding patient satisfaction. During the539fourth quarter of 2004 the Center for Medicare and Medicaid Services (CMS) published the Medicare Physicians Fee Schedule which540established favorable reimbursement rates for the endovenous laser procedure starting January 1, 2005. Private insurance also has541continued its favorable trend with coverage decisions which have caused more physicians to add this procedure to their practice.542We believe the current U.S. market size for treating varicose veins using endovenous therapy is greater than $80 million per year.543</FONT></P>544545<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->546<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The first product we launched547in our Vari-Lase product line was our Vari-Lase procedure kit in July 2003 in the United States. Our procedure kit is548custom-designed for the endovenous procedure, with features supporting ease-of-use and safety, and is compatible with the549competitive laser consoles already in use for this procedure. In December 2003, we received FDA clearance for our laser console,550which we have manufactured to our specifications by MedArt Corporation, a subsidiary of Asah Medico, a leading Denmark-based551medical laser manufacturer. During 2004 we developed and commenced sales of our Auto-Fill™ syringe and Vari-Lase procedure552packs as accessory products to the Vari-Lase product line. The Auto-Fill syringe is an easy fluid delivery system for local553anesthesia. The Vari-Lase Procedure Pack is a complete sterile pack of accessories designed for endovenous laser procedures. To554complete our Vari-Lase product line, we sell micro-introducers and guide wires which are used as accessory items in the endovenous555laser procedure as well as used in other interventional medical procedures. </FONT></P>556557<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->558<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Duett Product Line </FONT></H1>559560<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->561<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The first product we brought562to market, the Duett sealing device, is designed to provide a complete seal of the puncture site following catheterization563procedures such as angiography, angioplasty and stenting. Our Duett sealing device combines an easy-to-use balloon catheter564delivery mechanism with a biological procoagulant mixture, which we believe offers advantages over both manual compression and565competitive vascular sealing devices. We began selling our Duett sealing device in Europe in February 1998 and in the United566States in June 2000. Over 200,000 Duett sealing devices have been sold and deployed worldwide. In the fourth quarter of 2001 we567introduced the Diagnostic Duett version of the Duett sealing device, which utilizes a lower dose of procoagulant for the568less-challenging diagnostic subset of catheterization procedures. In mid-2002 we introduced the next generation “Pro”569line of the Duett sealing device for improved ease-of-use. In 2003 we made the decision to reduce our focus on growing the Duett570product line in order to focus on increasing sales of our new products. </FONT></P>571572<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->573<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe our Duett sealing574device (1) offers a complete seal of the puncture site with nothing left behind in the artery, (2) is an easy-to-use system and575(3) minimizes patient discomfort and permits early ambulation. Our product uses a balloon catheter, a device already familiar to576cardiologists and radiologists, which is inserted through the introducer sheath that is already in the patient. The inflated577balloon serves as a temporary mechanical seal, preventing the flow of blood from the artery. Our biological procoagulant, which is578a proprietary mixture of collagen, thrombin and diluents, is then delivered to the puncture site, stimulating rapid clotting and579creating a complete seal of both the arterial puncture and the tissue tract from the artery to the skin surface. The580blood-clotting speed and strength of thrombin enables the use of the Duett sealing device even in the presence of powerful581anti-clotting medications, such as ReoPro®, increasingly used in interventional catheterization procedures. With our Duett582sealing device, nothing is left behind in the artery, so immediate reaccess of the site, if necessary, is possible, and the583potential for infection is minimized. </FONT></P>584585<BR>586<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>587<HR SIZE=3 COLOR=GRAY NOSHADE>588<!-- *************************************************************************** -->589<!-- MARKER PAGE="sheet: 0; page: 0" -->590<BR>591592<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->593<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Flowable Product Line </FONT></H1>594595<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->596<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The second product we597developed and commercialized is the D-Stat Flowable hemostat, which we began selling worldwide in February 2002. The D-Stat598Flowable hemostat is a blood clotting material that can be delivered topically and into voids and open spaces to control active599bleeding. The D-Stat Flowable offers the advantage of being thick to maintain its position, yet easily deliverable. The D-Stat600Flowable consists of the same collagen, thrombin and diluent components as the Duett sealing device, which has been proven601effective in controlling bleeding from aggressive arterial puncture sites. </FONT></P>602603<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->604<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The D-Stat Flowable hemostat605can be used in a wide variety of interventional procedures as an adjunct to hemostasis. An example of these uses includes sealing606the access site after the removal of catheters from A-V access grafts. We believe that the D-Stat Flowable hemostat is the only607hemostat available in the United States that combines the thick consistency and extremely flowable delivery that is preferred by608the interventional physician in these opportunities. </FONT></P>609610<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->611<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We commenced sales of the612D-Stat Flowable worldwide in the first quarter of 2002. Currently, the approved clinical indications for the D-Stat Flowable are613limited to topical bleeding and blood “oozing” following percutaneous procedures. We believe these indications are but a614small fraction of the total potential market for the D-Stat Flowable. In October 2005 we announced the results of our 269 patient615clinical study of the use of the D-Stat Flowable in the hemostasis of prepectoral pockets created in pacemaker and defibrillator616implantations. The primary endpoints of the Pocket Protector study were a comparison of clinically relevant pocket hematoma617formation and the rate of major adverse events. The results showed a 48% reduction in hematoma formation observed in the618investigation group compared to the control group and a low overall device or procedure-related major event rate. We expect to619submit the premarket approval application (PMA) to the FDA during the first quarter of 2006 and we expect to obtain approval by620the end of the third quarter of 2006. We estimate that the U.S. market opportunity for this prepectoral pocket indication is621greater than 100,000 procedures or $10 million annually. We also believe that the D-Stat Flowable has application for use to seal622following breast biopsy and liver biopsy procedures, each of which we believe can match or exceed the prepectoral pocket market623opportunity for D-Stat Flowable. </FONT></P>624625<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->626<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Catheter Product Line </FONT></H1>627628<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->629<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At the end of the third630quarter of 2004 we received regulatory clearance in the United States for the Langston dual lumen pigtail catheter. The Langston631catheter is used for the precise measurement of intravascular pressure gradients, primarily measured to diagnose aortic valve632stenosis. We believe our Langston catheter is the only dual lumen pigtail catheter on the U.S. market that can be used for this633intended indication. During 2005 we received approval for additional sizes and configurations of the Langston catheter product634line. We believe the U.S. market opportunity for the Langston catheter product line is $10 million annually. </FONT></P>635636<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->637<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At the end of the fourth638quarter of 2005 we received regulatory clearance in the United States for the Twin-Pass dual access catheter and Skyway support639catheter, both of which we expect to launch in the first quarter of 2006. The Twin-Pass is a two lumen catheter designed to be640used in conjunction with steerable guidewires to access discrete regions of the coronary and peripheral arterial vasculature and641for use during procedures utilizing two guidewires. The Skyway support catheter can be used in the support of guidewires during642difficult lesion crossing procedures and in the exchange of guide wires in an interventional procedure. We believe that both of643these products address market opportunities of between $1 million and $5 million annually within interventional cardiology.644</FONT></P>645646<BR>647<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></P>648<HR SIZE=3 COLOR=GRAY NOSHADE>649<!-- *************************************************************************** -->650<!-- MARKER PAGE="sheet: 0; page: 0" -->651<BR>652653654655<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Products </FONT></H1>656657<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->658<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the first quarter of6592005 we launched the MAX-Support abdominal retraction belt. This product is a tape-free retraction system to expose the femoral660artery puncture site in obese patients. Nationwide, approximately 7% of catheterization laboratory patients require taping of661their belly apron to allow visualization of the femoral crease for the purpose of gaining access for the catheterization. The662Max-Support belt is a tape-free alternative that avoids the discomfort, inefficiencies and time involved in the current practice663of taping. We believe the market potential for the MAX-Support belt is approximately $1 million annually. </FONT></P>664665<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->666<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the second quarter of6672002 we acquired the Acolysis ultrasound thrombolysis system. The Acolysis system uses ultrasound energy generated by the Acolysis668controller that is delivered by the disposable Acolysis probe to lyse blood clots and plaque within the artery. The Acolysis669controller and probes are sold only in international markets, where it has been sold principally for the treatment of peripheral670vascular disease. Upon completion of our acquisition and integration of the Acolysis business, we commenced active international671sales of the Acolysis probes through our existing international distribution network in late 2002. We are in the process of672working on our next generation Acolysis ultrasound thrombolysis system. Once we complete our improvement on the current system we673will plan and structure a clinical study in the United States to study the effectiveness of the use of the Acolysis system to open674chronic peripheral occlusions, with the study not expected to be completed before 2008. </FONT></P>675676<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->677<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The amount of total revenue678contributed by each of our product lines for the last three fiscal years is set forth in Item 7, Part II of this Form 10-K.679</FONT></P>680681<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->682<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business Strategy </FONT></H1>683684<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->685<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our primary objective is to686establish ourselves as a leading supplier of clinically superior medical devices for substantial opportunities within687interventional medicine. The key steps in achieving our primary objective are the following: </FONT></P>688689<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->690<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>691<TR VALIGN=TOP>692<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>693<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>694<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>695<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Maintain and Improve our Clinically-Oriented Direct Sales Force696in the United States.</I> During the third quarter of 2000 we commenced sales of our Duett sealing device in the697United States through a direct sales force that includes clinical specialists who train interventional cardiologists, radiologists698and catheterization laboratory administrators on the use of our products. We believe that effective knowledge and training are key699factors in promoting use of interventional medical devices, and we have created and will continue to work to improve an700in-the-field training program for the use of our products. </FONT></TD>701</TR>702</TABLE>703<BR>704705<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->706<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>707<TR VALIGN=TOP>708<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>709<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>710<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>711<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Expand our Existing Products to Our Existing712Market.</I> Since the end of 2002 we have received clearance for several new products to create five new line713categories, all sold in the United States through our existing direct sales force to our existing markets. Each of these product714lines has generated material sales, and we believe that each of these product lines has the potential to generate even more sales715during 2006 and beyond. </FONT></TD>716</TR>717</TABLE>718<BR>719720<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->721<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>722<TR VALIGN=TOP>723<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>724<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>725<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>726<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Develop New Devices to be Sold Through our Direct Sales Force727to our Existing Customers.</I> We intend to continue to leverage our direct sales force by bringing additional728products to the interventional physician. During 2006 we expect to launch five new products in the United States – the729Skyway, Twin-Pass, GuideLiner and Gopher catheters, the Micro-Introducer Catheter, with additional products being developed for an730expected 2007 launch. </FONT></TD>731</TR>732</TABLE>733<BR>734735<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->736<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>737<TR VALIGN=TOP>738<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>739<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>740<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>741<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Explore Corporate Relationships to Augment our Direct Sales742Force.</I> In markets for our products beyond the interventional physician (such as the trauma market for our743Thrombix 3x3 product) and in other situations where synergistic sales can result, we intend to enter into corporate relationships744to broaden our products’ reach and increase our revenues. </FONT></TD>745</TR>746</TABLE>747<BR>748749<BR>750<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>751<HR SIZE=3 COLOR=GRAY NOSHADE>752<!-- *************************************************************************** -->753<!-- MARKER PAGE="sheet: 0; page: 0" -->754<BR>755756<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales, Marketing and Distribution </FONT></H1>757758<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->759<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the third quarter of 2000760we commenced sales of our Duett sealing device in the United States through our direct sales organization. As of December 31,7612005, our direct sales force consisted of approximately 72 employees. We believe that the majority of interventional762catheterization procedures in the United States are performed in high volume catheterization laboratories, and that these763institutions can be served by our focused direct sales force. We also believe that our sales force is able to sell each of our new764products to the same customer base. </FONT></P>765766<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->767<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As part of our sales768strategy, our sales force is clinically trained and is able to train physicians and other healthcare personnel on the use of our769products. We believe that effective training is a key factor in encouraging physicians to use interventional medical devices. We770have created, and will continue to work to improve, an in-the-field training program for the use of all of our products. We also771develop and maintain close working relationships with our customers to continue to receive input concerning our product772development plans. </FONT></P>773774<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->775<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are focused on building776market awareness and acceptance of our products. Our marketing organization provides a wide range of programs, materials and777events that support our sales force. These include product training, conference and trade show appearances and sales literature778and promotional materials. Members of our medical advisory board also aid in marketing our products by publishing articles and779making presentations at physicians’ meetings and conferences. </FONT></P>780781<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->782<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our international sales and783marketing strategy has been to sell to interventional cardiologists and interventional radiologists through established784independent distributors in major international markets, subject to required regulatory approvals. In Germany, we created our785wholly-owned subsidiary Vascular Solutions GmbH to sell directly to customers in the German market beginning in the fourth quarter786of 2000. In most of the other major developed markets our products are currently marketed through independent distributors. Under787multi-year written distribution agreements with each of our independent distributors, we ship our products to these distributors788upon receipt of purchase orders. Each of our independent distributors has the exclusive right to sell our products within a789defined territory. These distributors also market other medical products, although they have agreed not to sell directly790competitive products. Our independent distributors purchase our products from us at a discount from list price and resell the791device to hospitals and clinics. Sales to international distributors are denominated in United States dollars. The end-user price792is determined by the distributor and varies from country to country. </FONT></P>793794<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->795<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>New Product Development </FONT></H1>796797<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->798<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our research and development799staff is currently focused on developing new products to sell to our existing customer base through our direct sales force and on800developing next generation versions of our existing products. We incurred expenses of $3,789,000 in 2005, $3,401,000 in 2004 and801$3,671,000 in 2003 for research and development activities. To further leverage our efficiencies, our research and development802group continues to develop in-house capabilities to manufacture some of the components currently produced by outside vendors.803</FONT></P>804805<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->806<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In addition to our normal807research and development expenses, we incurred $1,620,000 in 2005 and $210,000 in 2004 in thrombin qualification expenses relating808to our project to qualify a new source of thrombin. On October 18, 2004, we entered into a supply agreement with Sigma-Aldrich809Fine Chemicals, an operating division of Sigma-Aldrich, Inc. (Sigma) for the supply of thrombin to us. Pursuant to the terms of810the agreement, we will be paying for certain development costs of Sigma to allow Sigma to produce thrombin. The payments are based811on certain milestones over a two year period. The initial contract term ends after ten years and is automatically extended for up812to five additional successive one year terms unless one party delivers notice of termination at least one year prior to the813scheduled termination of the agreement. During the term of the agreement, Sigma has agreed not to sell thrombin of the type814developed for us under the agreement in or as a component of a hemostatic product for medical use. We do not have any minimum815purchase requirements under the agreement; however, if we purchase less than three lots of thrombin in any year then (1) Sigma816will be released from its agreement not to sell thrombin in or as a component of a hemostatic product for medical use, and (2)817Sigma will have the right to terminate the agreement upon 30 days notice. </FONT></P>818819820<BR>821<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>822<HR SIZE=3 COLOR=GRAY NOSHADE>823<!-- *************************************************************************** -->824<!-- MARKER PAGE="sheet: 0; page: 0" -->825<BR>826827828829<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Sigma contract is part of830our plan to fully qualify a new source of thrombin and to bring the new thrombin through the regulatory process to be used in our831hemostatic products starting in 2007. The payments associated with the Sigma agreement are part of our total estimated832expenditures of $6.8 million (including the payments to Sigma) to complete this project. The failure by us to complete our833thrombin qualification project on time and on budget may affect our gross margins on our Duett, D-Stat Flowable and D-Stat Dry834products and could therefore seriously harm our business. </FONT></P>835836<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->837<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The costs and purchases838incurred through December 31, 2005 and the total estimated costs and purchases for the thrombin project (including costs and839purchases already incurred) are as follows: </FONT></P>840841842843<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>844<TR VALIGN=Bottom>845<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>846<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Incurred (as of<BR>December 31, 2005) </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>847<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total Estimated </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>848<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">849<TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Qualification expenses</FONT></TD>850<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>851<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>852<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="18%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.8 million</FONT></TD>853<TD WIDTH="13%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>854<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="18%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.3 million</FONT></TD>855<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>856<TR VALIGN=Bottom>857<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital equipment purchases</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>858<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.7 million</FONT></TD>859<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>860<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.8 million</FONT></TD>861<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>862<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">863<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thrombin inventory purchases</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>864<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.7 million</FONT></TD>865<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>866<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.7 million</FONT></TD>867<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>868<TR>869<TD COLSPAN=3></TD>870<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>871<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>872<TR VALIGN=Bottom>873<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>874<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.2 million</FONT></TD>875<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>876<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6.8 million</FONT></TD>877<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>878<TR>879<TD COLSPAN=3></TD>880<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>881<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>882</TABLE>883<BR>884885886<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The purchase of the $1.7887million in thrombin is expected to be used in our hemostat products starting in 2007. Following the qualification of the Sigma888thrombin for our existing products, we believe we can launch several additional new thrombin-based surgical products into the889existing $200 million annual U.S. thrombin market, which currently has only one competitor. The launch of the additional products890will require additional expenses and a clinical study in 2007. </FONT></P>891892<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->893<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We expect our research and894development activities to continue to expand to include evaluation of new concepts and products for the interventional cardiology895and interventional radiology field. We believe that there are many potential new interventional products that would fit within the896development, clinical, manufacturing and distribution network we have created for our existing products. </FONT></P>897898<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->899<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing </FONT></H1>900901<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->902<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We manufacture our products903in our facility in a suburb of Minneapolis, Minnesota. The catheter manufacturing and packaging processes occur under a controlled904clean room environment. Our manufacturing facility and processes were certified in July 1998 as compliant with the European905Community’s EN 13485 standards and were audited most recently in October 2005 for compliance with the FDA’s quality906systems regulations with no deficiencies noted. </FONT></P>907908<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->909<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchase components from910various suppliers and rely on single sources for several parts of our products. In September 1998 we entered into a ten year,911sole-source supply agreement with our collagen supplier, Davol Inc., that provides for a fixed price based on volume purchases912which is adjusted annually for increases in the Department of Labor’s employer’s cost index. We purchase our913requirements for thrombin (a component in the Duett and in all of the D-Stat products) under a Purchase Agreement dated June 10,9141999 with a subsidiary of King Pharmaceuticals, Inc. The agreement provides for a fixed price, with adjustments based on the915supplier’s manufacturing costs and the supplier’s annual percentage increase in the wholesale price of thrombin. The916agreement expired on May 29, 2005. Prior to the expiration of the agreement, we issued purchase orders for approximately $3.5917million of thrombin to benefit from the pricing provisions of the agreement. We believe that these purchases will satisfy our918thrombin requirements through at least the end of 2007. We have taken delivery of approximately $1.4 million of the $3.5 million919of King thrombin through December 31, 2005 and we expect the remaining $2.1 million of thrombin to be delivered by the end of the920third quarter of 2006. To date, we have not experienced any significant adverse effects resulting from shortages of components.921</FONT></P>922923924925<BR>926<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>927<HR SIZE=3 COLOR=GRAY NOSHADE>928<!-- *************************************************************************** -->929<!-- MARKER PAGE="sheet: 0; page: 0" -->930<BR>931932933<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->934<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The manufacture and sale of935our products entails significant risk of product liability claims. Although we have product liability insurance coverage in an936amount which we consider reasonable, it may not be adequate to cover potential claims. Any product liability claims asserted937against us could result in costly litigation, reduced sales and significant liabilities and divert the attention of our technical938and management personnel away from the development and marketing of our products for significant periods of time. </FONT></P>939940<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->941<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Competition </FONT></H1>942943<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->944<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Competition in the945interventional medical device industry is intense and dominated by very large and experienced companies such as Medtronic, Inc.,946Abbott Laboratories and Boston Scientific. We compete on the basis of our clinically differentiated products and focused947opportunities within this interventional medical device market. </FONT></P>948949<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->950<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our D-Stat Dry hemostatic951bandage competes in the noninvasive topical patch market segment of sealing devices. These patches are applied directly over the952puncture site and held in place with adjunctive manual compression for a period of 10-20 minutes. These patches include:953</FONT></P>954955<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->956<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>957<TR VALIGN=TOP>958<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>959<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>960<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>961<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Syvek™ Patch, manufactured and marketed by Marine Polymer962Technologies, Inc. </FONT></TD>963</TR>964</TABLE>965966967<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->968<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>969<TR VALIGN=TOP>970<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>971<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>972<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>973<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Closur-P.A.D.™, manufactured by Scion Cardiovascular and974distributed by Medtronic, Inc. </FONT></TD>975</TR>976</TABLE>977978979<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->980<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>981<TR VALIGN=TOP>982<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>983<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>984<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>985<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Chito-Seal™, distributed by Abbott Vascular, Inc. a986division of Abbott Laboratories </FONT></TD>987</TR>988</TABLE>989<BR>990991<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->992<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Pronto extraction993catheter competes in the market segment for removal of thrombus from the arterial system. There are many companies that are994selling or have developed products in this segment, including Possis Medical, Medtronic, Boston Scientific and ev3. </FONT></P>995996<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->997<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are aware of five998companies that sell a product for the endovenous laser treatment of varicose veins. These companies are AngioDynamics, biolitec,999Dornier MedTech, CoolTouch and Diomed. Each of these companies’ products contains the same components for the therapy but1000differ in procedural training, laser wavelength, custom-designed features and customer support. In addition, VNUS Medical1001Technologies sells a radiofrequency alternative to the laser for the treatment of varicose veins. </FONT></P>10021003<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1004<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Duett sealing device1005principally competes with three vascular sealing devices and manual compression. The three principal competitive vascular sealing1006devices are: </FONT></P>10071008<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1009<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1010<TR VALIGN=TOP>1011<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1012<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1013<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1014<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The VasoSeal<SUP>®</SUP> device, manufactured and marketed by1015Datascope Corp., seals the tissue tract by placing a dry collagen plug in the tissue tract adjacent to the puncture in the artery.1016</FONT></TD>1017</TR>1018</TABLE>1019<BR>10201021<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1022<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1023<TR VALIGN=TOP>1024<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1025<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1026<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1027<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Angio-Seal<SUP>®</SUP> device, sold by the Daig division1028of St. Jude Medical, Inc. and developed by Kensey Nash Corporation, seals the puncture site through the use of a collagen plug on1029the outside of the artery connected by a suture to a biodegradable anchor which is inserted into the artery. </FONT></TD>1030</TR>1031</TABLE>1032<BR>10331034<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1035<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1036<TR VALIGN=TOP>1037<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1038<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1039<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1040<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Closer™ device, sold by Perclose, Inc., a subsidiary of1041Abbott Laboratories, seals the puncture site through the use of a suture device that enables a physician to perform a minimally1042invasive replication of open surgery. </FONT></TD>1043</TR>1044</TABLE>1045<BR>10461047<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1048<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There are many companies that1049are selling or have developed hemostats which compete generally with our D-Stat Flowable hemostat. Virtually all of these devices,1050however, are positioned as hemostats for the surgical market and are not designed specifically for use in interventional1051procedures. </FONT></P>10521053<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1054<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In each of our product areas,1055we believe that several other companies are developing new devices. The medical device industry is characterized by rapid and1056significant technological change as well as the frequent emergence of new technologies. There are likely to be research and1057development projects related to these market areas of which we are currently unaware. A new technology or product may emerge that1058results in a reduced need for our products or results in a product that renders our product noncompetitive. </FONT></P>105910601061<BR>1062<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>1063<HR SIZE=3 COLOR=GRAY NOSHADE>1064<!-- *************************************************************************** -->1065<!-- MARKER PAGE="sheet: 0; page: 0" -->1066<BR>106710681069<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1070<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Regulatory Requirements </FONT></H1>10711072<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->1073<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>United States</I></B> </FONT> </P>10741075<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1076<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our products are regulated in1077the United States as medical devices by the FDA under the Federal Food, Drug and Cosmetic Act. The FDA classifies medical devices1078into one of three classes based upon controls the FDA considers necessary to reasonably ensure their safety and effectiveness.1079Class I devices are subject to general controls such as labeling, adherence to good manufacturing practices and maintenance of1080product complaint records, but are usually exempt from premarket notification requirements. Class II devices are subject to the1081same general controls and also are subject to special controls such as performance standards, and FDA guidelines, and may also1082require clinical testing prior to approval. Class III devices are subject to the highest level of controls because they are used1083in life-sustaining or life-supporting implantable devices. Class III devices require rigorous clinical testing prior to their1084approval and generally require a premarket approval (PMA) application prior to their sale. </FONT></P>10851086<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1087<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> If a medical device1088manufacturer can establish that a device is “substantially equivalent” to a legally marketed Class I or Class II device,1089or to an unclassified device, or to a Class III device for which the FDA has not called for PMAs, the manufacturer may seek1090clearance from the FDA to market the device by filing a 510(k) premarket notification. The 510(k) notification must be supported1091by appropriate data establishing the claim of substantial equivalence to the satisfaction of the FDA. Following submission of the1092510(k) notification, the manufacturer may not place the device into commercial distribution in the United States until an order is1093issued by the FDA. </FONT></P>10941095<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1096<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Manufacturers must file an1097investigated device exemption (or IDE) application if human clinical studies of a device are required and if the FDA considers1098experimental use of the device to represent significant risk to the patient. The IDE application must be supported by data,1099typically including the results of animal and mechanical testing of the device. If the IDE application is approved by the FDA,1100human clinical studies may begin at a specific number of investigational sites with a maximum number of patients, as approved by1101the FDA. The clinical studies must be conducted under the review of an independent institutional review board to ensure the1102protection of the patients’ rights. </FONT></P>11031104<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1105<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Generally, upon completion of1106these human clinical studies, a manufacturer seeks approval of a Class III medical device from the FDA by submitting a PMA1107application. A PMA application must be supported by extensive data, including the results of the clinical studies, as well as1108literature to establish the safety and effectiveness of the device. </FONT></P>11091110<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1111<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our Duett sealing device is1112classified as a Class III device and is subject to the PMA requirements. In May 1997, the FDA determined that the review of the1113Duett sealing device would be delegated to the Center for Devices and Radiological Health area of the FDA, with a consulting1114review by the Center for Biologic Evaluation and Research. During 1998 and 1999, we received approval of our IDE application to1115start our feasibility clinical study, filed our IDE Supplement to begin our multi-center clinical study, completed the SEAL1116multi-center clinical study and filed our PMA application with the FDA. In September 1999 our manufacturing facility was audited1117by the FDA, with no deficiencies or non-compliances noted by the inspector. In December 1999, we received the FDA’s review1118letter of our PMA application, and we submitted an amendment to our PMA to the FDA in January 2000. On June 22, 2000, we received1119approval from the FDA of our PMA application to sell the Duett sealing device in the United States. </FONT></P>11201121<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1122<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our D-Stat Dry, Pronto,1123Vari-Lase, D-Stat Flowable, Specialty Catheter and Other product lines require clearance of a 510(k) notification by the FDA prior1124to being sold in the United States. Each of the devices within these product lines was subject to a 510(k) notification which was1125determined to be “substantially equivalent” to a legally marketed predicate device by the FDA, thereby allowing1126commercial marketing in the United States. </FONT></P>11271128<BR>1129<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11 </FONT></P>1130<HR SIZE=3 COLOR=GRAY NOSHADE>1131<!-- *************************************************************************** -->1132<!-- MARKER PAGE="sheet: 0; page: 0" -->1133<BR>113411351136<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1137<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We also are subject to FDA1138regulations concerning manufacturing processes and reporting obligations. These regulations require that manufacturing steps be1139performed according to FDA standards and in accordance with documentation, control and testing standards. We also are subject to1140inspection by the FDA on an on-going basis. We are required to provide information to the FDA on adverse incidents as well as1141maintain a documentation and record keeping system in accordance with FDA guidelines. The advertising of our products also is1142subject to both FDA and Federal Trade Commission jurisdiction. If the FDA believes that we are not in compliance with any aspect1143of the law, it can institute proceedings to detain or seize products, issue a recall, stop future violations and assess civil and1144criminal penalties against us, our officers and our employees. </FONT></P>11451146<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->1147<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>International</I></B> </FONT> </P>11481149<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1150<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The European Union has1151adopted rules which require that medical products receive the right to affix the CE mark, an international symbol of adherence to1152quality assurance standards and compliance with applicable European medical device directives. As part of the CE mark compliance,1153manufacturers are required to comply with the European quality systems standards. We received the CE mark approval for our Duett1154sealing device and certification of our quality system in July 1998, and we received the CE mark approval for other select1155products within our product lines. </FONT></P>11561157<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1158<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> International sales of our1159products are subject to the regulatory requirements of each country in which we sell. These requirements vary from country to1160country but generally are much less stringent than those in the United States. We have obtained regulatory approvals where1161required for us to sell our products in the country. Through our Japanese distributor, in 2005 we gained regulatory approval of1162our Pronto extraction catheter for commercial sale in Japan. </FONT></P>11631164<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1165<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Third Party Reimbursement </FONT></H1>11661167<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1168<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the United States,1169healthcare providers that purchase medical devices, generally rely on third-party payors, principally the Centers for Medicare and1170Medicaid Services or CMS (formerly the Health Care Financing Administration, or HCFA), and private health insurance plans, to1171reimburse all or part of the cost of therapeutic and diagnostic catheterization procedures. We believe that in the current United1172States reimbursement system, the cost of vascular sealing devices is incorporated into the overall cost of the catheter procedure.1173Our other products are subject to reimbursement rules depending on the specific medical procedure in which they are utilized.1174</FONT></P>11751176<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1177<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Market acceptance of our1178products in international markets is dependent in part upon the availability of reimbursement from healthcare payment systems.1179Reimbursement and healthcare payment systems in international markets vary significantly by country. The main types of healthcare1180payment systems in international markets are government-sponsored healthcare and private insurance. Countries with1181government-sponsored healthcare, such as the United Kingdom, have a centralized, nationalized healthcare system. New devices are1182brought into the system through negotiations between departments at individual hospitals at the time of budgeting. In most foreign1183countries, there are also private insurance systems that may offer payments for alternative therapies. </FONT></P>11841185<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1186<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Patents and Intellectual Property </FONT></H1>11871188<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1189<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We file patent applications1190to protect technology, inventions and improvements that are significant to the development of our business, and use trade secrets1191and trademarks to protect other areas of our business. We currently have twelve United States patents issued and six additional1192patents pending concerning our Duett sealing device, our Pronto catheter, our Langston dual lumen pigtail catheter, our1193MAX-Support abdominal retraction belt, our Acolysis ultrasound product and our D-Stat Dry product. We also have pursued1194international patent applications, which designate the key developed nations with substantive patent protection systems.1195</FONT></P>1196119711981199<BR>1200<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></P>1201<HR SIZE=3 COLOR=GRAY NOSHADE>1202<!-- *************************************************************************** -->1203<!-- MARKER PAGE="sheet: 0; page: 0" -->1204<BR>120512061207<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1208<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The interventional medical1209device market in general, and the vascular sealing device and endovenous laser therapy fields in particular, are characterized by1210frequent and substantial intellectual property litigation. Each of the vascular sealing products currently on the U.S. market,1211including our Duett sealing device, has been subject to infringement litigation. In addition, two of our competitors in the1212endovenous laser therapy market (Diomed & VNUS) have brought eight separate intellectual property lawsuits against their1213competitors, including us. (See “Legal Proceedings” in Item 3 of Part I of this Form 10-K.) The interpretation of1214patents involves complex and evolving legal and factual questions. Intellectual property litigation in recent years has proven to1215be complex and expensive, and the outcome of such litigation is difficult to predict. </FONT></P>12161217<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1218<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We may become the subject of1219additional intellectual property claims in the future related to our products. Our defense of any intellectual property claims1220filed in the future, regardless of the merits of the complaint, could divert the attention of our technical and management1221personnel away from the development and marketing of our products for significant periods of time. The costs incurred to defend1222future claims could be substantial and adversely affect us, even if we are ultimately successful. </FONT></P>12231224<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1225<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We also rely on trade secret1226protection for certain aspects of our technology. We typically require our employees, consultants and vendors for major components1227to execute confidentiality agreements upon their commencing services with us or before the disclosure of confidential information1228to them. These agreements generally provide that all confidential information developed or made known to the other party during1229the course of that party’s relationship with us is to be kept confidential and not disclosed to third parties, except in1230special circumstances. The agreements with our employees also provide that all inventions conceived or developed in the course of1231providing services to us shall be our exclusive property. </FONT></P>12321233<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1234<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also register the trademarks and trade names through which we conduct our1235business. To date, we have registered the trademarks “D-Stat,” and “Vari-Lase,” and have applied for1236registration in the United States of the marks “Vascular Solutions Duett,” “Pronto,” “MAX-Support,”1237“Langston,” “Twin-Pass,” “Skyway,” “Langton,” “Thrombi-Gel,” and the Duett1238stylized logo. We acquired the registered trademark “Acolysis” in connection with our acquisition of the Acolysis1239therapeutic ultrasound business in 2002. U.S. trademark registrations are generally for a term of 10 years, renewable every 101240years as long as the trademark is used in the regular course of trade. </FONT></P>12411242<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1243<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employees </FONT></H1>12441245<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1246<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of December 31, 2005, we1247had 179 full time employees. Of these employees, 42 were in manufacturing activities, 90 were in sales and marketing activities,124815 were in research and development activities, 19 were in regulatory, quality assurance and clinical research activities and 131249were in general and administrative functions. We have never had a work stoppage and none of our employees are covered by1250collective bargaining agreements. We believe our employee relations are good. </FONT></P>125112521253<BR><BR><BR><BR><BR><BR><BR>1254<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13 </FONT></P>1255<HR SIZE=3 COLOR=GRAY NOSHADE>1256<!-- *************************************************************************** -->1257<!-- MARKER PAGE="sheet: 0; page: 0" -->1258<BR>125912601261<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1262<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Officers of the Registrant </FONT></H1>12631264<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1265<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our executive officers as of1266January 31, 2006 are as follows: </FONT></P>1267126812691270<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>1271<TR VALIGN=Bottom>1272<TH COLSPAN=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name </FONT><HR WIDTH=12% SIZE=1 COLOR=BLACK NOSHADE></TH>1273<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Age </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH><TH></TH>1274<TH COLSPAN=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Position </FONT><HR WIDTH=7% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>1275<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">1276<TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root</FONT></TD>1277<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1278<TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1279<TD WIDTH="2%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45</FONT></TD>1280<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1281<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1282<TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer and Director</FONT></TD>1283<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1284<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1285<TR VALIGN=Bottom>1286<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1287<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1288<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer, Vice President of Finance and Corporate Secretary</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1289<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">1290<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deborah Neymark</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1291<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1292<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Regulatory Affairs, Clinical Research and Quality Systems</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1293<TR VALIGN=Bottom>1294<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Quackenbush</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1295<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1296<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Manufacturing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1297<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">1298<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gregg Sutton</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1299<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1300<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Research and Development</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1301<TR VALIGN=Bottom>1302<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fred Reuning</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1303<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>1304<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President of Marketing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>1305</TABLE>1306<BR>1307130813091310<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Howard Root </I></B>1311has served as our Chief Executive Officer and a director since he co-founded Vascular Solutions, Inc. in February 1997. From 19901312to 1995, Mr. Root was employed by ATS Medical, Inc., a mechanical heart valve company, most recently as Vice President and General1313Counsel. Prior to joining ATS Medical, Mr. Root practiced corporate law, specializing in representing emerging growth companies,1314at the law firm of Dorsey & Whitney for over five years. Mr. Root received his B.S. in Economics and J.D. from the University1315of Minnesota. </FONT></P>13161317<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1318<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>James Hennen </I></B>1319has served as our Chief Financial Officer since January 2004. Mr. Hennen served as our Controller & Director of Finance from1320February 2002 through December 2003. Prior to joining us, Mr. Hennen served in various accounting positions, most recently as1321International Controller with WAM!NET, Inc., a globally networked information technology company for media transfer, where he1322worked since December 1997. From October 1995 through December 1997, Mr. Hennen was a Senior Auditor for Ernst & Young, LLP.1323Mr. Hennen received a B.S. in Business/Accounting from the University of Minnesota. Mr. Hennen is a Certified Public Accountant.1324</FONT></P>13251326<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1327<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <B><I>Deborah1328Neymark</I></B> has served as our Vice President of Regulatory Affairs, Clinical Affairs and Quality Systems since October 2000.1329Mrs. Neymark served as the Corporate Compliance Officer and Vice President of Regulatory Affairs, Clinical Research and Quality1330Systems for Empi, Inc. from October 1995 to October 2000. From May 1993 to October 1995, Mrs. Neymark was employed as a Regulatory1331Affairs Manager for Boston Scientific’s Scimed division. Prior to May 1993, Mrs. Neymark held regulatory affairs, clinical1332research and quality assurance positions at Medtronic and Lifecore Biomedical. She received her B.S. in Biology from Valparaiso1333University. </FONT> </P>13341335<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1336<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>James1337Quackenbush</I></B> has served as our Vice President of Manufacturing since March 1999. Prior to joining us, Mr. Quackenbush1338served as Vice President of Manufacturing and Operations with Optical Sensors, Inc., a diagnostic medical device company, where he1339worked since October 1992. From March 1989 through October 1992, Mr. Quackenbush served as operations manager with Schneider1340USA’s stent division. Prior to this time, he was an advanced project engineer with the 3M Medical Products Division. Mr.1341Quackenbush received a B.S. in Industrial Engineering from Iowa State University. </FONT></P>13421343<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1344<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Gregg Sutton</I></B>1345has served as our Vice President of Research & Development since October 2004. Prior to joining us, Mr. Sutton served as Vice1346President of Research & Development with AtriTech, Inc., a development stage interventional medical device company, since1347January 2000. From 1998 to 2000, he was Vice President of Research & Development of AngioGuard, Inc., an interventional1348medical device company that was acquired by Johnson & Johnson in 2000. In 1990, Mr. Sutton co-founded Navarre Biomedical,1349Inc., a manufacturer of interventional radiology products that was acquired by CR Bard in 1997. Prior to 1990 Mr. Sutton held1350product engineering positions at St. Jude Medical, Claris Medical and Daig Corporation. Mr. Sutton received a B.S. in Mechanical1351Engineering from the University of Minnesota. </FONT></P>135213531354<BR>1355<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></P>1356<HR SIZE=3 COLOR=GRAY NOSHADE>1357<!-- *************************************************************************** -->1358<!-- MARKER PAGE="sheet: 0; page: 0" -->1359<BR>136013611362<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1363<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B><I>Fred Reuning </I></B>1364has served as our Vice President of Marketing since July 2005. Prior to joining us, Mr. Reuning worked at Smiths1365Medical, a medical device company, where he was Director of Marketing for the Vascular Access division1366from November 2001 to July 2005 and Senior Product Manager from January 2000 to November 2001. From 1987 to 2000, he worked1367for Novartis Nutrition, a medical nutrition company, in product management for medical devices with his last position as1368Group Manager, Medical Devices from November 1997 to December 1999. Mr. Reuning received a B.A. in history from Washington1369and Lee University and a M.A. in international studies from Johns Hopkins School of Advanced International Studies.1370</FONT></P>13711372<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1373<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> There are no family1374relationships among any of our executive officers. </FONT></P>13751376<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1377<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Available Information </FONT></H1>13781379<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->1380<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We make available free of1381charge on or through our internet website at <U>http://www.vascularsolutions.com</U> our annual report on Form 10-K, quarterly1382reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or138315(d) of the Securities Exchange Act of 1934 (the Exchange Act) as soon as reasonably practicable after we electronically file1384such material with, or furnish it to, the SEC. </FONT></P>13851386<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->1387<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 1A. RISK FACTORS </FONT></H1>13881389<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1390<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>The risks and1391uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to1392us or that we currently deem immaterial may also impair our business operations. If any of the following risks occur, our1393business, financial condition or results of operations could be seriously harmed.</I> </FONT></P>13941395<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1396<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We will not be successful if the interventional medical device community1397does not adopt our new products</I> </FONT></P>13981399<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1400<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the third quarter of14012000 we commenced sales of our first product, the Duett sealing device, in the United States, which we believe represents the1402largest market for interventional medical devices. We have not become profitable with our sales of the Duett. In the second half1403of 2003, we received clearance to commence sales of four new interventional products in the United States. Our success will depend1404on the medical community’s acceptance of our new products. We cannot predict how quickly, if at all, the medical community1405will accept our new products, or, if accepted, the extent of their use. Our potential customers must: </FONT></P>14061407<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1408<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1409<TR VALIGN=TOP>1410<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1411<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1412<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1413<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>believe that our products offer benefits compared to the1414methodologies and/or devices that they are currently using; </FONT></TD>1415</TR>1416</TABLE>1417<BR>14181419<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1420<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1421<TR VALIGN=TOP>1422<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1423<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1424<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1425<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>use our products and obtain acceptable clinical outcomes;1426</FONT></TD>1427</TR>1428</TABLE>1429<BR>14301431<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1432<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1433<TR VALIGN=TOP>1434<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1435<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1436<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1437<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>believe that our products are worth the price that they will be1438asked to pay; and </FONT></TD>1439</TR>1440</TABLE>1441<BR>14421443<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1444<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1445<TR VALIGN=TOP>1446<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1447<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1448<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1449<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be willing to commit the time and resources required to change1450their current methodology. </FONT></TD>1451</TR>1452</TABLE>1453<BR>14541455<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1456<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Because we have only limited1457experience with sales of our new products, we have no ability to predict the level of growth in sales of these products. If we1458encounter difficulties in growing our sales of our new medical devices in the United States, our business will be seriously1459harmed. </FONT></P>14601461<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->1462<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>We have limited working capital to pursue our business</I> </FONT> </P>14631464<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1465<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On December 31, 2005, we had1466$4.3 million in cash and cash equivalents and a working capital of $10.9 million. During 2005, our operating activities resulted1467in the use of $1.7 million of cash. There can be no assurance that our existing working capital will be sufficient to satisfy our1468working capital needs. If our sales do not increase, or if we encounter unexpected expenses, we will need to raise additional1469working capital. We have no commitments for additional funding and so our ability to meet our long-term liquidity needs is1470uncertain. If we raise additional funds through the issuance of equity securities, our shareholders may experience significant1471dilution. Furthermore, additional financing may not be available when needed or, if available, financing may not be on terms1472favorable to us or our shareholders. If financing is not available when required or is not available on acceptable terms, we may1473be unable to develop or market our products or unable to take advantage of business opportunities, or we may be required to1474significantly curtail our business operations. </FONT></P>14751476<BR>1477<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15 </FONT></P>1478<HR SIZE=3 COLOR=GRAY NOSHADE>1479<!-- *************************************************************************** -->1480<!-- MARKER PAGE="sheet: 0; page: 0" -->1481<BR>148214831484<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->1485<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>We have incurred losses and we may not be profitable in the future</I> </FONT>1486</P>14871488<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1489<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since we commenced operations1490in February 1997, we have incurred net losses primarily from costs relating to the development and commercialization of our Duett1491sealing device and new products. At December 31, 2005, we had an accumulated deficit of $63.8 million. We expect to continue to1492significantly invest in our sales and marketing, and research and development activities. Because of our plans to introduce new1493products and expand our commercialization, we expect to incur net losses through at least the second quarter of 2006. Our business1494strategies may not be successful, and we may not become profitable in any future period or at all. If we do become profitable, we1495cannot be certain that we can sustain or increase profitability on a quarterly or annual basis. </FONT></P>14961497<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1498<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We may face additional intellectual property claims in the future which1499could prevent us from manufacturing and selling our products or result in our incurring substantial costs and liabilities</I>1500</FONT></P>15011502<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1503<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The interventional medical1504device industry is characterized by numerous patent filings and frequent and substantial intellectual property litigation.1505Companies in the interventional medical device industry have employed intellectual property litigation in an attempt to gain a1506competitive advantage. We have been subject to two intellectual property lawsuits concerning our Duett sealing device. Although we1507have settled both of these intellectual property lawsuits, it is possible that additional claims relating to the Duett could be1508brought in the future. We also are the subject of three intellectual property lawsuits concerning our Vari-Lase products. In1509addition, while we do not believe that any of our new products infringes any existing patent, it is highly likely that we will1510become subject to intellectual property claims with respect to our new products in the future. Intellectual property litigation in1511recent years has proven to be very complex, and the outcome of such litigation is difficult to predict. </FONT></P>15121513<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1514<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> An adverse determination in1515any intellectual property litigation or interference proceedings could prohibit us from selling a product, subject us to1516significant liabilities to third parties or require us to seek licenses from third parties. The costs associated with these1517license arrangements may be substantial and could include ongoing royalties. Furthermore, the necessary licenses may not be1518available to us on satisfactory terms, if at all. Adverse determinations in a judicial or administrative proceeding or failure to1519obtain necessary licenses could prevent us from manufacturing and selling a product. </FONT></P>15201521<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1522<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our defense of intellectual1523property claims filed in the future, regardless of the merits of the complaint, could divert the attention of our technical and1524management personnel away from the development and marketing of our products for significant periods of time. The costs incurred1525to future claims could be substantial and seriously harm us, even if our defense is ultimately successful. </FONT></P>15261527<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1528<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The loss of, or interruption of supply from, key vendors, including our1529single source supplier of thrombin, could limit our ability to manufacture our products</I> </FONT></P>15301531<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1532<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchase components used1533in our products from various suppliers and rely on a single source for the thrombin component of our Duett sealing device and1534D-Stat products. There are currently no FDA-approved alternative suppliers of thrombin. Our current supply agreement with our1535thrombin vendor terminated in May 2005. Because it requires FDA approval, establishing our new supplier for thrombin requires a1536lead-time of at least two years and involves significant additional costs. The failure by us to complete our thrombin1537qualification project on time and on budget, or the loss of any other key vendor, may limit our ability to manufacture our Duett,1538D-Stat Flowable and D-Stat Dry products and could therefore seriously harm our business. </FONT></P>153915401541<BR>1542<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></P>1543<HR SIZE=3 COLOR=GRAY NOSHADE>1544<!-- *************************************************************************** -->1545<!-- MARKER PAGE="sheet: 0; page: 0" -->1546<BR>154715481549<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1550<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We have purchased a substantial amount of thrombin inventory, and failure1551to both qualify our new source of thrombin and sell an increasing amount of our thrombin-based products could cause a substantial1552inventory write-off.</I> </FONT></P>15531554<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1555<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The principal component in1556all of our hemostatic products is thrombin. Under a previous supply agreement with our original thrombin supplier we issued1557substantial purchase orders prior to its expiration in 2005. As of December 31, 2005, we had approximately $1.4 million of1558thrombin from this original source in inventory. Currently we are in the process of qualifying a new source of thrombin, which has1559required us to purchase and hold in inventory approximately $1.7 million of additional thrombin as of December 31, 2005. We must1560complete our qualification work and receive FDA clearance before we can utilize this new source of thrombin as a component in our1561hemostatic products. If we do not achieve this FDA clearance, we will not be able to sell this thrombin and will be required to1562write-off our inventory. In addition, if any of our inventory of thrombin from the original source or the new source is destroyed1563or otherwise degraded, we could be exposed to substantial losses. </FONT></P>15641565<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1566<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our future operating results are difficult to predict and may vary1567significantly from quarter to quarter, which may adversely affect the price of our common stock</I> </FONT></P>15681569<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1570<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The limited history of our1571sales and our history of losses make prediction of future operating results difficult. You should not rely on our past revenue1572growth as any indication of future growth rates or operating results. The price of our common stock will likely fall in the event1573that our operating results do not meet the expectations of analysts and investors. Comparisons of our quarterly operating results1574are an unreliable indication of our future performance because they are likely to vary significantly based on many factors,1575including: </FONT></P>15761577<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1578<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1579<TR VALIGN=TOP>1580<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1581<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1582<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1583<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the level of sales of our products in the United States market;1584</FONT></TD>1585</TR>1586</TABLE>1587<BR>15881589<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1590<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1591<TR VALIGN=TOP>1592<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1593<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1594<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1595<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our ability to introduce new products and enhancements in a timely1596manner; </FONT></TD>1597</TR>1598</TABLE>1599<BR>16001601<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1602<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1603<TR VALIGN=TOP>1604<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1605<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1606<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1607<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the demand for and acceptance of our products; </FONT></TD>1608</TR>1609</TABLE>1610<BR>16111612<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1613<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1614<TR VALIGN=TOP>1615<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1616<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1617<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1618<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the success of our competition and the introduction of alternative1619products; </FONT></TD>1620</TR>1621</TABLE>1622<BR>16231624<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1625<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1626<TR VALIGN=TOP>1627<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1628<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1629<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1630<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our ability to command favorable pricing for our products;1631</FONT></TD>1632</TR>1633</TABLE>1634<BR>16351636<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1637<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1638<TR VALIGN=TOP>1639<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1640<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1641<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1642<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the growth of the market for our devices; </FONT></TD>1643</TR>1644</TABLE>1645<BR>16461647<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1648<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1649<TR VALIGN=TOP>1650<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1651<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1652<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1653<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the expansion and rate of success of our direct sales force in the1654United States and our independent distributors internationally; </FONT></TD>1655</TR>1656</TABLE>1657<BR>16581659<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1660<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1661<TR VALIGN=TOP>1662<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1663<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1664<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1665<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actions relating to ongoing FDA compliance; </FONT></TD>1666</TR>1667</TABLE>1668<BR>16691670<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1671<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1672<TR VALIGN=TOP>1673<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1674<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1675<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1676<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the effect of intellectual property disputes; </FONT></TD>1677</TR>1678</TABLE>1679<BR>16801681<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1682<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1683<TR VALIGN=TOP>1684<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1685<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1686<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1687<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the size and timing of orders from independent distributors or1688customers; </FONT></TD>1689</TR>1690</TABLE>1691<BR>16921693<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1694<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1695<TR VALIGN=TOP>1696<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1697<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1698<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1699<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the attraction and retention of key personnel, particularly in1700sales and marketing, regulatory, manufacturing and research and development; </FONT></TD>1701</TR>1702</TABLE>1703<BR>17041705<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1706<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1707<TR VALIGN=TOP>1708<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1709<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1710<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1711<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unanticipated delays or an inability to control costs;1712</FONT></TD>1713</TR>1714</TABLE>1715<BR>17161717<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1718<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1719<TR VALIGN=TOP>1720<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1721<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1722<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1723<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>general economic conditions as well as those specific to our1724customers and markets; and </FONT></TD>1725</TR>1726</TABLE>1727<BR>17281729<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1730<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1731<TR VALIGN=TOP>1732<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1733<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1734<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1735<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>seasonal fluctuations in revenue due to the elective nature of1736some procedures. </FONT></TD>1737</TR>1738</TABLE>1739<BR>174017411742<BR>1743<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>1744<HR SIZE=3 COLOR=GRAY NOSHADE>1745<!-- *************************************************************************** -->1746<!-- MARKER PAGE="sheet: 0; page: 0" -->1747<BR>174817491750175117521753<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1754<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We may face product liability claims that could result in costly1755litigation and significant liabilities</I> </FONT></P>17561757<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1758<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1759manufacture and sale of medical products entail significant risk of product liability1760claims. The medical device industry in general has been subject to significant medical1761malpractice litigation. Any product liability claims, with or without merit, could result1762in costly litigation, reduced sales, cause us to incur significant liabilities and divert1763our management’s time, attention and resources. Because of our limited operating1764history and lack of experience with these claims, we cannot be sure that our product1765liability insurance coverage is adequate or that it will continue to be available to us on1766acceptable terms, if at all. </FONT></P>17671768<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1769<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The market for interventional1770medical devices is highly competitive and will likely become more competitive, and our1771competitors may be able to respond more quickly to new or emerging technologies and1772changes in customer requirements that may render our products obsolete</I> </FONT></P>17731774<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1775<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The1776existing market for interventional medical devices is intensely competitive. We expect1777competition to increase further as companies develop new products and/or modify their1778existing products to compete directly with ours. Each of our products encounters1779competition from at least several medical device companies, including Medtronic Inc.,1780Abbot Laboratories, St. Jude Medical and Datascope. Each of these companies has: </FONT></P>17811782<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1783<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1784<TR VALIGN=TOP>1785<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1786<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1787<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1788<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>better name recognition; </FONT></TD>1789</TR>1790</TABLE>1791<BR>17921793<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1794<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1795<TR VALIGN=TOP>1796<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1797<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1798<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1799<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>broader product lines; </FONT></TD>1800</TR>1801</TABLE>1802<BR>18031804<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1805<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1806<TR VALIGN=TOP>1807<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1808<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1809<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1810<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>greater sales, marketing and distribution capabilities;1811</FONT></TD>1812</TR>1813</TABLE>1814<BR>18151816<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1817<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1818<TR VALIGN=TOP>1819<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1820<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1821<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1822<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>significantly greater financial resources; </FONT></TD>1823</TR>1824</TABLE>1825<BR>18261827<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1828<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1829<TR VALIGN=TOP>1830<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1831<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1832<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1833<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>larger research and development staffs and facilities; and1834</FONT></TD>1835</TR>1836</TABLE>1837<BR>18381839<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1840<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1841<TR VALIGN=TOP>1842<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1843<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>1844<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1845<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>existing relationships with some of our potential customers.1846</FONT></TD>1847</TR>1848</TABLE>1849<BR>18501851<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1852<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We may not be able to1853effectively compete with these companies. In addition, broad product lines may allow our competitors to negotiate exclusive,1854long-term supply contracts and offer comprehensive pricing for their products. Broader product lines may also provide our1855competitors with a significant advantage in marketing competing products to group purchasing organizations and other managed care1856organizations that are increasingly seeking to reduce costs through centralized purchasing. Greater financial resources and1857product development capabilities may allow our competitors to respond more quickly to new or emerging technologies and changes in1858customer requirements that may render our products obsolete. </FONT></P>18591860<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1861<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our international sales are subject to a number of risks that could1862seriously harm our ability to successfully commercialize our products in any international market</I> </FONT></P>18631864<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1865<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our international sales are1866subject to several risks, including: </FONT></P>18671868<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1869<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1870<TR VALIGN=TOP>1871<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1872<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1873<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1874<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the ability of our independent distributors to sell our products;1875</FONT></TD>1876</TR>1877</TABLE>1878<BR>18791880<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1881<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1882<TR VALIGN=TOP>1883<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1884<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1885<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1886<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the impact of recessions in economies outside the United States;1887</FONT></TD>1888</TR>1889</TABLE>1890<BR>18911892<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1893<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1894<TR VALIGN=TOP>1895<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1896<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1897<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1898<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>greater difficulty in collecting accounts receivable and longer1899collection periods; </FONT></TD>1900</TR>1901</TABLE>1902<BR>19031904<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1905<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1906<TR VALIGN=TOP>1907<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1908<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1909<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1910<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unexpected changes in regulatory requirements, tariffs or other1911trade barriers; </FONT></TD>1912</TR>1913</TABLE>1914<BR>19151916<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1917<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1918<TR VALIGN=TOP>1919<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1920<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1921<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1922<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>weaker intellectual property rights protection in some countries;1923</FONT></TD>1924</TR>1925</TABLE>1926<BR>19271928<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1929<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1930<TR VALIGN=TOP>1931<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1932<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1933<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1934<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>potentially adverse tax consequences; and </FONT></TD>1935</TR>1936</TABLE>1937<BR>19381939<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->1940<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>1941<TR VALIGN=TOP>1942<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1943<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> • </FONT></TD>1944<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>1945<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>political and economic instability. </FONT></TD>1946</TR>1947</TABLE>1948<BR>194919501951<BR>1952<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>1953<HR SIZE=3 COLOR=GRAY NOSHADE>1954<!-- *************************************************************************** -->1955<!-- MARKER PAGE="sheet: 0; page: 0" -->1956<BR>1957195819591960<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1961<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The occurrence of any of1962these events could seriously harm our future international sales and our ability to successfully commercialize our products in any1963international market. </FONT></P>19641965<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1966<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We have limited manufacturing experience and may encounter difficulties in1967our manufacturing operations which could seriously harm our business</I> </FONT></P>19681969<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1970<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have limited experience in1971manufacturing our products. In particular, we have limited experience in lyophilization, which is a key manufacturing step for our1972D-Stat Dry hemostatic bandage. We believe our facilities are adequate for our projected production of our products for the1973foreseeable future, but future facility requirements will depend largely on future sales of our products in the United States. We1974may encounter unforeseen difficulties in expanding our production of our new products, including problems involving production1975yields, quality control and assurance, component supply and shortages of qualified personnel, compliance with FDA regulations and1976requirements regarding good manufacturing practices, and the need for further regulatory approval of new manufacturing processes.1977Difficulties encountered by us in expanding and maintaining our manufacturing capabilities could seriously harm our business.1978</FONT></P>19791980<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->1981<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our business and results of operations may be seriously harmed by changes1982in third-party reimbursement policies</I> </FONT></P>19831984<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1985<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We could be seriously harmed1986by changes in reimbursement policies of governmental or private healthcare payors, particularly to the extent any changes affect1987reimbursement for catheterization procedures in which our products are used. Failure by physicians, hospitals and other users of1988our products to obtain sufficient reimbursement from healthcare payors for procedures in which our products are used or adverse1989changes in governmental and private third-party payors’ policies toward reimbursement for such procedures would seriously1990harm our business. </FONT></P>19911992<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1993<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the United States,1994healthcare providers, including hospitals and clinics that purchase medical devices such as our products, generally rely on1995third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to reimburse all or part of1996the cost of catheterization procedures. Any changes in this reimbursement system could seriously harm our business. </FONT></P>19971998<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->1999<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In international markets,2000acceptance of our products is dependent in part upon the availability of reimbursement within prevailing healthcare payment2001systems. Reimbursement and healthcare payment systems in international markets vary significantly by country. Our failure to2002receive international reimbursement approvals could have a negative impact on market acceptance of our products in the markets in2003which these approvals are sought. </FONT></P>20042005<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->2006<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our products and our manufacturing activities are subject to extensive2007governmental regulation that could prevent us from selling our products in the United States or introducing new and improved2008products</I> </FONT></P>20092010<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2011<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our products and our2012manufacturing activities are subject to extensive regulation by a number of governmental agencies, including the FDA and2013comparable international agencies. We are required to: </FONT></P>20142015<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2016<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2017<TR VALIGN=TOP>2018<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2019<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2020<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2021<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>obtain the clearance of the FDA and international agencies before2022we can market and sell our products; </FONT></TD>2023</TR>2024</TABLE>2025<BR>20262027<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2028<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2029<TR VALIGN=TOP>2030<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2031<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2032<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2033<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>satisfy these agencies’ content requirements for all of our2034labeling, sales and promotional materials; and </FONT></TD>2035</TR>2036</TABLE>2037<BR>20382039<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2040<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2041<TR VALIGN=TOP>2042<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2043<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2044<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2045<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>undergo rigorous inspections by these agencies. </FONT></TD>2046</TR>2047</TABLE>2048<BR>20492050<BR>2051<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>2052<HR SIZE=3 COLOR=GRAY NOSHADE>2053<!-- *************************************************************************** -->2054<!-- MARKER PAGE="sheet: 0; page: 0" -->2055<BR>20562057205820592060<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2061<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Compliance with the2062regulations of these agencies may delay or prevent us from introducing any new model of our existing products or other new2063products. Furthermore, we may be subject to sanctions, including temporary or permanent suspension of operations, product recalls2064and marketing restrictions if we fail to comply with the laws and regulations pertaining to our business. </FONT></P>20652066<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2067<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are also required to2068demonstrate compliance with the FDA’s quality system regulations. The FDA enforces its quality system regulations through2069pre-approval and periodic post-approval inspections. These regulations relate to product testing, vendor qualification, design2070control and quality assurance, as well as the maintenance of records and documentation. If we are unable to conform to these2071regulations, the FDA may take actions which could seriously harm our business. In addition, government regulation may be2072established that could prevent, delay, modify or rescind regulatory clearance or approval of our products. </FONT></P>20732074<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2075<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 1B. UNRESOLVED STAFF COMMENTS </FONT></H1>20762077<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2078<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>20792080<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2081<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 2. PROPERTIES </FONT></H1>20822083<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2084<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our offices are in2085approximately 43,000 square feet of leased space in a suburb of Minneapolis, Minnesota. These facilities include approximately208612,600 square feet used for manufacturing activities and approximately 3,500 square feet used for research and laboratory2087activities, with the remainder used for general purpose office space. Our lease for these facilities expires in September 2008. We2088believe that we may require additional space for our expanding operations before the expiration of this lease. We believe that2089there is suitable space available in the local market (although not in our current facility) at reasonable rates that are2090available to us if we need expansion space prior to the end of our lease. </FONT></P>20912092<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2093<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 3. LEGAL PROCEEDINGS </FONT></H1>20942095<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2096<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On December 11, 2003, we and2097one of our non-officer employees were named as defendants in a lawsuit brought by Diomed, Inc. in the United States District Court2098for the District of Massachusetts. The complaint alleges that in marketing our Vari-Lase endovenous laser procedure kit we engaged2099in false advertising and infringed a registered trademark of Diomed. The complaint also alleges that the non-officer employee, who2100previously worked for a company that conducted business with Diomed, improperly utilized trade secrets of Diomed in developing our2101Vari-Lase procedure kit. The complaint requests monetary damages and an injunction on the sale of our Vari-Lase procedure kit. We2102believe that the allegations included in the complaint are wholly without merit. On July 13, 2005, the court held a hearing on our2103motion for summary judgment, in which we sought dismissal of all claims. On January 31, 2006, the Court granted our motion for2104summary judgement dismissing all counts of Diomed’s complaint with the exception of one trade secret misappropriation count2105and a portion of two other counts to the extent they are based on alleged trade secret misappropriation. Our couterclaim against2106Diomed was not dismissed. The Court has scheduled a status conference for this case on March 2, 2006. Our insurance carrier2107initially accepted our tender of this claim and has paid for the expenses incurred in defending this lawsuit. After the summary2108judgment hearing, the insurance company notified us that they were withdrawing coverage prospectively, effective November 6, 2005.2109It is not possible to predict the timing or outcome of this litigation, including whether it will affect our ability to sell our2110Vari-Lase procedure kit, or to estimate the amount or range of potential loss. </FONT></P>2111211221132114<BR>2115<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20 </FONT></P>2116<HR SIZE=3 COLOR=GRAY NOSHADE>2117<!-- *************************************************************************** -->2118<!-- MARKER PAGE="sheet: 0; page: 0" -->2119<BR>212021212122<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2123<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On March 4, 2004, we were2124named as the defendant in an intellectual property lawsuit brought by Diomed, Inc. in the United States District Court for the2125District of Massachusetts. The complaint requested a judgment that our Vari-Lase procedure kit and Vari-Lase laser console2126infringe on a single patent held by Diomed, Inc. and asked for relief in the form of an injunction that would prevent us from2127selling our Vari-Lase products, compensatory and treble damages caused by the manufacture and sale of our product, and other2128costs, disbursements and attorneys’ fees. On April 12, 2005, the Judge entered a Memorandum and Order on Claims Construction2129from the Markman hearing phase of the litigation. In the Order, the Judge held that in order to violate the Diomed patent, a2130competing method must deliberately put the tip of the laser fiber in physical contact with the wall of the vein, must drain blood2131from the vein, must compress the vein and must maintain vein wall contact as the laser energy is delivered. We believe that our2132Vari-Lase products are not used in this method, and thus we do not believe the litigation has merit. On December 21, 2005, we2133filed our motion for summary judgment, in which we seek dismissal of all claims. It is not possible to predict the timing or2134outcome of this litigation, including whether it will affect our ability to sell their Vari-Lase products, or to estimate the2135amount or range of potential loss. </FONT></P>21362137<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2138<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On October 13, 2005, we were2139named as one of three defendants in an intellectual property lawsuit brought by VNUS Medical Technologies, Inc. in the United2140States District Court for the Northern District of California. The complaint requested a judgment that our Vari-Lase procedure kit2141and Vari-Lase laser console infringes on four patents held by VNUS Medical Technologies, Inc. and asked for relief in the form of2142an injunction that would prevent us from selling our Vari-Lase products, compensatory and treble damages caused by the manufacture2143and sale of the Company’s product, and other costs, disbursements and attorneys’ fees. We believe that our Vari-Lase2144products do not violate these patents, and thus we do not believe the litigation has merit. It is not possible to predict the2145timing or outcome of this litigation, including whether it will affect our ability to sell our Vari-Lase products, or to estimate2146the amount or range of potential loss. </FONT></P>21472148<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->2149<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> From time to time we are2150involved in legal proceedings arising in the normal course of our business. As of the date of this report we are not a party to2151any legal proceeding not described in this section in which an adverse outcome would reasonably be expected to have a2152material adverse effect on our results of operations or financial condition. </FONT></P>21532154<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2155<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS2156</FONT></H1>21572158<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2159<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> No matters were submitted to2160a vote of security holders during the quarter ended December 31, 2005. </FONT></P>216121622163<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>2164<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></P>2165<HR SIZE=3 COLOR=GRAY NOSHADE>2166<!-- *************************************************************************** -->2167<!-- MARKER PAGE="sheet: 0; page: 0" -->2168<BR>216921702171<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->2172<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART II </FONT></H1>21732174<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2175<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES </FONT></H1>21762177<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2178<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our common stock began2179trading on the NASDAQ National Market under the symbol “VASC” on July 20, 2000. The following table sets forth, for the2180periods indicated, the range of high and low last sale prices for the common stock as reported by the NASDAQ National Market.2181</FONT></P>2182218321842185<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=50% ALIGN=CENTER>2186<TR VALIGN=Bottom>2187<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2188<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>High </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2189<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Low </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>2190<TR VALIGN=Bottom>2191<TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2005</B> </FONT></TD>2192<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2193<TD WIDTH=13% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2194<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>2195<TD WIDTH=11% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2196<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>2197<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2198<TR VALIGN=Bottom>2199<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>2200<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.200</FONT></TD>2201<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2202<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.030</FONT></TD>2203<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2204<TR VALIGN=Bottom>2205<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>2206<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.470</FONT></TD>2207<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2208<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.070</FONT></TD>2209<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2210<TR VALIGN=Bottom>2211<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>2212<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.360</FONT></TD>2213<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2214<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.270</FONT></TD>2215<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2216<TR VALIGN=Bottom>2217<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Fourth Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2218<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.940</FONT></TD>2219<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2220<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.750</FONT></TD>2221<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2222<TR><TD> </TD></TR>2223<TR VALIGN=Bottom>2224<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2004</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>2225<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>2226<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2227<TR VALIGN=Bottom>2228<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>2229<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.690</FONT></TD>2230<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2231<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.090</FONT></TD>2232<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2233<TR VALIGN=Bottom>2234<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>2235<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.740</FONT></TD>2236<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2237<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.900</FONT></TD>2238<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2239<TR VALIGN=Bottom>2240<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>2241<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.100</FONT></TD>2242<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2243<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.000</FONT></TD>2244<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2245<TR VALIGN=Bottom>2246<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Fourth Quarter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2247<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.750</FONT></TD>2248<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2249<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.730</FONT></TD>2250<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2251</TABLE>2252<BR>225322542255<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holders </FONT></H1>22562257<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2258<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of December 31, 2005, we2259had 196 shareholders of record. Such number of record holders does not reflect shareholders who beneficially own common stock in2260nominee or street name. </FONT></P>22612262<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2263<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends </FONT></H1>22642265<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2266<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have paid no cash2267dividends on our common stock, and do not intend to pay cash dividends on our common stock in the future. </FONT></P>22682269<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2270<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 6. SELECTED FINANCIAL DATA </FONT></H1>22712272<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2273<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following selected2274financial data as of December 31, 2005 and 2004 and for the three years ended December 31, 2005, 2004 and 2003 are derived from,2275and should be read together with, our financial statements included elsewhere in this Form 10-K. The following selected financial2276data as of December 31, 2003, 2002 and 2001 and for the fiscal years ended December 31, 2002 and 2001 are derived from financial2277statements not included herein. The information set forth below should be read in conjunction with “Management’s2278Discussion and Analysis of Financial Condition and Results of Operations,” the Consolidated Financial Statements and Notes2279thereto and other financial information included elsewhere in this Form 10-K. </FONT></P>228022812282<BR><BR><BR><BR><BR><BR><BR><BR><BR>2283<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22 </FONT></P>2284<HR SIZE=3 COLOR=GRAY NOSHADE>2285<!-- *************************************************************************** -->2286<!-- MARKER PAGE="sheet: 0; page: 0" -->2287<BR>228822892290<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>2291<TR VALIGN=Bottom>2292<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2293<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31, </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>2294<TR VALIGN=Bottom>2295<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2296<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2297<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2298<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2299<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2300<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>2301<TR VALIGN=Bottom>2302<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2303<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(in thousands, except per share amounts) </FONT></TH></TR>2304<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2305<TD WIDTH="27%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statements of Operations Data:</FONT></TD>2306<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2307<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2308<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>2309<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2310<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>2311<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2312<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>2313<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2314<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>2315<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2316<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>2317<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2318<TR VALIGN=Bottom>2319<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>2320<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32,786</FONT></TD>2321<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2322<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,414</FONT></TD>2323<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2324<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,862</FONT></TD>2325<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2326<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,154</FONT></TD>2327<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2328<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,128</FONT></TD>2329<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2330<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2331<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>2332<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,386</FONT></TD>2333<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2334<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,757</FONT></TD>2335<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2336<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,628</FONT></TD>2337<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2338<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,039</FONT></TD>2339<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2340<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,007</FONT></TD>2341<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2342<TR>2343<TD COLSPAN=3></TD>2344<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2345<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2346<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2347<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2348<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2349<TR VALIGN=Bottom>2350<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>2351<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,400</FONT></TD>2352<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2353<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,657</FONT></TD>2354<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2355<TD ALIGN=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>2356<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2357<TD ALIGN=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>2358<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2359<TD ALIGN=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>2360<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2361<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2362<TD colspan=18 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses:</FONT></TD></TR>2363<TR VALIGN=Bottom>2364<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>2365<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,789</FONT></TD>2366<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2367<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,401</FONT></TD>2368<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2369<TD ALIGN=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>2370<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2371<TD ALIGN=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>2372<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2373<TD ALIGN=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>2374<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2375<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2376<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>2377<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,006</FONT></TD>2378<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2379<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,906</FONT></TD>2380<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2381<TD ALIGN="RIGHT"><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>2382<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2383<TD ALIGN="RIGHT"><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>2384<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2385<TD ALIGN="RIGHT"><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>2386<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2387<TR VALIGN=Bottom>2388<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>2389<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,681</FONT></TD>2390<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2391<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,360</FONT></TD>2392<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2393<TD ALIGN=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>2394<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2395<TD ALIGN=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>2396<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2397<TD ALIGN=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>2398<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2399<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2400<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>2401<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,810</FONT></TD>2402<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2403<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,138</FONT></TD>2404<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2405<TD ALIGN="RIGHT"><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>2406<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2407<TD ALIGN="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>2408<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2409<TD ALIGN="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>2410<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2411<TR VALIGN=Bottom>2412<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2413<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,620</FONT></TD>2414<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2415<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>210</FONT></TD>2416<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2417<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2418<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2419<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2420<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2421<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2422<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2423<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2424<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>2425<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2426<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2427<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2428<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2429<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2430<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2431<TD ALIGN="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>2432<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2433<TD ALIGN="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>2434<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2435<TR VALIGN=Bottom>2436<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>2437<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218</FONT></TD>2438<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2439<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218</FONT></TD>2440<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2441<TD ALIGN=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>2442<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2443<TD ALIGN=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>2444<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2445<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2446<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2447<TR>2448<TD COLSPAN=3></TD>2449<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2450<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2451<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2452<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2453<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2454<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2455<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>2456<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,124</FONT></TD>2457<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2458<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,233</FONT></TD>2459<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2460<TD ALIGN="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>2461<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2462<TD ALIGN="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>2463<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2464<TD ALIGN="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>2465<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2466<TR>2467<TD COLSPAN=3></TD>2468<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2469<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2470<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2471<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2472<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2473<TR><TD> </TD></TR>2474<TR VALIGN=Bottom>2475<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>2476<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(724</FONT></TD>2477<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2478<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,576</FONT></TD>2479<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2480<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,778</FONT></TD>2481<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2482<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(15,486</FONT></TD>2483<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2484<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13,911</FONT></TD>2485<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>2486<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2487<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>2488<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>163</FONT></TD>2489<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2490<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68</FONT></TD>2491<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2492<TD ALIGN="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>2493<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2494<TD ALIGN="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>2495<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2496<TD ALIGN="RIGHT"><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>2497<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2498<TR>2499<TD COLSPAN=3></TD>2500<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2501<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2502<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2503<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>2504<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>2505<TR VALIGN=Bottom>2506<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>2507<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (561</FONT></TD>2508<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2509<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,508</FONT></TD>2510<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2511<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628</FONT></TD>2512<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2513<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (14,979</FONT></TD>2514<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2515<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (12,250</FONT></TD>2516<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>2517<TR>2518<TD COLSPAN=3></TD>2519<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>2520<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>2521<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>2522<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>2523<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>2524<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2525<TD colspan=18 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss per common share –</FONT></TD></TR>2526<TR VALIGN=Bottom>2527<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic and diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2528<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.04</FONT></TD>2529<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2530<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.25</FONT></TD>2531<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2532<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>2533<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2534<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1.13</FONT></TD>2535<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>2536<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.93</FONT></TD>2537<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>2538<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2539<TD colspan=18 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common</FONT></TD></TR>2540<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2541<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>2542<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,515</FONT></TD>2543<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2544<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,952</FONT></TD>2545<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2546<TD ALIGN="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>2547<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2548<TD ALIGN="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>2549<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2550<TD ALIGN="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>2551<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2552<TR><TD> </TD></TR>2553<TR VALIGN=Bottom>2554<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2555<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>As of December 31, </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>2556<TR VALIGN=Bottom>2557<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2558<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2559<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2560<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2561<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>2562<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2001 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>2563<TR VALIGN=Bottom>2564<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>2565<TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(in thousands) </FONT></TH></TR>2566<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2567<TD colspan=18 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance Sheet Data:</FONT></TD></TR>2568<TR VALIGN=Bottom>2569<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>2570<TR VALIGN=Bottom>2571<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>2572<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,282</FONT></TD>2573<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2574<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,184</FONT></TD>2575<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2576<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,885</FONT></TD>2577<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2578<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,750</FONT></TD>2579<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2580<TD ALIGN=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>2581<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2582<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2583<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>2584<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,887</FONT></TD>2585<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2586<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,833</FONT></TD>2587<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2588<TD ALIGN="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>2589<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2590<TD ALIGN="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>2591<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2592<TD ALIGN="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>2593<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2594<TR VALIGN=Bottom>2595<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>2596<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,896</FONT></TD>2597<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2598<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,822</FONT></TD>2599<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2600<TD ALIGN=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>2601<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2602<TD ALIGN=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>2603<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2604<TD ALIGN=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>2605<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2606<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">2607<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>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>—</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>—</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="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>2617<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2618<TR VALIGN=Bottom>2619<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>2620<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,107</FONT></TD>2621<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2622<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,690</FONT></TD>2623<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2624<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,873</FONT></TD>2625<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>20,369</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>35,630</FONT></TD>2629<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>2630</TABLE>2631<BR>26322633263426352636<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>2637<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23 </FONT></P>2638<HR SIZE=3 COLOR=GRAY NOSHADE>2639<!-- *************************************************************************** -->2640<!-- MARKER PAGE="sheet: 0; page: 0" -->2641<BR>2642264326442645<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2646<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </FONT></H1>26472648<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2649<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following discussion of2650our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and2651Notes thereto, and the other financial information included elsewhere in this Form 10-K Report. This Management’s Discussion2652and Analysis of Financial Condition and Results of Operations contains descriptions of our expectations regarding future trends2653affecting our business. These forward-looking statements and other forward-looking statements made elsewhere in this document are2654made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Item 1A of Part I of this2655Form 10-K sets forth certain factors we believe could cause actual results to differ materially from those contemplated by the2656forward looking statements. </FONT></P>26572658<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2659<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overview </FONT></H1>26602661<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2662<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We are a medical device2663company focused on bringing solutions to interventional cardiologists and interventional radiologists. As a vertically-integrated2664medical device company, we generate ideas and create new interventional medical devices, and then deliver those products directly2665to the physician through our direct domestic sales force and international distribution network. We continue to develop new2666products and applications for our existing products. </FONT></P>26672668<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2669<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Since 2003, we have launched2670four substantial product lines: </FONT></P>26712672<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2673<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2674<TR VALIGN=TOP>2675<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2676<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2677<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2678<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>D-Stat Dry Product Line.</I> We launched the2679D-Stat Dry Hemostatic Bandage in September 2003. The D-Stat Dry hemostatic bandage consists of a freeze-dried pad of our D-Stat2680procoagulant which can be applied to topical bleeding with a custom adhesive bandage. Other products included in the D-Stat Dry2681product line include D-Stat 2Dry, the D-Stat Clamp, the D-Stat Radial and Thrombix trauma bandage (formerly D-Stat Dry 3x3).2682</FONT></TD>2683</TR>2684</TABLE>2685<BR>26862687<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2688<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2689<TR VALIGN=TOP>2690<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2691<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2692<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2693<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Pronto Extraction Catheter Product2694Line.</I> We launched the Pronto Extraction Catheter in international markets at the end of the third quarter of26952003, and received regulatory clearance for United States sales in December 2003. The Pronto extraction catheter consists of a2696catheter with a proprietary atraumatic distal tip and large extraction lumen for the removal of soft thrombus from arteries.2697Pronto-Short is also included in the Pronto product line. </FONT></TD>2698</TR>2699</TABLE>2700<BR>27012702<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2703<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2704<TR VALIGN=TOP>2705<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2706<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2707<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2708<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Vari-Lase Product Line.</I> We launched the2709Vari-Lase Procedure Kit in the third quarter of 2003 and the Vari-Lase Laser Console in the first quarter of 2004. The Vari-Lase2710product is a treatment for superficial venous reflux, otherwise known as varicose veins. Other products included in the Vari-Lase2711product line include Auto-Fill, Procedure Packs, MicroIintroducers and GuideWires. </FONT></TD>2712</TR>2713</TABLE>2714<BR>27152716<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2717<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2718<TR VALIGN=TOP>2719<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2720<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2721<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2722<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Specialty Catheter Product Line.</I> We2723received regulatory clearance for the Langston Dual Lumen Pigtail Catheter in September 2004 and launched this product in the2724fourth quarter of 2004. The Langston catheter is used to measure the precise measurement of aortic stenosis. </FONT></TD>2725</TR>2726</TABLE>2727<BR>27282729<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2730<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We believe these four new2731product lines together with sales of our existing Duett product line, D-Stat Flowable product line and Other Products, will result2732in continued substantial revenue growth in the range of 25% to 40% for 2006. We also believe our gross margin percent will be2733approximately 68% to 70% during 2006. </FONT></P>2734273527362737<BR><BR><BR><BR><BR><BR><BR>2738<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24 </FONT></P>2739<HR SIZE=3 COLOR=GRAY NOSHADE>2740<!-- *************************************************************************** -->2741<!-- MARKER PAGE="sheet: 0; page: 0" -->2742<BR>274327442745<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2746<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Results of Operations </FONT></H1>27472748<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2749<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Year ended December 31, 2005 compared to year ended December 31, 2004</I></B> </FONT> </P>27502751<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2752<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net sales increased to2753$32,786,000 for the year ended December 31, 2005 from $22,414,000 for the year ended December 31, 2004. Approximately 89% of our2754net sales for the year ended December 31, 2005 were to customers in the United States and 11% of the net sales were to customers2755in international markets. Net sales by product category were as follows: </FONT></P>27562757<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2758<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2759<TR VALIGN=TOP>2760<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2761<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2762<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2763<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the D-Stat Dry product line were $13,804,000 for the2764year ended December 31, 2005 compared to $8,831,000 for the year ended December 31, 2004. Through December 31, 2005, we have sold2765our D-Stat Dry to 904 of the estimated 3,000 cardiac and interventional radiology labs in the United States. </FONT></TD>2766</TR>2767</TABLE>2768<BR>27692770<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2771<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2772<TR VALIGN=TOP>2773<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2774<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2775<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2776<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Pronto product line were $6,357,000 for the year2777ended December 31, 2005 compared to $3,051,000 for the year ended December 31, 2004. We have sold our Pronto to 807 accounts in2778the United States through December 31, 2005. </FONT></TD>2779</TR>2780</TABLE>2781<BR>27822783<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2784<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2785<TR VALIGN=TOP>2786<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2787<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2788<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2789<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Vari-Lase product line were $5,008,000 for the2790year ended December 31, 2005 compared to $2,662,000 for the year ended December 31, 2004. We have sold our Vari-Lase kits to 3162791accounts in the United States through December 31, 2005. </FONT></TD>2792</TR>2793</TABLE>2794<BR>27952796<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2797<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2798<TR VALIGN=TOP>2799<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2800<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2801<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2802<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Duett product line were $3,954,000 for the year2803ended December 31, 2005 compared to $5,973,000 for the year ended December 31, 2004. We expect Duett sales to continue to decline2804at a rate of 20% to 30%, year over year, as we continue to harvest this product and focus on our new higher margin products.2805</FONT></TD>2806</TR>2807</TABLE>2808<BR>28092810<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2811<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2812<TR VALIGN=TOP>2813<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2814<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2815<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2816<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the D-Stat Flowable product line increased to2817$2,083,000 for the year ended December 31, 2005 compared to $1,441,000 for the year ended December 31, 2004, a 45% increase. We2818have sold our D-Stat Flowable to 753 accounts in the United States through December 31, 2005. </FONT></TD>2819</TR>2820</TABLE>2821<BR>28222823<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2824<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2825<TR VALIGN=TOP>2826<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2827<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2828<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2829<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Specialty Catheter product line were $1,036,0002830for the year ended December 31, 2005 compared to $133,000 for the year ended December 31, 2004. In September 2004 we launched the2831Langston dual lumen pigtail catheter and we have sold it to 487 accounts in the United States through December 31, 2005.2832</FONT></TD>2833</TR>2834</TABLE>2835<BR>28362837<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2838<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2839<TR VALIGN=TOP>2840<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2841<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2842<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2843<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Other Products were $544,000 for the year ended2844December 31, 2005 compared to $323,000 for the year ended December 31, 2004. Other Products include Acolysis, MAX Support Belt and2845freight. Acolysis is sold only in international markets. </FONT></TD>2846</TR>2847</TABLE>2848<BR>28492850<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2851<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Gross profit as a percentage2852of net sales increased to 71% for the year ended December 31, 2005 from 70% for the year ended December 31, 2004. Our selling mix2853continues to change to our higher margin products such as our D-Stat Dry, which has gross margins greater than 80%. We expect2854gross margins to be in the range of 67% to 70% in 2006 as our selling mix continues to change and our new V3 version of the Pronto2855has higher manufacturing costs than the original Pronto. </FONT></P>28562857<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2858<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development2859expenses increased 11% to $3,789,000 for the year ended December 31, 2005 from $3,401,000 for the year ended December 31, 2004.2860The increase was the result of our increased investment in research and development as well as our increase in head count to 152861employees at December 31, 2005 versus 12 at December 31, 2004. We expect our normal research and development expenses to be2862approximately 10% to 12% of sales per quarter in 2006 as we continue to pursue additional new products at an expected rate of2863approximately two new products per year and we continue to move our longer term development projects forward. Research and2864development expenses will decline as a percent of sales throughout 2006 as our sales increase. </FONT></P>286528662867<BR>2868<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25 </FONT></P>2869<HR SIZE=3 COLOR=GRAY NOSHADE>2870<!-- *************************************************************************** -->2871<!-- MARKER PAGE="sheet: 0; page: 0" -->2872<BR>287328742875<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2876<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical and regulatory2877expenses increased 5% to $2,006,000 for the year ended December 31, 2005 from $1,906,000 for the year ended December 31, 2004. The2878increase was the result of increased clinical study activity, increased FDA fees and increased number of employees compared to28792004. During 2005 our clinical studies consisted of the “Pocket Protector” study for a new indication of our D-Stat2880Flowable product and the D-Stat Dry study to obtain clinical data to support growing sales of the D-Stat Dry. Clinical and2881regulatory expenses fluctuate due to the timing of clinical and marketing studies. We expect clinical and regulatory expenses to2882be approximately 6% to 8% of sales per quarter in 2006 as we continue to pursue additional new products at an expected rate of2883approximately two new products per year and we continue to move our longer term development projects forward. Clinical and2884regulatory expenses will decline as a percent of sales throughout 2006 as our sales increase. </FONT></P>28852886<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2887<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales and marketing expenses2888increased 20% to $13,681,000 for the year ended December 31, 2005 from $11,360,000 for the year ended December 31, 2004. The2889increase in sales and marketing expenses is the direct result of our increase in our direct sales force to 72 employees at the end2890of 2005 compared to 57 as of December 31, 2004. We expect to add approximately 10 field sales employees during 2006 to complete2891our geographic coverage of the United States. As a result, we expect our sales and marketing expenses to be between 38% and 45% of2892sales per quarter in 2006. Sales and marketing expenses are expected to decline as a percent of sales throughout 2006 as our sales2893increase. </FONT></P>28942895<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2896<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> General and administrative2897expenses increased 31% to $2,810,000 for the year ended December 31, 2005 from $2,138,000 for the year ended December 31, 2004.2898The increase was primarily the result of higher legal fees relating to the Diomed litigation (see “Legal Proceedings” in2899Item 3 of Part I of this Form 10-K) along with higher business insurance and accounting fees in 2005 compared to 2004. We expect2900general and administrative expenses to be approximately 8% to 10% of sales per quarter in 2006. </FONT></P>29012902<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2903<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification2904project expenses were $1,620,000 for the year ended December 31, 2005 compared to $210,000 for the year ended December 31, 2004.2905We expect the total remaining expenses associated with our qualification of the new source of thrombin to be approximately $2.52906million in 2006. </FONT></P>29072908<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2909<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of purchased2910technology was $218,000 for each of the years ended December 31, 2005 and 2004. The amortization resulted from our acquisition of2911the Acolysis assets from the secured creditors of Angiosonics, Inc. We allocated $870,000 from the acquisition to purchased2912technology and are amortizing the amount over four years. </FONT></P>29132914<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2915<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest income increased to2916$163,000 for the year ended December 31, 2005 from $68,000 for the year ended December 31, 2004 primarily as a result of higher2917interest rates. </FONT></P>29182919<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->2920<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Results of Operations </FONT></H1>29212922<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->2923<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Year ended December 31, 2004 compared to year ended December 31, 2003</I></B> </FONT> </P>29242925<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->2926<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Net sales increased to2927$22,414,000 for the year ended December 31, 2004 from $11,862,000 for the year ended December 31, 2003. Approximately 89% of our2928net sales for the year ended December 31, 2004 were to customers in the United States and 11% of the net sales were to customers2929in international markets. Net sales by product category were as follows: </FONT></P>29302931<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2932<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2933<TR VALIGN=TOP>2934<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2935<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2936<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2937<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the D-Stat Dry product line were $8,831,000 for the2938year ended December 31, 2004 compared to $1,085,000 for the year ended December 31, 2003. Our D-Stat Dry product was launched at2939the end of the third quarter of 2003. </FONT></TD>2940</TR>2941</TABLE>2942<BR>2943294429452946<BR>2947<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26 </FONT></P>2948<HR SIZE=3 COLOR=GRAY NOSHADE>2949<!-- *************************************************************************** -->2950<!-- MARKER PAGE="sheet: 0; page: 0" -->2951<BR>29522953295429552956<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2957<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2958<TR VALIGN=TOP>2959<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2960<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2961<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2962<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Pronto product line were $3,051,000 for the year2963ended December 31, 2004 compared to $97,000 for the year ended December 31, 2003. Our Pronto product was launched at the end of2964the third quarter of 2003 in international markets, and we received FDA approval in December 2003 but did not commence sales in2965the United States until 2004. </FONT></TD>2966</TR>2967</TABLE>2968<BR>29692970<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2971<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2972<TR VALIGN=TOP>2973<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2974<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2975<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2976<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Vari-Lase product line were $2,662,000 for the2977year ended December 31, 2004 compared to $255,000 for the year ended December 31, 2003. Our Vari-Lase procedure kit was launched2978during the third quarter of 2003, and our Vari-Lase laser console was launched during the first quarter of 2004. </FONT></TD>2979</TR>2980</TABLE>2981<BR>29822983<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2984<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2985<TR VALIGN=TOP>2986<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2987<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>2988<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>2989<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Duett product line were $5,973,000 for the year2990ended December 31, 2004 compared to $8,995,000 for the year ended December 31, 2003. We expect Duett sales to continue to decline2991at a rate of between 20% to 30%, year over year, as we continue to harvest this product and focus on our new higher margin2992products. </FONT></TD>2993</TR>2994</TABLE>2995<BR>29962997<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->2998<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>2999<TR VALIGN=TOP>3000<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3001<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3002<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3003<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the D-Stat Flowable product line increased to3004$1,441,000 for the year ended December 31, 2004 compared to $1,187,000 for the year ended December 31, 2003, a 21% increase.3005</FONT></TD>3006</TR>3007</TABLE>3008<BR>30093010<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3011<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3012<TR VALIGN=TOP>3013<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3014<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3015<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3016<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of the Specialty Catheter product line were $133,000 for3017the year ended December 31, 2004 compared to no sales for the year ended December 31, 2003. In September 2004 we launched the3018Langston dual lumen pigtail catheter. </FONT></TD>3019</TR>3020</TABLE>3021<BR>30223023<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3024<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3025<TR VALIGN=TOP>3026<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3027<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>3028<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3029<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales of Other Products were $323,000 for the year ended3030December 31, 2004 compared to $243,000 for the year ended December 31, 2003. The increase in Other Products was due to increased3031freight revenue, which is the result of increased shipments. </FONT></TD>3032</TR>3033</TABLE>3034<BR>30353036<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3037<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Gross profit as a percentage3038of net sales increased to 70% for the year ended December 31, 2004 from 61% for the year ended December 31, 2003. The selling mix3039changed in 2004 to the higher margin products such as our D-Stat Dry, which had gross margins greater than 80%, and our Pronto,3040which had gross margins in excess of 75%. </FONT></P>30413042<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3043<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Research and development3044expenses decreased 7% to $3,401,000 for the year ended December 31, 2004 from $3,671,000 for the year ended December 31, 2003. The3045decrease was related to less outside project spending in 2004 compared to 2003. </FONT></P>30463047<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3048<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Clinical and regulatory3049expenses increased 24% to $1,906,000 for the year ended December 31, 2004 from $1,536,000 for the year ended December 31, 2003.3050The increase was the result of increased clinical study activity, increased FDA fees and increased number of employees compared to30512003. During 2004 our clinical studies consisted of the “Pocket Protector” study for a new indication of our D-Stat3052Flowable product and the D-Stat Dry study to obtain clinical data to support growing sales of the D-Stat Dry. Clinical and3053regulatory expenses fluctuate due to the timing of clinical and marketing studies. </FONT></P>30543055<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3056<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales and marketing expenses3057increased 18% to $11,360,000 for the year ended December 31, 2004 from $9,646,000 for the year ended December 31, 2003. The3058increase in sales and marketing expenses is the direct result of our increase in our direct sales force to 57 employees at the end3059of 2004 compared to 47 as of December 31, 2003. </FONT></P>30603061<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3062<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> General and administrative3063expenses increased 10% to $2,138,000 for the year ended December 31, 2004 from $1,942,000 for the year ended December 31, 2003.3064The increase was primarily the result of higher legal fees relating to the Diomed litigation (see “Legal Proceedings” in3065Item 3 of Part I of this Form 10-K) along with higher business insurance in 2004 compared to 2003. </FONT></P>30663067<BR>3068<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27 </FONT></P>3069<HR SIZE=3 COLOR=GRAY NOSHADE>3070<!-- *************************************************************************** -->3071<!-- MARKER PAGE="sheet: 0; page: 0" -->3072<BR>307330743075<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3076<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification3077project expenses were $210,000 for the year ended December 31, 2004 compared to no expenses for the year ended December 31, 2003.3078</FONT></P>30793080<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3081<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Amortization of purchased3082technology was $218,000 for the year ended December 31, 2004 and $217,000 for the year ended December 31, 2003. The amortization3083resulted from our acquisition of the Acolysis assets from the secured creditors of Angiosonics, Inc. </FONT></P>30843085<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3086<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Interest income decreased to3087$68,000 for the year ended December 31, 2004 from $150,000 for the year ended December 31, 2003 primarily as a result of lower3088interest rates and lower cash balances. </FONT></P>30893090<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3091<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income Taxes </FONT></H1>30923093<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3094<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have not generated any3095fiscal year pre-tax income to date and therefore have not paid any federal income taxes since our inception in December 1996. No3096provision or benefit for federal and state income taxes has been recorded for net operating losses incurred in any period since3097our inception. </FONT></P>30983099<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3100<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> As of December 31, 2005, we3101had approximately $58.2 million of federal net operating loss carryforwards available to offset future taxable income which begin3102to expire in the year 2013. As of December 31, 2005, we also had federal and state research and development tax credit3103carryforwards of approximately $2.1 million which begin to expire in the year 2013. As of December 31, 2005, we also had a foreign3104tax loss carryforward of approximately $2.5 million, which does not expire. Under the United States Tax Reform Act of 1986, the3105amounts of and benefits from net operating loss carryforwards may be impaired or limited in certain circumstances, including3106significant changes in ownership interests. Future use of our existing net operating loss carryforwards may be restricted due to3107changes in ownership or from future tax legislation. We performed a section 382 “change in ownership” study during the3108third quarter 2005 on our federal net operating loss carryforward, and we concluded that we will have no limitations on the net3109operating loss carryforward. </FONT></P>31103111<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3112<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity and Capital Resources </FONT></H1>31133114<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3115<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have financed all of our3116operations since inception through the issuance of equity securities and, to a lesser extent, sales of our products. Through3117December 31, 2005, we have sold capital stock generating aggregate net proceeds of approximately $78 million. At December 31,31182005, we had $4,282,000 in cash and cash equivalents on-hand compared to $7,184,000 at December 31, 2004. </FONT></P>31193120<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3121<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the year ended3122December 31, 2005, we used $1,729,000 in cash as a result of operating activities, we incurred capital expenditures in the amount3123of $2,200,000, and we generated $1,108,000 in financing activities through the sale of common stock upon the exercise of3124outstanding stock options and issuances under employee stock plans. Our capital expenditures included equipment related to our3125thrombin qualification process, leasehold improvements and manufacturing equipment. Our operating cash usage was primarily the3126result of our planned build up of thrombin from our current supplier as well as our required purchase from our new supplier to3127qualify our new source of thrombin. </FONT></P>31283129<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3130<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We purchase our requirements3131for thrombin (a component in the Duett and in all of the D-Stat products) under a Purchase Agreement dated June 10, 1999 with a3132subsidiary of King Pharmaceuticals, Inc. The agreement provides for a fixed price, with adjustments based on the supplier’s3133manufacturing costs and the supplier’s annual percentage increase in the wholesale price of thrombin. The agreement expired3134on May 29, 2005. Prior to the expiration of the agreement, we issued purchase orders for approximately $3.5 million of thrombin to3135benefit from the pricing provisions of the agreement, which thrombin we expect to be delivered through the third quarter of 2006.3136We believe that these purchases will satisfy our thrombin requirements through at least the end of 2007. We have taken delivery of3137approximately $1.4 million of the $3.5 million of King thrombin through December 31, 2005. We have executed a supply agreement for3138a new source of thrombin, which we plan to fully qualify and bring through the regulatory process by the second quarter of 2007 at3139a cumulative cost of approximately $4.3 million in development and qualification expenditures, of which approximately $2.5 million3140of the expenses remain and are projected to be incurred in 2006. We have purchased $700,000 in capital expenditures out of our3141total planned capital expenditures of $800,000. We also have purchased $1.7 million of thrombin from our new supplier as of the3142end of 2005, which fulfills our thrombin purchase requirement. With the thrombin already purchased and our planned additional King3143thrombin purchases, we expect our inventory to peak at approximately $8.8 million at the end of the third quarter of 2006, and3144then decrease throughout the remainder of 2006 and 2007 as the King thrombin is used in our products. This investment, while3145substantial, is within our projected capital resources and we expect will allow us to introduce new thrombin-based products as3146well as control our long-term cost of thrombin. The failure by us to complete our thrombin qualification project on time and on3147budget may affect our gross margins on our Duett, D-Stat Flowable and D-Stat Dry products and could therefore seriously harm our3148business. </FONT></P>31493150<BR>3151<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28 </FONT></P>3152<HR SIZE=3 COLOR=GRAY NOSHADE>3153<!-- *************************************************************************** -->3154<!-- MARKER PAGE="sheet: 0; page: 0" -->3155<BR>315631573158<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3159<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We currently have a $73160million credit facility with Silicon Valley Bank. The $5 million revolving line of credit has a 12 month term, bears interest at3161the rate of prime plus 0.5% and is secured by a first security interest on all of our assets. The $2 million equipment line of3162credit has a 36 month term, bears interest at the rate of prime plus 1.5% and is secured by a first security interest on all of3163our assets. The credit facility includes two covenants: minimum tangible net worth of $11,000,000 through August 31, 2006,3164$12,000,000 through November 30, 2006, and $13,000,000 thereafter, and liquidity coverage of not less than 1.25 to 1.00. We were3165in compliance with these covenants at December 31, 2005. As of December 31, 2005, we had no outstanding balance on the $7 million3166credit facility and the availability of the $5 million revolving line of credit was $4.0 million. On January 6, 2006, we drew down3167$2 million of the equipment line. </FONT></P>31683169<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3170<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The following table3171summarizes our contractual cash commitments as of December 31, 2005: </FONT></P>317231733174<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>3175<TR VALIGN=Bottom>3176<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>3177<TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Payments Due by Period </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>31783179<TR VALIGN=Bottom>3180<TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Contractual Obligations </FONT><HR SIZE=1 COLOR=BLACK NOSHADE WIDTH=34%></TH><TH></TH>3181<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>3182<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Less than 1 year </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>3183<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1-3 years </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>3184<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3-5 years </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>3185<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>More then 5 years </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>31863187<TR VALIGN="BOTTOM" BGCOLOR="#D6F3E8">3188<TD WIDTH="32%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Facility Operating Leases</FONT></TD>3189<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3190<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3191<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 937,000</FONT></TD>3192<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3193<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 335,000</FONT></TD>3194<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3195<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 602,000</FONT></TD>3196<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3197<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> —</FONT></TD>3198<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3199<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> —</FONT></TD>3200<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3201<TR VALIGN=Bottom>3202<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sigma Contract 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>3203<TD ALIGN=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>3204<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3205<TD ALIGN=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>3206<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3207<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>3208<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3209<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>3210<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3211<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>3212<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3213<TR VALIGN="BOTTOM" BGCOLOR="#D6F3E8">3214<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>King Pharmaceutical Thrombin Purchases</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3215<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,113,000</FONT></TD>3216<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3217<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,113,000</FONT></TD>3218<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3219<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>3220<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3221<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>3222<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3223<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>3224<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3225<TR>3226<TD COLSPAN=3></TD>3227<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>3228<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>3229<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>3230<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>3231<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>3232<TR VALIGN=Bottom>3233<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>3234<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,180,000</FONT></TD>3235<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3236<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,578,000</FONT></TD>3237<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3238<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 602,000</FONT></TD>3239<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3240<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> —</FONT></TD>3241<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3242<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> —</FONT></TD>3243<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>3244<TR>3245<TD COLSPAN=3></TD>3246<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>3247<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>3248<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>3249<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>3250<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>3251</TABLE>3252325332543255<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3256<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We do not have any other3257significant cash commitments related to supply agreements, nor do we have any significant commitments for capital expenditures.3258</FONT></P>32593260<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3261<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We currently anticipate that3262we will continue to experience positive cash flow from our normal operating activities, excluding requirements associated with our3263new supply of thrombin. We currently believe that our working capital of $10,887,000 at December 31, 2005, our recent $2 million3264equipment advance and our anticipated cash from product sales will be sufficient to meet all of our operating and capital3265requirements, including our thrombin inventory purchases under our current thrombin supply contract and our costs associated with3266the new supply of thrombin. However, our actual liquidity and capital requirements will depend upon numerous factors, including3267the costs and timing of expansion of sales and marketing activities; the amount of revenues from sales of our existing and new3268products; the cost of maintaining, enforcing and defending patents and other intellectual property rights; competing technological3269and market developments; developments related to regulatory and third party reimbursement matters; the cost and progress of our3270research and development efforts; and other factors. </FONT></P>32713272<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3273<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> If cash generated from3274operations is insufficient to satisfy our cash needs, we may be required to raise additional funds. In the event that additional3275financing is needed, and depending on market conditions, we may seek to raise additional funds for working capital purposes3276through the sale of equity or debt securities. </FONT></P>3277327832793280<BR>3281<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29 </FONT></P>3282<HR SIZE=3 COLOR=GRAY NOSHADE>3283<!-- *************************************************************************** -->3284<!-- MARKER PAGE="sheet: 0; page: 0" -->3285<BR>3286328732883289<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3290<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical Accounting Policies </FONT></H1>32913292<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3293<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Management’s Discussion3294and Analysis of Financial Condition and Results of Operations addresses our financial statements, which have been prepared in3295accordance with accounting principles generally accepted in the United States. The preparation of our financial statements3296requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of3297contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during3298the reporting period. On an on-going basis, we evaluate these estimates and judgments. We base our estimates and judgments on3299historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of3300which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from3301other sources. Actual results may differ from these estimates under different assumptions or conditions. </FONT></P>33023303<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3304<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our accounting policies are3305described in Note 2 to the financial statements. We set forth below those material accounting policies that we believe are the3306most critical to an investor’s understanding of our financial results and condition, and require complex management judgment.3307</FONT></P>33083309<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->3310<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Inventory</I> </FONT> </P>33113312<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3313<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We state our inventory at the3314lower of cost (first-in, first-out method) or market. The estimated value of excess, obsolete and slow-moving inventory as well as3315inventory with a carrying value in excess of its net realizable value is established by us on a quarterly basis through review of3316inventory on hand and assessment of future demand, anticipated release of new products into the market, historical experience and3317product expiration. Our stated value of inventory could be materially different if demand for our products decreased because of3318competitive conditions or market acceptance, or if products become obsolete because of advancements in the industry. </FONT></P>33193320<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->3321<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Revenue Recognition</I> </FONT> </P>33223323<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3324<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We recognize revenue in3325accordance with generally accepted accounting principles as outlined in the SEC’s Staff Accounting Bulletin No. 1043326“Revenue Recognition,” which requires that four basic criteria be met before revenue can be recognized: (i) persuasive3327evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectibility is reasonably assured; and (iv)3328product delivery has occurred or services have been rendered. We recognize revenue as products are shipped based on FOB shipping3329point terms when title passes to customers. We negotiate credit terms on a customer-by-customer basis and products are shipped at3330an agreed upon price. All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.3331</FONT></P>33323333<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3334<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We analyze the rate of3335historical returns when evaluating the adequacy of the allowance for sales returns, which is included with the allowance for3336doubtful accounts on our balance sheet. At December 31, 2005, this reserve was $30,000 compared to $20,000 at December 31, 2004.3337If the historical data we use to calculate these estimates does not properly reflect future returns, revenue could be overstated.3338</FONT></P>33393340<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->3341<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Allowance for Doubtful Accounts</I> </FONT> </P>33423343<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3344<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We maintain allowances for3345doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance is3346regularly evaluated by us for adequacy by taking into consideration factors such as past experience, credit quality of the3347customer base, age of the receivable balances, both individually and in the aggregate, and current economic conditions that may3348affect a customer’s ability to pay. At December 31, 2005, this reserve was $110,000 compared to $160,000 at December 31,33492004. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make3350payments, additional allowances may be required. </FONT></P>3351335233533354<BR>3355<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30</FONT></P>3356<HR SIZE=3 COLOR=GRAY NOSHADE>3357<!-- *************************************************************************** -->3358<!-- MARKER PAGE="sheet: 0; page: 0" -->3359<BR>3360336133623363<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->3364<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Warranty Costs</I> </FONT> </P>33653366<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3367<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We provide a warranty for3368certain products against defects in material and workmanship for periods of up to 24 months. We record a liability for warranty3369claims at the time of sale. The amount of the liability is based on the amount we are charged by our original equipment3370manufacturer to cover the warranty period. The original equipment manufacturer includes a year warranty with each product sold to3371us. We record a liability for the uncovered warranty period offered to a customer, provided the warranty period offered exceeds3372the initial one year warranty period covered by the original equipment manufacturer. At December 31, 2005, this warranty provision3373was $50,000 compared to $33,000 at December 31, 2004. If the assumptions used in calculating the provision were to materially3374change, resulting in more defects than anticipated, an additional provision may be required. </FONT></P>33753376<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->3377<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Income Taxes</I> </FONT> </P>33783379<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3380<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The carrying value of our net3381deferred tax assets assumes that we will be able to generate sufficient taxable income in the United States and, to a lesser3382extent, Germany, based on estimates and assumptions. We record a valuation allowance to reduce the carrying value of our net3383deferred tax asset to the amount that is more likely than not to be realized. For the year ended December 31, 2005, we recorded a3384$27.1 million valuation allowance related to our net deferred tax assets of $27.1 million. In the event we were to determine that3385we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase net3386income in the period such determination is made. On a quarterly basis, we evaluate the realizability of our deferred tax assets3387and assess the requirement for a valuation allowance. </FONT></P>33883389<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->3390<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>New Accounting Pronouncements</I> </FONT> </P>33913392<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3393<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Financial Accounting3394Standards Board (FASB) has issued Statement No. 123R, <I>Share-Based Payment</I> (SFAS 123R), which requires companies to measure3395and recognize compensation expense for all stock-based payments at fair value. SFAS 123R is effective for us starting with3396the quarter ending March 31, 2006. Early adoption is encouraged and retroactive application of the provisions of SFAS 123R3397to the beginning of the fiscal year that includes the effective date is permitted, but not required. We estimate the expense3398associated with SFAS 123R will be in the range of $1.3 million to $1.7 million in 2006. See the Stock-Based Compensation3399discussion in Note 2 of our financial statements for information related to the pro forma effects on our reported net income3400(loss) and net income (loss) per common share of applying the fair value recognition provisions of the previous Statement of3401Financial Accounting Standards (SFAS) 123,3402<I>Accounting for Stock-Based Compensation</I>, to stock-based employee compensation. </FONT></P>34033404<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3405<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK </FONT></H1>34063407<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3408<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Financial instruments that3409potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivables.3410We maintain our accounts for cash and cash equivalents principally at one major bank and one investment firm in the United States.3411We have a formal written investment policy that restricts the placement of investments to issuers evaluated as creditworthy. We3412have not experienced any losses on our deposits of our cash and cash equivalents. </FONT></P>34133414<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3415<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> With respect to accounts3416receivable, we perform credit evaluations of our customers and do not require collateral. There have been no material losses on3417accounts receivables. </FONT></P>34183419<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3420<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In the United States and3421Germany, we sell our products directly to hospitals and clinics in the local currency. </FONT></P>34223423<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3424<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In all other international3425markets, we sell our products to independent distributors who, in turn, sell to medical clinics. We sell our product in these3426countries through independent distributors denominated in United States dollars. Loss, termination or ineffectiveness of3427distributors to effectively promote our product would have a material adverse effect on our financial condition and results of3428operations. </FONT></P>3429343034313432<BR>3433<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31 </FONT></P>3434<HR SIZE=3 COLOR=GRAY NOSHADE>3435<!-- *************************************************************************** -->3436<!-- MARKER PAGE="sheet: 0; page: 0" -->3437<BR>3438343934403441<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3442<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We do not believe our3443operations are currently subject to significant market risks for interest rates, foreign currency exchange rates, commodity prices3444or other relevant market price risks of a material nature. </FONT></P>34453446<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3447<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We did not have any3448indebtedness as of December 31, 2005. If we were to borrow from our revolving credit or equipment line, we would be exposed to3449changes in interest rates, see note 17. Advances under our revolving and equipment lines of credit bear interest at an annual rate3450indexed to prime. We will thus be exposed to interest rate risk with respect to these lines of credit to the extent that interest3451rates rise when there are amounts outstanding under these lines of credit. Under our current policies, we do not use interest rate3452derivative instruments to manage exposure to interest rate changes. </FONT></P>34533454<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3455<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA </FONT></H1>34563457<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3458<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Consolidated Financial3459Statements and Notes thereto required pursuant to this Item begin on page 39 of this Annual Report on Form 10-K. </FONT></P>34603461<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3462<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE </FONT></H1>34633464<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3465<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>34663467<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3468<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 9A. CONTROLS AND PROCEDURES </FONT></H1>34693470<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3471<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluation of Disclosure Controls and Procedures. </FONT></H1>34723473<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3474<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Under the supervision and3475with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the3476effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the3477Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of3478the period covered by this report, our disclosure controls and procedures were effective. </FONT></P>34793480<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3481<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes in Internal Controls. </FONT></H1>34823483<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3484<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> During the fiscal quarter3485ended December 31, 2005, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f)3486under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over3487financial reporting. </FONT></P>34883489<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3490<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management’s Report on Internal Control Over Financial3491Reporting. </FONT></H1>34923493<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3494<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our management is responsible3495for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act3496Rule 13a-15(f). Our internal control system was designed to provide reasonable assurance to our management and board of3497directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no3498matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only3499reasonable assurance with respect to financial statement preparation and presentation. </FONT></P>35003501<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3502<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Under the supervision and3503with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an3504evaluation of the effectiveness of our internal control over financial reporting based on the framework in <I>Internal Control3505— Integrated Framework </I>issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our3506evaluation under the framework in <I>Internal Control — Integrated Framework</I>, our management concluded that our internal3507control over financial reporting was effective as of December 31, 2005. </FONT></P>3508350935103511<BR>3512<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32 </FONT></P>3513<HR SIZE=3 COLOR=GRAY NOSHADE>3514<!-- *************************************************************************** -->3515<!-- MARKER PAGE="sheet: 0; page: 0" -->3516<BR>3517351835193520<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3521<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our management’s3522assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by3523Virchow, Krause & Company, LLP, an independent registered public accounting firm, as stated in their report which is included3524herein on page 43. </FONT></P>35253526<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3527<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 9B. OTHER INFORMATION </FONT></H1>35283529<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3530<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> No information was required3531to be disclosed in a report on Form 8-K in the fourth quarter that was not so disclosed. </FONT></P>3532353335343535<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>3536<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33 </FONT></P>3537<HR SIZE=3 COLOR=GRAY NOSHADE>3538<!-- *************************************************************************** -->3539<!-- MARKER PAGE="sheet: 0; page: 0" -->3540<BR>3541354235433544<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->3545<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART III </FONT></H1>35463547<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3548<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT </FONT></H1>35493550<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3551<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3552reference to the Sections under the headings “Election of Directors,” “Committees of the Board of Directors”3553and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Proxy Statement for our Annual Meeting of3554Shareholders to be filed with the Securities and Exchange Commission within 120 days of the close of the year ended December 31,35552005. </FONT></P>35563557<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3558<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> See Item 1 of Part I hereof3559for information regarding our executive officers. </FONT></P>35603561<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3562<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We have adopted a code of3563ethics that applies to all of our directors, officers (including our chief executive officer, chief financial officer, chief3564accounting officer, and any person performing similar functions) and employees. We have made our Code of Ethics available by3565filing it as Exhibit 14 with our 2003 Annual Report on Form 10-K. </FONT></P>35663567<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3568<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 11. EXECUTIVE COMPENSATION </FONT></H1>35693570<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3571<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3572reference to the Sections under the headings “Director Compensation,” “Employment Agreements” and3573“Executive Compensation and Other Information” contained in the Proxy Statement for our Annual Meeting of Shareholders3574to be filed with the Securities and Exchange Commission within 120 days of the close of the year ended December 31, 2005.3575</FONT></P>35763577<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3578<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 12. SECURITY OWNERSHIP OF CERTAIN3579BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS </FONT></H1>35803581<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3582<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3583reference to the Section under the heading “Security Ownership of Certain Beneficial Owners and Management” and3584“Equity Compensation Plan Information” contained in the Proxy Statement for our Annual Meeting of Shareholders to be3585filed with the Securities and Exchange Commission within 120 days of the close of the year ended December 31, 2005. </FONT></P>35863587<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3588<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS </FONT></H1>35893590<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3591<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None. </FONT></P>35923593<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3594<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES </FONT></H1>35953596<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->3597<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated herein by3598reference to the Section under the heading “Additional Information about our Independent Auditor” contained in the Proxy3599Statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the3600close of the year ended December 31, 2005. </FONT></P>3601360236033604<BR><BR><BR><BR><BR><BR>3605<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34 </FONT></P>3606<HR SIZE=3 COLOR=GRAY NOSHADE>3607<!-- *************************************************************************** -->3608<!-- MARKER PAGE="sheet: 0; page: 0" -->3609<BR>3610361136123613<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->3614<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART IV </FONT></H1>36153616<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->3617<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES </FONT></H1>36183619<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->3620<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3621<TR VALIGN=TOP>3622<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>3623<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3624<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Documents filed as part of this Report. </FONT></TD>3625</TR>3626</TABLE>3627<BR>36283629<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3630<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3631<TR VALIGN=TOP>3632<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3633<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>3634<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3635<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following financial statements are filed herewith in Item 8 in3636Part II. </FONT></TD>3637</TR>3638</TABLE>3639<BR>36403641<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3642<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3643<TR VALIGN=TOP>3644<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3645<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3646<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>3647<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3648<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reports of Independent Registered Public Accounting Firms3649</FONT></TD>3650</TR>3651</TABLE>3652<BR>36533654<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3655<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3656<TR VALIGN=TOP>3657<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3658<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3659<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>3660<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3661<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Balance Sheets </FONT></TD>3662</TR>3663</TABLE>3664<BR>36653666<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3667<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3668<TR VALIGN=TOP>3669<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3670<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3671<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) </FONT></TD>3672<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3673<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Operations </FONT></TD>3674</TR>3675</TABLE>3676<BR>36773678<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3679<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3680<TR VALIGN=TOP>3681<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3682<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3683<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv) </FONT></TD>3684<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3685<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Changes in Shareholders’ Equity3686</FONT></TD>3687</TR>3688</TABLE>3689<BR>36903691<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3692<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3693<TR VALIGN=TOP>3694<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3695<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3696<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v) </FONT></TD>3697<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3698<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Cash Flows </FONT></TD>3699</TR>3700</TABLE>3701<BR>37023703<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->3704<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3705<TR VALIGN=TOP>3706<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3707<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3708<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi) </FONT></TD>3709<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3710<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes to Consolidated Financial Statements </FONT></TD>3711</TR>3712</TABLE>3713<BR>37143715<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3716<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3717<TR VALIGN=TOP>3718<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3719<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>3720<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3721<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statement Schedules </FONT></TD>3722</TR>3723</TABLE>3724<BR>37253726<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->3727<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Schedule II – Valuation3728and Qualifying Accounts. Such schedule should be read in conjunction with the consolidated financial statements. All other3729supplemental schedules are omitted because of the absence of conditions under which they are required. </FONT></P>37303731<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3732<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3733<TR VALIGN=TOP>3734<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3735<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>3736<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3737<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits </FONT></TD>3738</TR>3739</TABLE>3740<BR>3741374237433744<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3745<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3746<TR VALIGN=TOP>3747<TD WIDTH="7%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit<BR><U>Number</U> </FONT></TD>3748<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3749<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3750<TD WIDTH="90%" VALIGN="BOTTOM"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Description</U> </FONT></TD>3751</TR>3752</TABLE>375337543755<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3756<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3757<TR VALIGN=TOP>3758<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3759<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.1 </FONT></TD>3760<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3761<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Articles of Incorporation of Vascular3762Solutions, Inc. (incorporated by reference to Exhibit 3.1 to Vascular Solutions’ Form 10-Q for the quarter ended September376330, 2000). </FONT></TD>3764</TR>3765</TABLE>376637673768<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3769<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3770<TR VALIGN=TOP>3771<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3772<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.2 </FONT></TD>3773<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3774<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bylaws of Vascular Solutions, Inc. (incorporated by reference to3775Exhibit 3.2 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3776</TR>3777</TABLE>377837793780<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3781<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3782<TR VALIGN=TOP>3783<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3784<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.1 </FONT></TD>3785<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3786<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Specimen of Common Stock certificate (incorporated by reference to3787Exhibit 4.1 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3788</TR>3789</TABLE>379037913792<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3793<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3794<TR VALIGN=TOP>3795<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3796<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.2 </FONT></TD>3797<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3798<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of warrant dated January 31 and February 14, 1997 issued to3799representatives of Miller, Johnson & Kuehn, Incorporated (incorporated by reference to Exhibit 4.2 of Vascular Solutions’3800Registration Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3801</TR>3802</TABLE>380338043805<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3806<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3807<TR VALIGN=TOP>3808<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3809<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.3 </FONT></TD>3810<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3811<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of warrant dated December 29, 1997 issued to representatives3812of Miller, Johnson & Kuehn, Incorporated (incorporated by reference to Exhibit 4.3 of Vascular Solutions’ Registration3813Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3814</TR>3815</TABLE>381638173818<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3819<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3820<TR VALIGN=TOP>3821<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3822<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.4 </FONT></TD>3823<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3824<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Investors’ Rights Agreement dated3825December 9, 1998, by and between Vascular Solutions, Inc. and the purchasers of Series A and Series B preferred stock3826(incorporated by reference to Exhibit 4.4 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)).3827</FONT></TD>3828</TR>3829</TABLE>383038313832<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3833<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3834<TR VALIGN=TOP>3835<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3836<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.1 </FONT></TD>3837<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3838<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lease Agreement dated August 30, 2002 by and between First3839Industrial, L.P. as Landlord and Vascular Solutions, Inc. as Tenant (incorporated by reference to Exhibit 10.1 of Vascular3840Solutions’ Form 10-Q for the quarter ended September 30, 2002). </FONT></TD>3841</TR>3842</TABLE>3843384438453846<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3847<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3848<TR VALIGN=TOP>3849<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3850<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.2 </FONT></TD>3851<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3852<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sublease Agreement dated March 31, 2005 by and between Insignia3853Systems, Inc. and Vascular Solutions, Inc. (incorporated by reference to Exhibit 10.1 of Vascular Solutions’ Form 10-Q for3854the quarter ended March 31, 2005). </FONT></TD>3855</TR>3856</TABLE>3857<BR>3858385938603861<BR>3862<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35 </FONT></P>3863<HR SIZE=3 COLOR=GRAY NOSHADE>3864<!-- *************************************************************************** -->3865<!-- MARKER PAGE="sheet: 0; page: 0" -->3866<BR>3867386838693870<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3871<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3872<TR VALIGN=TOP>3873<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3874<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.3 </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>Consent Agreement dated March 31, 2005 by and between IRET –3877Plymouth, LLC as Landlord, Insignia Systems, Inc. as Tenant and Vascular Solutions, Inc. as Subtenant (incorporated by reference3878to Exhibit 10.2 of Vascular Solutions’ Form 10-Q for the quarter ended March 31, 2005). </FONT></TD>3879</TR>3880</TABLE>3881388238833884<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3885<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3886<TR VALIGN=TOP>3887<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3888<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.4 </FONT></TD>3889<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3890<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mutual and General Release dated November 9, 1998 by and between3891Vascular Solutions, Inc., Dr. Gary Gershony and B. Braun Medical, Inc. (incorporated by reference to Exhibit 10.5 of Vascular3892Solutions’ Registration Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3893</TR>3894</TABLE>3895389638973898<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3899<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3900<TR VALIGN=TOP>3901<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3902<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.5 </FONT></TD>3903<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3904<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase and Sale Agreement dated September 17, 1998 by and3905between Vascular Solutions, Inc. and Davol Inc. (incorporated by reference to Exhibit 10.8 of Vascular Solutions’3906Registration Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3907</TR>3908</TABLE>3909391039113912<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3913<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3914<TR VALIGN=TOP>3915<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3916<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.6 </FONT></TD>3917<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3918<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase Agreement dated June 10, 1999 by and between GenTrac,3919Inc. and Vascular Solutions, Inc. (incorporated by reference to Exhibit 10.9 of Vascular Solutions’ Registration Statement on3920Form S-1 (File No. 333-84089)). </FONT></TD>3921</TR>3922</TABLE>3923392439253926<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3927<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3928<TR VALIGN=TOP>3929<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3930<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.7* </FONT></TD>3931<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3932<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Employment Agreement by and between Vascular Solutions,3933Inc. and each of its executive officers (incorporated by reference to Exhibit 10.5 of Vascular Solutions’ Form 10-Q for the3934quarter ended March 31, 2004). </FONT></TD>3935</TR>3936</TABLE>393739383939<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3940<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3941<TR VALIGN=TOP>3942<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3943<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.8 </FONT></TD>3944<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3945<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Distribution Agreement (incorporated by reference to3946Exhibit 10.12 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)). </FONT></TD>3947</TR>3948</TABLE>394939503951<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3952<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3953<TR VALIGN=TOP>3954<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3955<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.9* </FONT></TD>3956<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3957<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. Employee Stock Purchase Plan, as amended3958(incorporated by reference to Exhibit 10.14 to Vascular Solutions’ Form 10-K for the year ended December 31, 2000).3959</FONT></TD>3960</TR>3961</TABLE>396239633964<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3965<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3966<TR VALIGN=TOP>3967<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3968<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.10* </FONT></TD>3969<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3970<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option and Stock Award Plan as Amended December 9, 20053971(incorporated by reference to Exhibit 10.1 of Vascular Solutions’ Form 8-K dated December 9, 2005). </FONT></TD>3972</TR>3973</TABLE>397439753976<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3977<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3978<TR VALIGN=TOP>3979<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3980<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.11** </FONT></TD>3981<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3982<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supply Agreement dated October 18, 2004 by and between Vascular3983Solutions and Sigma-Aldrich Fine Chemicals, an operating division of Sigma-Aldrich, Inc (incorporated by reference to Exhibit398410.12 to Vascular Solutions’ Form 10-K for the year ended December 31, 2004). </FONT></TD>3985</TR>3986</TABLE>398739883989<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->3990<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>3991<TR VALIGN=TOP>3992<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3993<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.12** </FONT></TD>3994<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>3995<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Private Label Purchase Agreement dated September 22, 2003 by and3996between Vascular Solutions and MedArt Corporation (incorporated by reference to Exhibit 10.18 of Vascular Solutions’ Form399710-Q for the quarter ended September 30, 2003). </FONT></TD>3998</TR>3999</TABLE>400040014002<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4003<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4004<TR VALIGN=TOP>4005<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4006<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.13 </FONT></TD>4007<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4008<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loan and Security Agreement dated December 31, 2003 by and between4009Vascular Solutions and Silicon Valley Bank (incorporated by reference to Exhibit 10.14 of Vascular Solutions’ Form 10-K for4010the year ended December 31, 2003). </FONT></TD>4011</TR>4012</TABLE>401340144015<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4016<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4017<TR VALIGN=TOP>4018<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4019<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.14 </FONT></TD>4020<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4021<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment to Loan Agreement dated December 29, 2005 by and between4022Vascular Solutions and Silicon Valley Bank. </FONT></TD>4023</TR>4024</TABLE>402540264027<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4028<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4029<TR VALIGN=TOP>4030<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4031<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.15* </FONT></TD>4032<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4033<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Incentive Stock Option Agreement (Plan) (incorporated by4034reference to Exhibit 10.1 of Vascular Solutions’ Form 8-K dated September 22, 2004). </FONT></TD>4035</TR>4036</TABLE>403740384039<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4040<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4041<TR VALIGN=TOP>4042<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4043<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.16* </FONT></TD>4044<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4045<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Nonqualified Stock Option Agreement (Plan) (incorporated4046by reference to Exhibit 10.2 of Vascular Solutions’ Form 8-K dated September 22, 2004). </FONT></TD>4047</TR>4048</TABLE>404940504051<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4052<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4053<TR VALIGN=TOP>4054<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4055<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.17* </FONT></TD>4056<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4057<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Board of Directors Stock Option Agreement (Plan), as4058amended December 9, 2005 (incorporated by reference to Exhibit 10.2 of Vascular Solutions’ Form 8-K dated December 9, 2005).4059</FONT></TD>4060</TR>4061</TABLE>406240634064<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4065<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4066<TR VALIGN=TOP>4067<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4068<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.18* </FONT></TD>4069<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4070<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Restricted Stock Award Agreement (incorporated by4071reference to Exhibit 10.3 of Vascular Solutions’ Form 8-K dated December 9, 2005). </FONT></TD>4072</TR>4073</TABLE>407440754076<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4077<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4078<TR VALIGN=TOP>4079<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4080<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 14 </FONT></TD>4081<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4082<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Code of Ethics (incorporated by reference to Exhibit 14 of4083Vascular Solutions’ Form 10-K for the year ended December 31, 2003).4084</FONT></TD>4085</TR>4086</TABLE>408740884089<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4090<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4091<TR VALIGN=TOP>4092<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4093<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 21 </FONT></TD>4094<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4095<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>List of Subsidiaries </FONT></TD>4096</TR>4097</TABLE>409840994100<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4101<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4102<TR VALIGN=TOP>4103<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4104<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.1 </FONT></TD>4105<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4106<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Virchow, Krause & Company, LLP. </FONT></TD>4107</TR>4108</TABLE>410941104111<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4112<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4113<TR VALIGN=TOP>4114<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4115<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.2 </FONT></TD>4116<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4117<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Ernst & Young LLP. </FONT></TD>4118</TR>4119</TABLE>412041214122<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4123<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4124<TR VALIGN=TOP>4125<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4126<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24.1 </FONT></TD>4127<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4128<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Power of Attorney (included on signature page). </FONT></TD>4129</TR>4130</TABLE>413141324133<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4134<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4135<TR VALIGN=TOP>4136<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4137<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 31.1 </FONT></TD>4138<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4139<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Executive Officer pursuant to Section 3024140of the Sarbanes-Oxley Act of 2002. </FONT></TD>4141</TR>4142</TABLE>414341444145<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4146<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4147<TR VALIGN=TOP>4148<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4149<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 31.2 </FONT></TD>4150<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4151<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Financial Officer pursuant to Section 3024152of the Sarbanes-Oxley Act of 2002. </FONT></TD>4153</TR>4154</TABLE>4155415641574158<BR>4159<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36 </FONT></P>4160<HR SIZE=3 COLOR=GRAY NOSHADE>4161<!-- *************************************************************************** -->4162<!-- MARKER PAGE="sheet: 0; page: 0" -->4163<BR>4164416541664167<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4168<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4169<TR VALIGN=TOP>4170<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4171<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32.1 </FONT></TD>4172<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4173<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Executive Officer pursuant to Section 9064174of the Sarbanes-Oxley Act of 2002. </FONT></TD>4175</TR>4176</TABLE>417741784179<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->4180<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>4181<TR VALIGN=TOP>4182<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4183<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32.2 </FONT></TD>4184<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4185<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of Chief Financial Officer pursuant to Section 9064186of the Sarbanes-Oxley Act of 2002. </FONT></TD>4187</TR>4188</TABLE>4189<BR>419041914192<!-- MARKER FORMAT-SHEET="Cutoff Rule" FSL="Default" -->4193<P>_________________ </P>419441954196<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4197<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> * Management contract or compensatory plan or arrangement required to be4198filed as an Exhibit to this Form 10-K.4199<BR>** Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of these4200exhibits have been deleted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential4201treatment. </FONT></P>42024203420442054206<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>4207<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37 </FONT></P>4208<HR SIZE=3 COLOR=GRAY NOSHADE>4209<!-- *************************************************************************** -->4210<!-- MARKER PAGE="sheet: 0; page: 0" -->4211<BR>4212421342144215<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->4216<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>SIGNATURES </FONT></H1>42174218<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->4219<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant to the requirements4220of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its4221behalf by the undersigned, thereunto duly authorized, on the 31st day of January, 2006. </FONT></P>42224223<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>4224<TR VALIGN=Top>4225<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4226<TD colspan=2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VASCULAR SOLUTIONS, INC.</FONT></TD></TR>4227<TR><td> </td></tr>4228<TR VALIGN=Top>4229<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4230<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>4231<TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Howard Root </FONT></TD></TR>4232<TR>4233<TD></TD><td></td>4234<TD ALIGN=left><HR NOSHADE COLOR=#000000 width=65% SIZE=1></TD></TR>4235<TR VALIGN=Top>4236<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><td> </td>4237<TD nowrap ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root<BR>Chief Executive Officer and Director </FONT></TD></TR>4238</TABLE>4239<BR>42404241<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> KNOW ALL PERSONS BY THESE4242PRESENTS, that each person whose signature appears below constitutes and appoints Howard Root and James Hennen (with full power to4243act alone), as his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and4244in his name, place and stead, in any and all capacities, to sign any and all amendments to the Annual Report on Form 10-K of4245Vascular Solutions, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the4246Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform4247each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as4248he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or4249substitutes, lawfully do or cause to be done by virtue hereof. </FONT></P>42504251<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant to the requirements4252of the Securities Exchange Act of 1934, this report has been signed on the 31st day of January, 2006, by the following persons in4253the capacities indicated. </FONT></P>425442554256<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>4257<TR VALIGN=TOP>4258<TD WIDTH=35% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Signature</U> </FONT></TD>4259<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4260<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4261<TD WIDTH=30% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Title</U> </FONT></TD>4262<TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4263<TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4264<TR><TD> </TD></TR>42654266<TR VALIGN=top>4267<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Howard Root </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root </FONT></TD><TD> </TD><TD> </TD>4268<TD nowrap ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer and Director<BR><I>(principal executive officer)</I></FONT> </TD></TR>4269<TR><TD> </TD></TR>42704271<TR VALIGN=top>4272<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ James Hennen </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen </FONT></TD><TD> </TD><TD> </TD>4273<TD nowrap ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President, Finance and Chief Financial Officer<BR><I>(principal financial officer)</I></FONT> </TD></TR>4274<TR><TD> </TD></TR>42754276<TR VALIGN=top>4277<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Timothy Slayton </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Timothy Slayton </FONT></TD><TD> </TD><TD> </TD>4278<TD nowrap ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Controller<BR><I>(principal accounting officer)</I></FONT> </TD></TR>4279<TR><TD> </TD></TR>42804281<TR VALIGN=top>4282<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Robert Paulson </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert Paulson </FONT></TD><TD> </TD><TD> </TD>4283<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director </FONT></TD></TR>4284<TR><TD> </TD></TR>42854286<TR VALIGN=top>4287<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Richard Nigon </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Richard Nigon </FONT></TD><TD> </TD><TD> </TD>4288<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director </FONT></TD></TR>4289<TR><TD> </TD></TR>4290<TR VALIGN=top>4291<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Michael Kopp </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael Kopp </FONT></TD><TD> </TD><TD> </TD>4292<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director </FONT></TD></TR>4293<TR><TD> </TD></TR>4294<TR VALIGN=top>4295<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Paul O’Connell </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Paul O’Connell </FONT></TD><TD> </TD><TD> </TD>4296<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director </FONT></TD></TR>4297<TR><TD> </TD></TR>42984299<TR VALIGN=top>4300<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ John Erb </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>John Erb </FONT></TD><TD> </TD><TD> </TD>4301<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director </FONT></TD></TR>4302<TR><TD> </TD></TR>43034304<TR VALIGN=top>4305<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Dr. Gary Dorfman </FONT><HR COLOR=BLACK SIZE=1 NOSHADE><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr. Gary Dorfman </FONT></TD><TD> </TD><TD> </TD>4306<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director </FONT></TD></TR>4307</TABLE>4308430943104311<BR>4312<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38 </FONT></P>4313<HR SIZE=3 COLOR=GRAY NOSHADE>4314<!-- *************************************************************************** -->4315<!-- MARKER PAGE="sheet: 0; page: 0" -->4316<BR>4317431843194320<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->4321<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SCHEDULE II<BR>4322VALUATION AND QUALIFYING ACCOUNTS<BR> YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 </FONT></H1>4323432443254326<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4327<TR VALIGN=Bottom>4328<TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Description </FONT><HR SIZE=1 COLOR=BLACK NOSHADE WIDTH=60%></TH> <TH></TH>4329<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<BR>Beginning of Year </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>4330<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additions Charged<BR>to Costs<BR>and Expenses </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>4331<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Less<BR>Deductions </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>4332<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<BR>End of Year </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>4333<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4334<TD WIDTH="43%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2005:</FONT></TD>4335<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4336<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4337<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>4338<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4339<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>4340<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4341<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>4342<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4343<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>4344<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4345<TR VALIGN=Bottom>4346<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>4347<TD ALIGN=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>4348<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4349<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,000</FONT></TD>4350<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4351<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 46,000</FONT></TD>4352<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> 30,000</FONT></TD>4354<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4355<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4356<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>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>160,000</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>(41,000</FONT></TD>4360<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4361<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000</FONT></TD>4362<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></TR>4365<TR>4366<TD COLSPAN=3></TD>4367<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4368<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4369<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4370<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4371<TR VALIGN=Bottom>4372<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>4373<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 180,000</FONT></TD>4374<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4375<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 15,000</FONT></TD>4376<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4377<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 55,000</FONT></TD>4378<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 140,000</FONT></TD>4380<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4381<TR>4382<TD COLSPAN=3></TD>4383<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4384<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4385<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4386<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>4387<TR><TD> </TD></TR>4388<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4389<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2004:</FONT></TD><TD COLSPAN=13 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4390<TR VALIGN=Bottom>4391<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales return allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4392<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,000</FONT></TD>4393<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4394<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,000</FONT></TD>4395<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4396<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,000</FONT></TD>4397<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4398<TD ALIGN=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>4399<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4400<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4401<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>4402<TD ALIGN=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>4403<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4404<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34,000</FONT></TD>4405<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4406<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,000</FONT></TD>4407<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4408<TD ALIGN=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>4409<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4410<TR>4411<TD COLSPAN=3></TD>4412<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4413<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4414<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4415<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4416<TR VALIGN=Bottom>4417<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>4418<TD ALIGN=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>4419<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4420<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 54,000</FONT></TD>4421<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4422<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 34,000</FONT></TD>4423<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4424<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 180,000</FONT></TD>4425<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4426<TR>4427<TD COLSPAN=3></TD>4428<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4429<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4430<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4431<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>4432<TR><TD> </TD></TR>4433<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4434<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED DECEMBER 31, 2003:</FONT></TD><TD COLSPAN=13 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4435<TR VALIGN=Bottom>4436<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sales return allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4437<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,000</FONT></TD>4438<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4439<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (13,000</FONT></TD>4440<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4441<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,000</FONT></TD>4442<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4443<TD ALIGN=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>4444<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4445<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4446<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>4447<TD ALIGN=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>4448<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4449<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>69,000</FONT></TD>4450<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4451<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,000</FONT></TD>4452<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4453<TD ALIGN=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>4454<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4455<TR>4456<TD COLSPAN=3></TD>4457<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4458<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4459<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4460<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4461<TR VALIGN=Bottom>4462<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>4463<TD ALIGN=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>4464<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4465<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 56,000</FONT></TD>4466<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4467<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,000</FONT></TD>4468<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4469<TD ALIGN=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>4470<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4471<TR>4472<TD COLSPAN=3></TD>4473<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4474<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4475<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4476<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>4477</TABLE>4478<BR>447944804481<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>4482<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39 </FONT></P>4483<HR SIZE=3 COLOR=GRAY NOSHADE>4484<!-- *************************************************************************** -->4485<!-- MARKER PAGE="sheet: 0; page: 0" -->4486<BR>4487448844894490<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4491<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent Registered Public Accounting Firm </FONT></P>4492<BR><BR>44934494<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4495<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders4496<BR>Vascular Solutions, Inc. </FONT></P><BR>44974498<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4499<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the accompanying consolidated balance sheets of Vascular4500Solutions, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of operations, changes in4501shareholders’ equity and cash flows for the years ended December 31, 2005 and 2004. These consolidated financial statements4502are the responsibility of the company’s management. Our responsibility is to express an opinion on these consolidated4503financial statements based on our audits. </FONT></P>45044505<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4506<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in accordance with the standards of the Public4507Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain4508reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes4509examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit4510also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the4511overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.4512</FONT></P>45134514<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4515<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the consolidated financial statements referred to above4516present fairly, in all material respects, the financial position of Vascular Solutions, Inc. as of December 31, 2005 and 2004 and4517the results of their operations and their cash flows for the years ended December 31, 2005 and 2004, in conformity with U.S.4518generally accepted accounting principles. </FONT></P>451945204521<P style="margin-left:450pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Virchow, Krause & Company, LLP </FONT></P>45224523<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota4524<BR>January 20, 2006 </FONT></P>4525452645274528<BR><BR><BR><BR><BR><BR>4529<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40 </FONT></P>4530<HR SIZE=3 COLOR=GRAY NOSHADE>4531<!-- *************************************************************************** -->4532<!-- MARKER PAGE="sheet: 0; page: 0" -->4533<BR>4534453545364537<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4538<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent Registered Public Accounting Firm </FONT></P>4539<BR><BR>45404541<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4542<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders4543<BR>Vascular Solutions, Inc. </FONT></P><BR>45444545<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4546<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the consolidated statements of operations, changes in4547shareholders’ equity, and cash flows for the year ended December 31, 2003. These financial statements are the responsibility4548of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.4549</FONT></P>45504551<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4552<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audit in accordance with the standards of the Public Company4553Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable4554assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the4555Company’s internal control over financial reporting. Our audit included consideration of internal control over financial4556reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of4557expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we4558express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the4559financial statements. An audit also includes assessing the accounting principles used and significant estimates made by4560management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable4561basis for our opinion. </FONT></P>45624563<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4564<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the financial statements referred to above present fairly, in4565all material respects, the consolidated results of operations and cash flows of Vascular Solutions, Inc. for the year ended4566December 31, 2003, in conformity with U.S. generally accepted accounting principles. </FONT></P>456745684569<P style="margin-left:450pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Ernst & Young LLP </FONT></P>45704571<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4572<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota4573<BR>January 16, 2004 </FONT></P>4574457545764577<BR><BR><BR><BR><BR><BR>4578<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41 </FONT></P>4579<HR SIZE=3 COLOR=GRAY NOSHADE>4580<!-- *************************************************************************** -->4581<!-- MARKER PAGE="sheet: 0; page: 0" -->4582<BR>4583458445854586<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4587<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent Registered Public Accounting Firm </FONT></P>4588<BR><BR>45894590<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4591<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders4592<BR>Vascular Solutions, Inc. </FONT></P><BR>45934594<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4595<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under date of January 20, 2006, we reported on the consolidated balance4596sheets of Vascular Solutions, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of operations,4597changes in shareholders’ equity, and cash flows for the years ended December 31, 2005 and 2004, as contained in the annual4598report on Form 10-K for the year ended December 31, 2005. In connection with our audits of the aforementioned consolidated4599financial statements, we have also audited the related financial statement schedule as listed in the accompanying index. This4600financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion4601on this financial statement schedule based on our audits. </FONT></P>460246034604<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4605<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, such financial statement schedule, when considered in4606relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the4607information set forth therein. </FONT></P>46084609<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4610<P style="margin-left:450pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Virchow, Krause & Company LLP </FONT></P>46114612<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4613<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota4614<BR>January 20, 2006 </FONT></P>4615461646174618<BR><BR><BR><BR><BR><BR>4619<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42 </FONT></P>4620<HR SIZE=3 COLOR=GRAY NOSHADE>4621<!-- *************************************************************************** -->4622<!-- MARKER PAGE="sheet: 0; page: 0" -->4623<BR>4624462546264627<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4628<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent Registered Public Accounting Firm </FONT></P>4629<BR><BR>46304631<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4632<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders4633<BR>Vascular Solutions, Inc. </FONT></P><BR>46344635<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4636<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited management’s assessment, included in the accompanying4637Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that Vascular Solutions, Inc.4638(the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on the4639criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the4640Treadway Commission (COSO). Vascular Solutions, Inc.‘s management is responsible for maintaining effective internal control4641over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our4642responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s4643internal control over financial reporting based on our audit. </FONT></P>46444645<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4646<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audit in accordance with standards of the Public Company4647Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable4648assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit4649included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing4650and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered4651necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinion. </FONT></P>46524653<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4654<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A company’s internal control over financial reporting is a process4655designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial4656statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control4657over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable4658detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable4659assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally4660accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with4661authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely4662detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the4663financial statements. </FONT></P>46644665<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4666<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because of its inherent limitations, internal control over financial4667reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are4668subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with4669the policies and procedures may deteriorate. </FONT></P>46704671<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4672<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, management’s assessment that Vascular Solutions, Inc.4673maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material4674respects, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring4675Organizations of the Treadway Commission (COSO). Also in our opinion, Vascular Solutions, Inc. maintained, in all material4676respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal4677Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).4678</FONT></P>46794680<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4681<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have also audited, in accordance with the standards of the Public Company4682Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Vascular Solutions, Inc. as of4683December 31, 2005 and 2004 and the related consolidated statements of operations, changes in shareholder’s equity and cash4684flows for the years ended December 31, 2005 and 2004, and our report dated January 20, 2006, expresses an unqualified opinion on4685those consolidated financial statements. </FONT></P>46864687<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->4688<P style="margin-left:450pt;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Virchow, Krause & Company, LLP </FONT></P>46894690<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->4691<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota4692<BR>January 20, 2006 </FONT></P>4693469446954696<BR>4697<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43 </FONT></P>4698<HR SIZE=3 COLOR=GRAY NOSHADE>4699<!-- *************************************************************************** -->4700<!-- MARKER PAGE="sheet: 0; page: 0" -->4701<BR>4702470347044705<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4706<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. </FONT></P>47074708<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4709<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Balance Sheets </FONT></P>471047114712<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4713<TR VALIGN=Bottom>4714<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>4715<TH COLSPAN="5" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>4716<TR VALIGN=Bottom>4717<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>4718<TH COLSPAN="2" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>4719<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>4720<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4721<TD WIDTH=63% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Assets</B> </FONT></TD>4722<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4723<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4724<TD WIDTH="1%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="10%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4725<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4726<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>4727<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4728<TR VALIGN=Bottom>4729<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>4730<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4731<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>4732<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,282,000</FONT></TD>4733<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4734<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,184,000</FONT></TD>4735<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4736<TR VALIGN=Bottom>4737<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts receivable, net of reserves of $140,000 and $180,000 at</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4738<TR VALIGN=Bottom>4739<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> December 31, 2005 and 2004, 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>4740<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,854,000</FONT></TD>4741<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4742<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,534,000</FONT></TD>4743<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4744<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4745<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>4746<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,962,000</FONT></TD>4747<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4748<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,659,000</FONT></TD>4749<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4750<TR VALIGN=Bottom>4751<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>4752<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>578,000</FONT></TD>4753<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4754<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>588,000</FONT></TD>4755<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4756<TR>4757<TD COLSPAN=3></TD>4758<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4759<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4760<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4761<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>4762<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,676,000</FONT></TD>4763<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4764<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,965,000</FONT></TD>4765<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4766<TR><TD> </TD></TR>4767<TR VALIGN=Bottom>4768<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>4769<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,955,000</FONT></TD>4770<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4771<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,374,000</FONT></TD>4772<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4773<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4774<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>4775<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>265,000</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>483,000</FONT></TD>4778<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4779<TR>4780<TD COLSPAN=3></TD>4781<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4782<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4783<TR VALIGN=Bottom>4784<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>4785<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,896,000</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,822,000</FONT></TD>4788<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4789<TR>4790<TD COLSPAN=3></TD>4791<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4792<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>4793<TR><TD> </TD></TR>4794<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4795<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liabilities and shareholders’ equity</B> </FONT></TD><TD COLSPAN=7 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4796<TR VALIGN=Bottom>4797<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4798<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4799<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4800<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,898,000</FONT></TD>4801<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4802<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 857,000</FONT></TD>4803<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4804<TR VALIGN=Bottom>4805<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>4806<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,196,000</FONT></TD>4807<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4808<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,612,000</FONT></TD>4809<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4810<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4811<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>4812<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,695,000</FONT></TD>4813<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4814<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>663,000</FONT></TD>4815<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4816<TR>4817<TD COLSPAN=3></TD>4818<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4819<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4820<TR VALIGN=Bottom>4821<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>4822<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,789,000</FONT></TD>4823<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4824<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,132,000</FONT></TD>4825<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4826<TR><TD> </TD></TR>4827<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4828<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commitments</FONT></TD><TD colspan=7 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4829<TR><TD> </TD></TR>4830<TR VALIGN=Bottom>4831<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders’ equity:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4832<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4833<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Common stock, $0.01 par value:</FONT></TD><TD COLSPAN=7 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4834<TR VALIGN=Bottom>4835<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>4836<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4837<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issued and outstanding shares - 14,642,225 - 2005; 14,350,937 - 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4838<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>147,000</FONT></TD>4839<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4840<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>144,000</FONT></TD>4841<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4842<TR VALIGN=Bottom>4843<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>4844<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>77,793,000</FONT></TD>4845<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4846<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>76,675,000</FONT></TD>4847<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4848<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4849<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>4850<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(42,000</FONT></TD>4851<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4852<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>101,000</FONT></TD>4853<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4854<TR VALIGN=Bottom>4855<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>4856<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(63,791,000</FONT></TD>4857<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>4858<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(63,230,000</FONT></TD>4859<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>4860<TR>4861<TD COLSPAN=3></TD>4862<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4863<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4864<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4865<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>4866<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,107,000</FONT></TD>4867<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4868<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,690,000</FONT></TD>4869<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4870<TR>4871<TD COLSPAN=3></TD>4872<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4873<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4874<TR VALIGN=Bottom>4875<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>4876<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,896,000</FONT></TD>4877<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4878<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,822,000</FONT></TD>4879<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4880<TR>4881<TD COLSPAN=3></TD>4882<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>4883<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>4884</TABLE>4885<BR>48864887<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>4888488948904891<BR>4892<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44 </FONT></P>4893<HR SIZE=3 COLOR=GRAY NOSHADE>4894<!-- *************************************************************************** -->4895<!-- MARKER PAGE="sheet: 0; page: 0" -->4896<BR>4897489848994900<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4901<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. </FONT></P>49024903<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->4904<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Operations </FONT></P>49054906490749084909<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>4910<TR VALIGN=Bottom>4911<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>4912<TH COLSPAN="8" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>4913<TR VALIGN=Bottom>4914<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>4915<TH COLSPAN="2" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH WIDTH="4%" STYLE="font-weight:bold;"></TH>4916<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>4917<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>4918<TR><TD> </TD></TR>4919<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4920<TD WIDTH=42% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>4921<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4922<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4923<TD WIDTH="1%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32,786,000</FONT></TD>4924<TD WIDTH="10%" ALIGN="LEFT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4925<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,414,000</FONT></TD>4926<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4927<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11,862,000</FONT></TD>4928<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4929<TR VALIGN=Bottom>4930<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>4931<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,386,000</FONT></TD>4932<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4933<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,757,000</FONT></TD>4934<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4935<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,628,000</FONT></TD>4936<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4937<TR>4938<TD COLSPAN=3></TD>4939<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>4940<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>4941<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>4942<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4943<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>4944<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,400,000</FONT></TD>4945<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4946<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,657,000</FONT></TD>4947<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4948<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,234,000</FONT></TD>4949<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4950<TR><TD> </TD></TR>4951<TR VALIGN=Bottom>4952<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>4953<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4954<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>4955<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,789,000</FONT></TD>4956<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4957<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,401,000</FONT></TD>4958<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4959<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,671,000</FONT></TD>4960<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4961<TR VALIGN=Bottom>4962<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>4963<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,006,000</FONT></TD>4964<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4965<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,906,000</FONT></TD>4966<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4967<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,536,000</FONT></TD>4968<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4969<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4970<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>4971<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,681,000</FONT></TD>4972<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4973<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,360,000</FONT></TD>4974<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4975<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,646,000</FONT></TD>4976<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4977<TR VALIGN=Bottom>4978<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>4979<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,810,000</FONT></TD>4980<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4981<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,138,000</FONT></TD>4982<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4983<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,942,000</FONT></TD>4984<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>4985<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">4986<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Thrombin qualification</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4987<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,620,000</FONT></TD>4988<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><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>210,000</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></TR>4993<TR VALIGN=Bottom>4994<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>4995<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218,000</FONT></TD>4996<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>4997<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218,000</FONT></TD>4998<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>217,000</FONT></TD>5000<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5001<TR>5002<TD COLSPAN=3></TD>5003<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5004<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5005<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5006<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5007<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>5008<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,124,000</FONT></TD>5009<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5010<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,233,000</FONT></TD>5011<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5012<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,012,000</FONT></TD>5013<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5014<TR>5015<TD COLSPAN=3></TD>5016<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5017<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5018<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5019<TR><TD> </TD></TR>5020<TR VALIGN=Bottom>5021<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>5022<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(724,000</FONT></TD>5023<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5024<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,576,000</FONT></TD>5025<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5026<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,778,000</FONT></TD>5027<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5028<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5029<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>5030<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>163,000</FONT></TD>5031<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5032<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68,000</FONT></TD>5033<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5034<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>5035<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5036<TR>5037<TD COLSPAN=3></TD>5038<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5039<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5040<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5041<TR><TD> </TD></TR>5042<TR VALIGN=Bottom>5043<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>5044<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (561,000</FONT></TD>5045<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5046<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,508,000</FONT></TD>5047<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5048<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628,000</FONT></TD>5049<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5050<TR>5051<TD COLSPAN=3></TD>5052<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5053<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>5054<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>5055<TR><TD> </TD></TR>5056<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5057<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss per common share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5058<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.04</FONT></TD>5059<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5060<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.25</FONT></TD>5061<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5062<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>5063<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5064<TR>5065<TD COLSPAN=3></TD>5066<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5067<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>5068<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>5069<TR><TD> </TD></TR>5070<TR VALIGN=Bottom>5071<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>5072<TR VALIGN=Bottom>5073<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>5074<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="12%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,515,524</FONT></TD>5075<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5076<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,952,278</FONT></TD>5077<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5078<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,858,765</FONT></TD>5079<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5080<TR>5081<TD COLSPAN=3></TD>5082<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5083<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>5084<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>5085</TABLE>5086<BR>50875088<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>5089509050915092<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>5093<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45 </FONT></P>5094<HR SIZE=3 COLOR=GRAY NOSHADE>5095<!-- *************************************************************************** -->5096<!-- MARKER PAGE="sheet: 0; page: 0" -->5097<BR>509850995100<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5101<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. </FONT></P>51025103<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5104<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Changes in Shareholders’ Equity </FONT></P>5105<BR>51065107<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>5108<TR VALIGN=Bottom>5109<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>5110<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Common Stock </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5111<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional<BR>Paid-In </FONT></TH><TH></TH>5112<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>5113<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated</FONT></TH><TH></TH>5114<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>5115<TR VALIGN=Bottom>5116<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>5117<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5118<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5119<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Capital </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5120<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Other </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5121<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deficit </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5122<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH></TR>51235124<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5125<TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2002</FONT></TD>5126<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5127<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5128<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>12,880,839</FONT></TD>5129<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5130<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 129,000</FONT></TD>5131<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5132<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 70,355,000</FONT></TD>5133<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5134<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (21,000</FONT></TD>5135<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5136<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (50,094,000</FONT></TD>5137<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5138<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 20,369,000</FONT></TD>5139<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5140<TR VALIGN=Bottom>5141<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>5142<TD ALIGN=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>5143<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5144<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,000</FONT></TD>5145<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5146<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82,000</FONT></TD>5147<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5148<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5149<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5150<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5151<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5152<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>83,000</FONT></TD>5153<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5154<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5155<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Issuance of common stock under the</FONT></TD><TD COLSPAN=19 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5156<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5157<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>5158<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>195,876</FONT></TD>5159<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5160<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,000</FONT></TD>5161<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5162<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>124,000</FONT></TD>5163<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5164<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5165<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5166<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5167<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5168<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>126,000</FONT></TD>5169<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5170<TR VALIGN=Bottom>5171<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>5172<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(153,400</FONT></TD>5173<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5174<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,000</FONT></TD>5175<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5176<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(138,000</FONT></TD>5177<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5178<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5179<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5180<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5181<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5182<TD ALIGN=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>5183<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5184<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5185<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>5186<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5187<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5188<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5189<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5190<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5191<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5192<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,000</FONT></TD>5193<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5194<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5195<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5196<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,000</FONT></TD>5197<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5198<TR VALIGN=Bottom>5199<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>5200<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5201<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>5202<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5203<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5204<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5205<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5206<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5207<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5208<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5209<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5210<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,628,000</FONT></TD>5211<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5212<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,628,000</FONT></TD>5213<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5214<TR VALIGN=Bottom>5215<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>5216<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5217<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5218<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5219<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5220<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5221<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5222<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,000</FONT></TD>5223<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5224<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5225<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5226<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,000</FONT></TD>5227<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5228<TR>5229<TD COLSPAN=3></TD>5230<TD COLSPAN=3></TD>5231<TD COLSPAN=3></TD>5232<TD COLSPAN=3></TD>5233<TD COLSPAN=3></TD>5234<TD COLSPAN=3></TD>5235<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>52365237<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5238<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>5239<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5240<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5241<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5242<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5243<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5244<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5245<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5246<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>(9,606,000</FONT></TD>5250<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>52515252<TR>5253<TD COLSPAN=3></TD>5254<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5255<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5256<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5257<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5258<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5259<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD></TR>5260<TR VALIGN=Bottom>5261<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>5262<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,989,170</FONT></TD>5263<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5264<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 130,000</FONT></TD>5265<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5266<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 70,423,000</FONT></TD>5267<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5268<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 42,000</FONT></TD>5269<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5270<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (59,722,000</FONT></TD>5271<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5272<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10,873,000</FONT></TD>5273<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5274<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5275<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>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>227,300</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>2,000</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>341,000</FONT></TD>5281<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5282<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5283<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>—</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>343,000</FONT></TD>5287<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5288<TR VALIGN=Bottom>5289<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>5290<TR VALIGN=Bottom>5291<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>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>245,567</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>3,000</FONT></TD>5295<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5296<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>273,000</FONT></TD>5297<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5298<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5299<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>—</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>276,000</FONT></TD>5303<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5304<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5305<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Sale of common stock in private</FONT></TD><TD colspan=19 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5306<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5307<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> placement at $6.75 per share in</FONT></TD><TD colspan=19 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5308<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5309<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> March 2004, net of offering costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>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>888,900</FONT></TD>5311<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5312<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,000</FONT></TD>5313<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>5,584,000</FONT></TD>5315<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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>—</FONT></TD>5317<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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>—</FONT></TD>5319<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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>5,593,000</FONT></TD>5321<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5322<TR VALIGN=Bottom>5323<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>5324<TR VALIGN=Bottom>5325<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>5326<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5327<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>54,000</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>(54,000</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>—</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></TR>5338<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5339<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>5340<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5341<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5342<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5343<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>12,000</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>12,000</FONT></TD>5351<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5352<TR VALIGN=Bottom>5353<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>5354<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5355<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>5356<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5357<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>(3,508,000</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>(3,508,000</FONT></TD>5367<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5368<TR VALIGN=Bottom>5369<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>5370<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5371<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5372<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5373<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5374<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5375<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5376<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>101,000</FONT></TD>5377<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5378<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5379<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>101,000</FONT></TD>5381<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5382<TR>5383<TD COLSPAN=3></TD>5384<TD COLSPAN=3></TD>5385<TD COLSPAN=3></TD>5386<TD COLSPAN=3></TD>5387<TD COLSPAN=3></TD>5388<TD COLSPAN=3></TD>5389<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5390<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5391<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>5392<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5393<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5394<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5395<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5396<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5397<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5398<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5399<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5400<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5401<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5402<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,407,000</FONT></TD>5403<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5404<TR>5405<TD COLSPAN=3></TD>5406<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5407<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5408<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5409<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5410<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5411<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD></TR>5412<TR VALIGN=Bottom>5413<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5414<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,350,937</FONT></TD>5415<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5416<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 144,000</FONT></TD>5417<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5418<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 76,675,000</FONT></TD>5419<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5420<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 101,000</FONT></TD>5421<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5422<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (63,230,000</FONT></TD>5423<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5424<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,690,000</FONT></TD>5425<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5426<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5427<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>5428<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>191,750</B> </FONT></TD>5429<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5430<TD ALIGN=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>2,000</B> </FONT></TD>5431<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5432<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>594,000</B> </FONT></TD>5433<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5434<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5435<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5436<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5437<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5438<TD ALIGN=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>596,000</B> </FONT></TD>5439<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5440<TR VALIGN=Bottom>5441<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>5442<TR VALIGN=Bottom>5443<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>5444<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>99,538</B> </FONT></TD>5445<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5446<TD ALIGN=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>1,000</B> </FONT></TD>5447<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5448<TD ALIGN=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>511,000</B> </FONT></TD>5449<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5450<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5451<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5452<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5453<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5454<TD ALIGN=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>512,000</B> </FONT></TD>5455<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5456<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5457<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Deferred compensation related to</FONT></TD><TD COLSPAN=19 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5458<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5459<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>5460<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5461<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5462<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5463<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5464<TD ALIGN=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>13,000</B> </FONT></TD>5465<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5466<TD ALIGN=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>(13,000</B> </FONT></TD>5467<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5468<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5469<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5470<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5471<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5472<TR VALIGN=Bottom>5473<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>5474<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5475<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5476<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5477<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5478<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5479<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5480<TD ALIGN=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>22,000</B> </FONT></TD>5481<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5482<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5483<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5484<TD ALIGN=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>22,000</B> </FONT></TD>5485<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5486<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5487<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Comprehensive loss:</FONT></TD><TD COLSPAN=19 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5488<TR VALIGN=Bottom>5489<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>5490<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5491<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5492<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5493<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5494<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5495<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5496<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5497<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5498<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(561,000</B> </FONT></TD>5499<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5500<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(561,000</B> </FONT></TD>5501<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>5502<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5503<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>5504<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5505<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5506<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5507<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5508<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5509<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5510<TD ALIGN=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>(152,000</B> </FONT></TD>5511<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5512<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5513<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5514<TD ALIGN=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>(152,000</B> </FONT></TD>5515<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>5516<TR>5517<TD COLSPAN=3></TD>5518<TD COLSPAN=3></TD>5519<TD COLSPAN=3></TD>5520<TD COLSPAN=3></TD>5521<TD COLSPAN=3></TD>5522<TD COLSPAN=3></TD>5523<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>55245525<TR VALIGN=Bottom>5526<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>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></FONT></TD>5528<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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></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></FONT></TD>5532<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5533<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5534<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></FONT></TD>5536<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </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"><B>(713,000</B> </FONT></TD>5538<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>5539<TR>5540<TD COLSPAN=3></TD>5541<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5542<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5543<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5544<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5545<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD>5546<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD> </TD></TR>5547<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5548<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5549<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>14,642,225</B> </FONT></TD>5550<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"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>147,000</B> </FONT></TD>5552<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5553<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>77,793,000</B> </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"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(42,000</B> </FONT></TD>5556<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5557<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(63,791,000</B> </FONT></TD>5558<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>5559<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>14,107,000</B> </FONT></TD>5560<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5561<TR>5562<TD COLSPAN=3></TD>5563<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD> </TD>5564<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD> </TD>5565<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD> </TD>5566<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD> </TD>5567<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD> </TD>5568<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD> </TD></TR>5569</TABLE>5570<BR>55715572<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes.</I> </FONT> </P>5573557455755576<BR>5577<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46 </FONT></P>5578<HR SIZE=3 COLOR=GRAY NOSHADE>5579<!-- *************************************************************************** -->5580<!-- MARKER PAGE="sheet: 0; page: 0" -->5581<BR>5582558355845585<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5586<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. </FONT></P>55875588<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->5589<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidated Statements of Cash Flows </FONT></P>55905591559255935594<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>5595<TR VALIGN=Bottom>5596<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>5597<TH COLSPAN="8" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH></TR>5598<TR VALIGN=Bottom>5599<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>5600<TH COLSPAN="2" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5601<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>5602<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH></TR>5603<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5604<TD WIDTH=48% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Operating activities</B> </FONT></TD>5605<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5606<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5607<TD WIDTH="1%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="10%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5608<TD WIDTH="7%" ALIGN="LEFT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5609<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5610<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5611<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>5612<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5613<TR VALIGN=Bottom>5614<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>5615<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (561,000</FONT></TD>5616<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5617<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,508,000</FONT></TD>5618<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5619<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628,000</FONT></TD>5620<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5621<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5622<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adjustments to reconcile net loss to net cash used</FONT></TD><TD COLSPAN=10 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5623<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5624<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> in operating activities:</FONT></TD><TD COLSPAN=10 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5625<TR VALIGN=Bottom>5626<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>5627<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>596,000</FONT></TD>5628<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5629<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>474,000</FONT></TD>5630<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>386,000</FONT></TD>5632<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5633<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5634<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>5635<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218,000</FONT></TD>5636<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5637<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>218,000</FONT></TD>5638<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>217,000</FONT></TD>5640<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5641<TR VALIGN=Bottom>5642<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>5643<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,000</FONT></TD>5644<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5645<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,000</FONT></TD>5646<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5647<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,000</FONT></TD>5648<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5649<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5650<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Change in 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>5651<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(40,000</FONT></TD>5652<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><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>20,000</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>30,000</FONT></TD>5656<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5657<TR VALIGN=Bottom>5658<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>5659<TR VALIGN=Bottom>5660<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>5661<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,304,000</FONT></TD>5662<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><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>(1,744,000</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>(483,000</FONT></TD>5666<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5667<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5668<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>5669<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,328,000</FONT></TD>5670<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5671<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(473,000</FONT></TD>5672<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5673<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,054,000</FONT></TD>5674<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5675<TR VALIGN=Bottom>5676<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>5677<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,000</FONT></TD>5678<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><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>(126,000</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>(135,000</FONT></TD>5682<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5683<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5684<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>5685<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,043,000</FONT></TD>5686<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><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>106,000</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>(20,000</FONT></TD>5690<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5691<TR VALIGN=Bottom>5692<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>5693<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>620,000</FONT></TD>5694<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5695<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>906,000</FONT></TD>5696<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5697<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>229,000</FONT></TD>5698<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5699<TR>5700<TD COLSPAN=3></TD>5701<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5702<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5703<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5704<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5705<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>5706<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,729,000</FONT></TD>5707<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5708<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,115,000</FONT></TD>5709<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5710<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,417,000</FONT></TD>5711<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5712<TR><TD> </TD></TR>5713<TR VALIGN=Bottom>5714<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><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>5715<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5716<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase of property and equipment, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5717<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,200,000</FONT></TD>5718<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5719<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(900,000</FONT></TD>5720<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5721<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(539,000</FONT></TD>5722<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5723<TR VALIGN=Bottom>5724<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>5725<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5726<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5727<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5728<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5729<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,695,000</FONT></TD>5730<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5731<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5732<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>5733<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5734<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5735<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,020,000</FONT></TD>5736<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5737<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,590,000</FONT></TD>5738<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5739<TR>5740<TD COLSPAN=3></TD>5741<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5742<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5743<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5744<TR VALIGN=Bottom>5745<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>5746<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,200,000</FONT></TD>5747<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5748<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,120,000</FONT></TD>5749<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5750<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,356,000</FONT></TD>5751<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5752<TR><TD> </TD></TR>5753<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5754<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Financing activities</B> </FONT></TD><TD COLSPAN=10 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5755<TR VALIGN=Bottom>5756<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>5757<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>596,000</FONT></TD>5758<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5759<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>343,000</FONT></TD>5760<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5761<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>83,000</FONT></TD>5762<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5763<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5764<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>5765<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>512,000</FONT></TD>5766<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5767<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,869,000</FONT></TD>5768<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5769<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>126,000</FONT></TD>5770<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5771<TR VALIGN=Bottom>5772<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>5773<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5774<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5775<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>5776<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5777<TD ALIGN=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>5778<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>5779<TR>5780<TD COLSPAN=3></TD>5781<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5782<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5783<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5784<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5785<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash provided 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>5786<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,108,000</FONT></TD>5787<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5788<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,212,000</FONT></TD>5789<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5790<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>69,000</FONT></TD>5791<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5792<TR><TD> </TD></TR>5793<TR VALIGN=Bottom>5794<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effect of exchange rate changes on 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>5795<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(81,000</FONT></TD>5796<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5797<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>102,000</FONT></TD>5798<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5799<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,000</FONT></TD>5800<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5801<TR>5802<TD COLSPAN=3></TD>5803<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5804<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5805<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5806<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5807<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>5808<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,902,000</FONT></TD>5809<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>5810<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,319,000</FONT></TD>5811<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5812<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,030,000</FONT></TD>5813<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5814<TR VALIGN=Bottom>5815<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>5816<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,184,000</FONT></TD>5817<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5818<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,865,000</FONT></TD>5819<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5820<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,835,000</FONT></TD>5821<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5822<TR>5823<TD COLSPAN=3></TD>5824<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5825<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>5826<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>5827<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">5828<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>5829<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" WIDTH="11%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,282,000</FONT></TD>5830<TD ALIGN="LEFT" WIDTH="4%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5831<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,184,000</FONT></TD>5832<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5833<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,865,000</FONT></TD>5834<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>5835<TR>5836<TD COLSPAN=3></TD>5837<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD WIDTH="4%" STYLE="font-weight:bold;"></TD>5838<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>5839<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>5840</TABLE>5841<BR>58425843<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes.</I> </FONT> </P>5844584558465847<BR><BR><BR><BR><BR><BR><BR>5848<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47 </FONT></P>5849<HR SIZE=3 COLOR=GRAY NOSHADE>5850<!-- *************************************************************************** -->5851<!-- MARKER PAGE="sheet: 0; page: 0" -->5852<BR>585358545855<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5856<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. Description of Business </FONT></H1>58575858<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5859<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, Inc. (the Company) is a medical device company focused on5860bringing solutions to interventional cardiologists and interventional radiologists. The Company’s current principle product5861lines consist of the following medical devices: </FONT></P>58625863<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5864<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5865<TR VALIGN=TOP>5866<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5867<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5868<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5869<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat Dry™ hemostatic bandage, a topical pad with a bandage5870used to control surface bleeding, </FONT></TD>5871</TR>5872</TABLE>58735874<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5875<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5876<TR VALIGN=TOP>5877<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5878<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5879<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5880<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pronto™ extraction catheter, a mechanical system for the5881removal of soft thrombus from arteries, </FONT></TD>5882</TR>5883</TABLE>58845885<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5886<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5887<TR VALIGN=TOP>5888<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5889<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5890<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5891<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vari-Lase® endovenous laser, a laser and procedure kit used5892for the treatment of varicose veins, </FONT></TD>5893</TR>5894</TABLE>58955896<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5897<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5898<TR VALIGN=TOP>5899<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5900<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5901<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5902<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Duett™ sealing device, used to seal the puncture site5903following catheterization procedures, </FONT></TD>5904</TR>5905</TABLE>59065907<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5908<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5909<TR VALIGN=TOP>5910<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5911<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5912<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5913<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D-Stat® Flowable hemostat, a thick, yet flowable, mixture used5914to control bleeding, </FONT></TD>5915</TR>5916</TABLE>59175918<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5919<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5920<TR VALIGN=TOP>5921<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5922<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5923<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5924<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ThrombiGel™ hemostatic foam, a unique gelatin/thrombin foam5925hemostat, </FONT></TD>5926</TR>5927</TABLE>59285929<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5930<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5931<TR VALIGN=TOP>5932<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5933<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5934<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5935<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Langston™ dual lumen catheters, used to measure intravascular5936pressure gradients, </FONT></TD>5937</TR>5938</TABLE>59395940<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5941<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5942<TR VALIGN=TOP>5943<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5944<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5945<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5946<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAX-Support™ abdominal retraction belt, used to allow femoral5947access in obese patients, and </FONT></TD>5948</TR>5949</TABLE>59505951<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->5952<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>5953<TR VALIGN=TOP>5954<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5955<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>• </FONT></TD>5956<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>5957<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acolysis® ultrasound (international only), a treatment for5958peripheral occlusive arterial disease. </FONT></TD>5959</TR>5960</TABLE>5961<BR>596259635964<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5965<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a vertically-integrated medical device company, the Company generates5966ideas and creates new interventional medical devices, and then delivers the products directly to the physician through a direct5967domestic sales force and an international distribution network. The Company was incorporated in the state of Minnesota in December59681996 and began operations in February 1997. </FONT></P>59695970<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->5971<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of Significant Accounting Policies </FONT></H1>59725973<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5974<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Basis of Consolidation</I> </FONT> </P>59755976<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5977<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated financial statements include the accounts of Vascular5978Solutions, Inc. and its wholly owned subsidiary, Vascular Solutions GmbH, after elimination of intercompany accounts and5979transactions. </FONT></P>59805981<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5982<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Segment Reporting</I> </FONT> </P>59835984<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5985<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A business segment is a distinguishable component of an enterprise that is5986engaged in providing an individual product or service or a group of related products or services and that is subject to risks and5987returns that are different from those of other business segments. The Company’s segments have similar economic5988characteristics and are similar in the nature of the products sold, type of customers, methods used to distribute the5989Company’s products and regulatory environment. Management believes that the Company meets the criteria for aggregating its5990operating segments into a single reporting segment. </FONT></P>59915992<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->5993<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Foreign Currency Translation and Transactions</I> </FONT> </P>59945995<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->5996<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, GmbH accounts for its transactions in its functional5997currency the Euro. Foreign assets and liabilities are translated into U.S. dollars using the year-end exchange rates. Equity is5998translated at average historical exchange rates. Results of operations are translated using the average exchange rates throughout5999the year. Translation gains or losses are accumulated as a separate component of shareholders’ equity. </FONT></P>60006001<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6002<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Comprehensive Loss</I> </FONT> </P>60036004<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6005<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of comprehensive loss are net loss and the effects of foreign6006currency translation adjustments. The accumulated other comprehensive income (loss) for the foreign currency translation6007adjustment at December 31, 2005 and 2004 was $(8,000) and $144,000, respectively. </FONT></P>6008600960106011<BR>6012<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48 </FONT></P>6013<HR SIZE=3 COLOR=GRAY NOSHADE>6014<!-- *************************************************************************** -->6015<!-- MARKER PAGE="sheet: 0; page: 0" -->6016<BR>601760186019<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6020<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of Significant Accounting Policies (Continued) </FONT></H1>60216022<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6023<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Fair Value of Financial Instruments</I> </FONT> </P>60246025<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6026<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The carrying amount for cash and cash equivalents, accounts receivable,6027accounts payable, and accrued expenses approximates fair value due to the immediate or short-term maturity of these financial6028instruments. </FONT></P>60296030<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6031<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Use of Estimates</I> </FONT> </P>60326033<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6034<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The preparation of financial statements in conformity with accounting6035principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts6036reported in the financial statements and accompanying notes. Actual results could differ from those estimates. </FONT></P>60376038<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6039<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Cash and Cash Equivalents</I> </FONT> </P>60406041<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6042<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company classifies all highly liquid investments with initial maturities6043of three months or less as cash equivalents. Cash equivalents consist of cash and money market funds and are stated at cost, which6044approximates market value. The Company deposits its cash in high quality financial institutions. The balances, at times may exceed6045federally insured limits. </FONT></P>60466047<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6048<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Credit risk and allowance for doubtful accounts</I> </FONT> </P>60496050<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6051<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company maintains allowances for doubtful accounts for estimated losses6052resulting from the inability of our customers to make required payments. This allowance is regularly evaluated by the Company for6053adequacy by taking into consideration factors such as past experience, credit quality of the customer base, age of the receivable6054balances, both individually and in the aggregate, and current economic conditions that may affect a customer’s ability to6055pay. Accounts receivable over 60 days past due are considered past due. The Company does not accrue interest on past due accounts6056receivable. Receivables are written off only after all collection attempts have failed and are based on individual credit6057evaluation and the specific circumstances of the customer. At December 31, 2005 and 2004, the allowance for doubtful accounts was6058$110,000 and $160,000, respectively. </FONT></P>60596060<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6061<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All product returns must be pre-approved and, if approved, customers are6062subject to a 20% restocking charge. The Company analyzes the rate of historical returns when evaluating the adequacy of the6063allowance for sales returns, which is included with the allowance for doubtful accounts on our balance sheet. At December 31, 20056064and 2004, the sales and return allowance was $30,000 and $20,000, respectively. </FONT></P>60656066<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6067<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts receivable are shown net of the combined total of the allowance for6068doubtful accounts and allowance for sales returns of $140,000 and $180,000 at December 31, 2005 and 2004, respectively.6069</FONT></P>60706071<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6072<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Inventories</I> </FONT> </P>60736074<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6075<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories are stated at the lower of cost (first-in, first-out method) or6076market. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.6077Inventories are comprised of the following at December 31: </FONT></P>607860796080<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>6081<TR VALIGN=Bottom>6082<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>6083<TH COLSPAN="2" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>6084<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH></TR>6085<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6086<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw materials</FONT></TD>6087<TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6088<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6089<TD WIDTH="1%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,965,000</FONT></TD>6090<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6091<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,379,000</FONT></TD>6092<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6093<TR VALIGN=Bottom>6094<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>6095<TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>834,000</FONT></TD>6096<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6097<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>221,000</FONT></TD>6098<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6099<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6100<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>6101<TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,163,000</FONT></TD>6102<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6103<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,059,000</FONT></TD>6104<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6105<TR>6106<TD COLSPAN=3></TD>6107<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6108<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6109<TR VALIGN=Bottom>6110<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6111<TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,962,000</FONT></TD>6112<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6113<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,659,000</FONT></TD>6114<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6115<TR>6116<TD COLSPAN=3></TD>6117<TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6118<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6119</TABLE>6120<BR>6121612261236124<BR>6125<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49 </FONT></P>6126<HR SIZE=3 COLOR=GRAY NOSHADE>6127<!-- *************************************************************************** -->6128<!-- MARKER PAGE="sheet: 0; page: 0" -->6129<BR>6130613161326133<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6134<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of Significant Accounting Policies (Continued) </FONT></H1>61356136<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6137<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Property and Equipment</I> </FONT> </P>61386139<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6140<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment are stated at cost. Depreciation is provided on a6141straight-line basis over the estimated useful lives of the assets as follows: </FONT></P>6142614361446145<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">6146<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6147<TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Manufacturing equipment</FONT></TD>6148<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1 to 7 years</FONT></TD></TR>6149<TR VALIGN="TOP">6150<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Office and computer equipment</FONT></TD>6151<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1 to 5 years</FONT></TD></TR>6152<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6153<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Furniture and fixtures</FONT></TD>6154<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3 to 5 years</FONT></TD></TR>6155<TR VALIGN="TOP">6156<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Leasehold improvements</FONT></TD>6157<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Remaining term of the lease</FONT></TD></TR>6158<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6159<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Research and development equipment</FONT></TD>6160<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3 to 7 years</FONT></TD></TR>6161</TABLE>6162<BR>616361646165<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Impairment of Long-Lived Assets</I> </FONT> </P>61666167<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company will record impairment losses on long-lived assets used in6168operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are6169less than the assets’ carrying amount. The amount of impairment loss recorded will be measured as the amount by which the6170carrying value of the assets exceeds the fair value of the assets. To date, the Company has determined that no impairment of6171long-lived assets exists. </FONT></P>61726173<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6174<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Revenue Recognition</I> </FONT> </P>61756176<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6177<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States and Germany, the Company sells its products directly to6178hospitals and clinics. Revenue is recognized in accordance with generally accepted accounting principles as outlined in the6179Security and Exchange Commission’s Staff Accounting Bulletin No. 104, <I>Revenue Recognition</I>, which requires that four6180basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed6181or determinable; (iii) collectibility is reasonably assured; and (iv) product delivery has occurred or services have been6182rendered. The Company recognizes revenue as products are shipped based on FOB shipping point terms when title passes to customers.6183The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed upon price. All product6184returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge. </FONT></P>61856186<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6187<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In all other international markets, the Company sells its products to6188international distributors which subsequently resell the products to hospitals and clinics. The Company has agreements with each6189of its distributors which provide that title and risk of loss pass to the distributor upon shipment of the products to the6190distributor. The Company warrants that its products are free from manufacturing defects at the time of shipment to the6191distributor. Revenue is recognized upon shipment of products to distributors following the receipt and acceptance of a6192distributor’s purchase order. Allowances are provided for estimated returns and warranty costs at the time of shipment.6193</FONT></P>61946195<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6196<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Shipping and handling costs</I> </FONT> </P>61976198<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6199<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with the Emerging Issues Task Force (EITF) issue 00-10,6200“Accounting for Shipping and Handling Fees and Costs,” the Company includes shipping and handling revenues in net sales6201and shipping and handling costs in cost of sales. </FONT></P>62026203<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6204<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Research and Development Costs</I> </FONT> </P>62056206<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6207<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All research and development costs are charged to operations as incurred.6208</FONT></P>6209621062116212<BR>6213<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50 </FONT></P>6214<HR SIZE=3 COLOR=GRAY NOSHADE>6215<!-- *************************************************************************** -->6216<!-- MARKER PAGE="sheet: 0; page: 0" -->6217<BR>6218621962206221<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6222<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of Significant Accounting Policies (Continued) </FONT></H1>62236224<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6225<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Warranty Costs</I> </FONT> </P>62266227<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6228<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain of the Company’s products are covered by warranties against6229defects in material and workmanship for periods of up to 24 months. The Company records a liability for warranty claims at the6230time of sale. The amount of the liability is based on the amount the Company is charged from their original equipment manufacturer6231to cover the warranty period. The original equipment manufacturer includes a year warranty with each product sold to the Company.6232The Company records a liability for the uncovered warranty period offered to a customer, provided the warranty period offered6233exceeds the initial one year warranty period covered by the original equipment manufacturer. </FONT></P>62346235<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6236<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warranty provisions and claims for the years ended December 31, 2005 and62372004, were as follows: </FONT></P>623862396240<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>6241<TR VALIGN=Bottom>6242<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH><TH></TH>6243<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH><TH></TH>6244<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR NOSHADE COLOR=#000000 SIZE=1></TH></TR>6245<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6246<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beginning balance</FONT></TD>6247<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6248<TD WIDTH=9% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6249<TD WIDTH="1%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="12%" ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,000</FONT></TD>6250<TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6251<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>6252<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6253<TR VALIGN=Bottom>6254<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warranty provisions</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6255<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,000</FONT></TD>6256<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6257<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,000</FONT></TD>6258<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6259<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6260<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warranty claims</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6261<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,000</FONT></TD>6262<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6263<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6264<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6265<TR>6266<TD COLSPAN=3></TD>6267<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6268<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6269<TR VALIGN=Bottom>6270<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ending balance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6271<TD ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT" STYLE="font-weight:bold;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 50,000</FONT></TD>6272<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6273<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,000</FONT></TD>6274<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6275<TR>6276<TD COLSPAN=3></TD>6277<TD COLSPAN="2" ALIGN="RIGHT" WIDTH="1%" STYLE="font-weight:bold;"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6278<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6279</TABLE>6280628162826283<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6284<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Stock-Based Compensation</I> </FONT> </P>62856286<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6287<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2005, the Company had a stock-based employee compensation6288plan, which is described more fully in Note 9. The Company accounts for the plan under the recognition and measurement principles6289of Accounting Principles Board (APB) Opinion No. 25, <I>Accounting for Stock Issued to Employees</I>, and related interpretations.6290No stock-based employee compensation cost is reflected in net loss, as all options granted under the plan had exercise prices6291equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net6292loss and net loss per share if the Company had applied the fair value recognition provisions of SFAS 123R to stock-based employee6293compensation. </FONT></P>629462956296<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6297<TR VALIGN=Bottom>6298<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6299<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Year Ended December 31 </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6300<TR VALIGN=Bottom>6301<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6302<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6303<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6304<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6305<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6306<TD WIDTH="47%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss, as reported</FONT></TD>6307<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6308<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6309<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> (561,000</B> </FONT></TD>6310<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6311<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (3,508,000</FONT></TD>6312<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6313<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (9,628,000</FONT></TD>6314<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6315<TR VALIGN=Bottom>6316<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>6317<TR VALIGN=Bottom>6318<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>6319<TR VALIGN=Bottom>6320<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>6321<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>(1,377,000</B> </FONT></TD>6322<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6323<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,231,000</FONT></TD>6324<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6325<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(573,000</FONT></TD>6326<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6327<TR>6328<TD COLSPAN=3></TD>6329<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6330<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6331<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6332<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6333<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>6334<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (1,938,000</B> </FONT></TD>6335<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6336<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (4,739,000</FONT></TD>6337<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6338<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (10,201,000</FONT></TD>6339<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6340<TR>6341<TD COLSPAN=3></TD>6342<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6343<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6344<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6345<TR><TD> </TD></TR>6346<TR VALIGN=Bottom>6347<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss per common share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6348<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6349<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Basic and diluted – as reported</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6350<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (0.04</B> </FONT></TD>6351<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6352<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.25</FONT></TD>6353<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6354<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.75</FONT></TD>6355<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6356<TR>6357<TD COLSPAN=3></TD>6358<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6359<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6360<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6361<TR VALIGN=Bottom>6362<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>6363<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> (0.13</B> </FONT></TD>6364<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6365<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.34</FONT></TD>6366<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>6367<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.79</FONT></TD>6368<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6369<TR>6370<TD COLSPAN=3></TD>6371<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6372<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6373<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6374</TABLE>6375<BR>63766377<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For purposes of calculating the above-required disclosure, the fair value of6378each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The fair value of the6379Company’s stock options was estimated assuming no expected dividends and the following weighted average assumptions:6380</FONT></P>638163826383<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6384<TR VALIGN=Bottom>6385<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6386<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6387<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6388<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6389<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6390<TD WIDTH="44%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life (years)</FONT></TD>6391<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6392<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6393<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5.50</B> </FONT></TD>6394<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6395<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>6.50</FONT></TD>6396<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6397<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.38</FONT></TD>6398<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6399<TR VALIGN=Bottom>6400<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>6401<TD ALIGN=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>58</B> </FONT></TD>6402<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>%</B> </FONT></TD>6403<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>94</FONT></TD>6404<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>6405<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>98</FONT></TD>6406<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>6407<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6408<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>6409<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4.34</B> </FONT></TD>6410<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>%</B> </FONT></TD>6411<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.85</FONT></TD>6412<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>6413<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.54</FONT></TD>6414<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>6415</TABLE>6416<BR>6417641864196420<BR>6421<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51 </FONT></P>6422<HR SIZE=3 COLOR=GRAY NOSHADE>6423<!-- *************************************************************************** -->6424<!-- MARKER PAGE="sheet: 0; page: 0" -->6425<BR>6426642764286429<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6430<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. Summary of Significant Accounting Policies (Continued) </FONT></H1>64316432<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6433<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The weighted average fair value of options granted with an exercise price6434equal to the deemed stock price on the date of grant during 2005, 2004 and 2003 was $5.64, $5.77 and $0.71, respectively.6435</FONT></P>64366437<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6438<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Income Taxes</I> </FONT> </P>64396440<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6441<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes are accounted for under the liability method. Deferred income6442taxes are provided for temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred6443tax assets are reduced by a valuation allowance to the extent that realization of the related deferred tax asset is not assured.6444</FONT></P>64456446<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6447<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Net Loss Per Common Share</I> </FONT> </P>64486449<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6450<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with SFAS No. 128, <I>Earnings Per Share</I>, basic net loss6451per common share is computed by dividing net loss by the weighted average common shares outstanding during the periods presented.6452Diluted net loss per common share is computed by dividing net loss by the weighted average common and potential dilutive common6453shares outstanding computed in accordance with the treasury stock method. For all periods presented, diluted loss per share is the6454same as basic loss per common share because the effect of outstanding options and warrants is antidilutive. </FONT></P>64556456<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6457<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Goodwill and Other Intangible Assets</I> </FONT> </P>64586459<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6460<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2002, the Company adopted SFAS No. 142, <I>Goodwill and Other6461Intangible Assets</I>. Goodwill is tested for impairment annually in the fourth quarter or more frequently if changes in6462circumstances or the occurrence of events suggest impairment exists. The Company has concluded that no impairment of goodwill6463exists as of December 31, 2005. </FONT></P>64646465<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6466<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other intangible assets consist of purchased technology. Purchased technology6467is amortized using the straight-line method over its estimated useful life of four years. The Company reviews intangible assets6468for impairment as changes in circumstances or the occurrence of events suggest the remaining value is not recoverable. </FONT></P>64696470<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6471<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>New Accounting Pronouncements</I> </FONT> </P>64726473<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6474<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Financial Accounting Standards Board (FASB) has issued Statement No.6475123R, <I>Share-Based Payment</I> (SFAS 123R), which requires companies to measure and recognize compensation expense for all6476stock-based payments at fair value. SFAS 123R is effective for the Company starting with the quarter ending March 31,64772006. Early adoption is encouraged and retroactive application of the provisions of SFAS 123R to the beginning of the fiscal6478year that includes the effective date is permitted, but not required. The Company estimates the expense associated with SFAS 123R6479will be in the range of $1.3 million to $1.7 million in 2006. See the Stock Based Compensation discussion above for6480information related to the pro forma effects on the Company’s reported net income (loss) and net income (loss) per common6481share of applying the fair value recognition provisions of the previous Statement of Financial Accounting Standards (SFAS) 123,6482<I>Accounting for Stock-Based Compensation</I>, to stock-based employee compensation. </FONT></P>64836484<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->6485<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Reclassification</I> </FONT> </P>64866487<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6488<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain 2004 and 2003 amounts have been reclassified to conform to the 20056489presentation. </FONT></P>6490649164926493<BR>6494<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52 </FONT></P>6495<HR SIZE=3 COLOR=GRAY NOSHADE>6496<!-- *************************************************************************** -->6497<!-- MARKER PAGE="sheet: 0; page: 0" -->6498<BR>649965006501<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. Goodwill and Other Intangible Assets </FONT></H1>65026503<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6504<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed in Note 2 above, the Company has adopted SFAS No. 141 and6505determined that the developed technology the Company acquired from Angiosonics, Inc. in April 2002 would be amortized over its6506useful life of four years. The goodwill acquired will not be amortized. The Company expects the future annual amortization expense6507for its acquired purchased development to be approximately $72,000 in 2006. </FONT></P>65086509<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6510<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balances of acquired intangible assets as of December 31, 2005 were as6511follows: </FONT></P>651265136514<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6515<TR VALIGN=Bottom>6516<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6517<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Carrying<BR>Amount </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6518<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>Amortization </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6519<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6520<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6521<TD WIDTH="41%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortizing intangibles:</FONT></TD>6522<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6523<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6524<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>6525<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6526<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>6527<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6528<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>6529<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6530<TR VALIGN=Bottom>6531<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>6532<TD ALIGN=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>6533<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6534<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 798,000</FONT></TD>6535<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6536<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 72,000</FONT></TD>6537<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6538<TR><TD> </TD></TR>6539<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6540<TD colspan=12 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-amortizing intangibles:</FONT></TD></TR>6541<TR VALIGN=Bottom>6542<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>6543<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>193,000</FONT></TD>6544<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6545<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6546<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6547<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>193,000</FONT></TD>6548<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6549<TR>6550<TD COLSPAN=3></TD>6551<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6552<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6553<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6554<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6555<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6556<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,063,000</FONT></TD>6557<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6558<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 798,000</FONT></TD>6559<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6560<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 265,000</FONT></TD>6561<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6562<TR>6563<TD COLSPAN=3></TD>6564<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6565<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6566<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6567</TABLE>6568<BR>65696570<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balances of acquired intangible assets as of December 31, 2004 were as6571follows: </FONT></P>657265736574<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6575<TR VALIGN=Bottom>6576<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6577<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Carrying<BR>Amount </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6578<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>Amortization </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6579<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6580<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6581<TD WIDTH="41%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortizing intangibles:</FONT></TD>6582<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6583<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6584<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>6585<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6586<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>6587<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6588<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>6589<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6590<TR VALIGN=Bottom>6591<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>6592<TD ALIGN=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>6593<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6594<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 580,000</FONT></TD>6595<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6596<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 290,000</FONT></TD>6597<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6598<TR><TD> </TD></TR>6599<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6600<TD colspan=12 ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-amortizing intangibles:</FONT></TD></TR>6601<TR VALIGN=Bottom>6602<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>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>193,000</FONT></TD>6604<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6605<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6606<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>193,000</FONT></TD>6608<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6609<TR>6610<TD COLSPAN=3></TD>6611<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6612<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6613<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6614<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6615<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6616<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,063,000</FONT></TD>6617<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6618<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 580,000</FONT></TD>6619<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6620<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 483,000</FONT></TD>6621<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6622<TR>6623<TD COLSPAN=3></TD>6624<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6625<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6626<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6627</TABLE>6628<BR>66296630<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. Property and Equipment </FONT></H1>66316632<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6633<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment consists of the following at December 31: </FONT></P>663466356636<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6637<TR VALIGN=Bottom>6638<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6639<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6640<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6641<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6642<TD WIDTH="59%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment:</FONT></TD>6643<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6644<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6645<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>6646<TD WIDTH="9%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6647<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>6648<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6649<TR VALIGN=Bottom>6650<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>6651<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> 3,083,000</B> </FONT></TD>6652<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6653<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,565,000</FONT></TD>6654<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6655<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6656<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>6657<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>1,153,000</B> </FONT></TD>6658<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6659<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>923,000</FONT></TD>6660<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6661<TR VALIGN=Bottom>6662<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>6663<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>303,000</B> </FONT></TD>6664<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6665<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>242,000</FONT></TD>6666<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6667<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6668<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>6669<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>462,000</B> </FONT></TD>6670<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6671<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>206,000</FONT></TD>6672<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6673<TR VALIGN=Bottom>6674<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>6675<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>367,000</B> </FONT></TD>6676<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6677<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>328,000</FONT></TD>6678<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6679<TR>6680<TD COLSPAN=3></TD>6681<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6682<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6683<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6684<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6685<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5,368,000</B> </FONT></TD>6686<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6687<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,264,000</FONT></TD>6688<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6689<TR VALIGN=Bottom>6690<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>6691<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>(2,413,000</B> </FONT></TD>6692<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>6693<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,890,000</FONT></TD>6694<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6695<TR>6696<TD COLSPAN=3></TD>6697<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6698<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6699<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6700<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>6701<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> 2,955,000</B> </FONT></TD>6702<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6703<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,374,000</FONT></TD>6704<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6705<TR>6706<TD COLSPAN=3></TD>6707<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6708<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6709</TABLE>6710<BR>671167126713<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6714<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. Private Placement </FONT></H1>67156716<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6717<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 9, 2004, the Company sold 888,900 shares of our common stock at an6718offering price of $6.75 per share for net proceeds of $5,593,000 in a private placement. </FONT></P>6719672067216722<BR>6723<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53 </FONT></P>6724<HR SIZE=3 COLOR=GRAY NOSHADE>6725<!-- *************************************************************************** -->6726<!-- MARKER PAGE="sheet: 0; page: 0" -->6727<BR>672867296730<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6731<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. Lines of Credit </FONT></H1>67326733<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6734<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 29, 2005, the Company modified and extended the secured6735asset-based loan and security agreement dated December 31, 2003. In addition to the operating line of credit, the Company added an6736equipment line of credit. The operating line of credit is a one-year, $5,000,000 facility with availability based primarily on6737eligible customer receivables and inventory. The interest rate is prime plus 0.5%. As of December 31, 2005, the Company had no6738outstanding loan balance against the facility. Based on the Company’s eligible customer receivables, inventory and cash6739balances, $4,001,000 was available for borrowing as of December 31, 2005. The operating line of credit also requires a one time6740facility fee of $25,000. </FONT></P>67416742<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6743<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The equipment line of credit is a three-year, $2,000,000 facility with an6744interest rate of prime plus 1.5%. As of December 31, 2005, the Company had no outstanding loan balance against the facility. As6745part of the equipment line of credit agreement, the Company must borrow a minimum of $1,000,000 on or before January 6, 2006. See6746additional discussion in Note 17 below. </FONT></P>67476748<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6749<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>These lines of credit include two covenants: minimum tangible net worth of6750$11,000,000 through August 31, 2006, $12,000,000 through November 30, 2006, and $13,000,000 thereafter, and liquidity coverage of6751not less than 1.25 to 1.00. The Company was in compliance with these covenants at December 31, 2005. </FONT></P>67526753<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6754<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. Leases </FONT></H1>67556756<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6757<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company leases a 43,000 square-foot office and manufacturing facility6758under an operating lease agreement, which expires in September 2008. Rent expense related to the operating lease was approximately6759$402,000, $343,000 and $336,000 for the years ended December 31, 2005, 2004, and 2003, respectively. </FONT></P>67606761<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6762<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future minimum lease commitments under this operating lease as of6763December 31, 2005 are as follows: </FONT></P>67646765<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=40%>6766<TR VALIGN=Bottom>6767<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6768<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>6769<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6770<TD WIDTH="49%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD>6771<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6772<TD WIDTH="19%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6773<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="18%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 335,000</FONT></TD>6774<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6775<TR VALIGN=Bottom>6776<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>6777<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>344,000</FONT></TD>6778<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6779<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">6780<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>6781<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>258,000</FONT></TD>6782<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6783<TR>6784<TD COLSPAN=3></TD>6785<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6786<TR VALIGN=Bottom>6787<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6788<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 937,000</FONT></TD>6789<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6790<TR>6791<TD COLSPAN=3></TD>6792<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6793</TABLE>6794<BR>679567966797<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. Income Taxes </FONT></H1>67986799<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->6800<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> At December 31, 2005, the6801Company had net operating loss carryforwards of approximately $58,175,000 for federal income tax purposes that are available to6802offset future taxable income and begin to expire in the year 2013. Included in the U.S. amount are approximately $2.2 million of6803deductions resulting from disqualifying dispositions of stock options. When these deductions from disqualifying dispositions are6804realized for financial statement purposes they will not result in a reduction in income tax expense, rather the benefit will be6805recorded as additional paid-in-capital. At December 31, 2005, the Company also had federal and Minnesota research and development6806tax credit carryforwards of approximately $2,086,000, which begin to expire in the year 2013. At December 31, 2005, the Company6807has foreign tax loss carryforwards of approximately $2,467,000 that do not expire. No benefit has been recorded for any loss or6808credit carryforwards, and utilization in future years may be limited under Sections 382 and 383 of the Internal Revenue Code6809if significant ownership changes have occurred or from future tax legislation changes. The Company performed a section 382 study6810during the third quarter 2005 on their federal net operating loss carryforward and the Company concluded that they will have no6811limitations on the net operating loss carryforward. </FONT></P>6812681368146815<BR>6816<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54 </FONT></P>6817<HR SIZE=3 COLOR=GRAY NOSHADE>6818<!-- *************************************************************************** -->6819<!-- MARKER PAGE="sheet: 0; page: 0" -->6820<BR>682168226823<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->6824<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. Income Taxes (Continued) </FONT></H1>68256826<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->6827<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of the Company’s deferred tax assets and liabilities as6828of December 31, 2005 and 2004 are as follows: </FONT></P>68296830<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6831<TR VALIGN=Bottom>6832<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6833<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6834<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6835<TR VALIGN=Bottom>6836<TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred tax assets:</FONT></TD>6837<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6838<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6839<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>6840<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6841<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>6842<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6843<TR VALIGN=Bottom>6844<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>6845<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> 24,257,000</B> </FONT></TD>6846<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6847<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24,089,000</FONT></TD>6848<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6849<TR VALIGN=Bottom>6850<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>6851<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>2,086,000</B> </FONT></TD>6852<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6853<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,598,000</FONT></TD>6854<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6855<TR VALIGN=Bottom>6856<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>6857<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>249,000</B> </FONT></TD>6858<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6859<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>231,000</FONT></TD>6860<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6861<TR VALIGN=Bottom>6862<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>6863<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>210,000</B> </FONT></TD>6864<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6865<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>213,000</FONT></TD>6866<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6867<TR VALIGN=Bottom>6868<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>6869<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>180,000</B> </FONT></TD>6870<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6871<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>172,000</FONT></TD>6872<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6873<TR VALIGN=Bottom>6874<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>6875<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>102,000</B> </FONT></TD>6876<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6877<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>114,000</FONT></TD>6878<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6879<TR>6880<TD COLSPAN=3></TD>6881<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6882<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6883<TR VALIGN=Bottom>6884<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6885<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>27,084,000</B> </FONT></TD>6886<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6887<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,417,000</FONT></TD>6888<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6889<TR VALIGN=Bottom>6890<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>6891<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>(27,084,000</B> </FONT></TD>6892<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </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>(26,417,000</FONT></TD>6894<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6895<TR>6896<TD COLSPAN=3></TD>6897<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6898<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6899<TR VALIGN=Bottom>6900<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>6901<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> —</B> </FONT></TD>6902<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </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> —</FONT></TD>6904<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6905<TR>6906<TD COLSPAN=3></TD>6907<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6908<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6909</TABLE>6910<BR>69116912<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company records a valuation allowance to reduce the carrying value of the6913net deferred taxes to an amount that is more likely than not to be realized. The increase in the valuation allowance was $667,000,6914$2,196,000 and $4,150,000 for the years ending December 31, 2005, 2004 and 2003, respectively. </FONT></P>69156916<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reconciliation of the statutory federal income tax rate to the Company’s6917effective tax rate is as follows: </FONT></P>6918691969206921<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>6922<TR VALIGN=Bottom>6923<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>6924<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6925<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>6926<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>6927<TR VALIGN=Bottom>6928<TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax at statutory rate</FONT></TD>6929<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6930<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6931<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(34.0</B> </FONT></TD>6932<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)%</B> </FONT></TD>6933<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>(34.0</FONT></TD>6934<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)%</FONT></TD>6935<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>(34.0</FONT></TD>6936<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)%</FONT></TD></TR>6937<TR VALIGN=Bottom>6938<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>State income taxes, net of federal benefit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6939<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>(5.0</B> </FONT></TD>6940<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </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>(6.0</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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6.0</FONT></TD>6944<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>6945<TR VALIGN=Bottom>6946<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>6947<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>19.0</B> </FONT></TD>6948<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6949<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.0</FONT></TD>6950<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>6951<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.0</FONT></TD>6952<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6953<TR VALIGN=Bottom>6954<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>6955<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>20.0</B> </FONT></TD>6956<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>6957<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37.0</FONT></TD>6958<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> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39.0</FONT></TD>6960<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>6961<TR>6962<TD COLSPAN=3></TD>6963<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6964<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>6965<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>6966<TR VALIGN=Bottom>6967<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>6968<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>—</B> </FONT></TD>6969<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> %</B> </FONT></TD>6970<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6971<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> %</FONT></TD>6972<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>6973<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> %</FONT></TD></TR>6974<TR>6975<TD COLSPAN=3></TD>6976<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6977<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>6978<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>6979</TABLE>6980<BR>698169826983<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. Stock Options and Warrants </FONT></H1>69846985<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Stock Option Plan</I> </FONT> </P>69866987<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has a stock option and stock award plan (the Stock Option Plan)6988which provides for the granting of incentive stock options to employees and nonqualified stock options to employees, directors,6989and consultants. As of December 31, 2005, the Company had reserved 3,900,000 shares of common stock under the Stock Option6990Plan. Under the Stock Option Plan, incentive stock options must be granted at an exercise price not less than the fair market6991value of the Company’s common stock on the grant date. The exercise price of a nonqualified option granted under the Stock6992Option Plan must not be less than 50% of the fair market value of the Company’s common stock on the grant date. Prior to the6993initial public offering in July 2000, the Board of Directors determined the fair value of the common shares underlying options by6994assessing the business progress of the Company as well as the market conditions for medical device companies and other external6995factors. The options expire on the date determined by the Board of Directors but may not extend more than ten years from the grant6996date. The Stock Option Plan also permits the granting of stock appreciation rights, restricted stock, and other stock-based6997awards. The incentive stock options generally become exercisable over a four-year period and the nonqualified stock options6998generally become exercisable over a two-year period. Unexercised options are canceled 90 days after termination of employment and6999become available under the Stock Option Plan. </FONT></P>70007001<BR>7002<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55 </FONT></P>7003<HR SIZE=3 COLOR=GRAY NOSHADE>7004<!-- *************************************************************************** -->7005<!-- MARKER PAGE="sheet: 0; page: 0" -->7006<BR>700770087009<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7010<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. Stock Options and Warrants (Continued) </FONT></H1>70117012<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7013<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the third quarter of 2002, the Company offered to exchange for its current7014employees, other than the Chief Executive Officer, any outstanding options to purchase shares of the Company’s common stock7015under the Stock Option Plan with an exercise price of at least $3.00 per share for new options the Company would grant under the7016plan. The new options were granted on February 18, 2003, which was six months and two business days after the date the options7017were exchanged. The Company granted 429,000 new options under the Stock Option Plan at an exercise price of $0.84. The number of7018shares granted to each participating option holder was the number of shares subject to the eligible options tendered by such7019option holder. A stock option holder had to be employed by the Company through February 18, 2003 in order to be eligible to7020receive the new options. As a result of this exchange of options, 467,000 options with an average price of $6.80 were7021canceled. </FONT></P>70227023<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7024<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Option activity is summarized as follows: </FONT></P>702570267027<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=70%>7028<TR VALIGN=Bottom>7029<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7030<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares<BR>Available<BR>for Grant </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7031<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Plan Options<BR>Outstanding </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7032<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise<BR>Price </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7033<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted Average<BR>Exercise Price </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7034<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7035<TD WIDTH="35%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2002</FONT></TD>7036<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7037<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7038<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,214,000</FONT></TD>7039<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7040<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>901,000</FONT></TD>7041<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7042<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="15%" NOWRAP ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.81 - $16.50</FONT></TD>7043<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7044<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.94</FONT></TD>7045<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7046<TR VALIGN=Bottom>7047<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>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>500,000</FONT></TD>7049<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7050<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7051<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>—</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>—</FONT></TD>7055<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7056<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7057<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>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>(889,000</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>889,000</FONT></TD>7061<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7062<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - 5.74</FONT></TD>7063<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7064<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.89</FONT></TD>7065<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7066<TR VALIGN=Bottom>7067<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>7068<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7069<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7070<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(66,000</FONT></TD>7071<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7072<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - 2.70</FONT></TD>7073<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7074<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.25</FONT></TD>7075<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7076<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7077<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>7078<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>219,000</FONT></TD>7079<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7080<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(219,000</FONT></TD>7081<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7082<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.81 - 16.50</FONT></TD>7083<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7084<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.49</FONT></TD>7085<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7086<TR>7087<TD COLSPAN=3></TD>7088<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7089<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7090<TR VALIGN=Bottom>7091<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>7092<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,044,000</FONT></TD>7093<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7094<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,505,000</FONT></TD>7095<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7096<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - 12.00</FONT></TD>7097<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7098<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.50</FONT></TD>7099<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7100<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7101<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>7102<TD ALIGN="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>7103<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7104<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7105<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7106<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7107<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7108<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7109<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7110<TR VALIGN=Bottom>7111<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>7112<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(357,000</FONT></TD>7113<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7114<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>357,000</FONT></TD>7115<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7116<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.74 - 10.89</FONT></TD>7117<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7118<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.75</FONT></TD>7119<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7120<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7121<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>7122<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7123<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7124<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(167,000</FONT></TD>7125<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7126<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - 7.31</FONT></TD>7127<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7128<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.03</FONT></TD>7129<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7130<TR VALIGN=Bottom>7131<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>7132<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50,000</FONT></TD>7133<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7134<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(50,000</FONT></TD>7135<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7136<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84 - 7.48</FONT></TD>7137<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7138<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.92</FONT></TD>7139<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7140<TR>7141<TD COLSPAN=3></TD>7142<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7143<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7144<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7145<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2004</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7146<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,237,000</FONT></TD>7147<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7148<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,645,000</FONT></TD>7149<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7150<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - 12.00</FONT></TD>7151<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7152<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.68</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=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>7156<TD ALIGN=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>7157<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7158<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7159<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7160<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7161<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7162<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</FONT></TD>7163<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7164<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7165<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>7166<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(344,000</FONT></TD>7167<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7168<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>344,000</FONT></TD>7169<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7170<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.90 - 11.62</FONT></TD>7171<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7172<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.74</FONT></TD>7173<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7174<TR VALIGN=Bottom>7175<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>7176<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>—</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 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(181,000</FONT></TD>7179<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7180<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - 10.89</FONT></TD>7181<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7182<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.20</FONT></TD>7183<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7184<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7185<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>7186<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>93,000</FONT></TD>7187<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7188<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(93,000</FONT></TD>7189<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7190<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.81 - 9.46</FONT></TD>7191<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7192<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.74</FONT></TD>7193<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7194<TR>7195<TD COLSPAN=3></TD>7196<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7197<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7198<TR VALIGN=Bottom>7199<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at December 31, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7200<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>1,486,000</B> </FONT></TD>7201<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7202<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>1,715,000</B> </FONT></TD>7203<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7204<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 0.78 - $12.00</B> </FONT></TD>7205<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7206<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 4.83</B> </FONT></TD>7207<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD></TR>7208<TR>7209<TD COLSPAN=3></TD>7210<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>7211<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>7212</TABLE>7213<BR>72147215<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes information about stock options outstanding at7216December 31, 2005: </FONT></P>7217721872197220<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=70%>7221<TR VALIGN=Bottom>7222<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7223<TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Outstanding</FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7224<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Exercisable</FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7225<TR VALIGN=Bottom>7226<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Range of<BR>Exercise Prices </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7227<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding<BR>as of December 31, 2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7228<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>Average<BR>Remaining<BR>Contractual Life </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7229<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>Average<BR>Exercise Price </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7230<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercisable<BR>as of<BR>December 31,<BR>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7231<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>Average<BR>Exercise Price </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7232<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7233<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD NOWRAP WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.78 - $ 0.83</FONT></TD>7234<TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7235<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61,000</FONT></TD>7236<TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7237<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="8%" ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.1</FONT></TD>7238<TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7239<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.79</FONT></TD>7240<TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7241<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59,000</FONT></TD>7242<TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7243<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.79</FONT></TD>7244<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7245<TR VALIGN=Bottom>7246<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD nowrap ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84 - 0.84</FONT></TD>7247<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7248<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>528,000</FONT></TD>7249<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7250<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.1</FONT></TD>7251<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7252<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84</FONT></TD>7253<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7254<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>458,000</FONT></TD>7255<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7256<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.84</FONT></TD>7257<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7258<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7259<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD NOWRAP ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.85 - 2.51</FONT></TD>7260<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7261<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>184,000</FONT></TD>7262<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7263<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.0</FONT></TD>7264<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7265<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.25</FONT></TD>7266<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7267<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>181,000</FONT></TD>7268<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7269<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.26</FONT></TD>7270<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7271<TR VALIGN=Bottom>7272<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD nowrap ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.52 - 6.00</FONT></TD>7273<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7274<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>255,000</FONT></TD>7275<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7276<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.0</FONT></TD>7277<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7278<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.69</FONT></TD>7279<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7280<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>253,000</FONT></TD>7281<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7282<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.70</FONT></TD>7283<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7284<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7285<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD NOWRAP ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.01 - 7.00</FONT></TD>7286<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7287<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>199,000</FONT></TD>7288<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7289<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.0</FONT></TD>7290<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7291<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.73</FONT></TD>7292<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7293<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>107,000</FONT></TD>7294<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7295<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.72</FONT></TD>7296<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7297<TR VALIGN=Bottom>7298<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD nowrap ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.01 - 12.00</FONT></TD>7299<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7300<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>488,000</FONT></TD>7301<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7302<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.4</FONT></TD>7303<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7304<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.40</FONT></TD>7305<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7306<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>201,000</FONT></TD>7307<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7308<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.32</FONT></TD>7309<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7310<TR>7311<TD COLSPAN=3></TD>7312<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7313<TD COLSPAN=3></TD>7314<TD COLSPAN=3></TD>7315<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7316<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7317<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>7318<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7319<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>1,715,000</B> </FONT> </TD>7320<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7321<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6.9</B> </FONT></TD>7322<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7323<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4.83</B> </FONT></TD>7324<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7325<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,259,000</B> </FONT> </TD>7326<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7327<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 3.88</B> </FONT></TD>7328<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7329<TR>7330<TD COLSPAN=3></TD>7331<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>7332<TD COLSPAN=3></TD>7333<TD COLSPAN=3></TD>7334<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>7335</TABLE>7336<BR>733773387339<BR>7340<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56 </FONT></P>7341<HR SIZE=3 COLOR=GRAY NOSHADE>7342<!-- *************************************************************************** -->7343<!-- MARKER PAGE="sheet: 0; page: 0" -->7344<BR>734573467347<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7348<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. Stock Options and Warrants (Continued) </FONT></H1>73497350<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7351<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Deferred Compensation</I> </FONT> </P>73527353<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7354<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, 2004, and 2003, the Company recorded $13,000, $54,000 and $-0-,7355respectively, of deferred compensation in connection with certain nonqualified stock options granted to medical advisory board7356members. The weighted average fair value of these options was $4.18. The deferred compensation recorded is amortized ratably over7357the period that the options vest and is adjusted for options which have been canceled. Deferred compensation expense was $22,000,7358$12,000 and $41,000 for the years ended December 31, 2005, 2004, and 2003, respectively. </FONT></P>73597360<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7361<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Warrants</I> </FONT> </P>73627363<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7364<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2005, the Company had the following warrants outstanding7365and exercisable: </FONT></P>73667367736873697370<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>7371<TR VALIGN=Bottom>7372<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise Price </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7373<TH COLSPAN=2 NOWRAP><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding as of<BR>December 31, 2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7374<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Expiration Date </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7375<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7376<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="18%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.50</FONT></TD>7377<TD WIDTH="18%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7378<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="18%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>70,000</FONT></TD>7379<TD WIDTH="18%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7380<TD WIDTH="26%" nowrap ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 31, 2007</FONT></TD>7381<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7382<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7383<TR VALIGN=Bottom>7384<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.50</FONT></TD>7385<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7386<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,000</FONT></TD>7387<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7388<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>February 14, 2007</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7389<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7390<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.00</FONT></TD>7391<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7392<TD ALIGN="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>7393<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7394<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 29, 2007</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7395<TR>7396<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7397<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7398<TR VALIGN=Bottom>7399<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2.17</FONT></TD>7400<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7401<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>152,000</FONT></TD>7402<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7403<TR>7404<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>7405<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>7406</TABLE>7407<BR>7408740974107411<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. Employee Stock Purchase Plan </FONT></H1>74127413<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7414<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an Employee Stock Purchase Plan (the Purchase Plan) under7415which 1,300,000 shares of common stock have been reserved for issuance. Eligible employees may contribute 1% to 10% of their7416compensation to purchase shares of the Company’s common stock at a discount of 15% of the market value at certain7417plan-defined dates up to a maximum of 2,000 shares per purchasing period. The Purchase Plan terminates in May 2010. In fiscal74182005, 2004 and 2003, 99,500 shares, 245,600 shares, and 195,900 shares, respectively, were issued under the Purchase Plan. At7419December 31, 2005, 516,000 shares were available for issuance under the Purchase Plan. </FONT></P>74207421<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7422<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11. Employee Retirement Savings Plan </FONT></H1>74237424<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7425<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an employee 401(k) retirement savings plan (the Plan). The7426Plan provides eligible employees with an opportunity to make tax-deferred contributions into a long-term investment and savings7427program. All employees over the age of 21 are eligible to participate in the Plan beginning with the first quarterly open7428enrollment date following start of employment. Through December 31, 2001, the Plan allowed eligible employees to contribute up to742918% of their annual compensation. Effective January 1, 2002, the employee contribution limit was increased to 50% of their annual7430compensation, subject to a maximum limit determined by the Internal Revenue Service, with the Company contributing an amount equal7431to 25% of the first 5% contributed to the Plan. The Company recorded an expense of $89,000, $73,000 and $74,000 for contributions7432to the Plan for the years ended December 31, 2005, 2004, and 2003, respectively. </FONT></P>7433743474357436<BR><BR><BR><BR><BR><BR><BR>7437<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57 </FONT></P>7438<HR SIZE=3 COLOR=GRAY NOSHADE>7439<!-- *************************************************************************** -->7440<!-- MARKER PAGE="sheet: 0; page: 0" -->7441<BR>744274437444<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12. Concentrations of Credit and Other Risks </FONT></H1>74457446<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States and Germany, the Company sells its products directly to7447hospitals and clinics. In all other international markets, the Company sells its products to distributors who, in turn, sell to7448medical clinics. Loss, termination, or ineffectiveness of distributors to effectively promote the Company’s product could7449have a material adverse effect on the Company’s financial condition and results of operations. </FONT></P>74507451<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No customers were more than 5% of net sales for the years ended December 31,74522005, 2004 and 2003. </FONT></P>74537454<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With respect to accounts receivable, the Company performs credit evaluations7455of its customers and does not require collateral. No customers were more than 5% of gross accounts receivable as of December 31,74562005 and 2004. There have been no material losses on customer receivables. </FONT></P>74577458<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales by geographic destination as a percentage of total net sales were as7459follows for the years ended December 31: </FONT></P>7460746174627463<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>7464<TR VALIGN=Bottom>7465<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7466<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7467<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7468<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003 </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7469<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7470<TD WIDTH="36%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic</FONT></TD>7471<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7472<TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7473<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>89</B> </FONT></TD>7474<TD WIDTH="15%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>%</B> </FONT></TD>7475<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>7476<TD WIDTH="15%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>7477<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>87</FONT></TD>7478<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>7479<TR VALIGN=Bottom>7480<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>7481<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</B> </FONT></TD>7482<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT></TD>7483<TD ALIGN=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>7484<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7485<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></TD>7486<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7487</TABLE>7488<BR>748974907491<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13. Related Party Sales </FONT></H1>74927493<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2005, 2004 and 2003, the Company sold $419,000, $279,000 and $-0-7494of product to a company in which a board member of the Company is a Vice President. As of December 31, 2005 and 2004, the Company7495had an accounts receivable balance due of $70,000 and $57,000 from this related party company. </FONT></P>74967497<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14. Dependence on Key Suppliers </FONT></H1>74987499<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">King Pharmaceuticals </FONT> </P>75007501<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7502<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company purchases certain key components from single-source suppliers.7503Any significant component delay or interruption could require the Company to qualify new sources of supply, if available, and7504could have a material adverse effect on the Company’s financial condition and results of operations. The Company purchases7505their requirements for thrombin (a component in the Duett and D-Stat products) under a Purchase Agreement dated June 10, 1999 with7506a subsidiary of King Pharmaceuticals, Inc. (King). The agreement provides for a fixed price, with adjustments based on the7507supplier’s manufacturing costs and the supplier’s annual percentage increase in the wholesale price of thrombin. The7508agreement expired on May 29, 2005. In anticipation of the agreement expiring, the Company submitted purchase orders to King for7509approximately $3.5 million of thrombin to benefit from the pricing provisions of the agreement. The Company expects the final lots7510of thrombin totaling $2.1 million to be delivered during the third quarter of 2006. The Company believes that these purchases will7511satisfy its thrombin requirements through at least the end of 2007. </FONT></P>75127513<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7514<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sigma </FONT></P>75157516<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7517<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 18, 2004, the Company entered into a supply agreement with7518Sigma-Aldrich Fine Chemicals, an operating division of Sigma-Aldrich, Inc. (Sigma) for the supply of thrombin to the Company.7519Pursuant to the terms of the agreement, the Company will be paying for certain development costs of Sigma to allow Sigma to7520produce thrombin. The payments are based on achievement of certain milestones over a two year period. The contract terminates7521after ten years and is automatically extended for up to five additional successive one year terms unless one party delivers notice7522of termination at least one year prior to the scheduled termination of the agreement. During the term of the contract, Sigma has7523agreed not to sell thrombin of the type developed for the Company under the contract in or as a component of a hemostatic product7524for medical use. The Company does not have any minimum purchase requirements under the contract; however, if the Company purchases7525less than three lots of thrombin in any year then (i) Sigma will be released from its agreement not to sell thrombin in or as a7526component of a hemostatic product for medical use, and (ii) Sigma will have the right to terminate the contract on 30 days notice.7527</FONT></P>7528752975307531<BR>7532<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>58 </FONT></P>7533<HR SIZE=3 COLOR=GRAY NOSHADE>7534<!-- *************************************************************************** -->7535<!-- MARKER PAGE="sheet: 0; page: 0" -->7536<BR>753775387539<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14. Dependence on Key Suppliers (Continued) </FONT></H1>75407541<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7542<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Sigma contract is the start of the Company’s plan to fully qualify a7543new source of thrombin and to bring the new thrombin through the regulatory process to be used in the Company’s hemostatic7544products starting in 2007. The cost associated with the Sigma agreement are part of the Company’s total estimated7545expenditures of $6.8 million (including the payments to Sigma) to complete the thrombin qualification project. The failure by the7546Company to complete the thrombin qualification project on time and on budget may affect the Company’s gross margins on the7547Duett, D-Stat Flowable and D-Stat Dry products and could therefore seriously harm the Company’s business. </FONT></P>75487549<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->7550<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The costs and purchases7551incurred through December 31, 2005 and the total estimated costs and purchases for the thrombin project (including costs and7552purchases already incurred) are as follows: </FONT></P>7553755475557556<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>7557<TR VALIGN=Bottom>7558<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>7559<TH nowrap COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Incurred (as of<BR>December 31, 2005) </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7560<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total Estimated </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7561<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7562<TD WIDTH="46%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Qualification expenses</FONT></TD>7563<TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7564<TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7565<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1.8 million</FONT></TD>7566<TD WIDTH="13%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7567<TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.3 million</FONT></TD>7568<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7569<TR VALIGN=Bottom>7570<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital equipment purchases</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7571<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.7 million</FONT></TD>7572<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7573<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.8 million</FONT></TD>7574<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7575<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7576<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thrombin inventory purchases</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7577<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.7 million</FONT></TD>7578<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7579<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.7 million</FONT></TD>7580<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7581<TR>7582<TD COLSPAN=3></TD>7583<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>7584<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>7585<TR VALIGN=Bottom>7586<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7587<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.2 million</FONT></TD>7588<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7589<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6.8 million</FONT></TD>7590<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7591<TR>7592<TD COLSPAN=3></TD>7593<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>7594<TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>7595</TABLE>7596<BR>7597759875997600<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15. Commitments and Contingencies </FONT></H1>76017602<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7603<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All legal cost related to litigation are charged to operations as incurred.7604</FONT></P>76057606<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7607<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diomed Litigation </FONT></P>76087609<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7610<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 11, 2003, the Company and a non-officer employee of the Company7611were named as defendants in a lawsuit brought by Diomed, Inc. in the United States District Court for the District of7612Massachusetts. The complaint alleges that in marketing the Company’s Vari-Lase endovenous laser procedure kit the Company7613engaged in false advertising and infringed a registered trademark of Diomed. The complaint also alleges that the non-officer7614employee, who previously worked for a company that conducted business with Diomed, improperly utilized trade secrets of Diomed in7615developing the Company’s Vari-Lase procedure kit. The complaint requests monetary damages and an injunction on the sale of7616the Company’s Vari-Lase procedure kit. The Company believes that the allegations included in the complaint are wholly without7617merit. On July 13, 2005, the court held a hearing on the Company’s motion for summary judgment, in which the Company sought7618dismissal of all claims. On January 31, 2006, the Court granted the Company’s motion for summary judgement dismissing all7619counts of Diomed’s complaint with the exception of one trade secret misappropriation count and a portion of two other counts7620to the extent they are based on alleged trade secret misappropriation. The Company’s counterclaim against Diomed was not7621dismissed. The Court has scheduled a status conference for this case on March 2, 2006. The Company’s insurance carrier7622initially accepted the Company’s tender of this claim and has paid for the expenses incurred in defending this lawsuit. After7623the summary judgment hearing, the insurance company notified the Company that they were withdrawing coverage prospectively,7624effective November 6, 2005. It is not possible to predict the timing or outcome of this litigation, including whether it will7625affect the Company’s ability to sell our Vari-Lase procedure kit, or to estimate the amount or range of potential loss.7626</FONT></P>762776287629<BR>7630<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59 </FONT></P>7631<HR SIZE=3 COLOR=GRAY NOSHADE>7632<!-- *************************************************************************** -->7633<!-- MARKER PAGE="sheet: 0; page: 0" -->7634<BR>763576367637<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7638<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15. Commitments and Contingencies (continued) </FONT></H1>76397640<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7641<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 4, 2004, the Company was named as the defendant in an intellectual7642property lawsuit brought by Diomed, Inc. in the United States District Court for the District of Massachusetts. The complaint7643requested a judgment that the Company’s Vari-Lase procedure kit and Vari-Lase laser console infringe on a single patent held7644by Diomed, Inc. and asked for relief in the form of an injunction that would prevent the Company from selling their Vari-Lase7645products, compensatory and treble damages caused by the manufacture and sale of the Company’s product, and other costs,7646disbursements and attorneys’ fees. On April 12, 2005, the Judge entered a Memorandum and Order on Claims Construction from7647the Markman hearing phase of the litigation. In the Order, the Judge held that in order to violate the Diomed patent, a competing7648method must deliberately put the tip of the laser fiber in physical contact with the wall of the vein, must drain blood from the7649vein, must compress the vein and must maintain vein wall contact as the laser energy is delivered. The Company believes that their7650Vari-Lase products are not used in this method, and thus the Company does not believe the litigation has merit. It is not possible7651to predict the timing or outcome of this litigation, including whether it will affect the Company’s ability to sell their7652Vari-Lase products, or to estimate the amount or range of potential loss. </FONT></P>76537654<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7655<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VNUS Medical Technologies Litigation </FONT></P>76567657<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7658<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 13, 2005, the Company was named as one of three defendants in an7659intellectual property lawsuit brought by VNUS Medical Technologies, Inc. in the United States District Court for the Northern7660District of California. The complaint requested a judgment that the Company’s Vari-Lase procedure kit and Vari-Lase laser7661console infringes on four patents held by VNUS Medical Technologies, Inc. and asked for relief in the form of an injunction that7662would prevent the Company from selling their Vari-Lase products, compensatory and treble damages caused by the manufacture and7663sale of the Company’s product, and other costs, disbursements and attorneys’ fees. The Company believes its Vari-Lase7664products do not violate these patents, and thus the Company does not believe the litigation has merit. It is not possible to7665predict the timing or outcome of this litigation, including whether it will affect the Company’s ability to sell their7666Vari-Lase products, or to estimate the amount or range of potential loss. </FONT></P>76677668<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->7669<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MedArt Purchase Commitment </FONT></P>76707671<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->7672<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company signed a purchase agreement with MedArt Corporation on September767322, 2003. Under that agreement, the Company was obligated to purchase laser consoles with an aggregate purchase price of7674$1,197,000 for its Vari-Lase business during the first year of the agreement, which commenced in December 2003. The Company7675fulfilled its laser console purchase requirement of $1,197,000 during 2004. </FONT></P>7676767776787679<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>7680<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60 </FONT></P>7681<HR SIZE=3 COLOR=GRAY NOSHADE>7682<!-- *************************************************************************** -->7683<!-- MARKER PAGE="sheet: 0; page: 0" -->7684<BR>7685768676877688<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16. Quarterly Financial Data (Unaudited, in7689Thousands, Except per Share Data) </FONT></H1>76907691<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>7692<TR VALIGN=Bottom>7693<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2005</B> </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH><TH></TH>7694<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fourth<BR>Quarter </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7695<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Third<BR>Quarter </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7696<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Second<BR>Quarter </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>7697<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>First<BR>Quarter </FONT><HR SIZE=1 COLOR=BLACK NOSHADE></TH></TR>7698<TR VALIGN=Bottom>7699<TD WIDTH=29% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>7700<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7701<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7702<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>7703<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7704<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>7705<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7706<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>7707<TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7708<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>7709<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7710<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7711<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>7712<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>8,859</B> </FONT></TD>7713<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7714<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8,574</B> </FONT></TD>7715<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7716<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8,079</B> </FONT></TD>7717<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7718<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>7,274</B> </FONT></TD>7719<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7720<TR VALIGN=Bottom>7721<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>7722<TD ALIGN=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>6,169</B> </FONT></TD>7723<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7724<TD ALIGN=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>6,244</B> </FONT></TD>7725<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7726<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5,771</B> </FONT></TD>7727<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7728<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5,216</B> </FONT></TD>7729<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7730<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7731<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7732<TD ALIGN="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>(450</B> </FONT></TD>7733<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7734<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>16</B> </FONT></TD>7735<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7736<TD ALIGN="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>33</B> </FONT></TD>7737<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7738<TD ALIGN="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>(323</B> </FONT></TD>7739<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>7740<TR VALIGN=Bottom>7741<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7742<TD ALIGN=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>(407</B> </FONT></TD>7743<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7744<TD ALIGN=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>60</B> </FONT></TD>7745<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7746<TD ALIGN=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>75</B> </FONT></TD>7747<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7748<TD ALIGN=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</B> </FONT></TD>7749<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>7750<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7751<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net income (loss) per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7752<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>(0.03</B> </FONT></TD>7753<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>7754<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>0.00</B> </FONT></TD>7755<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7756<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>0.00</B> </FONT></TD>7757<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7758<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$</B> </FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.02</B> </FONT></TD>7759<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD></TR>7760<TR><TD> </TD></TR>7761<TR VALIGN=Bottom>7762<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2004</B> </FONT> <HR SIZE=1 COLOR=BLACK NOSHADE></TD></TR>7763<TR><TD> </TD></TR>7764<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7765<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7766<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 6,706</FONT></TD>7767<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7768<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,974</FONT></TD>7769<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7770<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,275</FONT></TD>7771<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7772<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,459</FONT></TD>7773<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7774<TR VALIGN=Bottom>7775<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>7776<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,651</FONT></TD>7777<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7778<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,290</FONT></TD>7779<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7780<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,673</FONT></TD>7781<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7782<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,043</FONT></TD>7783<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD></TR>7784<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7785<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>7786<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(599</FONT></TD>7787<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7788<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(445</FONT></TD>7789<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7790<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,021</FONT></TD>7791<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7792<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,511</FONT></TD>7793<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7794<TR VALIGN=Bottom>7795<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>7796<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(573</FONT></TD>7797<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7798<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(437</FONT></TD>7799<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7800<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(999</FONT></TD>7801<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7802<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,499</FONT></TD>7803<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7804<TR VALIGN="BOTTOM" BGCOLOR="#d6f3e8">7805<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>7806<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.04</FONT></TD>7807<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7808<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.03</FONT></TD>7809<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7810<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.07</FONT></TD>7811<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>7812<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.11</FONT></TD>7813<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>7814</TABLE>78157816<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17. Subsequent Event </FONT></H1>78177818<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 6, 2006, the Company executed a $2,000,000 advance on the7819equipment line of credit, discussed above in Note 6. The advance is secured by various equipment acquired by the Company during7820the year ended December 31, 2005. </FONT></P>7821782278237824<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>7825<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61 </FONT></P>7826<HR SIZE=3 COLOR=GRAY NOSHADE>782778287829</BODY>7830</HTML>78317832</TEXT>7833</DOCUMENT>7834<DOCUMENT>7835<TYPE>EX-10.147836<SEQUENCE>27837<FILENAME>vasc060361_ex10-14.htm7838<DESCRIPTION>AMENDMENT TO LOAN AGREEMENT7839<TEXT>7840<HTML>7841<HEAD>7842<TITLE>Exhibit 10.14 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>7843</HEAD>7844<BODY>7845<BR><BR>7846784778487849<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->7850<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 10.14</B> </FONT> </P>78517852<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7853<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Silicon Valley Bank</FONT></H1>78547855<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->7856<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>Amendment to Loan Agreement</FONT></H1><BR>78577858<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7859<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Borrower: VASCULAR SOLUTIONS, INC. </FONT></H1>78607861<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->7862<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: December 29, 2005 </FONT></H1><BR>78637864<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->7865<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>THIS AMENDMENT TO LOAN7866AGREEMENT </B>(“Amendment”) is entered into between Silicon Valley Bank (“Silicon”) and the borrower named7867above (“Borrower”), with reference to the following facts: </FONT></P>78687869<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->7870<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> A.7871 Silicon and Borrower are parties to that certain Loan and Security Agreement, with an7872Effective Date of December 31, 2003 (as amended, the “Loan Agreement”). (The Loan Agreement and all other present7873and future documents, instruments and agreements relating thereto are referred to herein collectively as the “Loan7874Documents”. Capitalized terms used in this Agreement which are not defined herein shall have the meanings set forth in the7875Loan Agreement.) </FONT></P>78767877<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->7878<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> B.7879 The parties desire to amend the Loan Agreement as set forth in this Amendment.7880</FONT></P>78817882<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->7883<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The parties agree as follows:7884</FONT></P>78857886<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->7887<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>1.7888 </B><B>Revolving7889Maturity Date.</B> The definition of “Revolving Maturity Date,” which7890is contained in Section 13.1 of the Loan Agreement, is hereby amended from7891“December 29, 2005” to “December 28, 2006”.7892</FONT></P>78937894<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->7895<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>2.7896 </B><B>Equipment7897Advances.</B> The following new Section is added to the Loan Agreement following7898existing Section 2.1.1. </FONT></P>78997900<!-- MARKER FORMAT-SHEET="Head Sub 2 Left" FSL="Default" -->7901<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> 7902 <B>2.1.2.7903Equipment Advances.</B> </FONT></P>79047905<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->7906<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>7907<TR VALIGN=TOP>7908<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7909<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7910(a) Availability. Subject to the terms and conditions of this Agreement, and7911provided that no Default or Event of Default then exists, during the Draw7912Period, Bank shall make advances (each, an “Equipment Advance” and,7913collectively, “Equipment Advances”) not exceeding the Equipment Line.7914Equipment Advances may only be used to finance Eligible Equipment purchased7915within ninety (90) days (determined based upon the applicable invoice date of7916such Eligible Equipment) before the date of the Equipment Advance, except that7917the Initial Equipment Advance (as defined below) may be used to finance Eligible7918Equipment purchased on or after January 1, 2005. No Equipment Advance may exceed7919100% of the total invoice for Eligible Equipment, excluding software, leasehold7920improvements, taxes, shipping, warranty charges, freight, and installation7921expenses, and other soft costs, except that up to 30% of an Equipment Advance7922may relate to transferable software licenses, leasehold improvements and other7923soft costs, including sales tax, shipping, freight and installation expenses7924relating to such Eligible Equipment. Each Equipment Advance, other than the7925final Equipment Advance, must be in an amount equal to at least $50,000.7926Borrower agrees to borrow at least $1,000,000 of Equipment Advances in7927accordance with this Agreement on or before January 6, 2006 (the “Initial7928Equipment Advance”). The provisions of Section 2.1.1(d) apply, without7929limitation, to Bank’s obligation to make any Equipment Advance.7930</FONT></TD>7931</TR>7932</TABLE>7933<BR>7934793579367937<BR>7938<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->7939<HR SIZE=3 COLOR=GRAY NOSHADE>7940<!-- MARKER PAGE="sheet: 2; page: 2" -->7941<BR>79427943794479457946<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->7947<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>7948<TR VALIGN=TOP>7949<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7950<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7951(b) Payment. Interest accrues from the date of each Equipment Advance at the7952rate in Section 2.3(a) and is payable monthly beginning on the first day of the7953month following such Equipment Advance and continuing on the first day of each7954month thereafter. Each Equipment Advance shall be repaid by the Borrower to Bank7955in 30 equal monthly payments of principal, commencing on the first day of the7956sixth month following the date the Equipment Advance was made and continuing on7957the first day of each month thereafter until the Equipment Maturity Date, on7958which date the entire unpaid principal balance of the Equipment Advance, plus7959all accrued and unpaid interest thereon, shall be due and payable. Borrower may7960prepay the principal of Equipment Advances at its option, such prepayments to be7961applied to principal payments in the inverse order of maturity. Equipment7962Advances may not be repaid and re-borrowed. Financed Equipment shall not be7963subject to any Liens in favor of any other Person (including without limitation7964Liens which would fall within the definition of “Permitted Liens”).7965</FONT></TD>7966</TR>7967</TABLE>7968<BR>796979707971<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->7972<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>7973<TR VALIGN=TOP>7974<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>7975<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7976(c) Prepayment Upon an Event of Loss. Borrower shall bear the risk of any loss,7977theft, destruction, or damage of or to the Financed Equipment. If, during the7978term of this Agreement, any item of Financed Equipment becomes obsolete or is7979lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit for7980use, or seized by a governmental authority for any reason for a period equal to7981at least the remainder of the term of this Agreement (an “Event of7982Loss”), then, within ten (10) days following such Event of Loss, at7983Borrower’s option, Borrower shall (i) pay to Bank on account of the7984Obligations all accrued interest to the date of the prepayment, plus all7985outstanding principal owing with respect to the Financed Equipment subject to7986the Event of Loss; or (ii) repair or replace the Financed Equipment subject to7987an Event of Loss provided the repaired or replaced Financed Equipment is of7988equal or like value to the Financed Equipment subject to an Event of Loss and7989provided further that Bank has a first priority perfected security interest in7990such repaired or replaced Financed Equipment. </FONT></TD>7991</TR>7992</TABLE>7993<BR>799479957996<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->7997<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>7998<TR VALIGN=TOP>7999<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8000<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8001(d) Equipment Advance Request. To obtain an Equipment Advance, Borrower must8002notify Bank (the notice is irrevocable) by facsimile no later than 12:00 p.m.8003Pacific time 1 Business Day before the day on which the Equipment Advance is to8004be made. The notice in the form of Exhibit B (Payment/Advance Form) must be8005signed by a Responsible Officer or designee and include a copy of the invoice(s)8006for the Equipment being financed. Borrower represents, warrants and covenants8007that it will only request Equipment Advances for purposes of financing the8008purchase of new (as opposed to “used”) Eligible Equipment.8009</FONT></TD>8010</TR>8011</TABLE>8012<BR>8013801480158016<BR>8017<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8018<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-2- </FONT></P>8019<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->8020<HR SIZE=3 COLOR=GRAY NOSHADE>8021<!-- MARKER PAGE="sheet: 2; page: 2" -->8022<BR>80238024802580268027<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8028<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8029<TR VALIGN=TOP>8030<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8031<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8032(e) Borrower shall not remove any Financed Equipment from the Eligible Equipment8033Location unless the Equipment Advance that financed such Financed Equipment has8034been repaid to Bank in full. </FONT></TD>8035</TR>8036</TABLE>8037<BR>80388039<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8040<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>3.8041 </B><B>Interest Rate.</B> The first8042full sentence of Section 2.3(a) of the Loan Agreement – Interest8043Rate – reads as follows: </FONT></P>80448045<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8046<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8047<TR VALIGN=TOP>8048<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8049<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8050Revolving8051Advances accrue interest on the outstanding principal balance at a <I>per annum </I> rate8052equal to one-half of one percentage point (0.50%) above the Prime Rate. </FONT></TD>8053</TR>8054</TABLE>8055<BR>80568057<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8058<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Said sentence is hereby amended to8059read as follows: </FONT></P>80608061<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8062<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8063<TR VALIGN=TOP>8064<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8065<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8066Revolving8067Advances accrue interest on the outstanding principal balance at a per annum rate equal8068to one-half of one percentage point (0.50%) above the Prime Rate, and Equipment8069Advances accrue interest on the outstanding principal balance at a per annum rate equal to8070one and one-half of one percentage point (1.50%) above the Prime Rate. </FONT></TD>8071</TR>8072</TABLE>8073<BR>80748075<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8076<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>4.8077 </B><B>Payments.</B> The first full8078sentence of Section 2.3(b) of the Loan Agreement—Payments—reads as8079follows: </FONT></P>80808081<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8082<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8083<TR VALIGN=TOP>8084<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8085<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8086Interest due on the Committed Revolving Line is payable on the 25<SUP>th</SUP>8087day of each month for the period ending at the end of the day preceding such808825<SUP>th</SUP> day. </FONT></TD>8089</TR>8090</TABLE>8091<BR>80928093<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8094<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Said sentence is hereby amended to8095read as follows: </FONT></P>80968097<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8098<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8099<TR VALIGN=TOP>8100<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8101<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8102Interest due on the Committed Revolving Line is payable on the 25<SUP>th</SUP>8103day of each month for the period ending at the end of the day preceding such810425<SUP>th</SUP> day, and interest due on Equipment Advances is payable as set8105forth in Section 2.12(b). </FONT></TD>8106</TR>8107</TABLE>8108<BR>81098110<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8111<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>5.8112 </B><B>Insurance.</B> The following8113sentence is hereby added to the end of Section 6.5 of the Loan Agreement:8114“Without limiting the generality of the foregoing, the Borrower shall8115insure the Financed Equipment for not less than the replacement value thereof.8116</FONT></P>81178118<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8119<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>6.8120 </B><B>Tangible8121Net Worth.</B> Section 6.7 of the Loan Agreement reads as follows: </FONT></P>81228123<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8124<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8125<TR VALIGN=TOP>8126<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8127<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8128Borrower8129will maintain at all times: </FONT></TD>8130</TR>8131</TABLE>8132<BR>81338134<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->8135<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8136<TR VALIGN=TOP>8137<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8138<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8139<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>8140<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8141<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Tangible8142Net Worth</B>. A Tangible Net Worth of more than $11,000,000. </FONT></TD>8143</TR>8144</TABLE>8145<BR>8146814781488149<BR>8150<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8151<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-3- </FONT></P>8152<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->8153<HR SIZE=3 COLOR=GRAY NOSHADE>8154<!-- MARKER PAGE="sheet: 2; page: 2" -->8155<BR>8156815781588159<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->8160<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8161<TR VALIGN=TOP>8162<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8163<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8164<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>8165<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8166<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Liquidity8167Coverage</B>. A ratio of (A) unrestricted domestic cash (and equivalents)8168plus the amount of Eligible Accounts, divided by (B) the aggregate amount8169of Obligations outstanding hereunder, of not less than 1.25 to 1.00.8170</FONT></TD>8171</TR>8172</TABLE>8173<BR>81748175<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8176<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Said Section 6.7 is hereby amended to8177read as follows: </FONT></P>81788179<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8180<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8181<TR VALIGN=TOP>8182<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8183<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8184Borrower8185will maintain at all times: </FONT></TD>8186</TR>8187</TABLE>8188<BR>81898190<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->8191<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8192<TR VALIGN=TOP>8193<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8194<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8195<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>8196<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8197<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Tangible8198Net Worth</B>. A Tangible Net Worth of not less than (i) $11,000,000 through and8199including August 31, 2006, (ii) $12,000,000 from September 1, 2006 through and8200including November 30, 2006, and (iii) $13,000,000 from December 1, 2006 and at8201all times thereafter. </FONT></TD>8202</TR>8203</TABLE>8204<BR>82058206<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->8207<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8208<TR VALIGN=TOP>8209<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8210<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8211<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>8212<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8213<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Liquidity8214Coverage</B>. A ratio of (A) unrestricted domestic cash (and equivalents)8215plus the amount of Eligible Accounts, divided by (B) the aggregate amount8216of Obligations outstanding hereunder (excluding outstanding Equipment Advances),8217of not less than 1.25 to 1.00. </FONT></TD>8218</TR>8219</TABLE>8220<BR>82218222<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8223<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>7.8224 </B><B>Dispositions.</B> Clause (iii)8225of Section 7.1 of the Loan Agreement reads as follows: “(iii) of worn-out8226or obsolete Equipment”. Said clause “iii” is hereby amended to8227read as follows: “(iii) of worn-out or obsolete Equipment that does not8228constitute Financed Equipment”. </FONT></P>82298230<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8231<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>8.8232 </B><B>New Definitions.</B> The8233following definitions are hereby added to Section 13.1 of the Loan Agreement, in8234the appropriate alphabetical order: </FONT></P>82358236<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8237<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8238<TR VALIGN=TOP>8239<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8240<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8241<B>“Draw8242Period”</B> is the period of time beginning December 29, 2005 and continuing through8243the earlier of December 28, 2006 or the occurrence of an Event of Default. </FONT></TD>8244</TR>8245</TABLE>8246<BR>82478248<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8249<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8250<TR VALIGN=TOP>8251<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8252<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8253<B>“Eligible8254Equipment”</B> is general purpose computer equipment, office equipment, test and8255laboratory equipment, and furnishings that are located at the Eligible Equipment Location8256and that comply with all of Borrower’s representations and warranties to Bank and8257against which Bank has a first priority Lien. </FONT></TD>8258</TR>8259</TABLE>8260<BR>82618262<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8263<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8264<TR VALIGN=TOP>8265<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8266<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8267<B>“Eligible8268Equipment Location”</B> is Borrower’s corporate headquarters at 6464 Sycamore8269Court, Minneapolis, Minnesota 55369, provided that up to an aggregate of $400,000 of8270Financed Equipment (valued at cost) may be located at Sigma Aldrich’s premises at82713500 DeKalb Street, St. Louis, Missouri 63118 and 3506 S. Broadway, St. Louis, Missouri827263118 if before February 1, 2006 (i) Sigma Aldrich has provided Bank with a bailee8273agreement acceptable to Bank concerning Bank’s interest in such Financed Equipment or8274(ii) Bank has waived such bailee agreement in writing. </FONT></TD>8275</TR>8276</TABLE>8277<BR>82788279<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8280<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8281<TR VALIGN=TOP>8282<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8283<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8284<B>“Equipment8285Advance”</B> is defined in Section 2.1.2. </FONT></TD>8286</TR>8287</TABLE>8288<BR>82898290<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8291<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8292<TR VALIGN=TOP>8293<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8294<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8295<B>“Equipment8296Line”</B> is an Equipment Advance or Equipment Advances in an aggregate amount of up8297to $2,000,000. </FONT></TD>8298</TR>8299</TABLE>8300<BR>8301830283038304<BR>8305<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8306<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-4- </FONT></P>8307<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->8308<HR SIZE=3 COLOR=GRAY NOSHADE>8309<!-- MARKER PAGE="sheet: 2; page: 2" -->8310<BR>8311831283138314<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8315<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8316<TR VALIGN=TOP>8317<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8318<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8319<B>“Equipment8320Maturity Date”</B> is, for each Equipment Advance, the earliest of (a) the first day8321of the 36<SUP>th</SUP> month following such Equipment Advance, or (b) the occurrence of an8322Event of Default. </FONT></TD>8323</TR>8324</TABLE>8325<BR>83268327<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8328<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8329<TR VALIGN=TOP>8330<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8331<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8332<B>“Financed8333Equipment”</B> is all present and future Eligible Equipment and other Collateral in8334which Borrower has any interest, the purchase of which is financed by an Equipment8335Advance. </FONT></TD>8336</TR>8337</TABLE>8338<BR>83398340<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8341<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>9.8342 </B><B>Amended8343Definition.</B> The definition of the following term set forth in Section 13.18344of the Loan Agreement is hereby amended to read as follows: </FONT></P>83458346<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->8347<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8348<TR VALIGN=TOP>8349<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8350<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8351<B>“Credit8352Extension”</B> is each Revolving Advance, Equipment Advance and other extension of8353credit or credit accommodation by Bank for Borrower’s benefit. </FONT></TD>8354</TR>8355</TABLE>8356<BR>83578358<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8359<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>10.8360 </B><B>New8361Facility Fee.</B> Borrower shall pay to Silicon a fee of $25,000 concurrently8362herewith, which shall be in addition to interest and to all other amounts8363payable hereunder and under the Loan Documents and which shall not be8364refundable. Silicon is authorized to charge said fee to Borrower’s loan8365account or any of Borrower’s deposit accounts maintained with Silicon.8366</FONT></P>83678368<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8369<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>11.8370 </B><B>Amendment8371Regarding Existing Fees.</B> Subsection 2.4(a) of the Loan Agreement –8372Facility Fee – is hereby amended to read in its entirety as follows:8373“(a) [Omitted]”. Subsect 2.4(c) – Unused Line Fee – of the8374Loan Agreement is hereby amended to read in its entirety as follows: “(c)8375[Omitted]”. </FONT></P>83768377<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8378<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>12.8379 </B><B>Borrowing Base.</B> The8380definition of “Borrowing Base” contained in Section 13.1 of the Loan8381Agreement reads as follows: </FONT></P>83828383<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8384<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8385<TR VALIGN=TOP>8386<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8387<TD WIDTH=93%>8388<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>“Borrowing8389Base”</B> shall mean: </FONT> </TD>8390</TR>8391</TABLE>8392<BR>83938394<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8395<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8396<TR VALIGN=TOP>8397<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8398<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8399(A) up to 75% of Eligible Accounts as determined and confirmed by Bank from8400Borrower’s most recent Borrowing Base Certificate; <U>provided</U>,8401<U>however</U>, that Bank may lower the percentage of the Borrowing Base after8402performing an audit of Borrower’s Collateral in Bank’s good faith8403business judgment; and </FONT></TD>8404</TR>8405</TABLE>8406<BR>84078408<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8409<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8410<TR VALIGN=TOP>8411<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8412<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8413(B) up8414to 25% of Eligible Inventory, <U>provided</U> that Advances hereunder based on Eligible8415Inventory shall at no time exceed the lesser of (i) $1,500,000 or (ii) 33% of8416the amount of Eligible Accounts, as applicable from time to time. </FONT></TD>8417</TR>8418</TABLE>8419<BR>84208421<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8422<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Said definition is hereby amended to8423read as follows: </FONT></P>842484258426<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8427<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8428<TR VALIGN=TOP>8429<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8430<TD WIDTH=93%>8431<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>“Borrowing8432Base”</B> shall mean: </FONT> </TD>8433</TR>8434</TABLE>8435<BR>84368437<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8438<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8439<TR VALIGN=TOP>8440<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8441<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8442(A) up to 75% of Eligible Accounts; <U>provided</U>, <U>however</U>, that Bank8443may lower the percentage of the Borrowing Base after performing an audit of8444Borrower’s Collateral in Bank’s good faith business judgment; plus8445</FONT></TD>8446</TR>8447</TABLE>8448<BR>8449845084518452<BR>8453<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8454<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-5- </FONT></P>8455<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->8456<HR SIZE=3 COLOR=GRAY NOSHADE>8457<!-- MARKER PAGE="sheet: 2; page: 2" -->8458<BR>84598460846184628463<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8464<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8465<TR VALIGN=TOP>8466<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8467<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8468(B) up8469to 25% of Eligible Inventory, <U>provided</U> that Advances hereunder based on Eligible8470Inventory shall at no time exceed the lesser of (i) $1,500,000 or (ii) 33% of8471the amount of Eligible Accounts, as applicable from time to time; plus </FONT></TD>8472</TR>8473</TABLE>8474<BR>84758476<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8477<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8478<TR VALIGN=TOP>8479<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8480<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8481(C) up to 50% of Borrower’s unrestricted cash which is held at Bank and is8482subject to Bank’s first-priority perfected security interest; </FONT></TD>8483</TR>8484</TABLE>8485<BR>84868487<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->8488<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8489<TR VALIGN=TOP>8490<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8491<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8492as the foregoing are determined and confirmed by Bank from Borrower’s most8493recent Borrowing Base Certificate. </FONT></TD>8494</TR>8495</TABLE>8496<BR>84978498<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8499<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>13.8500 </B><B>Representations True.</B> Borrower8501represents and warrants to Silicon that all representations and8502warranties set forth in the Loan Agreement, as amended hereby, are true and8503correct. </FONT></P>85048505<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->8506<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <B>14.8507 </B><B>General Provisions.</B> This8508Amendment, the Loan Agreement, any prior written amendments to the Loan8509Agreement signed by Silicon and Borrower, and the other Loan Documents set forth8510in full all of the representations and agreements of the parties with respect to8511the subject matter hereof and supersede all prior discussions, representations,8512agreements and understandings between the parties with respect to the subject8513hereof. Except as herein expressly amended, all of the terms and provisions of8514the Loan Agreement, and all other Loan Documents shall continue in full force8515and effect and the same are hereby ratified and confirmed. This Amendment is8516part of the Loan Agreement and its terms are incorporated herein. </FONT></P>8517<BR>85188519<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%" ALIGN="CENTER">8520<TR VALIGN="BOTTOM" ALIGN="LEFT">8521<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Borrower:</FONT></TH>8522<TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>8523<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Silicon:</FONT></TH></TR>8524<TR><TD> </TD></TR>8525<TR VALIGN="BOTTOM" ALIGN="LEFT">8526<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">VASCULAR SOLUTIONS, INC.</FONT></TH>8527<TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>8528<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">SILICON VALLEY BANK</FONT></TH></TR>8529<TR><TD> </TD></TR>8530<TR><TD> </TD></TR>8531<TR VALIGN="TOP">8532<TD WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>By</B> </FONT></TD>8533<TD WIDTH="37%" style="border-bottom: 2px solid black"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT>8534</TD>8535<TD WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>8536<TD WIDTH="4%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>By</B> </FONT></TD>8537<TD WIDTH="37%" style="border-bottom: 2px solid black"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT>8538</TD></TR>8539<TR VALIGN="TOP">8540<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>8541<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> President or Vice President</FONT></TD>8542<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="5"> </FONT></TD>8543<TD VALIGN="BOTTOM"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Title</B> </FONT></TD>8544<TD style="border-bottom: 2px solid black"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>8545</TABLE>8546854785488549<BR><BR><BR><BR>8550<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8551<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-6- </FONT></P>8552<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->8553<HR SIZE=3 COLOR=GRAY NOSHADE>8554<!-- MARKER PAGE="sheet: 2; page: 2" -->8555<BR>855685578558<!-- MARKER FORMAT-SHEET="Head Center Underline" FSL="Default" -->8559<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>EXHIBIT B</U> </FONT></P>8560<BR>85618562<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->8563<DIV ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B><BIG>L</BIG>OAN <BIG>P</BIG>AYMENT/<BIG>A</BIG>DVANCE8564<BIG>R</BIG>EQUEST <BIG>F</BIG>ORM</B> </FONT> </DIV>85658566<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->8567<DIV><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8568 DEADLINE8569FOR SAME DAY PROCESSING IS 12:00 P.S.T. </FONT></DIV>8570<BR>857185728573<TABLE CELLPADDING="0" CELLSPACING="0">8574<TR VALIGN="TOP">8575<TD WIDTH="600"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Fax To: 952-475-8471</B> </FONT></TD>8576<TD WIDTH="15" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Date:</B> </FONT> </TD>8577<TD WIDTH="150" style="border-bottom: 1px solid black"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>8578</TABLE><BR>85798580<DIV style="border: 1px solid black">8581<table width="773" border="0" cellspacing="2" cellpadding="0">8582<tr>8583<td width="100"></td>8584<td width="350"><strong><FONT face="Wingdings">o</FONT><font size="3"> <BIG>L</BIG>OAN <BIG>P</BIG>AYMENT:</font></strong></td>8585<td width="10"></td>8586<td></td>8587</tr>85888589<TR><TD> </TD></TR>8590<tr>8591<td width="100"></td>8592<td width="350">8593<div align="right">8594<font size="1"> __________________ (Borrower)</font></div>8595</td>8596<td width="10"></td>8597<td></td>8598</tr>8599<TR><TD> </TD></TR>8600<tr>8601<td width="100"></td>8602<td width="350"><font size="2">From Account # </font><font size="1"> ________________________________</font></td>8603<td width="10"></td>8604<td><font size="2">To Account # </font><font size="1"> ________________________________</font></td>8605</tr>8606<tr>8607<td width="100"></td>8608<td width="350"><font size="1">8609 8610 (Deposit Account #)</font></td>8611<td width="10"></td>8612<td><font size="1"> 8613 (Loan Account #)</font></td>8614</tr>8615<TR><TD> </TD></TR>8616<TR><TD> </TD></TR>8617<tr>8618<td width="100"></td>8619<td colspan="3"><font size="2">Principal $ ________________________________</font><font size="2"> and/or Interest $ ______________________________________</font></td>8620</tr>8621<tr>8622<td width="100"></td>8623<td width="350"></td>8624<td width="10"></td>8625<td></td>8626</tr>8627</table><BR>8628</DIV>862986308631<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8632<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All Borrower’s representation8633and warranties in the Loan and Security Agreement are true, correct and complete in all8634material respects up to and including the date of the transfer request for a loan payment,8635but those representations and warranties expressly referring to another date shall be8636true, correct and complete in all material respects as of that date: </FONT></P>8637<BR>86388639<TABLE CELLPADDING="0" CELLSPACING="0">8640<TR VALIGN="BOTTOM">8641<TH></TH>8642<TH></TH></TR>8643<TR VALIGN="TOP">8644<TD WIDTH="100"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>8645<TD>8646<FONT FACE="Times New Roman, Times, Serif" SIZE="2">8647<B>Authorized Signature:</B>________________________________ Phone Number:______________________________ </FONT> </TD></TR>8648</TABLE>8649<BR><BR>865086518652<DIV style="border: 1px solid black">8653<table width="773" border="0" cellspacing="2" cellpadding="0">8654<tr>8655<td width="100"></td>8656<td width="350"><strong><FONT face="Wingdings">o</FONT><font size="3"> <BIG>L</BIG>OAN <BIG>A</BIG>DVANCE:</font></strong></td>8657<td width="10"></td>8658<td></td>8659</tr>86608661<TR><TD> </TD></TR>8662<tr>8663<td width="100"></td>8664<td colspan="3">8665<div align="left">8666<font size="2"><strong>Complete <em>Outgoing Wire Request</em> section below if all or a portion of the funds from this loan<br>8667advance are for an outgoing wire.</strong></font></div>8668</td></tr>8669<TR><TD> </TD></TR>8670<TR><TD> </TD></TR>8671<tr>8672<td width="100"></td>8673<td width="350"><font size="2">From Account # <U> new8674 8675 8676 </U></font></td>8677<td width="10"></td>8678<td><font size="2">To Account # </font><font size="1"> ________________________________</font></td>8679</tr>8680<tr>8681<td width="100"></td>8682<td width="350"><font size="1">8683 8684 (Loan Account #)</font></td>8685<td width="10"></td>8686<td><font size="1"> 8687 (Deposit Account #)</font></td>8688</tr>8689<TR><TD> </TD></TR>8690<TR><TD> </TD></TR>8691<tr>8692<td width="100"></td>8693<td colspan="3"><font size="2"> Amount of Advance $ _______________________</font></td>8694</tr>8695<tr>8696<td width="100"></td>8697<td width="350"></td>8698<td width="10"></td>8699<td></td>8700</tr>8701</table><BR>8702</DIV>870387048705<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->8706<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All8707Borrower’s representation and warranties in the Loan and Security Agreement are true,8708correct and complete in all material respects up to and including the date of the transfer8709request for an advance, but those representations and warranties expressly referring to8710another date shall be true, correct and complete in all material respects as of that date: </FONT></P>8711<BR>8712<TABLE CELLPADDING="0" CELLSPACING="0">8713<TR VALIGN="BOTTOM">8714<TH></TH>8715<TH></TH></TR>8716<TR VALIGN="TOP">8717<TD WIDTH="100"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>8718<TD>8719<FONT FACE="Times New Roman, Times, Serif" SIZE="2">8720<B>Authorized Signature:</B>________________________________ Phone Number:______________________________ </FONT> </TD></TR>8721</TABLE>8722<BR>8723872487258726<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->8727<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-7- </FONT></P>8728<!-- MARKER FORMAT-SHEET="Page Break" FSL="Workstation" -->8729<HR SIZE=3 COLOR=GRAY NOSHADE>8730<!-- MARKER PAGE="sheet: 2; page: 2" -->8731<BR>8732873387348735<DIV style="border: 1px solid black">8736<table width="773" border="0" cellspacing="2" cellpadding="0">8737<tr>8738<td width="100"></td>8739<td width="350"><strong><font size="3"><BIG>O</BIG>UTGOING <BIG>W</BIG>IRE <BIG>R</BIG>EQUEST:</font></strong></td>8740<td width="10"></td>8741<td></td></tr>87428743<TR><TD> </TD></TR>8744<tr>8745<td width="100"></td>8746<td colspan="3">8747<div align="left">8748<FONT SIZE="2"><STRONG>Complete only if all or a portion of funds from the <I>loan advance</I> above are to be wired.</STRONG> </FONT></div>8749</td>8750</tr>8751<TR><TD> </TD></TR>8752<tr>8753<td width="100"></td>8754<td colspan="3"><font size="2">Deadline for same day processing is 12:00pm, P.S.T.</font></td></tr>8755<TR><TD> </TD></TR>8756<TR><TD> </TD></TR>8757<tr>8758<td width="100"></td>8759<td width="350"><font size="2">Beneficiary Name: </font><font size="1"> ________________________________</font></td>8760<td width="10"></td>8761<td><font size="2">Amount of Wire: $ </font><font size="1"> ________________________________</font></td></tr>8762<TR><TD> </TD></TR>8763<tr>8764<td width="100"></td>8765<td width="350"><font size="2">Beneficiary Bank: </font><font size="1"> _________________________________</font></td>8766<td width="10"></td>8767<td><font size="2">Account Number: </font><font size="1"> _________________________________</font></td></tr>8768<TR><TD> </TD></TR>8769<TR>8770<TD> </TD>8771<td><font size="2">City and State: </font><font size="1"> ____________________________________</font></td></TR>8772<TR><TD> </TD></TR>8773<TR><TD> </TD>8774<td colspan="3"><font size="2">Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __</font></td>8775</TR>8776<TR><TD> </TD></TR>87778778<tr>8779<td width="100"></td>8780<td colspan="3"><font size="2">8781Beneficiary Bank Code (Swift, Sort, Chip, etc.):</font><font size="1"> _______________________________________________________________</font></td></tr>8782<tr>8783<td width="100"></td>8784<td width="350"></td>8785<td width="10"></td>8786<td><font size="1"><strong>(For International Wire Only)</strong></font></td>8787</tr>8788</table><BR>8789</DIV>8790<BR><BR>87918792<table width="773" border="0" cellspacing="2" cellpadding="0">8793<tr>8794<td width="100"></td>8795<td width="350"><font size="2">Intermediary Bank: </font><font size="1"> ________________________________</font></td>8796<td width="10"></td>8797<td><font size="2">Transit (ABA) #: </font><font size="1"> ________________________________</font></td></tr>8798<TR><TD> </TD></TR>8799<tr>8800<td width="100"></td>8801<td colspan="3"><font size="2">For Further Credit to: </font><font size="1">8802__________________________________________________________________________________________________________</font></td>8803</tr>8804<TR><TD> </TD></TR>8805<tr>8806<td width="100"></td>8807<td colspan="3"><font size="2">Special Instruction:</font><font size="1">8808____________________________________________________________________________________________________________</font></td>8809</tr></table><BR>88108811881288138814<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->8815<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <I>By8816signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be8817processed in accordance with and subject to the terms and conditions set forth in the8818agreements(s) covering funds transfer service(s), which agreements(s) were previously8819received and executed by me (us).</I> </FONT></P>882088218822<table width="773" border="0" cellspacing="2" cellpadding="0">8823<tr>8824<td width="100"></td>8825<td width="320"><font size="2">Authorized Signature: </font><font size="1">_____________________________</font></td>8826<td width="10"></td>8827<td><font size="2">2nd Signature (If Required): </font><font size="1">_____________________________</font></td>8828</tr>8829<TR><TD> </TD></TR>8830<tr>8831<td width="100"></td>8832<td width="320"><font size="2">Print Name/Title: </font><font size="1">___________________________________</font></td>8833<td width="10"></td>8834<td><font size="2">Print Name/Title: </font>8835<font size="1">_________________________________________</font></td></tr>8836<TR><TD> </TD></TR>8837<tr>8838<td width="100"></td>8839<td width="320"><font size="2">Telephone # </font>8840<font size="1">_______________________________________</font></td>8841<td width="10"></td>8842<td><font size="2">Telephone # </font>8843<font size="1">_____________________________________________</font></td></tr>8844</table><BR>88458846884788488849<BR>8850<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8851<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-8- </FONT></P>8852<HR SIZE=3 COLOR=GRAY NOSHADE>885388548855</BODY>8856</HTML>8857</TEXT>8858</DOCUMENT>8859<DOCUMENT>8860<TYPE>EX-218861<SEQUENCE>38862<FILENAME>vasc060361_ex21.htm8863<DESCRIPTION>LIST OF SUBSIDIARIES8864<TEXT>8865<HTML>8866<HEAD>8867<TITLE>Exhibit 21 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>8868</HEAD>8869<BODY>8870<BR><BR>887188728873<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->8874<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Exhibit 21 </FONT></H1>88758876<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->8877<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsidiaries </FONT></H1>88788879<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->8880<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vascular Solutions, GmbH8881(Germany) </FONT></P>8882888388848885<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>8886<HR SIZE=3 COLOR=GRAY NOSHADE>88878888888988908891</BODY>8892</HTML>8893</TEXT>8894</DOCUMENT>8895<DOCUMENT>8896<TYPE>EX-23.18897<SEQUENCE>48898<FILENAME>vasc060361_ex23-1.htm8899<DESCRIPTION>CONSENT OF VIRCHOW, KRAUSE & COMPANY, LLP8900<TEXT>8901<HTML>8902<HEAD>8903<TITLE>Exhibit 23.1 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>8904</HEAD>8905<BODY>8906<BR><BR>89078908<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->8909<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 23.1</B> </FONT> </P>8910<BR>89118912<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8913<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONSENT OF INDEPENDENT8914REGISTERED PUBLIC ACCOUNTING FIRM </FONT></P><BR>89158916<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->8917<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We8918consent to the incorporation by reference in the Registration Statements on Form S-8 (File8919No. 333-54164), Form S-3 (File No. 333-127034) and Form S-3 (File No. 333-114231) of8920Vascular Solutions, Inc. of our reports dated January 20, 2006, relating to the8921consolidated financial statements, the financial statement schedule, management’s8922assessment of the effectiveness of internal control over financial reporting and the8923effectiveness of internal control over financial reporting, which appears on pages 39, 418924and 42 of this annual report on Form 10-K for the year ended December 31, 2005. </FONT></P><BR>89258926<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->8927<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8928<TR VALIGN=TOP>8929<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8930<TD nowrap WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ VIRCHOW, KRAUSE & COMPANY, LLP </FONT></TD>8931</TR>8932</TABLE>8933<BR>893489358936<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->8937<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota<BR>January893830, 2006 </FONT></P>893989408941<BR><BR><BR><BR>8942<HR SIZE=3 COLOR=GRAY NOSHADE>89438944</BODY>8945</HTML>8946</TEXT>8947</DOCUMENT>8948<DOCUMENT>8949<TYPE>EX-23.28950<SEQUENCE>58951<FILENAME>vasc060361_ex23-2.htm8952<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP8953<TEXT>8954<HTML>8955<HEAD>8956<TITLE>Exhibit 23.2 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>8957</HEAD>8958<BODY>8959<BR><BR>89608961<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->8962<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 23.2</B> </FONT> </P>8963<BR>896489658966<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->8967<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Consent of Independent8968Registered Public Accounting Firm </FONT></P><BR>89698970<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8971<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by8972reference in the Registration Statements (Form S-8 No. 333-54164, Form S-3 No. 333-1270348973and Form S-3 No. 333-114231) of our report dated January 16, 2004, with respect to the8974consolidated financial statements of Vascular Solutions, Inc. included in the Annual8975Report (Form 10-K) for the year ended December 31, 2005. </FONT></P>89768977<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->8978<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our audits also included the8979financial statement schedule of Vascular Solutions, Inc. listed in Item 15(a). This8980schedule is the responsibility of the Company’s management. Our responsibility is to8981express an opinion based on our audits. In our opinion, the financial statement schedule8982referred to above, when considered in relation to the basic financial statements taken as8983a whole, presents fairly in all material respects the information set forth therein. </FONT></P>89848985<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->8986<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>8987<TR VALIGN=TOP>8988<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>8989<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Ernst & Young LLP</FONT></TD>8990</TR>8991</TABLE>8992<BR><BR>89938994<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->8995<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minneapolis, Minnesota8996<BR>January 30, 2006 </FONT></P>899789988999<BR><BR><BR><BR>9000<HR SIZE=3 COLOR=GRAY NOSHADE>90019002</BODY>9003</HTML>9004</TEXT>9005</DOCUMENT>9006<DOCUMENT>9007<TYPE>EX-31.19008<SEQUENCE>69009<FILENAME>vasc060361_ex31-1.htm9010<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO SECTION 3029011<TEXT>9012<HTML>9013<HEAD>9014<TITLE>Exhibit 31.1 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>9015</HEAD>9016<BODY>9017<BR><BR>90189019<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->9020<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 31.1</B> </FONT> </P>90219022<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->9023<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CERTIFICATIONS </FONT></H1>90249025<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->9026<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Howard Root, certify9027that: </FONT></P>90289029<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9030<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9031<TR VALIGN=TOP>9032<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>9033<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9034<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I9035have reviewed this annual report on Form 10-K of Vascular Solutions, Inc.; </FONT></TD>9036</TR>9037</TABLE>9038<BR>90399040<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9041<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9042<TR VALIGN=TOP>9043<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>9044<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9045<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based9046on my knowledge, this report does not contain any untrue statement of a9047material fact or omit to state a material fact necessary to make the statements9048made, in light of the circumstances under which such statements were made, not9049misleading with respect to the period covered by this report; </FONT></TD>9050</TR>9051</TABLE>9052<BR>90539054<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9055<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9056<TR VALIGN=TOP>9057<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>9058<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9059<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based9060on my knowledge, the financial statements, and other financial information9061included in this report, fairly present in all material respects the financial9062condition, results of operations and cash flows of the registrant as of, and9063for, the periods presented in this report; </FONT></TD>9064</TR>9065</TABLE>9066<BR>90679068<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9069<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9070<TR VALIGN=TOP>9071<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>9072<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9073<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The9074registrant’s other certifying officer and I are responsible for9075establishing and maintaining disclosure controls and procedures (as defined in9076Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial9077reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the9078registrant and have: </FONT></TD>9079</TR>9080</TABLE>9081<BR>90829083<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9084<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9085<TR VALIGN=TOP>9086<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9087<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>9088<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9089<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed9090such disclosure controls and procedures, or caused such disclosure controls and9091procedures to be designed under our supervision, to ensure that material9092information relating to the registrant, including its consolidated subsidiaries,9093is made known to us by others within those entities, particularly during the9094period in which this report is being prepared; </FONT></TD>9095</TR>9096</TABLE>9097<BR>90989099<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9100<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9101<TR VALIGN=TOP>9102<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9103<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>9104<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9105<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed9106such internal control over financial reporting, or caused such internal control9107over financial reporting to be designed under our supervision, to provide9108reasonable assurance regarding the reliability of financial reporting and the9109preparation of financial statements for external purposes in accordance with9110generally accepted accounting principles; </FONT></TD>9111</TR>9112</TABLE>9113<BR>91149115<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9116<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9117<TR VALIGN=TOP>9118<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9119<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>9120<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9121<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluated9122the effectiveness of the registrant’s disclosure controls and procedures9123and presented in this report our conclusions about the effectiveness of the9124disclosure controls and procedures as of the end of the period covered by this9125report based on such evaluation; and </FONT></TD>9126</TR>9127</TABLE>9128<BR>91299130<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9131<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9132<TR VALIGN=TOP>9133<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9134<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) </FONT></TD>9135<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9136<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>disclosed9137in this report any change in the registrant’s internal control over9138financial reporting that occurred during the registrant’s most recent9139fiscal quarter (the registrant’s fourth fiscal quarter in the case of an9140annual report) that has materially affected, or is reasonably likely to9141materially affect, the registrant’s internal control over financial9142reporting; and </FONT></TD>9143</TR>9144</TABLE>9145<BR>91469147<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9148<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9149<TR VALIGN=TOP>9150<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>9151<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9152<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The9153registrant’s other certifying officer and I have disclosed, based on our9154most recent evaluation of internal control over financial reporting, to the9155registrant’s auditors and the audit committee of the registrant’s9156board of directors (or persons performing the equivalent functions):9157</FONT></TD>9158</TR>9159</TABLE>9160<BR>91619162<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9163<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9164<TR VALIGN=TOP>9165<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9166<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>9167<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9168<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all9169significant deficiencies and material weaknesses in the design or operation of9170internal control over financial reporting which are reasonably likely to9171adversely affect the registrant’s ability to record, process, summarize and9172report financial information; and </FONT></TD>9173</TR>9174</TABLE>9175<BR>91769177<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9178<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9179<TR VALIGN=TOP>9180<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9181<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>9182<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9183<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any9184fraud, whether or not material, that involves management or other employees who9185have a significant role in the registrant’s internal control over financial9186reporting. </FONT></TD>9187</TR>9188</TABLE>9189919091919192<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%">9193<TR><TD colspan="2"></TD>9194<TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2><!-- Insert company (optional) --></FONT></TD></TR>9195<TR><TD colspan="4"> </TD></TR><TR><TD colspan="4"> </TD></TR>9196<TR VALIGN=TOP><TD WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</FONT></TD>9197<TD WIDTH=64%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 31, 20069198</FONT></TD>9199<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>9200<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Howard Root </FONT><HR NOSHADE="NOSHADE" COLOR="BLACK" SIZE="1"></TD></TR>9201<TR><TD colspan="3"></TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root</FONT></TD></TR>9202<TR><TD colspan="3"> </TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Chief Executive Officer</I> </FONT></TD></TR>9203</TABLE>9204<BR>9205920692079208<BR>9209<HR SIZE=3 COLOR=GRAY NOSHADE>9210921192129213</BODY>9214</HTML>921592169217</TEXT>9218</DOCUMENT>9219<DOCUMENT>9220<TYPE>EX-31.29221<SEQUENCE>79222<FILENAME>vasc060361_ex31-2.htm9223<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO SECTION 3029224<TEXT>9225<HTML>9226<HEAD>9227<TITLE>Exhibit 31.2 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>9228</HEAD>9229<BODY>9230<BR><BR>92319232<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->9233<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 31.2</B> </FONT> </P>92349235<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->9236<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CERTIFICATIONS </FONT></H1>92379238<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->9239<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, James Hennen, certify9240that: </FONT></P>92419242<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9243<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9244<TR VALIGN=TOP>9245<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>9246<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9247<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I9248have reviewed this annual report on Form 10-K of Vascular Solutions, Inc.; </FONT></TD>9249</TR>9250</TABLE>9251<BR>92529253<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9254<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9255<TR VALIGN=TOP>9256<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>9257<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9258<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based9259on my knowledge, this report does not contain any untrue statement of a material9260fact or omit to state a material fact necessary to make the statements made, in9261light of the circumstances under which such statements were made, not misleading9262with respect to the period covered by this report; </FONT></TD>9263</TR>9264</TABLE>9265<BR>92669267<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9268<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9269<TR VALIGN=TOP>9270<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>9271<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9272<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based9273on my knowledge, the financial statements, and other financial information9274included in this report, fairly present in all material respects the financial9275condition, results of operations and cash flows of the registrant as of, and9276for, the periods presented in this report; </FONT></TD>9277</TR>9278</TABLE>9279<BR>92809281<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9282<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9283<TR VALIGN=TOP>9284<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>9285<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9286<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The9287registrant’s other certifying officer and I are responsible for9288establishing and maintaining disclosure controls and procedures (as defined in9289Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial9290reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the9291registrant and have: </FONT></TD>9292</TR>9293</TABLE>9294<BR>92959296<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9297<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9298<TR VALIGN=TOP>9299<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9300<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>9301<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9302<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed9303such disclosure controls and procedures, or caused such disclosure controls and9304procedures to be designed under our supervision, to ensure that material9305information relating to the registrant, including its consolidated subsidiaries,9306is made known to us by others within those entities, particularly during the9307period in which this report is being prepared; </FONT></TD>9308</TR>9309</TABLE>9310<BR>93119312<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9313<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9314<TR VALIGN=TOP>9315<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9316<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>9317<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9318<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed9319such internal control over financial reporting, or caused such internal control9320over financial reporting to be designed under our supervision, to provide9321reasonable assurance regarding the reliability of financial reporting and the9322preparation of financial statements for external purposes in accordance with9323generally accepted accounting principles; </FONT></TD>9324</TR>9325</TABLE>9326<BR>93279328<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9329<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9330<TR VALIGN=TOP>9331<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9332<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>9333<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9334<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluated9335the effectiveness of the registrant’s disclosure controls and procedures9336and presented in this report our conclusions about the effectiveness of the9337disclosure controls and procedures as of the end of the period covered by this9338report based on such evaluation; and </FONT></TD>9339</TR>9340</TABLE>9341<BR>93429343<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9344<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9345<TR VALIGN=TOP>9346<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9347<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) </FONT></TD>9348<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9349<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>disclosed9350in this report any change in the registrant’s internal control over9351financial reporting that occurred during the registrant’s most recent9352fiscal quarter (the registrant’s fourth fiscal quarter in the case of an9353annual report) that has materially affected, or is reasonably likely to9354materially affect, the registrant’s internal control over financial9355reporting; and </FONT></TD>9356</TR>9357</TABLE>9358<BR>93599360<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->9361<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9362<TR VALIGN=TOP>9363<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>9364<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9365<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The9366registrant’s other certifying officer and I have disclosed, based on our9367most recent evaluation of internal control over financial reporting, to the9368registrant’s auditors and the audit committee of the registrant’s9369board of directors (or persons performing the equivalent functions):9370</FONT></TD>9371</TR>9372</TABLE>9373<BR>93749375<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9376<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9377<TR VALIGN=TOP>9378<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9379<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>9380<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9381<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all9382significant deficiencies and material weaknesses in the design or operation of9383internal control over financial reporting which are reasonably likely to9384adversely affect the registrant’s ability to record, process, summarize and9385report financial information; and </FONT></TD>9386</TR>9387</TABLE>9388<BR>93899390<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->9391<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9392<TR VALIGN=TOP>9393<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9394<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>9395<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9396<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any9397fraud, whether or not material, that involves management or other employees who9398have a significant role in the registrant’s internal control over financial9399reporting. </FONT></TD>9400</TR>9401</TABLE>94029403940494059406<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%">9407<TR><TD colspan="2"></TD>9408<TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2><!-- Insert company (optional) --></FONT></TD></TR>9409<TR><TD colspan="4"> </TD></TR><TR><TD colspan="4"> </TD></TR>9410<TR VALIGN=TOP><TD WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: </FONT></TD>9411<TD WIDTH=64%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>January 31, 2006 </FONT></TD>9412<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>9413<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ James Hennen </FONT><HR NOSHADE="NOSHADE" COLOR="BLACK" SIZE="1"></TD></TR>9414<TR><TD colspan="3"></TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen </FONT></TD></TR>9415<TR><TD colspan="3"> </TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Chief Financial Officer</I> </FONT></TD></TR>9416</TABLE>9417<BR>941894199420<BR>9421<HR SIZE=3 COLOR=GRAY NOSHADE>9422942394249425</BODY>9426</HTML>9427</TEXT>9428</DOCUMENT>9429<DOCUMENT>9430<TYPE>EX-32.19431<SEQUENCE>89432<FILENAME>vasc060361_ex32-1.htm9433<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO SECTION 9069434<TEXT>9435<HTML>9436<HEAD>9437<TITLE>Exhibit 32.1 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>9438</HEAD>9439<BODY>9440<BR><BR>944194429443<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->9444<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 32.1</B> </FONT> </P>94459446<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->9447<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CERTIFICATION PURSUANT TO9448<BR>18 U.S.C. §1350,9449<BR>AS ADOPTED PURSUANT TO9450<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</FONT></H1>9451<BR>94529453<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->9454<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the Annual Report of Vascular Solutions, Inc. (the9455“Company”) on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission9456(the “Report”), I, Howard Root, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as9457adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: </FONT></P>94589459<!-- MARKER FORMAT-SHEET="Para (List) Hang Level 2" FSL="Default" -->9460<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9461<TR VALIGN=TOP>9462<TD ALIGN=RIGHT WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>9463<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9464<TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Report fully complies with the requirements of9465Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and </FONT></P></TD>9466</TR>9467</TABLE>9468<BR>94699470<!-- MARKER FORMAT-SHEET="Para (List) Hang Level 2" FSL="Default" -->9471<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9472<TR VALIGN=TOP>9473<TD ALIGN=RIGHT WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>9474<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9475<TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information contained in the Report fairly9476presents, in all material respects, the financial condition and results of operations of the Company.9477</FONT></P></TD>9478</TR>9479</TABLE>948094819482<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%">9483<TR><TD colspan="2"></TD>9484<TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>9485<TR><TD colspan="4"> </TD></TR><TR><TD colspan="4"> </TD></TR>9486<TR VALIGN=TOP><TD WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>9487<TD WIDTH=64%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9488<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>9489<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Howard Root </FONT><HR NOSHADE="NOSHADE" COLOR="BLACK" SIZE="1"></TD></TR>9490<TR><TD colspan="3"></TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Howard Root</FONT></TD></TR>9491<TR><TD colspan="3"> </TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Executive Officer<BR>January 31, 2006</FONT></TD></TR>9492</TABLE>9493<BR>9494949594969497<BR><BR><BR><BR><BR><BR>9498<HR SIZE=3 COLOR=GRAY NOSHADE>9499950095019502</BODY>9503</HTML>95049505</TEXT>9506</DOCUMENT>9507<DOCUMENT>9508<TYPE>EX-32.29509<SEQUENCE>99510<FILENAME>vasc060361_ex32-2.htm9511<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO SECTION 9069512<TEXT>9513<HTML>9514<HEAD>9515<TITLE>Exhibit 32.2 to Vascular Solutions, Inc. Form 10-K dated December 31, 2005 </TITLE>9516</HEAD>9517<BODY>9518<BR><BR>951995209521<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->9522<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Exhibit 32.2</B> </FONT> </P>95239524<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->9525<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CERTIFICATION PURSUANT TO9526<BR>18 U.S.C. §1350,9527<BR>AS ADOPTED PURSUANT TO9528<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </FONT></H1><BR>952995309531<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the Annual Report of Vascular Solutions, Inc. (the9532“Company”) on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission9533(the “Report”), I, James Hennen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as9534adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: </FONT></P>95359536<!-- MARKER FORMAT-SHEET="Para (List) Hang Level 2" FSL="Default" -->9537<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9538<TR VALIGN=TOP>9539<TD ALIGN=RIGHT WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>9540<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9541<TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Report fully complies with the requirements of9542Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and </FONT></P></TD>9543</TR>9544</TABLE>9545<BR>95469547<!-- MARKER FORMAT-SHEET="Para (List) Hang Level 2" FSL="Default" -->9548<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>9549<TR VALIGN=TOP>9550<TD ALIGN=RIGHT WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>9551<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9552<TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information contained in the Report fairly9553presents, in all material respects, the financial condition and results of operations of the Company. </FONT></P></TD>9554</TR>9555</TABLE>9556955795589559<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%">9560<TR><TD colspan="2"></TD>9561<TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>9562<TR><TD colspan="4"> </TD></TR><TR><TD colspan="4"> </TD></TR>9563<TR VALIGN=TOP><TD WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>9564<TD WIDTH=64%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>9565<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>9566<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ James Hennen </FONT><HR NOSHADE="NOSHADE" COLOR="BLACK" SIZE="1"></TD></TR>9567<TR><TD colspan="3"></TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>James Hennen</FONT></TD></TR>9568<TR><TD colspan="3"> </TD><TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer<BR>January 31, 2006</FONT></TD></TR>9569</TABLE>9570<BR>9571957295739574<BR><BR><BR><BR><BR><BR>9575<HR SIZE=3 COLOR=GRAY NOSHADE>9576957795789579</BODY>9580</HTML>9581</TEXT>9582</DOCUMENT>9583</SEC-DOCUMENT>9584-----END PRIVACY-ENHANCED MESSAGE-----958595869587