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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001104659-02-004008.txt : 20020814
<SEC-HEADER>0001104659-02-004008.hdr.sgml : 20020814
<ACCEPTANCE-DATETIME>20020814125800
ACCESSION NUMBER:		0001104659-02-004008
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20020630
FILED AS OF DATE:		20020814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ANIKA THERAPEUTICS INC
		CENTRAL INDEX KEY:			0000898437
		STANDARD INDUSTRIAL CLASSIFICATION:	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
		IRS NUMBER:				043145961
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14027
		FILM NUMBER:		02733540

	BUSINESS ADDRESS:	
		STREET 1:		236 WEST CUMMINGS PARK
		CITY:			WOBURN
		STATE:			MA
		ZIP:			01801
		BUSINESS PHONE:		6179326616

	MAIL ADDRESS:	
		STREET 1:		236 WEST CUMMINGS PARK
		CITY:			WOBURN
		STATE:			MA
		ZIP:			01801

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ANIKA RESEARCH INC
		DATE OF NAME CHANGE:	19930309
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>j4192_10q.htm
<DESCRIPTION>10-Q
<TEXT>
<html>



<head>



<title>  </title>



</head>



<body>



<div style="font-family:'Times New Roman';">



<div style="border:none;border-top:double windowtext 9.0pt;padding:0in 0in 0in 0in;">



<p style="border:none;margin:0in 0in .0001pt;padding:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



</div>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">SECURITIES AND EXCHANGE COMMISSION</font></b></p>



<h1 style="letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">WASHINGTON, D.C.

20549</font></b></h1>





<div align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="1" width="25%" noshade color="black" align="center">



</font></b></div>





<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<h1 style="letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;">FORM

10-Q</font></b></h1>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.6%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="3" face="Wingdings" style="font-family:Wingdings;font-size:12.0pt;font-weight:bold;">&#253;</font></b></p>

  </td>

  <td width="93%" valign="top" style="padding:0in .7pt 0in .7pt;width:93.4%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;letter-spacing:-.1pt;">QUARTERLY REPORT PURSUANT TO SECTION

  13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">For the quarterly period

ended June 30, 2002</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.6%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="3" face="Wingdings" style="font-family:Wingdings;font-size:12.0pt;font-weight:bold;">o</font></b></p>

  </td>

  <td width="93%" valign="top" style="padding:0in .7pt 0in .7pt;width:93.4%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;letter-spacing:-.1pt;">TRANSITION REPORT PURSUANT TO SECTION

  13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">For the

transition period

from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<h1 style="letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Commission File

Number 000-21326</font></b></h1>





<div align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="1" width="25%" noshade color="black" align="center">



</font></b></div>





<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<div align="center">



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;letter-spacing:-.1pt;">Anika Therapeutics,&nbsp;Inc.</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(Exact Name of Registrant as Specified in Its Charter)</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt .7pt .7pt;width:48.16%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Massachusetts</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:2.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" valign="top" style="padding:0in .7pt .7pt .7pt;width:49.14%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">04-3145961</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt .7pt .7pt;width:48.16%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(State or Other Jurisdiction of Incorporation or Organization)</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:2.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" valign="top" style="padding:0in .7pt .7pt .7pt;width:49.14%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(I.R.S. Employer Identification No.)</font></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt .7pt .7pt;width:48.16%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:2.7%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" valign="top" style="padding:0in .7pt .7pt .7pt;width:49.14%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt .7pt .7pt;width:48.16%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">236 West Cummings Park, Woburn, Massachusetts</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:2.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" valign="top" style="padding:0in .7pt .7pt .7pt;width:49.14%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">01801</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt .7pt .7pt;width:48.16%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(Address of Principal Executive Offices)</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:2.7%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" valign="top" style="padding:0in .7pt .7pt .7pt;width:49.14%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(Zip Code)</font></p>

  </td>

 </tr>

 <tr>

  <td width="48%" valign="top" style="padding:0in .7pt .7pt .7pt;width:48.16%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:2.7%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" valign="top" style="padding:0in .7pt .7pt .7pt;width:49.14%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Registrant&#146;s

  Telephone Number, Including Area Code: <b><font style="font-weight:bold;">(781)&nbsp;932-6616</font></b></font></p>

  </td>

 </tr>

</table>



</div>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Former Name, Former Address and Former Fiscal

Year, if Changed Since Last Report.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Indicate by check mark whether the registrant

(1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15

(d)&nbsp;of the Securities Exchange Act of 1934 during the preceding

12&nbsp;months (or for such shorter period that the registrant was required to

file such reports), and (2)&nbsp;has been subject to such filing requirements

for the last 90&nbsp;days.&#160; Yes </font><font face="Wingdings" style="font-family:Wingdings;">&#253;</font>&#160;&#160;&#160; No <font face="Wingdings" style="font-family:Wingdings;">o</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Indicate the number of shares

outstanding of each of the issuer&#146;s classes of common stock, as of the last

practicable date.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">At August 7, 2002 there were 9,934,280 outstanding

shares of Common Stock, par value $.01 per share.</font></p>



<div style="border:none;border-bottom:double windowtext 9.0pt;padding:0in 0in 0in 0in;">



<p style="border:none;margin:0in 0in .0001pt;padding:0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



</div>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PART I: FINANCIAL INFORMATION</font></b></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">ITEM 1: FINANCIAL STATEMENTS</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Anika Therapeutics, Inc. and Subsidiaries</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Consolidated Balance Sheets</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="100%" style="border:none;border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="68%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">June 30,<br>

  2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">December

  31,<br>

  2001</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ASSETS</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">(Unaudited)</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Current

  assets:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cash and equivalents</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">7,477,859</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,064,977</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Short-term marketable

  securities</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,500,000</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,994,401</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accounts receivable, net of

  reserves of $25,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,228,694</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,240,929</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Inventories</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,786,648</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,726,982</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Prepaid expenses and other

  current assets</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">455,603</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">540,476</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total

  current assets</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">17,448,804</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">19,567,765</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Property and equipment, at

  cost</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,572,235</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,530,047</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Less:&#160; accumulated depreciation</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(7,126,819</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(6,583,175</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,445,416</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,946,872</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Long-term deposits</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">143,060</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">148,160</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Notes receivable from

  officers</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">178,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">253,000</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total assets</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20,215,280</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">22,915,797</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p align="center" style="margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">LIABILITIES

  AND STOCKHOLDERS&#146; EQUITY</font></b></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Current liabilities:</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accounts payable</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">765,938</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">954,585</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accrued expenses</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,740,923</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,842,399</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Deferred revenue</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">566,010</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">15,001</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total current liabilities</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,072,871</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,811,985</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Stockholders&#146; equity:</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Redeemable convertible

  preferred stock, $.01 par value; 750,000 shares authorized, no shares issued

  and outstanding</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Undesignated preferred stock,

  $.01 par value; 1,250,000 shares authorized, no shares issued and outstanding</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Common stock, $.01 par value;

  30,000,000 shares authorized, 9,991,943 shares issued</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">99,919</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">99,919</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Additional paid-in capital</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">31,640,234</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">31,640,234</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Treasury stock (at cost,

  57,663 shares)</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(279,756</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(279,756</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accumulated deficit</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(14,317,988</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(11,356,585</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total stockholders&#146; equity</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">17,142,409</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20,103,812</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total liabilities and

  stockholders&#146; equity</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20,215,280</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">22,915,797</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The accompanying notes are an integral part of

these unaudited consolidated financial statements.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='2',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Anika Therapeutics, Inc. and Subsidiaries</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Consolidated Statements of Operations</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">(Unaudited)</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="39%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="28%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:28.06%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Quarter

  Ended June 30,</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="28%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:28.08%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Six Months

  Ended June 30,</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Product revenue</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:11.72%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,415,877</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,919,034</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,800,594</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,097,652</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">License revenue</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">10,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total revenue</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,420,877</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,919,034</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,810,594</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,097,652</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cost of product revenue</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,201,318</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,109,049</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,288,732</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,077,997</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Gross profit</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,219,559</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">809,985</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,521,862</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,019,655</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Operating expenses:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Research and development</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,050,426</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">921,325</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,140,300</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,269,195</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Selling, general and

  administrative</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,388,837</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,858,790</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,468,332</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,247,364</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Litigation settlement costs</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">886,480</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">950,716</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total operating expenses</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,439,263</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,666,595</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,608,632</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">6,467,275</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Loss from operations</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(1,219,704</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(2,856,610</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(3,086,770</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(5,447,620</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Interest income, net</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">62,508</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">206,202</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">125,367</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">478,781</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Net loss</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.72%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(1,157,196</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(2,650,408</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(2,961,403</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(4,968,839</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Basic and diluted net loss

  per common share</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:11.72%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(0.12</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(0.27</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(0.30</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(0.50</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.0%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Shares used to calculate

  basic and diluted net loss per common share</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,934,280</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,934,280</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,934,280</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,934,280</font></p>

  </td>

  <td width="0%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:.86%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The accompanying notes are an integral part of

these unaudited consolidated financial statements.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='3',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Anika

Therapeutics, Inc. and Subsidiaries</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Consolidated Statements of Cash Flows</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">For the Six Months Ended</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">(Unaudited)</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="100%" style="border:none;border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="68%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">June 30,<br>

  2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">June 30,<br>

  2001</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cash flows from operating

  activities:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Net loss</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(2,961,403</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(4,968,839</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Adjustments to reconcile net

  loss to net cash used by operations:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Depreciation</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">543,644</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">471,360</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Amortization of deferred

  compensation</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">127,645</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Forgiveness of note

  receivable from officer</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">129,000</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Changes in operating assets

  and liabilities:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accounts receivable</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">12,235</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">486,309</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Inventories</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">940,334</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">112,972</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Prepaid expenses and other

  current assets</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">84,873</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">137,823</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accounts payable</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(188,647</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">781,107</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Accrued expenses</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(101,476</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">485,363</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Deferred revenue</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">551,009</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">237,657</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Net cash used in operating

  activities</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(1,119,431</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(1,999,603</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cash flows from investing

  activities</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Proceeds from sale of

  short-term marketable securities</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,994,401</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">12,001,865</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Purchase of short-term

  marketable securities</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(2,500,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(9,383,839</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Purchase of property and equipment</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(42,188</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(626,355</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Note receivable from officers</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">75,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Deposits</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,100</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,940</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Net cash provided by (used

  in) investing activities</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(467,687</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,997,611</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Decrease in cash and cash

  equivalents</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(1,587,118</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(1,992</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cash and cash equivalents at

  beginning of period</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9,064,977</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">8,265,936</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="68%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:68.96%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cash and cash equivalents at

  end of period</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">7,477,859</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">8,263,944</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.96%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The

accompanying notes are an integral part of these unaudited consolidated

financial statements.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='4',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ANIKA THERAPEUTICS, INC.</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">NOTES TO

CONSOLIDATED FINANCIAL STATEMENTS</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Unaudited)</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">1.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Nature of Business</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Anika Therapeutics, Inc. (&#147;Anika&#148; or the &#147;Company&#148;)

develops, manufactures and commercializes therapeutic products and devices

intended to promote the protection and healing of bone, cartilage and soft

tissue. These products are based on hyaluronic acid (&#147;HA&#148;), a naturally

occurring, biocompatible polymer found throughout the body. Due to its unique

biophysical and biochemical properties, HA plays an important role in a number

of physiological functions such as the protection and lubrication of soft

tissues and joints, the maintenance of the structural integrity of tissues, and

the transport of molecules to and within cells. The Company&#146;s currently

marketed products consist of ORTHOVISC<sup>&#174;</sup>, which is an HA product used

in the treatment of some forms of osteoarthritis in humans, and HYVISC<sup>&#174;</sup>,

which is an HA product used in the treatment of equine osteoarthritis.

ORTHOVISC<sup>&#174;</sup> is currently approved for sale and is being marketed in

Canada, parts of Europe, Turkey, and Israel. In the U.S., ORTHOVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup> is currently

limited to investigational use. The Company manufactures AMVISC<sup>&#174;</sup> and

AMVISC<sup>&#174;</sup> Plus for Bausch &amp; Lomb Surgical, which are HA products

used as viscoelastic supplements in ophthalmic surgery.&#160; The Company also manufactures CoEase<font face="Symbol" style="font-family:Symbol;">&#212;</font>

for Advanced Medical Optics, Inc., STAARVISC<sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup>II

for STAAR Surgical Company and ShellGel<font face="Symbol" style="font-family:Symbol;">&#212;</font>

for Cytosol Ophthalmics, Inc. which are injectible ophthalmic viscoelastic

products.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">2.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Basis of Presentation</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The accompanying consolidated financial statements

have been prepared by the Company without audit, pursuant to the rules and

regulations of the Securities and Exchange Commission and in accordance with

accounting principles generally accepted in the United States.&#160; In the opinion of management, these

consolidated financial statements contain all adjustments (consisting only of

normal recurring adjustments) necessary to fairly state the financial position

of the Company as of June 30, 2002, the results of its operations for the

quarter and six months ended June 30, 2002 and 2001 and it&#146;s cash flows for the

six months ended June 30, 2002 and 2001.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The accompanying consolidated financial statements and

related notes should be read in conjunction with the Company&#146;s annual financial

statements filed with the Annual Report on Form 10-K for the year ended

December 31, 2001. The results of operations for the quarter and six months

ended June 30, 2002 are not necessarily indicative of the results to be

expected for the year ending December 31, 2002.&#160; See &#147;Risk Factors and Certain Factors Affecting Future Operating

Results&#148;.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">3.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Summary of Significant Accounting Policies</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<h6 align="left" style="font-style:italic;font-weight:normal;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">Use of Estimates</font></i></h6>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The preparation of financial statements in conformity with accounting

principles generally accepted in the United States requires management to make

estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities at the date of

the financial statements and the reported amounts of revenues and expenses

during the reporting period. Actual results could differ from those estimates.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='5',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-autospace:none;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Principles

of Consolidation</font></i></p>



<p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The accompanying

consolidated financial statements include the accounts of Anika Therapeutics,

Inc. and its wholly owned subsidiaries, Anika Securities Corporation and Anika

Therapeutics UK, Ltd.&#160; All intercompany

transactions and balances have been eliminated in consolidation.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Cash and Cash Equivalents</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Cash and cash equivalents consist of cash and investments with original

maturities of 90 days or less.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Marketable Securities</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company

follows the provisions of Statement of Financial Accounting Standards (&#147;SFAS&#148;)

No.&nbsp;115, <i><font style="font-style:italic;">Accounting for Certain

Investments in Debt and Equity Securities.&#160;

</font></i>Short-term marketable securities consist of investments with

maturities within twelve months of the balance sheet date. The Company

classifies these marketable securities as held to maturity, and accordingly

they are carried at amortized cost. Aggregate fair value, amortized cost and

average maturity for marketable securities held at June 30, 2002 and December

31, 2001 are as follows:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="95%" style="border:none;border-collapse:collapse;margin-left:.25in;width:95.0%;">

 <tr>

  <td width="53%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="font-size:1.0pt;font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="left" style="font-size:1.0pt;font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:avoid;text-align:left;">&nbsp;</p>

  </td>

  <td width="43%" colspan="8" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:43.14%;">

  <p style="font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">June 30, 2002</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.88%;">

  <p align="left" style="font-size:1.0pt;font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:avoid;text-align:left;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="53%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">Amortized</font></b><b><font size="1" style="font-size:8.0pt;font-weight:bold;">  <font style="letter-spacing:-.1pt;">Cost</font></font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">Gross Unrealized<br>

  Holding Gain(Loss)</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.02%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">Fair Value</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.88%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="53%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Commercial Bond (12 month maturity)</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,000,000</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(3,040</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.02%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,996,960</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="53%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Municipal Bond (12 month maturity)</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,500,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.02%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,500,000</font></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="53%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,500,000</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(3,040</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.02%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">)</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,496,960</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.88%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="95%" style="border:none;border-collapse:collapse;margin-left:.25in;width:95.0%;">

 <tr>

  <td width="53%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="font-size:1.0pt;font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt 10.0pt;page-break-after:avoid;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p align="left" style="font-size:1.0pt;font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:avoid;text-align:left;">&nbsp;</p>

  </td>

  <td width="43%" colspan="8" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:43.12%;">

  <p style="font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">December

  31, 2001</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.9%;">

  <p align="left" style="font-size:1.0pt;font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:avoid;text-align:left;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="53%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.02%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">Amortized</font></b><b><font size="1" style="font-size:8.0pt;font-weight:bold;">  <font style="letter-spacing:-.1pt;">Cost</font></font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">Gross Unrealized<br>

  Holding Gain(Loss)</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.02%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="13%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.04%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">Fair Value</font></b></p>

  </td>

  <td width="0%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:.9%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="53%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Commercial Paper (weighted average maturity of 5.5

  months)</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.72%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,994,401</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">39,802</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.02%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:11.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,034,203</font></p>

  </td>

  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:.9%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr height="0">

  <td width="370" style="border:none;"></td>

  <td width="14" style="border:none;"></td>

  <td width="9" style="border:none;"></td>

  <td width="80" style="border:none;"></td>

  <td width="14" style="border:none;"></td>

  <td width="9" style="border:none;"></td>

  <td width="81" style="border:none;"></td>

  <td width="14" style="border:none;"></td>

  <td width="9" style="border:none;"></td>

  <td width="81" style="border:none;"></td>

  <td width="6" style="border:none;"></td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">During the six months ending June 30, 2002, securities

classified as held to maturity, with an aggregate amortized cost of $2,032,000,

including interest and realized gains of $37,599, matured.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Revenue Recognition</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Product revenue is recognized upon shipment to the

customer as long as there is persuasive evidence of an arrangement, the sales

price is fixed or determinable and collection of the related receivable is

probable.&#160; ORTHOVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup> has been sold

through several distribution arrangements as well as two outsource order

processing arrangements (&#147;logistics agents&#148;). Sales of product through third

party logistics agents in certain markets are recognized as revenue upon

shipment by the logistics agent to the customer.&#160; The Company recognizes non-refundable up-front or milestone

payments received as part of supply, distribution, and marketing arrangements,

ratably over the terms of the agreements to which the payments apply.&#160; Amounts received or billed prior to meeting

the Company&#146;s revenue recognition criteria are recorded as deferred revenue in

the accompanying balance sheet.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='6',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Reporting Comprehensive Income</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">SFAS No.&nbsp;130, <i><font style="font-style:italic;">Reporting Comprehensive Income,</font></i>

establishes standards for reporting and display of comprehensive income (loss)

and its components in the financial statements. Comprehensive income (loss) is

the total of net income (loss) and all other non-owner changes in equity

including such items as unrealized holding gains/losses on securities, foreign

currency translation adjustments and minimum pension liability adjustments. The

Company had no other items of comprehensive income (loss) for the quarter and

six months ended June 30, 2002 and 2001 except for its reported net loss.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<h6 align="left" style="font-style:italic;font-weight:normal;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">Disclosures About Segments

of an Enterprise and Related Information</font></i></h6>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Operating segments are identified

as components of an enterprise about which separate discrete financial

information is available for evaluation by the chief operating decision maker,

or decision-makers, in making decisions regarding how to allocate resources and

assess performance. The Company&#146;s chief decision-making group consists of two

individuals: the chief executive officer and president and the&#160; chief financial officer. Based on the

criteria established by SFAS No. 131, <i><font style="font-style:italic;">Disclosures

about Segments of an Enterprise and Related Information</font></i>, the Company

has one reportable operating segment, the results of which are disclosed in the

accompanying financial statements.&#160;

Substantially all of the operations and assets of the Company have been

derived from and are located in the United States.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Revenues by geographic location

in total and as a percentage of total revenues are as follows:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="85%" style="border:none;border-collapse:collapse;margin-left:.5in;width:85.0%;">

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="68%" colspan="9" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:68.24%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Quarter

  Ended June,</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.94%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.96%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of<br>

  Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of<br>

  Revenue</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">United States</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,688,277</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">78.6</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,955,793</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">67.0</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Middle East</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">30,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">0.9</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Other/Europe</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">702,600</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20.5</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">963,241</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">33.0</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,420,877</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,919,034</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="85%" style="border:none;border-collapse:collapse;margin-left:.5in;width:85.0%;">

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="68%" colspan="9" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:68.24%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Six Months

  Ended June 30,</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.94%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.96%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of<br>

  Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of<br>

  Revenue</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">United States</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,551,380</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">78.3</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,396,275</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">66.6</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Middle East</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">89,115</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1.5</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">11,950</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">0.2</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Other/Europe</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,170,099</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20.2</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,689,427</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">33.1</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,810,594</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.52%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.78%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,097,652</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt .2in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Since early 2001, sales of product for the Turkish market have been made

to a European-based entity and have accordingly been classified in the

&#147;Other/Europe&#148; category since that time.</font></p>



<p style="margin:0in 0in .0001pt .2in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Product revenue by significant customers as a percent of total revenues

is as follows:</font></p>



<p style="margin:0in 0in .0001pt .2in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="85%" style="border:none;border-collapse:collapse;margin-left:.5in;width:85.0%;">

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.94%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Quarter

  Ended June 30,</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.96%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Six Months

  Ended June 30,</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.28%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">AMVISC</font><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font><font style="letter-spacing:-.1pt;"> Bausch &amp; Lomb</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.28%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">42.2</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">50.9</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">47.1</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">56.9</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">HYVISC</font><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font><font style="letter-spacing:-.1pt;"> Boehringer Ingelheim</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.28%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">16.6</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">9.8</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">15.1</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">7.9</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">ORTHOVISC</font><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font><font style="letter-spacing:-.1pt;"> Pharmaren AG</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.28%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">11.6</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">23.7</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">8.9</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">22.1</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.28%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">70.4</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">84.4</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">71.1</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">86.9</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.18%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='7',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">4.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Earnings Per Share</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company

reports earnings per share in accordance with SFAS No. 1<font style="letter-spacing:-.1pt;">28, <i><font style="font-style:italic;">Earnings per Share</font></i>,

which establishes standards for computing and presenting earnings (loss) per

share.</font></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Basic earnings per

share is computed by dividing net income (loss) by the weighted average number

of common shares outstanding during the period. Diluted earnings per share is

computed by dividing net income (loss) by the weighted average number of common

shares and dilutive potential common shares outstanding during the period.

Under the treasury stock method, the dilutive unexercised options are assumed

to be exercised at the beginning of the period or at issuance, if later. The

assumed proceeds are then used to purchase common shares at the average market

price during the period. For periods where the Company has incurred a loss,

dilutive net loss per share is equal to basic net loss per share.&#160; Accordingly, the dilutive effect of

outstanding options totaling 126,875 and 416,500, respectively, at June 30,

2002 and 2001, are excluded from the calculation of diluted weighted average

shares outstanding because to include them would have been antidilutive for the

periods presented.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">5.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Inventories</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories

consist of the following: </font></p>



<table border="1" cellspacing="0" cellpadding="0" width="75%" style="border:none;border-collapse:collapse;margin-left:1.0in;width:75.0%;">

 <tr>

  <td width="58%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:58.66%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt 10.0pt;text-align:center;text-indent:-10.0pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">June 30,<br>

  2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;letter-spacing:-.1pt;">December 31,<br>

  2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="58%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:58.66%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Raw materials</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.64%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,256,422</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.64%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,542,511</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="58%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:58.66%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Work-in-process</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:17.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,320,791</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="17%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:17.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,971,067</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="58%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:58.66%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Finished goods</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">209,435</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="17%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">213,404</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="58%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:58.66%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="15%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.64%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,786,648</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.66%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="15%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.64%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,726,982</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Inventories are stated at the lower of cost or market, with cost being

determined using the first-in, first-out (FIFO) method.&#160; Work-in-process and finished goods

inventories include materials, labor, and manufacturing overhead.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">6.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Notes Receivable from Officers</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Notes receivable from officers of $178,000 consists of loans made to one

officer and one former officer.&#160; The

note receivable from the officer accrues interest at 6.22%.&#160; The note receivable from the former officer

is secured by a mortgage on his primary residence, accrues interest at an annual

rate of 6.0% and is due on August 12, 2004.&#160;

A note in the amount of $75,000 from the Company&#146;s former chief

executive officer was repaid on June 12, 2002.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">7.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Licensing and Distribution Agreements</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In July 2000, the

Company entered into a seven-year supply agreement (the &#147;BLS Agreement&#148;) with

Bausch &amp; Lomb Surgical, a unit of Bausch &amp; Lomb.&#160; Under the terms of the BLS Agreement,

effective January 1, 2001, the Company became Bausch &amp; Lomb&#146;s exclusive provider

of AMVISC<sup>&#174;</sup> and AMVISC<sup>&#174;</sup> Plus, ophthalmic viscoelastic

products, in the U.S. and international markets.&#160; The BLS Agreement expires December 31, 2007, superceding an

existing supply contract with Bausch &amp; Lomb Surgical that was set to expire

December 31, 2001 (the &#147;Old BLS Agreement&#148;).&#160;

The BLS Agreement is subject to early termination and/or reversion to a

non-exclusive basis under certain circumstances.&#160; The</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='8',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">BLS Agreement lifts

contractual restrictions on the Company&#146;s sales of certain ophthalmic products

to other companies contained in the Old BLS Agreement, subject to payment of

royalties to Bausch &amp; Lomb by the Company.&#160;&#160; The Company agreed to a reduction in unit selling prices

effective April 1, 2000, and the elimination of minimum unit purchase obligations

by Bausch &amp; Lomb Surgical.&#160; Under

the terms of the BLS Agreement, the price for units sold in a calendar year is

dependent on total unit volume of sales of certain ophthalmic products during

the year. Accordingly, unit prices for sales occurring in the six months ended

June 30, 2002 are subject to possible retroactive price adjustments when the

actual annual unit volume for 2002 becomes known.&#160; In accordance with the Company&#146;s revenue recognition policy, revenue

is not recognized if the sale price is not fixed or determinable and any

amounts received in excess of revenue recognized is recorded as deferred

revenue. At June 30, 2002, the deferred revenue under the BLS Agreement

amounted to approximately $488,000.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In April 2001, the

Company entered into a five-year supply agreement with Cytosol Ophthalmics,

Inc.&#160; Under the terms of the agreement,

effective April 11, 2001, the Company became Cytosol Ophthalmic&#146;s exclusive

provider of sterile sodium hyaluronate ophthalmic viscoelastic products in the

U.S. and international markets.&#160; Under

the agreement, in lieu of up-front payments, the Company is entitled to an

increase in the price per unit it charges Cytosol of $2 per unit for the

initial 50,000 units purchased.&#160; As a

result, revenue of $2 per unit for the initial 50,000 units purchased will be

deferred at the time of shipment and recognized ratably over the remaining term

of the agreement.&#160; The agreement expires

April 11, 2006.&#160; The agreement is

subject to early termination and/or reversion to a non-exclusive basis under

certain circumstances. At June 30, 2002, deferred revenue under this agreement

amounted to approximately $73,000. At June 30, 2002, deferred revenue also

includes $5,000 relating to fees paid to the Company under its agreement with AMA

Pharmaceuticals.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">8.</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">Legal Matters</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Securities

and Exchange Commission Investigation</font></i>.&#160;&#160; The SEC has issued a formal order of

investigation and has required the Company to provide information in connection

with certain revenue recognition matters.&#160;

The Company has been cooperating fully.&#160;

These matters, relating to the Company&#146;s historical accounting for and

disclosures concerning sales of ORTHOVISC<sup><font face="Symbol" style="font-family:Symbol;">&#210;</font></sup>

under a long-term supply and distribution agreement with Zimmer, were also the

subject of the Company&#146;s March 15, 2000 disclosure concerning an informal SEC

inquiry and the restatement of results for 1998 and the first three quarters of

1999.&#160; As reported on August 14, 2001,

as a result of the SEC&#146;s ongoing investigation, the Company, in conjunction

with its independent auditors, determined to again restate its financial

results for the fourth quarter of 1998 and the first quarter of 1999.&#160; As a result of the SEC&#146;s investigation, the

Company has been informed that the staff of the Boston District Office of the SEC

(the &#147;Staff&#148;) is considering recommending that the SEC authorize civil

injunctive actions against the Company and others, including former officers of

the Company, concerning these matters.&#160;

The Company was invited by the Staff to submit its views as to why a

civil injunctive action against the Company should not be instituted, and the

Company did so.&#160; The Company is

currently in discussions with the Staff concerning possible resolution of the

matter by settlement.&#160; The Company is

not in a position to predict whether such a settlement will be reached.&#160; In addition, if the Company expends

substantial additional costs and fees in responding to this matter, then the

matter may have an adverse effect on the Company&#146;s financial position.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='9',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
<br clear="all" style="page-break-before:always;">

</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman"><font style="font-size:10.0pt;font-weight:bold;">ITEM 2. MA</font>NAGEMENT&#146;S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">This

Quarterly Report on Form 10-Q contains forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933 and Section 21E of the

Securities Exchange Act of 1934, including statements regarding:</font></i></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>our

future sales and product revenues, including possible retroactive price

adjustments, expectations regarding unit volumes or other offsets to price

reductions;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>our

efforts to increase sales of ophthalmic viscoelastic products;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>our

manufacturing capacity and work-in-process manufacturing;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>the

timing, scope, and rates of patient enrollment in clinical trials and related

costs;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>FDA

or other regulatory approvals and/or reimbursement approvals of new or

potential products;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>the

development of possible new products;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>the

rate at which we use cash and the amounts used;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>possible

negotiations or renegotiations with existing or new distribution and

collaboration partners; and</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="3" face="Times New Roman" style="font-size:12.0pt;font-style:italic;">&#149;</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i>the

possible resolution of the SEC investigation by settlement, and the effect of

the SEC investigation on our financial position if we expend substantial

additional costs and fees in our response to the investigation.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Statements identified by words such

as &#147;will,&#148; &#147;likely,&#148; &#147;may,&#148; &#147;believe,&#148; &#147;expect,&#148; &#147;anticipate,&#148; &#147;intend,&#148; and

other expressions, that are predictions of, or indicate future events and

trends and which do not relate to historical matters, also identify

forward-looking statements.&#160; Such

forward looking statements involve known and unknown risks, uncertainties and

other factors, some of which are beyond our control, including those factors

described in the section titled &#147;Risk Factors and Certain Factors Affecting

Future Operating Results&#148; in this Quarterly Report on Form 10-Q.&#160; Our actual results, performance or

achievement could differ materially from anticipated results, performance or

achievement, expressed or implied in such forward-looking statements.&#160; Such forward looking statements are based

upon the current assumptions and beliefs of management and are only

expectations of future results.&#160;

Additional factors that might cause such a difference are set forth

herein and in the &#147;Management&#146;s Discussions and Analysis of Financial Condition

and Results of Operations&#148; beginning on page 10 of this Quarterly Report on

Form 10-Q, as well as factors described in our Annual Report on Form 10-K for

the year ended December 31, 2001 and our press releases and other filings with

the Securities and Exchange Commission.&#160;

We undertake no obligation to publicly update or revise any

forward-looking statement whether as a result of new information, future events

or otherwise.</font></i></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Results of

Operations</font></i></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Product revenue.</font></i><font style="letter-spacing:-.1pt;">&#160; Product revenue for the quarter

ended June 30, 2002 was $3,415,877, an increase of $496,843, or 17.0%, from

$2,919,034 for the quarter ended June 30, 2001. Product revenue for the six

months ended June 30, 2002 was $5,800,594, an increase of $702,942, or 13.8%,

from $5,097,652 for the six months ended June 30, 2001.&#160; The increase in product revenue for the

quarter and six months ended June 30, 2002 compared to the same periods last

year is primarily due to higher ophthalmic product sales and sales of HYVISC&#174;

partially offset by lower sales of ORTHOVISC&#174;.&#160;

Sales of ophthalmic products increased approximately $444,000 and

$667,000 for the quarter and six months ended June 30, 2002, respectively,

primarily due to new supply agreements with Cytosol Ophthalmics, Inc. and

Advanced Medical Optics, Inc., and sales of HYVISC&#174; increased approximately

$283,000 and $476,000.&#160; The decrease in

sales of ORTHOVISC&#174; is primarily attributable to lower sales for the Turkish

market.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">We derive a substantial portion of our revenue from the sale of AMVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font></sup><font style="letter-spacing:-.1pt;"> and AMVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font></sup><font style="letter-spacing:-.1pt;">Plus to Bausch&nbsp;&amp; Lomb Surgical.&#160; For the quarter and six months ended June

30, 2002, AMVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font></sup><font style="letter-spacing:-.1pt;"> and AMVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#226;</font></sup><font style="letter-spacing:-.1pt;">Plus sales accounted for 42.2% and 47.1% of

product revenue, respectively, compared to 50.9% and 56.9% of product revenue

for the quarter and six months ended June 30, 2001.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='10',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
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</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Revenues by geographic location in total and as a percentage of total

revenues are as follows:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="80%" style="border:none;border-collapse:collapse;margin-left:.5in;width:80.0%;">

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="68%" colspan="9" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:68.34%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Quarter

  Ended June,</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="33%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:33.02%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.98%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of

  Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.32%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of

  Revenue</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">United States</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,688,277</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">78.6</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,955,793</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">67.0</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Middle East</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">30,000</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">0.9</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.32%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&#151;</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Other/Europe</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">702,600</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20.5</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.32%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">963,241</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">33.0</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,420,877</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:13.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">2,919,034</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="1" cellspacing="0" cellpadding="0" width="80%" style="border:none;border-collapse:collapse;margin-left:.5in;width:80.0%;">

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="68%" colspan="9" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:68.34%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Six Months

  Ended June 30,</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="33%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:33.02%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="32%" colspan="4" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:32.98%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2001</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of<br>

  Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.32%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Revenue</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Percent of<br>

  Revenue</font></b></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">United States</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:13.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">4,551,380</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">78.3</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:13.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">3,396,275</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">66.6</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Middle East</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:15.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">89,115</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1.5</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:15.32%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">11,950</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">0.2</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Other/Europe</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,170,099</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">20.2</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.32%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">1,689,427</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">33.1</font></p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

 </tr>

 <tr>

  <td width="28%" valign="top" style="border:none;padding:0in .7pt .7pt .7pt;width:28.22%;">

  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Total</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt .7pt .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:13.74%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,810,594</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt .7pt .7pt;width:1.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">$</font></p>

  </td>

  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:13.7%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">5,097,652</font></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:2.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>

  </td>

  <td width="15%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt .7pt .7pt;width:15.3%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">100.0</font></p>

  </td>

  <td width="1%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:1.06%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">%</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt .2in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Since early 2001, sales of product for the Turkish market have been made

to a European-based entity and have accordingly been classified in the

&#147;Other/Europe&#148; category since that time.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">License revenue.</font></i><font style="letter-spacing:-.1pt;">&#160; License

revenue was $5,000 and $10,000 for the quarter and six months ended June 30,

2002, related to an annual up-front payment associated with a five year supply

agreement with a purchaser of our ophthalmic products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Gross profit.</font></i><font style="letter-spacing:-.1pt;">&#160; Gross profit for the quarter

ended June 30, 2002 was $1,219,559, or 35.7% of revenue, an increase of

$409,574, or 50.6%, from a gross profit of $809,985, or 27.7% of revenue, for

the quarter ended June 30, 2001.&#160; Gross

profit for the six months ended June 30, 2002 was $1,521,862, or 26.2% of

revenue, an increase of $502,207, or 49.3%, from a gross profit of $1,019,655,

or 20.0% of revenue, for the six months ended June 30, 2001.&#160; Gross profit for the quarter and six months

ended June 30, 2002, as compared with same periods last year, benefited from

improved manufacturing cost performance resulting from our efforts over the

past year to reduce work in process inventories combined with increase sales

volumes.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Research and development.</font></i><font style="letter-spacing:-.1pt;">&#160; Research

and development expenses for the quarter ended June 30, 2002 was $1,050,426, an

increase of $129,101, or 14.0%, compared to $921,325 for the quarter ended June

30, 2001.&#160; Research and development

expenses for the six months ended June 30, 2002 was $2,140,300, a decrease of

$128,895, or 5.7%, compared to $2,269195 for the six months ended June 30,

2001.&#160; Research and development expenses

include costs for the current Phase III clinical trial for ORTHOVISC&#174;, our

product for treatment of osteoarthritis of the knee, for which we are currently

seeking FDA approval.&#160; The increase in

research and development expense for the quarter ended June 30, 2002 compared

to the same period last year is primarily due to higher costs related to the

ORTHOVISC&#174; clinical trial partially offset by a decrease in employee related costs

due to lower headcount.&#160; The decrease in

research and development expense for the six months ended June 30, 2002

compared to the same period last year is primarily due to a decrease in

employee related costs due to lower headcount partially offset by higher costs

related to the ORTHOVISC&#174; clinical trial.&#160;

The increase in costs related to the ORTHOVISC&#174;&#160; clinical trial for the six months ended June

30, 2002 compared to the same period last year was partially offset by

expenditures in the first quarter of last year related to the preparation for

initiation of a clinical trial for INCERT&#174;, a therapy</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">11</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
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</font></b>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">for

preventing post-surgical adhesions.&#160; As

previously disclosed, we determined not to commence a clinical trial for

INCERT&#174; during 2001.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Selling, general and administrative.</font></i><font style="letter-spacing:-.1pt;">&#160; Selling,

general and administrative expenses for the quarter ended June 30, 2002 was

$1,388,837, a decrease of $469,953, or 25.3%, compared to $1,858,790 for the

quarter ended June 30, 2001.&#160;&#160; Selling,

general and administrative expenses for the six months ended June 30, 2002 was

$2,468,332, a decrease of $779,032, or 24.0%, compared to $3,247,364 for the

six months ended June 30, 2001. The decrease is primarily attributable to

separation costs of $515,000 incurred in the first six months of 2001 related

to management changes we implemented in June 2001 combined with lower

professional service fees and lower ORTHOVISC&#174; selling expenses in foreign

markets in 2002 compared to 2001.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Litigation settlement costs.</font></i><font style="letter-spacing:-.1pt;">&#160;

Litigation settlement costs for the quarter and six months ended June

30, 2001 included a charge of $850,000, which is the amount of a $1.25 million

settlement amount contributed by us related to a putative class action

suit.&#160; For the quarter and six months

ended June 30, 2001, professional fees related to the putative class action

suit were $36,480 and $100,716, respectively.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Interest income, net.</font></i><font style="letter-spacing:-.1pt;">&#160; Interest

income, net, for the quarter ended June 30, 2002 was $62,508, a decrease of

$143,694, or 69.7%, compared to $206,202 for the quarter ended June 30,

2001.&#160; Interest income, net, for the six

months ended June 30, 2002 was $125,367, a decrease of $353,414, or 73.8%,

compared to $478,781 for the six months ended June 30, 2001.&#160; The decrease in interest income, net, is

primarily due to lower interest rates on investments combined with lower

average cash balances during the quarter and six months ended June 30, 2002,

compared to the same periods last year.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">LIQUIDITY AND CAPITAL RESOURCES</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Liquidity is defined as the ability to meet current and future financial

obligations of a short-term nature.&#160;

Historically, we have funded our cash requirements from available cash

and short-term marketable securities.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">At June 30, 2002, we had cash, cash equivalents and short-term

marketable securities of $12.0 million and working capital of $14.4 million

compared to cash, cash equivalents and short-term marketable securities of

$13.1 million and working capital of $16.8 million at December 31, 2001. Short-term

marketable securities at June 30, 2002 consist of a commercial bond and a

municipal bond each with an original maturity of one year.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Aggregate cash used in operating activities was $1,119,431 for the six

months ended June 30, 2002 and $1,999,603 for the six months ended June 30,

2001.&#160; Cash used in operating activities

for the six months ended June 30, 2002 included net loss, adjusted for

depreciation and amortization, of $2,417,759.&#160;

This cash used in operating activities was partially offset by cash

provided by a reduction in inventory of $940,334 and an increase in deferred

revenue of $551,009. The increase in deferred revenue largely relates to unit

pricing provisions under the Company&#146;s supply agreement with Bausch &amp; Lomb

(see Note 7).&#160;&#160; Cash used in operating

activities for the six months ended June 30, 2001 included net loss, adjusted

for depreciation and amortization, of $4,369,834.&#160; This cash used in operating activities was partially offset by

cash provided by a reduction accounts receivable of $486,309, an increase in

accounts payable and accrued expenses of $1,266,470 and an increase in deferred

revenue of $237,657.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Capital expenditures were $42,188 for the six months ended June 30,

2002.&#160; Capital expenditures in 2002 are

expected to include spending for small equipment, computers, and furniture and

fixtures associated with normal operations.&#160;

We anticipate that use of cash in 2002 will be significantly less than

cash used in 2001.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



<b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">
<!-- SEQ.=1,FOLIO='12',FILE='C:\C2\mnelson\4192_4\t_779528\j4192_10q.htm',USER='mnelson',CD='Aug 14 11:10 2002' -->
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Our future capital requirements and the adequacy of available funds will

depend, on numerous factors, including:</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">market acceptance of its existing and future

products;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the successful commercialization of products in

development;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">progress in its product development efforts;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the magnitude and scope of product development

efforts;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">progress with pre-clinical studies, clinical

trials and product clearances by the FDA and other agencies;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the cost of maintaining adequate manufacturing

capabilities;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the cost of filing, prosecuting, defending and

enforcing patent claims and other intellectual property rights;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">competing technological and market developments;

and</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the development of strategic alliances for the

marketing of certain of its products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;letter-spacing:-.1pt;">We have historically derived the majority of

our revenues from a small number of customers, most of whom resell our products

to end users and most of whom are significantly larger companies than us.&#160; For the six months ended June 30, 2002,

Bausch &amp; Lomb accounted for 47.1% of product revenues and 46.4% of our

accounts receivable balance and </font><font style="letter-spacing:-.1pt;">Boehringer

Ingelheim accounted for 15.1% of

product revenues and 25.6% of our accounts receivable balance.&#160; On March 11, 2002, Bausch &amp; Lomb&#146;s

senior debt and short-term debt ratings were downgraded.&#160; Although Bausch &amp; Lomb emphasized at

that time it was not facing any issues with respect to liquidity, any such

issues that impact their ability to pay their accounts with us could adversely

impact future revenues.</font></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">There can be no assurance that we will record profits in future periods.

However, we believe that our cash and investments on hand will be sufficient to

meet our requirements at least through June 30, 2003.&#160; See &#147;Risk Factors and Certain Other Factors Affecting Future

Operating Results &#150; History of Losses; Uncertainty of Future Profitability.&#148;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The terms of any future equity financings may be dilutive to our

stockholders and the terms of any debt financings may contain restrictive

covenants, which could limit our ability to pursue certain courses of

action.&#160; Our ability to obtain financing

is dependent on the status of our future business prospects as well as

conditions prevailing in the relevant capital markets. No assurance can be

given that any additional financing will be made available to us or will be

available on acceptable terms should such a need arise.</font></p>



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<p align="left" style="font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Critical

Accounting Policies</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In December 2001,

the SEC requested that reporting companies discuss their most &#147;critical

accounting policies&#148; in management&#146;s discussion and analysis of financial

condition and results of operations.&#160;

The SEC indicated that a &#147;critical accounting policy&#148; is one that is

important to the portrayal of a company&#146;s financial condition and operating

results and requires management&#146;s most difficult, subjective or complex

judgments, often as a result of the need to make estimates about the effect of

matters that are inherently uncertain.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">We have identified the policies below as critical to our business

operations and the understanding of our results of operations.&#160; The impact and any associated risks related

to these policies on our business operations is discussed throughout

Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations

where such policies affect our reported and expected financial results.&#160; For a detailed discussion on the application

of this and other accounting policies, see Note 2 in the Notes to the</font></p>



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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Consolidated

Financial Statements of our Annual Report on Form 10-K for the year ended

December 31, 2001.&#160; Our preparation of

this Quarterly Report on Form 10-Q requires us to make estimates and

assumptions that affect the reported amount of assets and liabilities,

disclosure of contingent assets and liabilities at the date of our financial

statements, and we cannot make any assurances that actual results will not

differ from those estimates.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Revenue Recognition.&#160; Product

revenue is recognized upon shipment to the customer as long as there is (i) persuasive

evidence of an arrangement, (ii) the sales price is fixed or determinable and

(iii) collection of the related receivable is probable.&#160; Amounts billed or collected prior to

recognition of revenue is classified as deferred revenue.&#160; Determination of criteria (ii) and (iii) are

based on management&#146;s judgments regarding the fixed nature of the product fee

and collectibility of those fees.&#160; Under

our agreement with Bausch and Lomb, the price for units sold in a calendar year

is dependent on total unit volume of sales of certain ophthalmic products

during the year. Accordingly, unit prices for sales occurring in interim

quarters are subject to possible retroactive price adjustments when the actual

annual unit volume for the year becomes known.&#160;

In accordance with our revenue recognition policy, the amount of revenue

subject to the contracted price adjustment is recorded as deferred revenue

until the annual unit volume becomes known and the sales price becomes

fixed.&#160; ORTHOVISC&#174; has been sold through

several distribution arrangements as well as outsource order-processing

arrangements&#160; (&#147;logistic agents&#148;.)&#160; Sales of product through third party

logistics agents in certain markets are recognized as revenue upon shipment by

the logistics agent to the customer.&#160; We

recognize non-refundable upfront or milestone payments received as part of

supply, distribution, and marketing arrangements, ratably over the terms of the

arrangements to which the payments apply.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Reserve for Obsolete/Excess Inventory.&#160;

Inventories are stated at the lower of cost or market.&#160; We regularly review raw materials and

work-in-process inventories and record a provision for excess and obsolete

inventory if the inventory has not progressed through the manufacturing process

for a period of time in excess of the typical inventory cycle period.&#160; The reserve is adjusted in subsequent

periods to reflect the current movement of the inventory through the

manufacturing process.</font></p>



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<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">RISK

FACTORS AND CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS</font></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">Our

business is subject to comprehensive and varied government regulation and, as a

result, failure to obtain FDA or other governmental approvals for our products

may materially adversely affect our business, results of operations or

financial condition.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Product development and approval within the Food &amp; Drug

Administration framework takes a number of years and involves the expenditure

of substantial resources.&#160; There can be

no assurance that the FDA will grant approval for our new products on a timely

basis if at all, or that FDA review will not involve delays that will adversely

affect our ability to commercialize additional products or expand permitted

uses of existing products, or that the regulatory framework will not change, or

that additional regulation will not arise at any stage of our product

development process which may adversely affect approval of or delay an

application or require additional expenditures by us.&#160; In the event our future products are regulated as human drugs or

biologics, the FDA&#146;s review process of such products typically would be

substantially longer and more expensive than the review process to which they

are currently subject as devices.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Class III devices

are those that generally must receive pre-market approval from the FDA (e.g. life-sustaining,

life-supporting and implantable or new devices which have not been found to be

substantially equivalent to legally marketed devices) and require clinical

testing to ensure safety and effectiveness and FDA approval prior to marketing

and distribution.&#160; In order for us to

commercially distribute ORTHOVISC<sup>&#174;</sup> in the U.S., we must obtain a

pre-market approval.&#160; The PMA process

can be expensive, uncertain and lengthy. A number of devices for which PMAs

have been sought have never</font></p>



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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">been approved for

marketing.&#160; The review of an application

often occurs over a protracted time period, potentially taking two years or

more from the filing date to complete.&#160;

We submitted a PMA application for ORTHOVISC&#174; in December 1997.&#160; In October 1998, we were notified by the FDA

that our PMA application for ORTHOVISC&#174; was not approvable and that additional

clinical data would be required to demonstrate the effectiveness of ORTHOVISC&#174;.

We submitted an IDE to the FDA in February 1999 and received approval in late

March 1999 to commence a second Phase III clinical study.&#160; We received initial results from the Phase

III clinical trial in late May 2000 that we determined did not show sufficient

efficacy to support the filing of a PMA application.&#160; We have evaluated available information and in February 2001, we

commenced another Phase III clinical trial of ORTHOVISC&#174;.&#160; The trial is being conducted in up to 25

centers in the U.S. and Canada, with 360 patients expected to be enrolled, and

with evaluation over a six-month period following treatment.&#160; There can be no assurances that:</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>any additional

clinical data will support the efficacy of ORTHOVISC<sup>&#174;</sup>;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>we will complete<b><font style="font-weight:bold;">  </font></b>any

additional clinical trials of ORTHOVISC<sup>&#174;</sup>;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>we will be able

to successfully complete the FDA approval process; or</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>any additional

clinical trials will support a PMA application and/or FDA approval in a timely

manner or at all.</p>



<p style="margin:0in 0in .0001pt 3.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt 3.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">There also can be no assurance that any delay in

receiving FDA approvals will not continue to adversely affect our competitive

position.&#160;&#160; Furthermore, even if we were

to receive a PMA approval:</font></p>



<p style="margin:0in 0in .0001pt 3.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the approval may

include significant limitations on the indications and other claims sought for

use for which the product may be marketed;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the approval may

include other significant conditions to approval such as post-market testing,

tracking, or surveillance requirements; and</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>we may not be

able to achieve meaningful sales of ORTHOVISC&#174; in the U.S.</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Once obtained, marketing approval can be withdrawn by

the FDA for a number of reasons, including, among other things, the failure to

comply with regulatory standards, or the occurrence of unforeseen problems

following initial approval.&#160; We may be

required to make further filings with the FDA under certain circumstances. The

FDA&#146;s regulations require a PMA supplement for any changes that affect the

safety and effectiveness of an approved device, including, but not limited to,

new indications for use, labeling changes, the use of a different facility to

manufacture, process or package the device, and changes in performance or

design specifications.&#160; Changes in

manufacturing that affect safety and effectiveness may be deemed approved after

a 30-day notice unless the FDA requests a supplement.&#160; Our failure to receive approval of a PMA supplement regarding the

use of a different manufacturing facility or any other change affecting the

safety or effectiveness of an approved device on a timely basis, or at all, may

have a material adverse effect on our business, financial condition, and

results of operations.&#160; The FDA could

also limit or prevent the manufacture or distribution of our products and has

the power to require the recall of such products.&#160; Significant delay or cost in obtaining, or failure to obtain FDA

approval to market products, any FDA limitations on the use of our products, or

any withdrawal or suspension of approval or rescission of approval by the FDA

could have a material adverse effect on our business, financial condition, and

results of operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In addition, all FDA approved or cleared products

manufactured by us must be manufactured in compliance with the FDA&#146;s Good

Manufacturing Practices (GMP) regulations and, for medical devices, the FDA&#146;s

Good Manufacturing Practices/Quality System Regulations (GMP/QSR).&#160; Ongoing compliance with GMP/QSR and other

applicable regulatory requirements is enforced through periodic inspection by

state and federal agencies, including the FDA.&#160;

The FDA may inspect us and our facilities from time to time to determine

whether we are in compliance with regulations relating to medical device</font></p>



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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">and manufacturing companies, including regulations concerning

manufacturing, testing, quality control and product labeling practices.&#160; There can be no assurance that we will be

able to comply with current or future FDA requirements applicable to the

manufacture of products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">FDA regulations depend heavily on administrative

interpretation and there can be no assurance that the future interpretations

made by the FDA or other regulatory bodies, with possible retroactive effect,

will not adversely affect us.&#160; In

addition, changes in the existing regulations or adoption of new governmental

regulations or policies could prevent or delay regulatory approval of our

products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Failure to comply with applicable regulatory

requirements could result in, among other things, warning letters, fines,

injunctions, civil penalties, recall or seizure of products, total or partial

suspension of production, refusal of the FDA to grant pre-market clearance or

PMA&#146;s for devices, withdrawal of approvals and criminal prosecution.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In addition to regulations enforced by the FDA, we are

subject to other existing and future federal, state, local and foreign

regulations.&#160; International regulatory

bodies often establish regulations governing product standards, packing

requirements, labeling requirements, import restrictions, tariff regulations,

duties and tax requirements. There can be no assurance that we will be able to

achieve and/or maintain compliance required for CE marking or other foreign

regulatory approvals for any or all of our products or that we will be able to

produce our products in a timely and profitable manner while complying with applicable

requirements.&#160; Federal, state, local and

foreign regulations regarding the manufacture and sale of medical products are

subject to change.&#160; We cannot predict

what impact, if any, such changes might have on our business.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The process of obtaining approvals from the FDA and

other regulatory authorities can be costly, time consuming, and subject to

unanticipated delays.&#160; There can be no

assurance that approvals or clearances of our products will be granted or that

we will have the necessary funds to develop certain of its products.&#160; Any failure to obtain, or delay in obtaining

such approvals or clearances, could adversely affect our ability to market our

products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">We have historically

incurred operating losses and we cannot make any assurances about our future

profitability.</font></i></b></p>



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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">From our inception through

December&nbsp;31, 1996 and in 1999, 2000, and 2001, we have incurred annual

operating losses.&#160; As of June 30, 2002,

we had an accumulated deficit of approximately $14.3 million. The continued

development of our products will require the commitment of substantial

resources to conduct research and preclinical and clinical development

programs, and to establish sales and marketing capabilities or distribution

arrangements.&#160; Our ability to reach

profitability is highly uncertain.&#160; To

achieve profitability, we must, among other things, successfully complete

development of certain of our products, obtain regulatory approvals and

establish sales and marketing capabilities or distribution arrangements for

certain of our products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">Substantial

competition could materially affect our financial performance.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">We compete with many companies,

including, among others, large pharmaceutical companies and specialized medical

products companies.&#160; Many of these

companies have substantially greater financial and other resources, larger

research and development staffs, more extensive marketing and manufacturing

organizations and more experience in the regulatory process than us.&#160; We also compete with academic institutions,

governmental agencies and other research organizations that may be involved in

research, development and commercialization of products.&#160; Because a number of companies are developing

or have developed HA products for similar applications, the successful

commercialization of a particular product</font></p>



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<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">will depend in part upon our ability to complete

clinical studies and obtain FDA marketing and foreign regulatory approvals

prior to our competitors, or, if regulatory approval is not obtained prior to

competitors, to identify markets for our products that may be sufficient to

permit meaningful sales of our products.&#160;

For example, several of our competitors have already obtained FDA and foreign

regulatory approvals for marketing HA products with applications similar to

that of ORTHOVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup><font style="letter-spacing:-.1pt;">.&#160; Thus,

the successful commercialization of ORTHOVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup><font style="letter-spacing:-.1pt;"> will depend in part on our ability to effectively

market ORTHOVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup><font style="letter-spacing:-.1pt;"> against more established products with a longer

sales history.&#160; There can be no

assurance that we will be able to compete against current or future competitors

or that competition will not have a material adverse effect on our business,

financial condition and results of operations.&#160;

We are currently experiencing uncertainties in the Turkish market from

economic, regional, political, and competitive factors.&#160; As a result, we are uncertain of the extent

of our future sales in this market.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Our clinical trials may not support a PMA filing.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Several of our products, including ORTHOVISC</font><sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup>, will require

clinical trials to determine their safety and efficacy for U.S. and

international marketing approval by regulatory bodies, including the FDA.&#160; In late May 2000, our initial analysis of

the results of our second Phase III clinical trial of ORTHOVISC<sup><font face="Symbol" style="font-family:Symbol;letter-spacing:-.1pt;">&#210;</font></sup> did not show

sufficient efficacy to support the filing of a PMA application to obtain FDA

approval.&#160; Although we have received

(IDE) approval from the FDA for ORTHOVISC<sup>&#174;</sup> there can be no assurance

that:</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>any additional

clinical data will support the efficacy of ORTHOVISC&#174;,</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>we will complete

any additional clinical trials of ORTHOVISC&#174;,</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>we will be able

to successfully complete the FDA approval process for either ORTHOVISC&#174;, or</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>additional

ORTHOVISC&#174;&#160; clinical trials will support

a PMA application and/or FDA approval in a timely manner, or at all.</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">There can be no assurance that we will not encounter additional

problems that will cause us to delay, suspend or terminate the clinical

trials.&#160; In addition, we cannot make any

assurance that such clinical trials, if completed, will ultimately demonstrate

these products to be safe and efficacious.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">We are dependent upon marketing and distribution partners

and the failure to maintain strategic alliances on acceptable terms will have a

material adverse effect on our business, financial condition and results of

operations</font></i>.</b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our success will be dependent, in part, upon the

efforts of our marketing partners and the terms and conditions of our

relationships with such marketing partners.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We cannot assure you that such marketing partners will

not seek to renegotiate their current agreements on terms less favorable to

us.&#160; Under the terms of the BLS

Agreement, effective January 1, 2001, we became Bausch &amp; Lomb&#146;s exclusive

provider of AMVISC<sup>&#174;</sup> and AMVISC<sup>&#174;</sup> Plus ophthalmic

viscoelastic products, in the U.S. and international markets.&#160; The BLS Agreement expires December 31, 2007,

and superceded an existing supply contract with Bausch &amp; Lomb that was set

to expire December 31, 2001.&#160; The BLS

Agreement is subject to early termination and/or reversion to a non-exclusive

basis under certain circumstances.&#160; The

BLS Agreement lifts contractual restrictions on our ability to sell certain

ophthalmic products to other companies, subject to our payment of

royalties.&#160; We agreed to a reduction in

unit selling prices retroactively effective to April 1, 2000 and the

elimination of minimum unit purchase obligations of Bausch &amp; Lomb.</font></p>



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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We have not achieved incremental sales of our

ophthalmic products to Bausch &amp; Lomb and/or other companies sufficient to

offset the effects of the price reduction and royalties to Bausch &amp; Lomb

and there can be no assurances that we will be able to do so in the future.&#160; The reduction in unit prices resulted in a

decrease in our revenue and gross profit from Bausch &amp; Lomb.&#160; We expect revenue in 2002 to be consistent

with 2001.&#160; In addition, under certain

circumstances, Bausch &amp; Lomb has the right to terminate the agreement,

and/or the agreement may revert to a non-exclusive basis; in each case, we

cannot make any assurances that such circumstances will not occur.&#160; For the years ended December 31, 2001 and

2000, sales of AMVISC<sup>&#174;</sup> products to Bausch &amp; Lomb accounted for

65.2% and 54.1% of product revenues, respectively.&#160; For the six months ended June 30, 2002, sales to Bausch &amp;

Lomb amounted to 47.1% of our revenue. Although we intend to continue to seek

new opthalmic product customers, there can be no assurances that we will be

successful in obtaining new customers or to achieve meaningful sales to such

new customers.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We have a relationship with a logistic agent

(outsource order processing providers) to distribute ORTHOVISC<sup>&#174;</sup> to

customers in certain European countries previously served by Zimmer.&#160; We have entered into new distribution

agreements for ORTHOVISC<sup>&#174;</sup> in Canada and the U.K.&#160; We are seeking to establish long-term

distribution and marketing relationships with new distribution partners in

additional countries.&#160; There can be no

assurance that we will be able to identify or engage appropriate distribution

or collaboration partners or effectively transition to any such partners. There

can be no assurance that we will obtain European or other reimbursement

approvals or, if such approvals are obtained, they will be obtained on a timely

basis or at a satisfactory level of reimbursement.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We will need to obtain the assistance of additional

marketing partners to bring new and existing products to market.&#160; The failure to establish strategic

partnerships for the marketing and distribution of our products on acceptable

terms will have a material adverse effect on our business, financial condition,

and results of operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Our future success depends upon market acceptance of our

existing and future products</font></i>.</b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our success will depend in part upon the acceptance of

our existing and future products by the medical community, hospitals and

physicians and other health care providers, and third-party payors. Such

acceptance may depend upon the extent to which the medical community perceives

our products as safer, more effective or cost-competitive than other similar

products. Ultimately, for our new products to gain general market acceptance,

it will also be necessary for us to develop marketing partners for the distribution

of our products. There can be no assurance that our new products will achieve

significant market acceptance. Failure of some or all of our future products to

achieve significant market acceptance could have a material adverse effect on

our business, financial condition, and results of operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">We may be unable to adequately protect our intellectual

property rights.</font></i></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our success will depend, in part, on our ability to

obtain and enforce patents, protect trade secrets, obtain licenses to

technology owned by third parties when necessary, and conduct our business

without infringing on the proprietary rights of others. The patent positions of

pharmaceutical, medical products and biotechnology firms, including ours, can

be uncertain and involve complex legal and factual questions. There can be no

assurance that any patent applications will result in the issuance of patents

or, if any patents are issued, whether they will provide significant

proprietary protection or commercial advantage, or will not be circumvented by

others. In the event a third party has also filed one or more patent

applications for any of its inventions, we may have to participate in

interference proceedings declared by the PTO to determine priority of invention

(see below), which could result in failure to obtain, or the loss of, patent

protection for the inventions and the loss of any right to use the inventions.

Even if the eventual outcome is favorable to us, such interference proceedings

could result in substantial</font></p>



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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">cost to us, and diversion of management&#146;s attention away from our

operations. Submission and prosecution of patent applications, litigation to

establish the validity and scope of patents, assertion of patent infringement

claims against others and the defense of patent infringement claims by others

can be expensive and time consuming. There can be no assurance that in the

event that any claims with respect to any of our patents, if issued, will not

be challenged by one or more third parties, that any court or patent authority

ruling on such challenge will determine that such patent claims are valid and

enforceable. An adverse outcome in such litigation could cause us to lose

exclusivity covered by the disputed rights. If a third party is found to have

rights covering products or processes used by us, we could be forced to cease

using the technologies or marketing the products covered by such rights, we

could be subject to significant liabilities to such third party, or we could be

required to license technologies from such third party. Furthermore, even if

our patents are determined to be valid, enforceable, and broad in scope, there

can be no assurance that competitors will not be able to design around such

patents and compete with us using the resulting alternative technology.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We have a policy of seeking patent protection for

patentable aspects of our proprietary technology. We intend to seek patent

protection with respect to products and processes developed in the course of

our activities when we believe such protection is in our best interest and when

the cost of seeking such protection is not inordinate. However, no assurance

can be given that any patent application will be filed, that any filed

applications will result in issued patents or that any issued patents will

provide us with a competitive advantage or will not be successfully challenged

by third parties. The protections afforded by patents will depend upon their

scope and validity, and others may be able to design around our patents. Our

issued patents and any patents, which arise from our licensed application,

would provide competitive protection, if at all, only in the United States.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other entities have filed patent applications for or

have been issued patents concerning various aspects of HA-related products or

processes. There can be no assurance that the products or processes we develop

will not infringe on the patent rights of others in the future. Any such

infringement may have a material adverse effect on our business, financial

condition, and results of operations. We received notice from the PTO in 1995

that a third party was attempting to provoke a patent interference with respect

to one of our co-owned patents covering the use of INCERT<sup>&#174;</sup> for

post-surgical adhesion prevention. It is unclear whether an interference will

be declared.&#160; If an interference is

declared, it is not possible at this time to determine the merits of the

interference or the effect, if any, the interference will have on our

development or marketing of INCERT<sup>&#174;</sup> for this use.&#160; No assurance can be given that we would be

successful in any such interference proceeding.&#160; If the third-party interference were to be decided adversely to

us, involved claims of our patent would be cancelled and the third party may

enforce patent rights against us which could prohibit the sale and use of

INCERT<sup>&#174;</sup> products.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We also rely upon trade secrets and proprietary

know-how for certain non-patented aspects of our technology. To protect such

information, we require all employees, consultants and licensees to enter into

confidentiality agreements limiting the disclosure and use of such information.

There can be no assurance that these agreements provide meaningful protection

or that they will not be breached, that we would have adequate remedies for any

such breach, or that our trade secrets, proprietary know-how, and our

technological advances will not otherwise become known to others. In addition,

there can be no assurance that, despite precautions taken by us, others have

not and will not obtain access to our proprietary technology. Further, there

can be no assurance that third parties will not independently develop

substantially equivalent or better technology.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pursuant to the BLS Agreement, we have agreed to transfer

to Bausch &amp; Lomb, upon expiration of the term of the BLS agreement on

December 31, 2007, or in connection with earlier termination in certain

circumstances, our manufacturing process, know-how and technical information,

which relate to AMVISC<sup>&#174;</sup> products. Upon expiration of the BLS

Agreement, there can be no assurance that Bausch &amp;</font></p>



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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Lomb will continue to use us to manufacture AMVISC<sup>&#174;</sup> and

AMVISC<sup>&#174;</sup> Plus. If Bausch &amp; Lomb discontinues using&#160; us as a manufacturer after such time, our

business, financial condition, and results of operations would likely be

materially and adversely affected.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Our manufacturing processes involve inherent risks and

disruption could materially adversely affect our business, financial condition

and results of operations.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our results of operations are dependent upon the

continued operation of our manufacturing facility in Woburn, Massachusetts. The

operation of biomedical manufacturing plants involves many risks, including the

risks of breakdown, failure or substandard performance of equipment, the

occurrence of natural and other disasters, and the need to comply with the

requirements of directives of government agencies, including the FDA. In

addition, we rely on a single supplier for syringes and a small number of

suppliers for a number of other materials required for the manufacturing and

delivery of our HA products. Furthermore, our manufacturing processes and

research and development efforts involve animals and products derived from

animals. The utilization of animals in research and development and product

commercialization is subject to increasing focus by animal rights activists.

The activities of animal rights groups and other organizations that have

protested animal based research and development programs or boycotted the

products resulting from such programs could cause an interruption in our

manufacturing processes and research and development efforts. The occurrence of

material operational problems, including but not limited to the events

described above, could have a material adverse effect on our business,

financial condition, and results of operations during the period of such

operational difficulties.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Our financial performance depends on the continued growth

and demand for our products and we may not be able to successfully manage the

expansion of our operations</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our future success depends on substantial growth in

product sales. There can be no assurance that such growth can be achieved or,

if achieved, can be sustained. There can be no assurance that even if

substantial growth in product sales and the demand for our products is

achieved, we will be able to:</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>develop the

necessary manufacturing capabilities;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>obtain the

assistance of additional marketing partners;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>attract, retain

and integrate the required key personnel; or</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>implement the

financial, accounting and management systems needed to manage growing demand

for our products</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our failure to successfully manage future growth could have a material

adverse effect on our business, financial condition, and results of operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Sales of our

products are largely dependent upon third party reimbursement and our

performance may be harmed by health care cost containment initiatives.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the U.S. and other markets, health care providers,

such as hospitals and physicians, that purchase health care products, such as

our products, generally rely on third party payors, including Medicare,

Medicaid and other health insurance and managed care plans, to reimburse all or

part of the cost of the health care product. We depend upon the distributors

for our products to secure reimbursement and reimbursement approvals.

Reimbursement by third party payors may depend on a number of factors,

including the payor&#146;s determination that the use of our products is clinically

useful and cost-effective, medically necessary and not experimental or

investigational. Since reimbursement approval is required from each payor

individually, seeking such approvals can be a time consuming and costly process

which, in the future, could require us or our marketing partners to provide

supporting scientific, clinical and cost-</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20</font></p>





<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></b></div>



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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">effectiveness data for the use of our products separately to each

payor. Significant uncertainty exists as to the reimbursement status of newly

approved health care products, and third party payors are increasingly

attempting to contain the costs of health care products and services by

limiting both coverage and the level of reimbursement for new therapeutic

products and by refusing in some cases to provide coverage for uses of approved

products for disease indications for which the FDA has not granted marketing

approval. In addition, Congress and certain state legislatures have considered

reforms that may affect current reimbursement practices, including controls on

health care spending through limitations on the growth of Medicare and Medicaid

spending. There can be no assurance that third party reimbursement coverage

will be available or adequate for any products or services we develop. Outside

the U.S., the success of our products is also dependent in part upon the

availability of reimbursement and health care payment systems. Lack of adequate

coverage and reimbursement provided by governments and other third party payors

for our products and services could have a material adverse effect on our

business, financial condition, and results of operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">We may seek financing

in the future, which could be difficult to obtain and which could dilute your

ownership interest or the value of your shares.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">We had cash, cash equivalents and

short-term marketable securities of approximately $12.0&nbsp;million as of June

30, 2002.&#160; Our future capital

requirements and the adequacy of available funds will depend, however, on

numerous factors, including:</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">market acceptance of our existing and future

products;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the successful commercialization of products in

development;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">progress in our product development efforts;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the magnitude and scope of such product

development efforts,</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">progress with preclinical studies, clinical trials

and product clearances by the FDA and other agencies;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the cost and timing of our efforts to manage our

manufacturing capabilities and related costs;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the cost of filing, prosecuting, defending and

enforcing patent claims and other intellectual property rights;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">competing technological and market developments;

and</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .75in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;letter-spacing:-.1pt;">&#149;</font><font size="1" style="font-size:3.0pt;letter-spacing:-.1pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="letter-spacing:-.1pt;">the development of strategic alliances for the

marketing of certain of our products.</font></p>



<p style="margin:0in 0in .0001pt 20.9pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">To the extent that funds

generated from our operations, together with our existing capital resources are

insufficient to meet future requirements, we will be required to obtain

additional funds through equity or debt financings, strategic alliances with

corporate partners and others, or through other sources.&#160; The terms of any future equity financings

may be dilutive to you and the terms of any debt financings may contain

restrictive covenants, that limit our ability to pursue certain courses of

action.&#160; Our ability to obtain financing

is dependent on the status of our future business prospects, as well as

conditions prevailing in the relevant capital markets.&#160; No assurance can be given that any

additional financing will be made available to us or will be available on

acceptable terms should such a need arise.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">We could become

subject to product liability claims, which, if successful, could materially

adversely affect our business, financial condition and results of operations.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The testing, marketing and sale

of human health care products entail an inherent risk of allegations of product

liability, and there can be no assurance that substantial product liability

claims will not be asserted against us.&#160;

Although we have not received any material product liability claims to

date and have an insurance policy of $5,000,000 per occurrence and $5,000,000

in the aggregate to cover such claims should they arise, there can be no

assurance that material claims will not arise in the future or that our

insurance</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">21</font></p>





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</font></b></div>



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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">will be adequate to cover all situations.&#160; Moreover, there can be no assurance that

such insurance, or additional insurance, if required, will be available in the

future or, if available, will be available on commercially reasonable terms.&#160; Any product liability claim, if successful,

could have a material adverse effect on our business, financial condition and

results of operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">Our business is

dependent upon hiring and retaining qualified management and scientific

personnel.</font></i></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;letter-spacing:-.1pt;">We are highly dependent on the

members of our management and scientific staff, the loss of one or more of whom

could have a material adverse effect on us. In June 2001, Mr. Engle, the former

Chief Executive Officer and Chairman of the Board of Directors, and Mr. Slater,

the former Vice President of Operations, ceased to be employees.&#160; </font>As of April 2, 2002, Mr. Sherwood,

previously President and Chief Operating Officer succeeded Mr. Potter as the

Chief Executive Officer of the Company.&#160;

Mr. Potter agreed to remain the Chief Financial Officer until a new

Chief Financial Officer was appointed in order to effect an orderly

transition.&#160; As of March 25, 2002, we

appointed a new Senior Vice President of Sales and Marketing.&#160; As of July 8, 2002, we appointed a new Chief

Financial Officer to succeed Mr. Potter.&#160;

<font style="letter-spacing:-.1pt;">There can be no assurances that such

management changes will not adversely affect our business.&#160; In addition, we believe that our future

success will depend in large part upon our ability to attract and retain highly

skilled, scientific, managerial and manufacturing personnel.&#160; We face significant competition for such

personnel from other companies, research and academic institutions, government

entities and other organizations.&#160; There

can be no assurance that we will be successful in hiring or retaining the

personnel we require.&#160; The failure to

hire and retain such personnel could have a material adverse effect on our

business, financial condition and results of operations.</font></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">We are subject to environmental regulation and any failure

to comply with applicable laws could subject us to significant liabilities and

harm our business</font></i>.</b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We are subject to a variety of local, state and

federal government regulations relating to the storage, discharge, handling,

emission, generation, manufacture and disposal of toxic, or other hazardous

substances used in the manufacture of our products. Any failure by us to

control the use, disposal, removal or storage of hazardous chemicals or toxic

substances could subject us to significant liabilities, which could have a

material adverse effect on our business, financial condition, and results of

operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">Our future operating

results may be harmed by economic, political and other risks relating to

international sales.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;letter-spacing:-.1pt;">During the years ended December

31, 2001 and 2000, approximately, 27.9% and 20.2%, respectively, of our product

sales were sold to international distributors. During the six months ended June

30, 2002 approximately 21.7% of our product sales were sold to international distributors.

Our representatives, agents and distributors who sell products in international

markets are subject to the laws and regulations of the foreign jurisdictions in

which they operate and in which our products are sold. A number of risks are

inherent in international sales and operations.&#160; For example, the volume of international sales may be limited by

the imposition of government controls, export license requirements, political

and/or economic instability, trade restrictions, changes in tariffs, difficulties

in managing international operations, import restrictions and fluctuations in

foreign currency exchange rates. We sell our ORTHOVISC</font><sup>&#174;</sup><font style="letter-spacing:-.1pt;"> product to a European sales and marketing company

to supply the Turkish market. The Turkish economic situation has been volatile

and the impacts of this volatility on future sales of ORTHOVISC</font><sup>&#174;</sup><font style="letter-spacing:-.1pt;"> are uncertain.&#160;

Such changes in the volume of sales may continue to have&#160; adverse effects on our business, financial

condition, and results of operations.</font></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22</font></p>





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</font></b></div>



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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">&nbsp;</font></b></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Our stock price has been and may remain highly volatile, and

we cannot assure you that market making in our common stock will continue</font></i>.</b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The market price of shares of our common stock may be

highly volatile.&#160; Factors such as

announcements of new commercial products or technological innovations by us or

our competitors, disclosure of results of clinical testing or regulatory

proceedings, governmental regulation and approvals, developments in patent or

other proprietary rights, public concern as to the safety of products developed

by us and general market conditions may have a significant effect on the market

price of our common stock.&#160; In

particular, our stock price declined significantly in October 1998 following

our announcement that the FDA had notified us that its PMA for ORTHOVISC&#174; was

not approvable and that additional clinical data would be required to

demonstrate the effectiveness of ORTHOVISC&#174;.&#160;

The stock price declined again in May 2000 following our announcements

that initial analysis of results from the Phase III clinical trial of

ORTHOVISC&#174; did not show sufficient efficacy to support the filing of a PMA

application to obtain FDA approval, and that the SEC had issued a formal order

of investigation and required us to provide information in connection with

certain revenue recognition matters.&#160;

The trading price of our common stock could be subject to wide

fluctuations in response to quarter-to-quarter variations in our operating

results, material announcements by us or our competitors, governmental

regulatory action, conditions in the health care industry generally or in the

medical products industry specifically, or other events or factors, many of

which are beyond our control.&#160; In

addition, the stock market has experienced extreme price and volume

fluctuations which have particularly affected the market prices of many medical

products companies and which often have been unrelated to the operating

performance of such companies.&#160; Our

operating results in future quarters may be below the expectations of equity

research analysts and investors. In such event, the price of our common stock

would likely decline, perhaps substantially.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;letter-spacing:-.1pt;">No person is under any obligation

to make a market in the </font>common stock <font style="letter-spacing:-.1pt;">or

to publish research reports on us, and any person making a market in the </font>common

stock <font style="letter-spacing:-.1pt;">or publishing research reports on us

may discontinue market making or publishing such reports at any time without

notice.&#160; There can be no assurance that

an active public market in our </font>common stock <font style="letter-spacing:-.1pt;">will be sustained.</font></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">There is a risk that we may be unable to

maintain our listing on the Nasdaq National Market.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Our common stock is currently

traded on the Nasdaq National Market. Under NASDAQ&#146;s listing maintenance

standards, if the minimum bid price of our Common Stock is under $1.00 per

share for 30 consecutive trading days, NASDAQ may choose to notify us that it

is delisting our common stock from its National Market. If the minimum bid

price of our common stock does not thereafter regain compliance for a minimum

of 10 consecutive trading days during the 90 days following notification by

NASDAQ, our common stock may be delisted from trading on the NASDAQ. There is a

risk that our common stock will not meet NASDAQ&#146;s listing maintenance standards

and fail to remain eligible for trading on the NASDAQ National Market. If our

common stock is delisted, the delisting would most likely have a material

adverse effect on the price and liquidity of our common stock and your ability

to sell any of our Common Stock at all would be severely limited.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;letter-spacing:-.1pt;">Our charter documents

contain anti-takeover provisions that may prevent or delay any attempt to

acquire us.</font></i></b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Certain provisions of our

Restated Articles of Organization and Amended and Restated By-laws could have

the effect of discouraging a third party from pursuing a non-negotiated

takeover of us and preventing certain changes in control.&#160; These provisions include a classified Board

of Directors, advance notice to the Board of Directors of stockholder proposals,

limitations on the ability of stockholders to remove directors and to call

stockholder meetings, and the provision that vacancies on the Board of

Directors be filled by a majority of the remaining directors.&#160; In addition, the Board of Directors adopted

a Shareholders Rights Plan in April 1998.&#160;

We are also subject to Chapter 110F of the Massachusetts General</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">23</font></p>





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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Laws which, subject to certain exceptions,

prohibits a Massachusetts corporation from engaging in any of a broad range of

business combinations with any &#147;interested stockholder&#148; for a period of three

years following the date that such stockholder became an interested

stockholder.&#160; These provisions could discourage

a third party from pursuing a takeover of us at a price considered attractive

by many stockholders, since such provisions could have the effect of preventing

or delaying a potential acquirer from acquiring control of us and our Board of

Directors.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">The SEC commenced an investigation concerning

our revenue recognition matters</font></i>.</b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The SEC has issued a formal order of investigation and

has required us to provide information in connection with certain revenue

recognition matters.&#160; We have been

cooperating fully.&#160; These matters,

relating to our historical accounting for and disclosures concerning sales of

ORTHOVISC<sup>&#174;</sup> under a long-term supply and distribution agreement with

Zimmer, were also the subject of our March 15, 2000 disclosure concerning an

informal SEC inquiry and the restatement of results for 1998 and the first

three quarters of 1999.&#160; On August 14,

2001, as a result of the SEC&#146;s ongoing investigation, we, in conjunction with

our independent auditors, determined to again restate our <font style="letter-spacing:-.15pt;">financial results for the fourth quarter of 1998

and the first quarter of 1999 as discussed in Note 15 of the consolidated

financial statements included in the company&#146;s Annual Report on Form 10-K for

the year ended December 31, 2001.&#160; </font>&#160;&#160;As a result of the SEC&#146;s investigation, we

have been informed that the staff of the Boston District Office of the SEC (the

&#147;Staff&#148;) is considering recommending that the SEC authorize civil injunctive

actions against us and others, including former officers, concerning these

matters.&#160; We were invited by the Staff

to submit our views as to why a civil injunctive action against us should not

be instituted, and we have done so.&#160; We

are currently in discussions with the Staff concerning possible resolution of

the matter by settlement.&#160; We are not in

a position to predict whether such a settlement will be reached.&#160; In addition, if we expend substantial

additional costs and fees in responding to this matter, then the matter may

have an adverse effect on our financial position.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">Our revenues are derived from a small number of customers, the

loss of which could materially adversely affect our business, financial

condition and results of operations</font></i>.</b></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;letter-spacing:-.1pt;">We have

historically derived the majority of our revenues from a small number of

customers, most of whom resell our products to end users and most of who are

significantly larger companies than us.&#160;

For the six months ended June 30, 2002, Bausch &amp; Lomb accounted for

47.1% of product revenues and 46.4% of our accounts receivable balance and </font><font style="letter-spacing:-.1pt;">Boehringer Ingelheim accounted for 15.1% of product revenues and 25.6% of our accounts

receivable balance.&#160; Our failure to

generate as much revenue as expected from these customers or the failure of

these customers to purchase our products would adversely affect our business.

On March 11, 2002, Bausch &amp; Lomb&#146;s senior debt and short-term debt ratings

were downgraded.&#160; Although Bausch &amp;

Lomb emphasized at that time it was not facing any issues with respect to

liquidity, any such issues that impact their ability to pay their accounts with

us could adversely impact future revenues.&#160;

In addition, if present and future customers terminate their purchasing

arrangements with us, significantly reduce or delay their orders, or seek to

renegotiate their agreements on terms less favorable to us, our business,

financial condition, and results of operations will be adversely affected.&#160; If we accept terms less favorable than the

terms of the current agreement, such renegotiations may have a material adverse

effect on our business, financial condition, and/or results of operations.&#160; Furthermore, we may be subject to the

perceived or actual advantage the customers may have given their relative size

and importance to us in any future negotiations.&#160; Any termination, change, reduction or delay in orders could

seriously harm our business, financial condition, and results of operations.

Accordingly, unless and until we diversify and expand our customer base, our

future success will significantly depend upon the timing and size of future

purchases by our largest customers and the financial and operational success of

these customers.&#160; Product revenue in the

future may continue to be adversely impacted by economic uncertainties

associated with the Turkish market.</font></font></p>



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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">24</font></p>





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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The loss of any one of our major customers or the

delay of significant orders from such customers, even if only temporary, could

reduce or delay our recognition of revenues, harm our reputation in the

industry, and reduce our ability to accurately predict cash flow, and, as a consequence,

could seriously harm our business, financial condition, and results of

operations.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We, through our distributors, distribute ORTHOVISC<sup>&#174;</sup>

in territories such as Canada, Spain, Portugal, Turkey, and Israel. Due to the

result of the unfavorable results of the U.S. ORTHOVISC<sup>&#174;</sup> Phase III

clinical trial announced on May 31, 2000, marketing efforts in these countries

have been and may continue to be negatively affected.&#160; There can be no assurance that past ORTHOVISC<sup>&#174;</sup> sales

levels will be maintained or that sales will occur at all in these countries.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">25</font></p>





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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-autospace:none;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ITEM

3.&#160; QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK</font></b></p>



<p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As of June 30, 2002, we do not participate in any

derivative financial instruments or other financial and commodity instruments

for which fair value disclosure would be required under SFAS No. 107. All of

our investments consist of money market funds and commercial paper that are

carried on our books at amortized cost, which approximates fair market value.

Accordingly, we have no quantitative information concerning the market risk of

participating in such investments.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Primary Market Risk Exposures</font></i></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our primary market risk exposures are in the areas of

interest rate risk and foreign currency exchange rate risk. Our investment

portfolio of cash equivalent and short-term investments is subject to interest

rate fluctuations, but we believe this risk is immaterial due to the short-term

nature of these investments.&#160; Our

exposure to currency exchange rate fluctuations is specific to certain sales to

a foreign customer and is expected to continue to be modest. The impact of

currency exchange rate movements on sales to this foreign customer was

immaterial for the quarter ended June 30, 2002.&#160; Currently, we do not engage in foreign currency hedging

activities.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PART II: OTHER

INFORMATION</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 1.&#160; Legal Proceedings</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">See Note 8, &#147;Legal Matters&#148; of the consolidated financial

statements.&#160; The description of such

matters is incorporated herein by reference to such financial statements.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 4.&#160; Submission of Matters to a Vote of Security Holders</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">On June 5, 2002, we held our 2002 Annual Meeting of

Stockholders.&#160; At our annual meeting,

stockholders were asked to consider a proposal to elect a Class III Director of

Anika to serve until the 2005 annual meeting of stockholders and until his

successors is duly elected and qualified (the &#147;Election Proposal&#148;).</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">With respect to the Election Proposal, Steven E.

Wheeler was nominated as a Class III Director of Anika.&#160; Mr. &#160;Wheeler received 9,218,811shares voted in favor of his election

and 244,087 votes were withheld.&#160; Mr.

Wheeler was therefore elected as Class III Director.&#160; Joseph L. Bower and Eugene A. Davidson, Ph.D. (Class I

Directors), and Samuel F. McKay and Harvey S. Sadow (Class II Directors)

continued to serve their respective terms after the Annual Meeting.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">26</font></p>





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<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Exhibits and Reports on Form 8-K</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(a)</font></b></p>

  </td>

  <td width="11%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:11.24%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit<br>

  No.</font></b></p>

  </td>

  <td width="3%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:3.66%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="78%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt .7pt .7pt;width:78.5%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Description</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="11%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:11.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:3.66%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="78%" valign="bottom" style="border:none;padding:0in .7pt .7pt .7pt;width:78.5%;">

  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(3)</font></p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Articles of Incorporation and Bylaws: </font></p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="11%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:11.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;">&nbsp;</p>

  </td>

  <td width="3%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:3.66%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="78%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:78.5%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.1</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The

  Amended and Restated Articles of Organization of the Company, incorporated

  herein by reference to Exhibit 3.1 to the Company&#146;s Registration Statement on

  Form 10 (File no. 000-21326), filed with the Securities and Exchange Commission

  on March 5, 1993.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.2</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Certificate

  of Vote of Directors Establishing a Series of Convertible Preferred Stock,

  incorporated herein by reference to Exhibits to the Company&#146;s Registration

  Statement on Form 10 (File no. 000-21326), filed with the Securities and

  Exchange Commission on March 5, 1993.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.3*</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Amendment

  to the Amended and Restated Articles of Organization of the Company, dated

  January 8, 1997.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.4</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Certificate

  of Vote of Directors Establishing a Series of a Class of Stock, incorporated

  herein by reference to Exhibit 3.1 of the Company&#146;s Registration Statement on

  Form 8-AB12 (File no. 001-14027), filed with the Securities and Exchange

  Commission on April 7, 1998.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.5</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Amendment

  to the Amended and Restated Articles of Organization of the Company,

  incorporated herein by reference to the Company&#146;s quarterly report on Form

  10-QSB for the quarterly period ending June 30, 1998 (File no. 001-14027),

  filed with the Securities and Exchange Commission on August 14, 1998.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.6*</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Amended

  and Restated By-laws of the Company.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Instruments

  Defining the Rights of Security Holders</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.1</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Shareholder

  Rights Agreement dated as of April 6, 1998 between the Company and Firstar

  Trust Company, incorporated herein by reference to Exhibit 4.1 to the

  Company&#146;s Registration Statement on Form 8-A12B (File no. 001-14027), filed

  with the Securities and Exchange Commission on April 7, 1998.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(10)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Material

  Contracts</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.1*</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Separation

  Agreement dated April 2, 2002 by and between the Company and Edward Ross, Jr.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.2*</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Letter

  Agreement dated June 25, 2002 by and between the Company and William J.

  Knight.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.3*</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Change

  in Control, Bonus and Severance Agreement dated July 8, 2002 by and between

  the Company and William J. Knight.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.4*</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Amended

  and Restated Change in Control, Bonus and Severance Agreement dated July 8,

  2002 by and between the Company and Charles H. Sherwood.</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(11)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Statement

  Regarding the Computation of Per Share Earnings</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="3" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt 40.0pt;text-indent:-40.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.1</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>See

  Note 4 to the Financial Statements included herewith.</p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="1" width="25%" noshade color="black" align="left">



</font></div>





<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">* filed herewith</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">27</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(b)</font></b></p>

  </td>

  <td width="93%" colspan="2" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Reports

  on Form 8-K:</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="2" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="2" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Registrant filed the following Reports on Form

  8-K during the quarter ended June 30, 2002:</font></p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="73%" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:73.76%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="19%" valign="top" style="padding:0in .7pt .7pt .7pt;width:19.64%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="6%" valign="top" style="padding:0in .7pt .7pt .7pt;width:6.6%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="93%" colspan="2" valign="bottom" style="padding:0in .7pt .7pt .7pt;width:93.4%;">

  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160; Current Report on Form 8-K filed June 10,

  2002, as amended by Current Report on Form 8-K/A filed June 20, 2002,

  announcing that the Company had terminated Arthur Andersen LLP as independent

  auditor.</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">28</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-weight:bold;letter-spacing:-.1pt;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">SIGNATURES</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Pursuant to the requirements of Section&nbsp;13 or 15(d) of the

Securities Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized in

Woburn, Massachusetts on August 14, 2002.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="46%" valign="top" style="padding:0in .7pt 0in .7pt;width:46.02%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="53%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;text-transform:uppercase;">Anika Therapeutics, Inc.</font></p>

  </td>

 </tr>

 <tr>

  <td width="46%" valign="top" style="padding:0in .7pt 0in .7pt;width:46.02%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="53%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:53.98%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="46%" valign="top" style="padding:0in .7pt 0in .7pt;width:46.02%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;<font style="letter-spacing:-.1pt;">August

  14, 2002</font></font></p>

  </td>

  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.22%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">By:</font></p>

  </td>

  <td width="33%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:33.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">/s/&#160; William J. Knight</font></p>

  </td>

  <td width="16%" valign="top" style="padding:0in .7pt 0in .7pt;width:16.5%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="46%" valign="top" style="padding:0in .7pt 0in .7pt;width:46.02%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.22%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:49.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">William

  J. Knight</font></p>

  </td>

 </tr>

 <tr>

  <td width="46%" valign="top" style="padding:0in .7pt 0in .7pt;width:46.02%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.22%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:49.76%;">

  <p style="margin:0in 0in .0001pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;letter-spacing:-.1pt;">Chief Financial Officer and Treasurer</font></i></p>

  </td>

 </tr>

 <tr>

  <td width="46%" valign="top" style="padding:0in .7pt 0in .7pt;width:46.02%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.22%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="49%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:49.76%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">(Principal

  Financial Officer and Accounting Officer)</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">29</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



</div>



</body>



</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>3
<FILENAME>j4192_ex3d3.htm
<DESCRIPTION>EX-3.3
<TEXT>
<html>



<head>



<title>  </title>



</head>



<body>



<div style="font-family:'Courier New';">



<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT 3.3</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">-0033257</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="14%" valign="top" style="border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:14.54%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Examiner</font></p>

  </td>

  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.46%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="14%" valign="top" style="border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:14.54%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name Approved</font></p>

  </td>

  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.46%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CPM

R.A.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="14%" valign="top" style="border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:14.54%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">P.C.</font></p>

  </td>

  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.46%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">NO.

04-3145961</font></u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">THE

COMMONWEALTH OF MASSACHUSETTS</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WILLIAM

FRANCIS GALVIN</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Secretary

of the Commonwealth</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">One

Ashburton Place, Boston, Massachusetts&#160;

02108-1512</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ARTICLES

OF AMENDMENT</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(GENERAL

LAWS, CHAPTER 156B, SECTION 72)</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We, J. Melville Engle,

*President, and Sean F. Moran, *Clerk,</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="9%" valign="top" style="padding:0in .7pt 0in .7pt;width:9.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">of </font></p>

  </td>

  <td width="91%" valign="top" style="padding:0in .7pt 0in .7pt;width:91.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Anika

  Research, Inc. ,</font></p>

  </td>

 </tr>

 <tr>

  <td width="9%" valign="top" style="padding:0in .7pt 0in .7pt;width:9.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="91%" valign="top" style="padding:0in .7pt 0in .7pt;width:91.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Exact

  name of corporation)</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="9%" valign="top" style="padding:0in .7pt 0in .7pt;width:9.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">located at </font></p>

  </td>

  <td width="91%" valign="top" style="padding:0in .7pt 0in .7pt;width:91.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">236

  West Cummings Park, Woburn, MA 01801</font></p>

  </td>

 </tr>

 <tr>

  <td width="9%" valign="top" style="padding:0in .7pt 0in .7pt;width:9.0%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="91%" valign="top" style="padding:0in .7pt 0in .7pt;width:91.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Street

  address of corporation in Massachusetts)</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='1',FILE='C:\C2\rreeve\4192_3\t_773850\j4192_ex3d3.htm',USER='rreeve',CD='Aug 14 06:25 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">certify that these Articles of

Amendment affecting articles numbered:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="7%" valign="top" style="padding:0in .7pt 0in .7pt;width:7.88%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="92%" valign="top" style="padding:0in .7pt 0in .7pt;width:92.12%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Article

  1</font></p>

  </td>

 </tr>

 <tr>

  <td width="7%" valign="top" style="padding:0in .7pt 0in .7pt;width:7.88%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="92%" valign="top" style="padding:0in .7pt 0in .7pt;width:92.12%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Number

  those articles 1, 2, 3, 4, 5 and/or 6 being amended)</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">of the Articles of Organization

were duly adopted at a meeting held on January 8, 1997, by vote of:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="100%" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4,197,334

  shares of Common of 4,917,023 shares outstanding,</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(type,

  class &amp; series, if any)</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="100%" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">125,476

  shares of Series A Preferred of 126,259 shares outstanding, and</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(type,

  class &amp; series, if any)</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.0%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="22%" valign="top" style="padding:0in .7pt 0in .7pt;width:22.18%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">shares

  of</font></p>

  </td>

  <td width="13%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:13.36%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">of</font></p>

  </td>

  <td width="6%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:6.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" valign="top" style="padding:0in .7pt 0in .7pt;width:17.9%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">shares

  outstanding,</font></p>

  </td>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="6" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(type,

  class &amp; series, if any)</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/1**/ being at least a majority

of each type, class or series outstanding and entitled to vote thereon:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Changed

name of corporation to Anika Therapeutics, Inc.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/*/ Delete the inapplicable words.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/**/ Delete the inapplicable

clause.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/1/ For amendments adopted

pursuant to Chapter 156B, Section 70.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/2/ For amendments adopted

pursuant to Chapter 156B, Section 71.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NOTE: IF THE SPACE PROVIDED

UNDER ANY ARTICLE OR ITEM ON THIS FORM IS INSUFFICIENT, ADDITIONS SHALL BE SET

FORTH ON ONE SIDE ONLY OF SEPARATE 8 1/2 X 11 SHEETS OF PAPER WITH A LEFT

MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE MAY BE MADE ON A

SINGLE SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS CLEARLY INDICATED.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='2',FILE='C:\C2\rreeve\4192_3\t_773850\j4192_ex3d3.htm',USER='rreeve',CD='Aug 14 06:25 2002' -->
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To change the number of shares

and the par value (if any) of any type, class or series of stock which the

corporation is authorized to issue, fill in the following:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The total presently authorized is:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="38%" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:38.78%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">WITHOUT PAR VALUE STOCKS</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="59%" colspan="6" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:59.16%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">WITH PAR VALUE STOCKS</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">TYPE</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">NUMBER OF SHARES</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">TYPE</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">NUMBER OF SHARES</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">PAR VALUE</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="17%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.06%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Preferred:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Preferred:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Change the total authorized to:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="38%" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:38.78%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">WITHOUT PAR VALUE STOCKS</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="59%" colspan="5" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:59.16%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">WITH PAR VALUE STOCKS</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">TYPE</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="border:none;padding:0in .7pt 0in .7pt;width:2.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">NUMBER OF SHARES</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">TYPE</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">NUMBER OF SHARES</font></b></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">PAR VALUE</font></b></p>

  </td>

 </tr>

 <tr>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common:</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Preferred:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.06%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Preferred:</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>

  </td>

  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.04%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="18%" valign="top" style="padding:0in .7pt 0in .7pt;width:18.36%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- SEQ.=1,FOLIO='3',FILE='C:\C2\rreeve\4192_3\t_773850\j4192_ex3d3.htm',USER='rreeve',CD='Aug 14 06:25 2002' -->
<br clear="all" style="page-break-before:always;">

</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The foregoing amendment(s) will

become effective when these Articles of Amendment are filed in accordance with

General Laws, Chapter 156B, Section 6 unless these articles specify, in

accordance with the vote adopting the amendment, a later effective date not

more than thirty days after such filing, in which event the Amendment will

become effective on such later date.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SIGNED UNDER THE PENALTIES OF

PERJURY, this 8th day of January, 1997,</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="26%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:26.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ J. Melville Engle,

  *President,</font></p>

  </td>

  <td width="73%" valign="top" style="padding:0in .7pt 0in .7pt;width:73.28%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="26%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:26.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">J. Melville Engle</font></p>

  </td>

  <td width="73%" valign="top" style="padding:0in .7pt 0in .7pt;width:73.28%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="26%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:26.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Sean F. Moran, *Clerk.</font></p>

  </td>

  <td width="73%" valign="top" style="padding:0in .7pt 0in .7pt;width:73.28%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="26%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:26.72%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Sean F. Moran</font></p>

  </td>

  <td width="73%" valign="top" style="padding:0in .7pt 0in .7pt;width:73.28%;">

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<FILENAME>j4192_ex3d6.htm
<DESCRIPTION>EX-3.6
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<p align="right" style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;font-weight:normal;">Exhibit </font></b><font size="2" style="font-size:10.0pt;font-variant:normal;font-weight:normal;text-transform:uppercase;">3.6</font></p>



<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;font-weight:normal;text-transform:uppercase;">&nbsp;</font></b></p>



<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;text-transform:uppercase;">AMENDED

AND RESTATED BY-LAWS</font></b></p>



<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;font-weight:normal;text-transform:uppercase;">&nbsp;</font></b></p>



<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;text-transform:uppercase;">OF</font></b></p>



<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;font-weight:normal;text-transform:uppercase;">&nbsp;</font></b></p>



<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;text-transform:uppercase;">ANIKA

THERAPEUTICS, INC.</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<h1 style="font-weight:normal;margin:0in 0in .0001pt .5in;page-break-after:auto;text-align:center;text-decoration:underline;text-indent:-.5in;"><u><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Article

1 - </font>Stockholders</font></u></h1>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Place of Meetings</u>.&#160; All meetings of stockholders shall be held

within the Commonwealth of Massachusetts unless the Articles of Organization

permit the holding of stockholders&#146; meetings outside Massachusetts, in which

event such meetings may be held either within or without Massachusetts.&#160; Meetings of stockholders shall be held at

the principal office of the Corporation unless a different place is fixed by the

Board of Directors or the President and stated in the notice of the meeting.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Annual Meeting</u>.&#160; The annual meeting of stockholders shall be

held within six months after the end of each fiscal year of the Corporation on

a date to be fixed by the Board of Directors or the President (which date shall

not be a legal holiday in the place where the meeting is to be held) at the

time and place to be fixed by the Board of Directors or the President and

stated in the notice of the meeting.&#160;

The purposes for which the annual meeting is to be held, in addition to

those prescribed by law, by the Articles of Organization or by these By-Laws,

may be specified by the Board of Directors or the President.&#160; If no annual meeting is held in accordance

with the foregoing provisions, a special meeting may be held in lieu of the

annual meeting, and any action taken at that special meeting shall have the

same effect as if it had been taken at the annual meeting, and in such case all

references in these By-Laws to the annual meeting of stockholders shall be

deemed to refer to such special meeting.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Special Meetings</u>.&#160; Special meetings of stockholders may be

called at any time by the President or by the Chairman of the Board of

Directors.&#160; Business transacted at any

special meeting of stockholders shall be limited to matters relating to the

purpose or purposes stated in the notice of the meeting.&#160; Notwithstanding any other provision of law,

these By-Laws or the Corporation&#146;s Articles of Organization, as amended, and

notwithstanding the fact that a lesser percentage may be specified by law, the

affirmative vote of the holders of at least seventy-five percent (75%) of the

votes which all the stockholders would be entitled to cast at any annual

election of directors or class of directors shall be required to amend or

repeal this Section 1.3 or to adopt any provision inconsistent with this

Section&nbsp;1.3.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notice of Meetings</u>.&#160; A written notice of each meeting of

stockholders, stating the place, date and hour thereof, and the purposes for

which the meeting is to be held, shall be given by the Clerk, Assistant Clerk

or other person calling the meeting at least seven days before the meeting to

each stockholder entitled to vote at the meeting and to each stockholder who by

law, by the Articles of Organization or by these By-Laws is entitled to such

notice, by leaving such notice with him or at his residence or usual place of

business, or by mailing it postage prepaid and addressed to him at his address

as it appears in the records of the Corporation.&#160; Whenever any notice is required to be given to a stockholder by

law, by the Articles of Organization or by these By-Laws, no such notice need

be given if a written waiver of notice, executed before or</font></h2>



<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>





<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



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</font></h2>



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<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">after the meeting by the

stockholder or his authorized attorney, is filed with the records of the

meeting.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Quorum</u>.&#160; Unless the Articles of Organization

otherwise provide, the holders of a majority of the number of shares of the

stock issued, outstanding and entitled to vote on any matter shall constitute a

quorum with respect to that matter, except that if two or more classes of stock

are outstanding and entitled to vote as separate classes, then in the case of

each such class a quorum shall consist of the holders of a majority of the number

of shares of the stock of that class issued, outstanding and entitled to

vote.&#160; Shares owned directly or

indirectly by the Corporation shall not be counted in determining the total

number of shares outstanding for this purpose.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Adjournments</u>.&#160; Except as provided in Section 1.3 hereof,

any meeting of stockholders may be adjourned to any other time and to any other

place at which a meeting of stockholders may be held under these By-Laws by the

stockholders present or represented at the meeting, although less than a

quorum, or by any officer entitled to preside or to act as clerk of such

meeting, if no stockholder is present.&#160;

It shall not be necessary to notify any stockholder of any adjournment.&#160; Any business which could have been

transacted at any meeting of the stockholders as originally called may be

transacted at any adjournment of the meeting.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Voting and Proxies</u>.&#160; Each stockholder shall have one vote for

each share of stock entitled to vote held of record by such stockholder and a

proportionate vote for each fractional share so held, unless otherwise provided

by the Articles of Organization.&#160;

Stockholders may vote either in person or by written proxy dated not

more than six months before the meeting named in the proxy.&#160; Proxies shall be filed with the clerk of the

meeting, or of any adjourned meeting, before being voted.&#160; Except as otherwise limited by their terms,

a proxy shall entitle the persons named in the proxy to vote at any adjournment

of such meeting, but shall not be valid after final adjournment of such

meeting.&#160; A proxy with respect to stock

held in the name of two or more persons shall be valid if executed by any one

of them, unless at or prior to exercise of the proxy the Corporation receives a

specific written notice to the contrary from any one of them.&#160; A proxy purported to be executed by or on

behalf of a stockholder shall be deemed valid unless challenged at or prior to

its exercise.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.8&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Action at Meeting</u>.&#160; When a quorum is present at any meeting, the

holders of a majority of the stock present or represented and voting on a

matter (or if there are two or more classes of stock entitled to vote as

separate classes, then in the case of each such class, the holders of a

majority of the stock of that class present or represented and voting on a

matter), shall decide any matter to be voted on by the stockholders, except

when a larger vote is required by law, the Articles of Organization or these

By-Laws.&#160; Any election by stockholders

shall be determined by a plurality of the votes cast by the stockholders

entitled to vote at the election.&#160; No

ballot shall be required for such election unless requested by a stockholder

present or represented at the meeting and entitled to vote in the election.&#160; The Corporation shall not directly or indirectly

vote any share of its own stock.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.9&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Introduction of Business at

Meeting</u>.&#160; Except as otherwise

provided by law, at any annual or special meeting of stockholders only such

business shall be conducted as shall have been properly brought before the meeting.&#160; In order to be properly brought before the

meeting,</font></h2>



<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></h2>





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</font></h2>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">such business must have

been either (A) specified in the written notice of the meeting (or any

supplement thereto) given to stockholders of record on the record date for such

meeting by or at the direction of the Board of Directors, (B) brought before

the meeting at the direction of the Board of Directors or the chairman of the

meeting or (C) specified in a written notice given by or on behalf of a

stockholder of record on the record date for such meeting entitled to vote

thereat or a duly authorized proxy for such stockholder, in accordance with all

of the following requirements.&#160; A notice

referred to in clause (C) hereof must be delivered personally to or mailed to

and received at the principal executive office of the Corporation, addressed to

the attention of the Clerk, not more than ten (10) days after the date of the

initial notice referred to in clause (A) hereof, in the case of business to be

brought before a special meeting of stockholders, and not less than thirty (30)

days prior to the first anniversary date of the initial notice referred to in

clause (A) hereof to the previous year&#146;s annual meeting, in the case of

business to be brought before an annual meeting of stockholders; <u>provided</u>,

<u>however</u>, that such notice shall not be required to be given more than

sixty (60) days prior to an annual meeting of stockholders.&#160; Such notice referred to in clause (C) hereof

shall set forth (i) a full description of each such item of business proposed

to be brought before the meeting, (ii) the name and address of the person

proposing to bring such business before the meeting, (iii) the class and number

of shares held of record, held beneficially and represented by proxy by such

person as of the record date for the meeting (if such date has been made

publicly available) and as of the date of such notice, (iv) if any item of such

business involves nomination for director, all information regarding each such

nominee that would be required to be set forth in a definitive proxy statement

filed with the Securities and Exchange Commission pursuant to Section&nbsp;14

of the Securities Exchange Act of 1934, as amended, or any successor thereto,

and the written consent of each such nominee to serve if elected, and (v) all

other information that would be required to be filed with the Securities and

Exchange Commission if, with respect to the business proposed to be brought

before the meeting, the person proposing such business was a participant in a

solicitation subject to Section&nbsp;14 of the Securities Exchange Act of 1934,

as amended, or any successor thereto.&#160;

No business shall be brought before any meeting of stockholders of the

Corporation otherwise than as provided in this paragraph.</font></h2>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Notwithstanding

the foregoing provisions, the Board of Directors shall be obligated to include

information as to any nominee for director in any proxy statement or other

communication sent to stockholders.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The chairman of

the meeting may, if the facts warrant, determine and declare to the meeting

that any proposed item of business was not brought before the meeting in

accordance with the foregoing procedure and, if he should so determined, he

shall so declare to the meeting and the defective item of business shall be

disregarded.</font></p>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.10&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Action without Meeting</u>.&#160; Until the Corporation becomes subject to the

reporting requirements of the Securities Exchange Act of 1934 (the &#147;Triggering

Event&#148;), any action required or permitted to be taken at any annual or special

meeting of stockholders of the Corporation may be taken without a meeting,

without prior notice and without a vote, if a consent in writing, setting forth

the action so taken, is signed by the holders of outstanding stock having not less

than the minimum number of votes that would be necessary to authorize or take

such action at a meeting at which all shares entitled to vote on such action

were present and voted.&#160; Prompt notice

of the taking of corporate action without a meeting by less than unanimous</font></h2>



<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></h2>





<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



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</font></h2>



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<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">written consent shall be

given to those stockholders who have not consented in writing.&#160; Effective upon the date of the Triggering

Event, stockholders of the Corporation may not take any action by written

consent in lieu of a meeting.&#160;

Notwithstanding any other provision of law, these By-Laws or the

Corporation&#146;s Articles or Organization, and notwithstanding the fact that a

lesser percentage may be specified by law, the affirmative vote of the holders

of seventy-five percent (75%) of the votes which all the stockholders would be

entitled to cast at any annual election of directors or class of directors

shall be required to amend or repeal, or to adopt any provision inconsistent

with, this Section&nbsp;1.9.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h1 style="font-weight:normal;margin:0in 0in .0001pt .5in;page-break-after:auto;text-align:center;text-decoration:underline;text-indent:-.5in;"><u><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Article

2 - </font>Directors</font></u></h1>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Powers</u>.&#160; The business of the Corporation shall be

managed by a Board of Directors, who may exercise all the powers of the

Corporation except as otherwise provided by law, by the Articles of

Organization or by these By-Laws.&#160; In

the event of a vacancy in the Board of Directors, the remaining Directors,

except as otherwise provided by law, may exercise the powers of the full Board

until the vacancy is filled.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Number, Election and Qualification</u>.&#160; The number of Directors which shall

constitute the whole Board of Directors shall be determined by vote of the

stockholders or the Board of Directors, but shall consist of not less than

three Directors (except that whenever there shall be only two stockholders the

number of Directors shall be not less than two and whenever there shall be only

one stockholder or prior to the issuance of any stock, there shall be at least

one Director).&#160; The number of Directors

may be decreased at any time and from time to time either by the stockholders

or by a majority of the Directors then in office, but only to eliminate

vacancies existing by reason of the death, resignation, removal or expiration

of the term of one or more Directors.&#160;

The Directors shall be elected at the annual meeting of stockholders by

such stockholders as have the right to vote on such election.&#160; No Director need be a stockholder of the

Corporation.&#160; The number of Directors

may be increased at any time and from time to time by the stockholders or by a

majority of the Directors then in office.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Classes of Directors</u>.&#160; The Board of Directors shall be and is

divided into three classes:&#160;

Class&nbsp;I, Class&nbsp;II and Class III.&#160; No one class shall have more than one director more than any

other class.&#160; If a fraction is contained

in the quotient arrived at by dividing the authorized number of directors by

three, then, if such fraction is one-third, the extra directors shall be a

member of Class&nbsp;I and, if such fraction is two-thirds, one of the extra

directors shall be a member of Class&nbsp;I and the other extra director shall

be a member of Class&nbsp;II, unless otherwise provided for from time to time

by resolution adopted by a majority of the Board of Directors.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Election of Directors</u>.&#160; Elections of directors need not be by

written ballot except as and to the extent provided in the By-Laws of the

Corporation.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Terms of Office</u>.&#160; Each director shall serve for a term ending

on the date of the third annual meeting following the annual meetings at which

such director was elected; <u>provided</u>, <u>however</u>, that each initial

director in Class&nbsp;I shall serve for a term ending on the date of the

annual meeting next following the end of the Corporation&#146;s fiscal year ending

August&nbsp;31, 1994; each initial director in Class&nbsp;II shall serve for a

term ending on the date of the annual meeting next following the end of the

Corporation&#146;s fiscal year ending August&nbsp;31, 1995; and each initial</font></h2>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></h2>





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</font></h2>



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<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">director in Class III

shall serve for a term ending on the date of the annual meeting next following

the end of the Corporation&#146;s fiscal year ending August&nbsp;31, 1996.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Allocation of Directors Among

Classes in the Event of Increases or Decreases in the Number of Directors</u>.&#160; In the event of any increase or decrease in

the authorized number of directors, (i) each director then serving as such

shall nevertheless continue as a director of the class of which he is a member

until the expiration of his current term or his prior death, retirement or

resignation and (ii) the newly created or eliminated directorships resulting

from such increase or decrease shall be apportioned by the Board of Directors

among the three classes of directors so as to ensure than no one class has more

than one director more than any other class.&#160;

To the extent possible, consistent with the foregoing rule, any newly

created directorships shall be added to those classes whose terms of office are

to expire at the latest dates following such allocation, and any newly

eliminated directorships shall be subtracted from those classes whose terms of

office are to expire at the earliest dates following such allocation, unless

otherwise provided for form time to time by resolution adopted by a majority of

the directors then in office, although less than a quorum.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Tenure</u>.&#160; Notwithstanding any provisions to the

contrary contained herein, each director shall hold office until his successor

is elected and qualified, or until his earlier death, resignation or removal.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.8&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Vacancies</u>.&#160; Any vacancy in the Board of Directors,

however occurring, including a vacancy resulting from an enlargement of the

Board, may be filled by a vote of a majority of directors then in office.&#160; A director elected to fill a vacancy shall

be elected for the unexpired term of his predecessor in office, if applicable,

and a director chosen to fill a position resulting from an increase in the

number of directors shall hold office until the next election of the class for

which such director shall have been chosen and until his successor is elected or

qualified, or until his earlier death, resignation or removal.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.9&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Resignation</u>.&#160; Any Director may resign by delivering his

written resignation to the Corporation at its principal office or to the

President or Clerk.&#160; Such resignation

shall be effective upon receipt unless it is specified to be effective at some

other time or upon the happening of some other event.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.10&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Removal</u>.&#160; A Director may be removed from office with

or without cause by vote of the holders of a majority of the shares entitled to

vote in the election of Directors.&#160;

However, the Directors elected by the holders of a particular class or

series of stock may be removed from office with or without cause only by vote

of the holders of a majority of the outstanding shares of such class or series.&#160; In addition, a Director may be removed from

office&#160; for cause by vote of a majority

of the Directors then in office.&#160; A

Director may be removed for cause only after reasonable notice and opportunity

to be heard before the body proposing to remove him.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.11&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Regular Meetings</u>.&#160; Regular meetings of the Directors may be

held without call or notice at such places, within or without Massachusetts,

and at such times as the Directors may from time to time determine, provided

that any Director who is absent when such determination is made shall be given

notice of the determination.&#160; A regular

meeting of the Directors may be held without a call or notice immediately after

and at the same place as the annual meeting of</font></h2>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></h2>





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</font></h2>



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<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">stockholders.&#160; Meetings of the Directors shall be held at

least once in every fiscal quarter of the Company.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.12&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Special Meetings</u>.&#160; Special meetings of the Directors may be

held at any time and place, within or without Massachusetts, designated in a

call by the Chairman of the Board, President, Treasurer, two or more Directors,

any one Director who is a member of the Executive Committee or by one Director

in the event that there is only a single Director in office.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.13&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Meetings by Telephone Conference

Calls</u>.&#160; Directors or members of any

committee designated by the Directors may participate in a meeting of the

Directors or such committee by means of a conference telephone or similar

communications equipment by means of which all persons participating in the

meeting can hear each other at the same time and participation by such means

shall constitute presence in person at a meeting.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.14&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notice of Special Meetings</u>.&#160; Notice of any special meeting of the

Directors shall be given to each Director by the Clerk or by the officer or one

of the Directors calling the meeting.&#160;

Notice shall be duly given to each Director (i) by notice given to such

Director in person or by telephone at least 48 hours in advance of the meeting,

(ii) by sending a telegram or telecopy, or by delivering written notice by hand

to his last known business or home address at least 48 hours in advance of the

meeting, or (iii) by mailing written notice to his last known business or home

address at least 72 hours in advance of the meeting.&#160; Notice need not be given to any Director if a written waiver of

notice, executed by him before or after the meeting, is filed with the records

of the meeting, or to any Director who attends the meeting without protesting

prior to the meeting or at its commencement the lack of notice to him.&#160; A notice or waiver of notice of a Directors&#146;

meeting need not specify the purposes of the meeting.&#160; If notice is given in person or by telephone, an affidavit of the

Clerk, officer or Director who gives such notice that the notice has been duly

given shall, in the absence of fraud, be conclusive evidence that such notice

was duly given.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.15&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Quorum</u>.&#160; A majority of the total number of the whole

Board of Directors shall constitute a quorum at all meetings of the Board of

Directors.&#160; In the event one or more of

the directors shall be disqualified to vote at any meeting, then the required

quorum shall be reduced by one for each such director so disqualified;

provided, however, that in no case shall less than one-third (1/3) of the

number so fixed constitute a quorum.&#160; In

the absence of a quorum at any such meeting, a majority of the directors

present may adjourn the meeting from time to time without further notice other

than announcement at the meeting, until a quorum shall be present.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.16&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Action at Meeting</u>.&#160; At any meeting of the Board of Directors at

which a quorum is present, the vote of a majority of those present shall be

sufficient to take any action, unless a different vote is specified by law, by

the Articles of Organization or by these By-Laws.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.17&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Action by Consent</u>.&#160; Any action required or permitted to be taken

at any meeting of the Board of Directors may be taken without a meeting if all

the Directors consent to the action in writing and the written consents are

filed with the records of the Directors&#146; meetings.&#160; Each such consent shall be treated for all purposes as a vote at

a meeting.</font></h2>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></h2>





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</font></h2>



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<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.18&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Committees</u>.&#160; The Board of Directors may, by vote of a

majority of the Directors then in office, elect from their number an executive

committee or other committees and may by like vote delegate to committees so

elected some or all of their powers to the extent permitted by law.&#160; Except as the Board of Directors may

otherwise determine, any such committee may make rules for the conduct of its

business, but unless otherwise provided by the Directors or in such rules, its

business shall be conducted as nearly as possible in the same manner as is

provided by these By-Laws for the Directors.&#160;

The Board of Directors shall have the power at any time to fill

vacancies in any such committee, to change its membership or to discharge the

committee.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.19&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Executive Committee</u>.&#160; The Executive Committee of the Board of

Directors shall consist of up to four members.&#160;

The Executive Committee will be responsible for formulating and

establishing a strategic business plan for the future and presenting same to

the full Board of Directors.&#160; The

Executive Committee will review and approve the Annual Operating Plan before it

is submitted to the Board of Directors for formal approval.&#160; The Executive Committee will review and

monitor actual business and financial performance against the Annual Operating Plan

and the Strategic Plan and report to the full Board of Directors thereon.&#160; The Executive Committee will be responsible

for reviewing the operating activities of the Company including sales and

marketing, regulatory, manufacturing, product development, finance and

administration.&#160; The Executive Committee

shall meet at least once every calendar month until the Corporation shall have

positive net income for a fiscal year.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.20&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Compensation of Directors</u>.&#160; Directors may be paid such compensation for

their services and such reimbursement for expenses of attendance at meetings as

the Board of Directors may from time to time determine.&#160; No such payment shall preclude any Director

from serving the Corporation in any other capacity and receiving compensation

therefor.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.21&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Consent to Certain Actions</u>. &#160;The approval of two-thirds of the Board of

Directors shall be required to take any of the actions set forth in

Section&nbsp;8 of the Series&nbsp;A Preferred Stock Purchase Agreement dated as

of May&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 1995 by and among the Corporation and the

investors listed on Schedule&nbsp;1 thereto to the extent such actions would

otherwise be prohibited by such Section 8 unless such prohibition is waived by

the holders of the Corporation&#146;s Series&nbsp;A Preferred Stock.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h1 style="font-weight:normal;margin:0in 0in .0001pt .5in;page-break-after:auto;text-align:center;text-decoration:underline;text-indent:-.5in;"><u><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Article

3 - </font>Officers</font></u></h1>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Enumeration</u>.&#160; The officers of the Corporation shall

consist of a President, a Treasurer, a Clerk and such other officers with such

other titles as the Board of Directors may determine, including, but not

limited to, a Chairman of the Board, a Vice Chairman of the Board, a Clerk and

one or more Vice Presidents, Assistant Treasurers, and Assistant Clerks.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Election</u>.&#160; The president, Treasurer and Clerk shall be

elected annually by the Board of Directors at their first meeting following the

annual meeting of stockholders.&#160; Other

officers may be chosen or appointed by the Board of Directors at such meeting

or at any other meeting.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Qualification</u>.&#160; Neither the President nor any other officer

need be a director or stockholder.&#160; Any

two or more offices may be held by the same person.&#160; The Clerk shall be a</font></h2>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></h2>





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</font></h2>



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<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">resident of Massachusetts

unless the Corporation has a resident agent appointed for the purpose of

service of process.&#160; Any officer may be

required by the Directors to give bond for the faithful performance of his

duties to the Corporation in such amount and with such sureties as the

Directors may determine.&#160; The premiums

for such bonds may be paid by the Corporation.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Tenure</u>.&#160; Except as otherwise provided by law, by the

Articles of Organization or by these By-Laws, the President, Treasurer and

Clerk shall hold office until the first meeting of the Directors following the

next annual meeting of stockholders and until their respective successors are

chosen and qualified; and all other officers shall hold office until the first

meeting of the Directors following the annual meeting of stockholders, unless a

different term is specified in the vote choosing or appointing them, or until

his earlier death, resignation or removal.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Resignation and Removal</u>.&#160; Any officer may resign by delivering his

written resignation to the Corporation at its principal office or to the

President, or Clerk.&#160; Such resignation

shall be effective upon receipt unless it is specified to be effective at some

other time or upon the happening of some other event.</font></h2>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Any officer may be

removed at any time, with or without cause, by vote of a majority of the entire

number of Directors then in office.&#160; An

officer may be removed for cause only after reasonable notice and opportunity

to be heard by the Board of Directors prior to action thereon.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Except as the

Board of Directors may otherwise determine, no officer who resigns or is

removed shall have any right to any compensation as an officer for any period

following his resignation or removal, or any right to damages on account of

such removal, whether his compensation be by the month or the year or

otherwise, unless such compensation is expressly provided in a duly authorized

written agreement with the Corporation.</font></p>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Vacancies</u>.&#160; The Board of Directors may fill any vacancy

occurring in any office for any reason and may, in its discretion, leave

unfilled for such period as it may determine any offices other than those of

President, Treasurer and Clerk.&#160; Each

such successor shall hold office for the unexpired term of his predecessor and

until his successor is chosen and qualified, or until he sooner dies, resigns

or is removed.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Chairman of the Board and

Vice-Chairman of the Board</u>.&#160; The

Board of Directors may appoint a Chairman of the Board and may designate him as

Chief Executive Officer.&#160; If the Board

of Directors appoints a Chairman of the Board, he shall perform such duties and

possess such powers as are assigned to him by the Board of Directors.&#160; If the Board of Directors appoints a

Vice-Chairman of the Board, he shall, in the absence or disability of the

Chairman of the Board, perform the duties and exercise the powers of the

Chairman of the Board and shall perform such other duties and possess such

other powers as may from time to time be vested in him by the Board of

Directors.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.8&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>President</u>.&#160; The President shall, subject to the

direction of the Board of Directors, have general charge and supervision of the

business of the Corporation.&#160; Unless

otherwise provided by the Board of Directors, he shall preside at all meetings

of the stockholders and, if he is a Director, at all meetings of the Board of

Directors.&#160; Unless the Board of

Directors has designated the Chairman of the Board or another officer as Chief

Executive Officer, the</font></h2>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></h2>





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</font></h2>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">President shall be the

Chief Executive Officer of the Corporation.&#160;

The President shall perform such other duties and shall possess such

other powers as the Board of Directors may from time to time prescribe.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.9&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Vice Presidents</u>.&#160; Any Vice President shall perform such duties

and possess such powers as the Board of Directors or the President may from

time to time prescribe.&#160; In the event of

the absence, inability or refusal to act of the President, the Vice President

(or if there shall be more than one, the Vice Presidents in the order

determined by the Board of Directors) shall perform the duties of the President

and when so performing shall have all the powers of and be subject to all the

restrictions upon the President.&#160; The

Board of Directors may assign to any Vice President the title of Executive Vice

President, Senior Vice President or any other title selected by the Board of

Directors.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.10&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Treasurer and Assistant Treasurers</u>.&#160; The Treasurer shall perform such duties and

shall have such powers as may from time to time be assigned to him by the Board

of Directors or the President.&#160; In

addition, the Treasurer shall perform such duties and have such powers as are

incident to the office of treasurer, including without limitation the duty and

power to keep and be responsible for all funds and securities of the

Corporation, to deposit funds of the Corporation in depositories selected in

accordance with these By-Laws, to disburse such funds as ordered by the Board

of Directors, to make proper accounts of such funds, and to render as required

by the Board of Directors statements of all such transactions and of the

financial condition of the Corporation.</font></h2>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Assistant

Treasurers shall perform such duties and possess such powers as the Board of

Directors, the President or the Treasurer may from time to time prescribe.&#160; In the event of the absence, inability or

refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be

more than one, the Assistant Treasurers in the order determined by the Board of

Directors) shall perform the duties and exercise the powers of the Treasurer.</font></p>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.11&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Clerk and Assistant Clerks</u>.&#160; The Clerk shall perform such duties and

shall possess such powers as the Board of Directors or the President may from

time to time prescribe. In addition, the Clerk shall perform such duties and

have such powers as are incident to the office of the clerk, including without

limitation the duty and power to give notices of all meetings of stockholders

and special meetings of the Board of Directors, to attend all meetings of

stockholders and the Board of Directors and keep a record of the proceedings,

to maintain a stock ledger and prepare lists of stockholders and their

addresses as required, to be custodian of corporate records and the corporate

seal and to affix and attest to the same on documents.</font></h2>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Any Assistant

Clerk shall perform such duties and possess such powers as the Board of

Directors, the President or the Clerk may from time to time prescribe.&#160; In the event of the absence, inability or

refusal to act of the Clerk, the Assistant Clerk (or if there shall be more

than one, the Assistant Clerks in the order determined by the Board of Directors)

shall perform the duties and exercise the powers of the Clerk.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the absence of

the Clerk or any Assistant Clerk at any meeting of stockholders or Directors,

the person presiding at meeting shall designate a temporary clerk to keep a

record of the meeting.</font></p>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></h2>





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</font></h2>



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<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.12&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Salaries</u>.&#160; Officers of the Corporation shall be

entitled to such salaries, compensation or reimbursement as shall be fixed or

allowed from time to time by the Board of Directors.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h1 style="font-weight:normal;margin:0in 0in .0001pt .5in;page-break-after:auto;text-align:center;text-decoration:underline;text-indent:-.5in;"><u><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Article

4 - </font>Capital Stock</font></u></h1>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Issue of Capital Stock</u>.&#160; Unless otherwise voted by the stockholders,

the whole or any part of any unissued balance of the authorized capital stock

of the Corporation or the whole or any part of the capital stock of the

Corporation held in its treasury may be issued or disposed of by vote of the

Board of Directors, in such manner, for such consideration and on such terms as

the Directors may determine.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Certificate of Stock</u>.&#160; Each stockholder shall be entitled to a

certificate of the capital stock of the Corporation in such form as may be

prescribed from time to time by the Directors.&#160;

The certificate shall be signed by the President or a Vice President,

and by the Treasurer or an Assistant Treasurer, but when a certificate is

countersigned by a transfer agent or a registrar, other than a Director,

officer or employee of the Corporation, such signature may be a facsimile.&#160; In case any officer who has signed or whose

facsimile signature has been placed upon such certificate shall have ceased to

be such officer before such certificate is issued, it may be issued by the

Corporation with the same effect as if he were such officer at the time of its

issue.</font></h2>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Every certificate

for shares of stock which are subject to any restriction on transfer pursuant

to the Articles of Organization, the By-Laws, applicable securities laws or any

agreement to which the Corporation is a party, shall have conspicuously noted

on the face or back of the certificate either the full text of the restriction

or a Stockholder of the existence of such restrictions and a statement that the

Corporation will furnish a copy of the restrictions to the holder of such

certificate upon written request and without charge.&#160; Every certificate issued when the Corporation is authorized to

issue more than one class or series of stock shall set forth on its face or

back either the full text of the preferences, voting powers, qualifications and

special and relative rights of the shares of each class and series authorized

to be issued or a statement of the existence of such preferences, powers,

qualifications and rights and a statement that the Corporation will furnish a

copy thereof to the holder of such certificate upon written request and without

charge.</font></p>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Transfers</u>.&#160; Subject to the restrictions, if any, stated

or noted on the stock certificates, shares of stock may be transferred on the

books of the Corporation by the surrender to the Corporation or its transfer

agent of the certificate representing such shares properly endorsed or

accompanied by a written assignment or power of attorney properly executed, and

with such proof of authority or the authenticity of signature as the

Corporation or its transfer agent may reasonably require.&#160; Except as may be otherwise required by law,

by the Articles of Organization or by these By-Laws, the Corporation shall be

entitled to treat the record holder of stock as shown on its books as the owner

of such stock for all purposes, including the payment of dividends and the

right to vote with respect thereto, regardless of a any transfer, pledge or

other disposition of such stock until the shares have been transferred on the

books of the Corporation in accordance with the requirements of these By-Laws.</font></h2>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>





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</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;text-indent:0in;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">It shall be the

duty of each stockholder to notify the Corporation of his post office address

and of his taxpayer identification number.</font></p>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Record Date</u>.&#160; The Board of Directors may fix in advance a

time not more than 60&nbsp;days preceding the date of any meeting of

stockholders or the date for the payment of any dividend or the making of any

distribution to stockholders or the last day on which the consent or dissent of

stockholders may be effectively expressed for any purpose, as the record date

for determining the stockholders having the right to notice of and to vote at

such meeting, and any adjournment, or the right to receive such dividend or

distribution or the right to give such consent or dissent.&#160; In such case only stockholders of record on

such record date shall have such right, notwithstanding any transfer of stock

on the books of the Corporation after the record date.&#160; Without fixing such record date the

Directors may for any of such purposes close the transfer books for all or any

part of such period.</font></h2>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If no record date

is fixed and the transfer books are not closed, the record date for determining

the stockholders having the right to notice of or to vote at a meeting of

stockholders shall be at the close of business on the day before the day on

which notice is given, and the record date for determining the stockholders for

any other purpose shall be at the close of business on the day on which the

Board of Directors acts with respect to such purpose.</font></p>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Replacement of Certificates</u>.&#160; In case of the alleged loss or destruction

or the mutilation of a certificate of stock, a duplicate certificate may be

issued in place of the lost, destroyed or mutilated certificate, upon such

terms as the Directors may prescribe, including the presentation of reasonable

evidence of such loss, destruction or mutilation and the giving of such

indemnity as the Directors may require for the protection of the Corporation or

any transfer agent or registrar.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h1 style="font-weight:normal;margin:0in 0in .0001pt .5in;page-break-after:auto;text-align:center;text-decoration:underline;text-indent:-.5in;"><u><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Article

5 - </font>Miscellaneous Provisions</font></u></h1>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Fiscal Year</u>.&#160; Except as otherwise set forth in the

Articles of Organization or as otherwise determined from time to time by the

Board of Directors, the fiscal year of the Corporation shall in each year end

on December&nbsp;31.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Seal</u>.&#160; The seal of the Corporation shall, subject

to alteration by the Directors, bear its name, the word &#147;Massachusetts&#148; and the

year of its incorporation.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Voting of Securities</u>.&#160; Except as the Board of Directors may

otherwise designate, the President or Treasurer may waive notice of, and act

as, or appoint any person or persons to act as, proxy or attorney&#150;in&#150;fact

for this Corporation (with or without power of substitution) at, any meeting of

stockholders or shareholders of any other corporation or organization, the

securities of which may be held by this Corporation.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Corporate Records</u>. &#160;The original, or attested copies, of the

Articles of Organization, By-Laws and records of all meetings of the

incorporators and stockholders, and the stock records, which shall contain the

names of all stockholders and the record address and the amount of stock held

by each, shall be kept in Massachusetts at the principal office of the

Corporation, or at an office of its transfer agent or of the Clerk.&#160; These copies and records need</font></h2>



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<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11</font></h2>





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</font></h2>



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<h2 align="center" style="font-size:10.0pt;font-weight:normal;margin:0in 0in .0001pt;text-align:center;">&nbsp;</h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">not all be kept in the

same office.&#160; They shall be available at

all reasonable times for the inspection of any stockholder for any proper

purpose, but not to secure a list of stockholders for the purpose of selling

the list or copies of the list or of using the list for a purpose other than in

the interest of the applicant, as a stockholder, relative to the affairs of the

Corporation.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Evidence of Authority</u>.&#160; A certificate by the Clerk or an Assistant

Clerk, or a temporary Clerk, as to any action taken by the stockholders,

Directors, any committee or any officer or representative of the Corporation

shall as to all persons who rely on the certificate in good faith be conclusive

of such action.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Articles of Organization</u>.&#160; All references in these By-Laws to the

Articles of Organization shall be deemed to refer to the Articles of

Organization shall be deemed to refer to the Articles of Organization of the

Corporation, as amended and in effect from time to time.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severability</u>.&#160; Any determination that any provision of these

By-Laws is for any reason inapplicable, illegal or ineffective shall not affect

or invalidate any other provision of these By-Laws.</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>



<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.8&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Pronouns</u>.&#160; All pronouns used in these By-Laws shall be

deemed to refer to the masculine, feminine or neuter, singular or plural, as

the identify of the person or persons may require.</font></h2>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<h1 style="font-weight:normal;margin:0in 0in .0001pt .5in;page-break-after:auto;text-align:center;text-decoration:underline;text-indent:-.5in;"><u><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Article

6 - </font>Amendments</font></u></h1>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Unless otherwise

provided for therein, these By-Laws may be amended by vote of the holders of a

majority of the shares of each class of the capital stock at the time

outstanding and entitled to vote at any annual or special meeting of

stockholders, if notice of the substance of the proposed amendment is stated in

the notice of such meeting.&#160; If

authorized by the Articles of Organization and unless otherwise provided for

therein, the Directors, by a majority of their number then in office, may also

make, amend or repeal these By-Laws, in whole or in part, except with respect

to (a)&nbsp;the provisions of these By-Laws governing (i)&nbsp;the removal of

Directors and (ii)&nbsp;the amendment of these By-Laws and (b)&nbsp;any

provision of these By-Laws which by law, the Articles of Organization or these

By-Laws requires action by the stockholders.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Not later than the

time of giving notice of the meeting of stockholders next following the making,

amending or repealing by the Directors of any By-Law, notice stating the

substance of such change shall be given to all stockholders entitled to vote on

amending the By-Laws.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Any By-Law adopted

by the Directors may be amended or repealed by the stockholders entitled to

vote or amending the By-Law.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>





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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exhibit 10.1</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">[ANIKA THERAPEUTICS

LETTERHEAD]</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">April 2, 2002</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PERSONAL

&amp; CONFIDENTIAL</font></u></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr. Edward Ross, Jr. </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">26 Locke Lane</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Lexington, MA&#160; 02173</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Ed:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This letter notifies you in writing of the termination

of your employment with Anika Therapeutics, Inc. (the &#147;Company&#148;).&#160; This letter also proposes an agreement

between you and the Company.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Your employment will terminate effective March 22,

2002.&#160; The Company shall pay you your

current base salary through March 22, 2002.&#160;

In addition, the Company will pay you for all accrued but unused

vacation time through March 22, 2002, which will be based on 270.91 hours of

accrued but unused vacation time.&#160; The

Company also will provide you with the right to continue group medical and

dental insurance coverage under the terms of the law known as &#147;COBRA&#148;.&#160; The termination of other benefits will be

addressed in separate correspondence.&#160;

For further details refer to Section 3a.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The payment and other terms set forth above will not

be affected by whether or not you agree to the terms set forth below.&#160; </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The remainder of this letter proposes an agreement

(the &#147;Agreement&#148;) between you and the Company.&#160;

The purpose of this Agreement is to establish an amicable arrangement

for ending your employment relationship, to release the Company and related

persons or entities from any claims to establish a brief Consultancy Period (as

defined herein) and to permit you to receive fair and reasonable separation pay

and related benefits. </font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If you agree to the terms of this Agreement, you

acknowledge that you are entering into this Agreement voluntarily.&#160; It is customary in employment separation

agreements that provide for severance pay for the departing employee to release

the employer from any possible claims, even if the employer believes, as is the

case here, that no such claims exist.&#160;

You understand that you are giving up your right to bring any and all

possible legal claims against the Company.&#160;

Neither the Company nor you want your employment relationship to end

with a legal dispute.&#160; By entering into

this Agreement, you understand that the Company is not admitting in any way

that it violated any legal obligation that it owed to you.&#160; To the contrary, the Company&#146;s willingness

to enter into this Agreement demonstrates that it is continuing to deal with

you fairly and in good faith.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">With those understandings, you and the Company agree

as follows:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As we have discussed, you understand that your

employment with the Company as its Vice President of Sales and Marketing and

from any and all other positions that you may hold with the Company will

terminate effective March 22, 2002 (the &#147;Termination Date&#148;).&#160; You agree that up to and including March 22,

2002, you shall work diligently and responsibly in performing the duties

associated with your current position as Vice President of Sales and

Marketing.&#160; </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severance

Pay</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If this Agreement becomes effective, the Company will

not assert that your employment was terminated for &#147;cause&#148; due to

non-performance and shall agree to provide severance pay (&#147;Severance Pay&#148;) to

you consisting of the continuation of your current base salary rate of

$166,049.00 per year for the six-month period plus 5-week consulting period

(see paragraph 4) beginning March 23, 2002 (the &#147;Salary Continuation Period&#148;),

payable on the Company&#146;s regular bi-weekly payroll dates.&#160; The Company will suspend the payment of

Severance Pay until such time as the Agreement becomes effective in accordance

with Section 15.&#160; If the Agreement

becomes effective, the Company will reinstate you to the payroll and shall

provide any suspended payroll payments to you no later than the second payroll

date after this Agreement becomes effective. </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Benefits</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Medical and Dental Benefits</u></font></p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By agreeing to this Agreement, you elect to continue

your medical and dental insurance coverage under COBRA.&#160; Your COBRA period will commence on March 23,

2002.&#160; Provided that you remain eligible

for COBRA continuation coverage, the Company shall continue to pay the premiums

for your group medical and dental insurance coverage on the same basis as if

you continued to be employed during the Salary Continuation period.&#160; Thereafter, you may continue coverage at

your own expense for the remainder of the COBRA period to the extent you remain

eligible.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Stock and Stock Option Plans</u></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Nothing in this Agreement is intended to reduce or

expand your rights under the Company&#146;s Stock Option Plan dated March 3, 1993,

as amended (the &#147;Plan&#148;), or the agreements you entered into pursuant to the

Plan.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Outplacement</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company shall pay up to $10,000 to Stybell Peabody

&amp; Associates to assist you in your efforts to obtain new employment,

provided that such outplacement services are provided on or prior to October 1,

2002.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">d.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Other Benefits</u></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Your eligibility to participate in any other employee

benefit plans and programs sponsored by or made available to employees of the

Company or its affiliated or related entities ceases effective on or after your

Termination Date in accordance with applicable benefit plan terms and benefit

practices.&#160; Your rights to benefits, if

any, are governed by the terms of those benefit plans and programs.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Consultancy

Period</u></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For the six-week period commencing on Monday, March

25, 2002 (the &#147;Consultancy Period&#148;), you agree that you shall perform for the

Company any requested services that are reasonably performed by someone of your

knowledge and skill level, including, but not limited to, services that will

assist the Company in the transition from your position as Vice President of

Sales and Marketing, and may include the application of any factual or

scientific knowledge you may have related to the Company&#146;s business or products

(the &#147;Consultancy&#148;), as follows:</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Through

April 5, 2002, you agree that you will report to the office for no fewer than

20 hours, but no more than 40 hours as requested by the Company. </p>



<p style="margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>From

April 6, 2002 through April 26, 2002, you should not report to the office

unless directed to do so by the Company.&#160;

At its discretion, the Company will determine the number of hours to be

worked and when those hours are to be worked, provided that such times are

reasonable and do not unreasonably interfere with your search for new

employment.&#160; </p>



<p style="margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree that during the Consultancy Period, you shall perform the

Consultancy in a responsible and diligent manner and that you will not take any

actions intended to damage the Company or its products.&#160; </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the event that you sign this Agreement, the Company will pay your

regular base pay as of the Termination Date for the Consultancy Period, payable

on the Company&#146;s regular bi-weekly payroll dates after the Effective Date of

this Agreement.&#160; If you do not sign this

Agreement, the Company will compensate you for time actually spent by you

consulting as contemplated in this paragraph 4 of the Agreement at a rate of

$80.00 per hour, rounded to the nearest half hour.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Tax

Treatment</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company shall undertake to make deductions,

withholdings and tax reports with respect to payments and benefits under this

Agreement to the extent that it reasonably and in good faith believes that it

is required to make such deductions, withholdings and tax reports.&#160; Payments under this Agreement shall be in

amounts net of any such deductions or withholdings.&#160; Nothing in this Agreement shall be construed to require the

Company to make any payments to compensate you for any adverse tax effect associated

with any payments or benefits or for any deduction or withholding from any

payment or benefit.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Release

of Claims</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In consideration for, among other terms, the payments

and benefits described in Sections 2, 3 (c) and 4, to which you otherwise would

not be entitled, you voluntarily release and forever discharge the Company, its

affiliated and related entities, its and their respective predecessors,

successors and assigns, and each of their current and former officers,

directors, shareholders, employees, attorneys, accountants and agents in their

official and personal capacities (collectively referred to as the &#147;Releasees&#148;)

generally from all claims, demands, debts, damages and liabilities of every

name and nature, known or unknown, that, as of the date that you sign this

Agreement, you now have, ever had, now claim to have or ever claimed to have

had against any or all of the Releasees (&#147;Claims&#148;).&#160; This release includes, without limitation, all Claims relating to

your employment by and termination of employment with the Company; all Claims of

wrongful discharge; all Claims of breach of contract; all Claims of retaliation

or discrimination under federal, state or local law (including, without

limitation, Claims of age discrimination under the Age Discrimination in

Employment Act); all Claims of defamation or other torts; all Claims of

violation of public policy; all Claims for wages, bonuses, incentive

compensation, vacation pay or any other compensation or benefits; and all

Claims for damages of any sort, including, without limitation, compensatory

damages, punitive damages and attorneys fees; provided, however, that this

release shall not affect your right to enforce this Agreement.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree that you shall not seek or accept

reinstatement with any Releasees.&#160; You

also agree that you shall not seek damages of any nature, equitable or legal

remedies, attorney&#146;s fees, or costs from any of the Releasees with respect to

any Claim.&#160; As a material inducement to

the Company to enter into this Agreement, you hereby represent that you have

not heretofore assigned to any third party and you have not heretofore filed

with any agency or court any Claim released by this Agreement.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Return

of Property</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You will return all Company property that is in your

possession, custody or control, including, without limitation, computer

equipment, software, cellular telephones, keys and access cards, credit cards,

files and any other documents (including computerized data and any </font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">copies made of any computerized data or software) containing

information concerning the Company, its business or customer relationships (in

the latter two cases, actual or prospective), no later than the date when this

Agreement becomes effective.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Cooperation</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree that, at any time in the future, you shall

cooperate fully with the Company as reasonably requested, consistent with your

schedule, in all regulatory matters, in the gathering of information for the

Company&#146;s annual reports, filings and statements with the Securities and

Exchange Commission and the Nasdaq Stock Market, Inc. or exchange on which the

Company&#146;s securities are listed, and in the defense or prosecution of any legal

claims or actions that already have been brought or that may be brought in the

future against or on behalf of the Company that related to events or

occurrences that transpired during your employment with the Company.&#160; Your full cooperation in connection with

such regulatory matters, information gathering claims, actions or disputes

shall include, without limitation, being available to meet with representatives

of the Company to prepare for regulatory processes and counsel to prepare for

discovery or trial and to testify truthfully as a witness when reasonably

requested by the Company.&#160; The Company will

reimburse you for any reasonable out-of-pocket expenses (which shall not be

construed to include your personal attorney&#146;s fees) that you incur in

connection with such cooperation, provided that you provide the Company

reasonable documentation of such out-of-pocket expenses.&#160; In addition, with the exception of any time

spent by you actually testifying as a witness, the Company shall reimburse you

at a rate of $100.00 per hour for each hour that you spend cooperating with the

Company, or acting in furtherance thereof, in accordance with this Section.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Confidentiality

of Agreement</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree to keep the existence and terms of this

Agreement in the strictest confidence and to not reveal, unless legally

compelled to do so, the existence or terms of this Agreement to any persons

except your attorney and your financial advisors, provided that they also agree

to keep such information confidential.&#160;

You shall be considered to have breached this Agreement if any of those

individuals fails to keep such information completely confidential.&#160; Nothing in this Section 9 shall be construed

to prevent you from disclosing such matters to the extent required by a

lawfully issued subpoena or duly issued court order; <u>provided</u> that you

provide the Company with advance written notice as soon as is practicable and a

reasonable opportunity to contest such subpoena or court order.&#160; Nothing contained herein shall be deemed to

limit your rights under applicable law, including 29&nbsp;U.S.C. &#167;&nbsp;626(f)(4).</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company agrees to keep the existence and terms of

this Agreement in the strictest confidence and to not reveal, unless legally

compelled to do so, the existence or terms of this Agreement to any persons

except its attorney and its financial advisors, provided that they also agree to

keep such information confidential.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Validity

of Non-Disclosure and Non-Competition Agreement </u></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You acknowledge and agree that you remain bound by the

terms of the Company&#146;s Non-Disclosure and Non-Competition Agreement that was

executed by you on December 2, 1996.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Non-Disparagement</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You will refrain from making any disparaging

statements, taking any actions, or conducting yourself in any way that

adversely affects the reputation or goodwill of the Company and/or its

affiliated entities and the current and former officers, directors,

shareholders, employees and agents of any of them.&#160; These non-disparagement obligations shall not in any way affect

your obligation to testify truthfully in any legal proceeding.&#160; </font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company, as represented by the Anika management

team as of the signature date of this agreement, will refrain from making any

disparaging statements, taking any actions, or conducting itself in any way

that adversely affects your reputation or goodwill.&#160; These non-disparagement obligations shall not in any way affect

the Company&#146;s obligation to testify truthfully in any legal proceeding.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Treatment

of Reference Inquiries</u></font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company agrees that any inquiries regarding your

employment will be referred to the Human Resources Department which will

respond to any such inquiries by stating the dates of your employment, the

position held by you and that your termination followed changes in management. </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Consideration

of the Agreement</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement is a legally binding document.&#160; Provided that you do not revoke this

Agreement in accordance with Section 15 below, your signature will commit you

to the terms of this Agreement.&#160; You

acknowledge that you have been advised to discuss all aspects of this Agreement

with your attorney, that you have carefully read and fully understand all of

the provisions of this Agreement and that you are voluntarily entering into

this Agreement.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Consent

to Jurisdiction</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You and the Company hereby consent to the jurisdiction

of the Superior Court of the Commonwealth of Massachusetts and the United

States District Court for the District of Massachusetts with respect to any

claim of violation of this Agreement.&#160;

With respect to any such court action you (a) submit to the jurisdiction

of such courts, (b) consent to service of process, and (c) waive any other

requirement (whether imposed by statute, rule of court or otherwise) with

respect to personal jurisdiction or venue.</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Other

Provisions</u></font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You acknowledge that you have been given the

opportunity to consider this Agreement for twenty-one (21) days before signing

it.&#160; You further acknowledge that any

changes made to this Agreement since it was originally issued to you on March

22, 2002 are not material and do not restart the running of any period in which

you are statutorily permitted to review this Agreement.&#160; If you sign this Agreement within less than

twenty-one (21) days of the date of its delivery to you, you acknowledge that

such decision was entirely voluntary and that you had the opportunity to

consider this Agreement for the entire twenty-one (21) day period.&#160; To accept this Agreement, you must provide

the fully signed Agreement to the undersigned by the end of the twenty-one (21)

day period.&#160; For a period of seven (7)

days from the date you sign this Agreement, you have the right to revoke this

Agreement by written notice to the undersigned.&#160; If you do not revoke this Agreement, it shall become effective on

the eighth (8th) day after you sign it.&#160;

This Agreement shall not become effective or enforceable until the

expiration of the seven (7) day revocation period (the &#147;Effective Date&#148;).</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement constitutes the entire agreement

regarding the termination of your employment with the Company.&#160; This Agreement supersedes any previous

agreements or understandings between us, except for any agreements under the

Company&#146;s Stock Option Plan, as described in Section 3(b) and the

Non-Disclosure and Non-Competition Agreement described in Section 10.&#160; In signing this Agreement, you are not

relying upon any oral promises or representations made by anyone at or on

behalf of the Company. </font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement will be interpreted and enforced under

the laws of the Commonwealth of Massachusetts, without regard to conflict of

law principles. In the event of any dispute, this Agreement will be construed

as a whole, will be interpreted in accordance with its fair meaning, and will

not be construed strictly for or against either you or the Company.&#160; This Agreement is executed under seal.&#160; Please indicate your agreement to the terms

of this Agreement by signing and returning to me a copy of this letter.&#160; You are advised to consult with an attorney

before signing this Agreement. </font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Sincerely,</font></p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ANIKA THERAPEUTICS, INC.</font></p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>

  </td>

  <td width="28%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:28.94%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160; /s/ Douglas

  R. Potter</font></p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accepted and agreed to:</font></p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="6%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="25%" valign="top" style="padding:0in .7pt 0in .7pt;width:25.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Douglas R. Potter</font></p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="6%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="25%" valign="top" style="padding:0in .7pt 0in .7pt;width:25.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

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  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Edward Ross, Jr.</font></p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Edward Ross, Jr.</font></p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.08%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date:&#160; April

  9, 2002</font></p>

  </td>

  <td width="47%" valign="top" style="padding:0in .7pt 0in .7pt;width:47.64%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:32.26%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

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  <td width="145" style="border:none;"></td>

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  <td width="24" style="border:none;"></td>

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  <td width="185" style="border:none;"></td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>





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<div style="font-family:'Times New Roman';">



<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exhibit 10.2</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">[ANIKA THERAPEUTICS LETTERHEAD]</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">June 25, 2002</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr. William J. Knight</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">39 Bare Hill Road</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Boxford, MA 01921</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Bill:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">I am pleased to present our

offer to you to join Anika Therapeutics, Inc. as an employee. The terms of our

offer, subject to approval by the Compensation Committee of the Board of

Directors, are outlined below:</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Position</font></u>:

Chief Financial Officer.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Description of

duties</font></u>: You will have responsibility for all the

financial activities of the Company including financial plans and policies,

accounting practices and procedures, and the Company&#146;s relationship with its

shareholders and the outside financial community.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Reporting to</font></u>:

Charles H. Sherwood, Ph.D., President and Chief Executive Officer.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Employment

date</font></u>: Your anticipated start date is no later than

July 15, 2002.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Rate of pay</font></u>:

$6,923.08 per bi-weekly payroll (annualized $180,000).</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Management

bonus plan</font></u>: Target 20% of salary at plan. Bonus is

payable shortly after year-end based on Company performance and personal

performance against key objectives. In accordance with the Management Bonus

Plan, your bonus for 2002 will be prorated based on the number of months of

your employment.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Stock options</font></u>:

75,000 options.&#160; Options will vest over

4 years in accordance with the terms of the stock option agreement.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Benefits</font></u>:

You will be eligible to participate in the Anika employee benefit programs upon

commencement of employment. This program currently covers comprehensive medical

and dental benefits, life and disability insurance, supplemental disability

insurance, and a Section 125 Plan. You will be eligible to participate in our

401(k) Savings and Investment Plan at the first enrollment date following your

date of hire. Under the current terms, the 401(k) plan entitles you to contribute

up to the maximum limit established by the IRS. The Company will match 100% of

your contribution up to 5% of your salary. Your participation in the benefit

plans will be governed by and subject to the plan terms as described in the

official documents and Summary Plan Descriptions.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Vacation</font></u>:

You will accrue three weeks of vacation during your first year of employment

and are subject to the terms of accrual and use set forth in Anika&#146;s policies.

Presently, the policy allows the accrual of one additional day of vacation for

each year of employment up to a maximum of four weeks.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Severance in

the event of termination</font></u>:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 39.0pt;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Termination without cause

(non-performance related): If Anika terminates your employment without &#147;cause&#148;

(as construed under Massachusetts common law for employment contracts), Anika

will continue your base salary at its then current rate for six months, subject

to your compliance with your obligations under your other agreements with the

Company and your cooperation with any other reasonable requests by Anika for

assistance during that period. In addition, in such circumstances the Company

will also pay the premiums for continuation of medical and dental benefits

under COBRA for you and your family for six months after termination of your

employment (or until the end of COBRA eligibility, if earlier), subject to your

premium payment of the active employee share of premium payments for such

coverage.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 39.0pt;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Termination for cause: Anika may

terminate your employment at any time for cause by delivering to you a

certified copy of a resolution of the Board of Directors on Anika finding that

you committed an act of omission constituting cause hereunder and specifying

the particulars thereof in detail, adopted at a meeting called and held for

that purpose and of which you were provided not less than seven days advance

notice, including notice of the agenda of such meeting. As used herein, the

term &#147;cause&#148; shall mean :</p>



<p style="margin:0in 0in .0001pt 39.0pt;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="15%" valign="top" style="padding:0in 0in 0in 0in;width:15.92%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.9%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">i.</font></p>

  </td>

  <td width="1%" valign="top" style="padding:0in 0in 0in 0in;width:1.68%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="78%" valign="top" style="padding:0in 0in 0in 0in;width:78.5%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">conviction

  of a felony involving the Company,</font></p>

  </td>

 </tr>

 <tr>

  <td width="15%" valign="top" style="padding:0in 0in 0in 0in;width:15.92%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.9%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ii.</font></p>

  </td>

  <td width="1%" valign="top" style="padding:0in 0in 0in 0in;width:1.68%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="78%" valign="top" style="padding:0in 0in 0in 0in;width:78.5%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">acting in a

  manner which is materially detrimental or materially damaging to the

  Company&#146;s reputation or business operations other than actions which involve

  your bad judgment or a decision which was taken in good faith, provided that

  you shall have failed to remedy such action within ten days after receiving

  written notice of the Company&#146;s position with respect to such action; or</font></p>

  </td>

 </tr>

 <tr>

  <td width="15%" valign="top" style="padding:0in 0in 0in 0in;width:15.92%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.9%;">

  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">iii.</font></p>

  </td>

  <td width="1%" valign="top" style="padding:0in 0in 0in 0in;width:1.68%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="78%" valign="top" style="padding:0in 0in 0in 0in;width:78.5%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">committing

  any material breach of this agreement, provided that, if such breach is

  capable of being remedied, you shall have failed to remedy such breach within

  ten days after your receipt of written notice requesting that you remedy such

  breach.</font></p>

  </td>

 </tr>

</table>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Change in

Control, Bonus, and Severance Agreement</font></u>: Subject to

the approval of the Compensation Committee of the Board of Directors, an

Agreement (attached) between you and Anika Therapeutics, Inc. shall be executed

providing terms pertaining to a Change in Control. The purpose of this

Agreement is to reinforce and encourage your continued attention and dedication

to your assigned duties without distraction in the face of potentially

disturbing circumstances arising from the possibility of a Change in Control.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Arbitration: In the event of

any controversy or claim arising out of or relating to this letter agreement or

otherwise arising out your employment or the termination of that employment

(including, without limitation, any claims of unlawful employment

discrimination whether based on age or otherwise), that controversy or claim

shall, to the fullest extent permitted by law, be settled by arbitration under

the auspices of the American Arbitration Association (&#147;AAA&#148;) in Boston,

Massachusetts in accordance with the Employment Dispute Resolution Rules of the

AAA, including, but not limited to, the rules and procedures applicable to the

selection of</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">arbitrators (or alternatively,

in any other forum or in any other form agreed upon by the parties). In the

event that any person or entity other than you or Anika may be a party with

regard to any such controversy or claim, such controversy or claim shall be

submitted to arbitration subject to such other person or entity&#146;s agreement.

Judgment upon the award rendered by the arbitrator may be entered in any court

having jurisdiction thereof. This provision shall be specifically enforceable.

Notwithstanding the foregoing, this provision shall not preclude either party

from pursuing a court action for the sole purpose of obtaining a temporary

restraining order or a preliminary injunction in circumstances in which such

relief is appropriate; provided that any other relief shall be pursued through

an arbitration proceeding pursuant to this provision.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Contingency</font></u>:

This offer is contingent upon your execution of the <i><font style="font-style:italic;">Anika Non-Disclosure and Non-Competition Agreement</font></i> as an

employee of Anika Therapeutics. In addition, all employees are subject to a

background check including verification of education.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You, like everyone else at

Anika, will be an at-will employee. The terms of your employment will be

interpreted in accordance with and governed by the laws of the Commonwealth of

Massachusetts.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Finally, this offer is

conditioned on your representation that you are not subject to any

confidentiality or non-competition agreement or any other similar type of

restriction that would affect your ability to devote full time and attention to

your work at Anika Therapeutics, Inc. Upon commencement of your employment, you

will be required to provide evidence that you are a U.S. citizen or national, a

lawful permanent resident, or an alien authorized to work in the U.S.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If the terms of this offer are

acceptable, please indicate your acceptance by signing both copies of this

letter and the <i><font style="font-style:italic;">Anika Non-Disclosure and

Non-Competition Agreement </font></i>and return one copy of each to me. I am

enthusiastic about Anika&#146;s future prospects and look forward to your leadership

and contribution to the Anika team.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Sincerely,</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="25%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:25.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Charles

  H. Sherwood</font></p>

  </td>

  <td width="74%" valign="top" style="padding:0in 0in 0in 0in;width:74.38%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Charles H.

  Sherwood, Ph.D.</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">President

  and Chief Executive Officer</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Agreed and

  accepted:</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="25%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:25.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ William J.

  Knight</font></p>

  </td>

  <td width="74%" valign="top" style="padding:0in 0in 0in 0in;width:74.38%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">William J.

  Knight</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date: June

  27, 2002</font></p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Enclosures</font></p>

  </td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





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<DOCUMENT>
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<FILENAME>j4192_ex10d3.htm
<DESCRIPTION>EX-10.3
<TEXT>
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<head>



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<div style="font-family:'Times New Roman';">



<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exhibit 10.3</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ANIKA

THERAPEUTICS, INC.</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Change

in Control, Bonus and Severance Agreement</font></u></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">AGREEMENT made as

of July 8, 2002 by and among Anika Therapeutics, Inc., a Massachusetts

corporation with its principal place of business in Woburn, Massachusetts (the

&#147;Company&#148;), and William J. Knight of Boxford, Massachusetts (the &#147;Executive&#148;),

an individual presently employed as the Chief Financial Officer, Vice President

of Finance, Treasurer and Clerk of the Company.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Purpose</u>.&#160; The Company considers it essential to the

best interests of its stockholders to foster the continuous employment of key

management personnel.&#160; The Board of

Directors of the Company (the &#147;Board&#148;) recognizes, however, that, as is the

case with many publicly held corporations, the possibility of a Change in

Control (as defined in Section&nbsp;2 hereof) exists and that such possibility,

and the uncertainty and questions which it may raise among management, may

result in the departure or distraction of management personnel to the detriment

of the Company and its stockholders.&#160;

Therefore, the Board has determined that appropriate steps should be

taken to reinforce and encourage the continued attention and dedication of

members of the Company&#146;s management, including the Executive, to their assigned

duties without distraction in the face of potentially disturbing circumstances

arising from the possibility of a Change in Control.&#160; Nothing in this Agreement shall be construed as creating an

express or implied contract of employment and, except as otherwise agreed in

writing between the Executive and the Company, the Executive shall not have any

right to be retained in the employ of the Company.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Change in Control</u>.&#160; A &#147;Change in Control&#148; shall mean the

occurrence of any one of the following events:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>any &#147;person,&#148; as such

term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934

(the &#147;Act&#148;) (other than the Company, any of its subsidiaries, any trustee,

fiduciary or other person or entity holding securities under any employee benefit

plan or trust of the Company or any of its subsidiaries), together with all

&#147;affiliates&#148; and &#147;associates&#148; (as such terms are defined in Rule 12b-2 under

the Act) of such person, shall become the &#147;beneficial owner&#148; (as such term is

defined in Rule 13d-3 under the Act), directly or indirectly, of securities of

the Company representing 51% or more of the combined voting power of the

Company&#146;s then outstanding securities having the right to vote in an election

of the Company&#146;s Board of Directors (&#147;Voting Securities&#148;); or</p>



<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>persons who, as of the

date hereof, constitute the Company&#146;s Board of Directors (the &#147;Incumbent

Directors&#148;) cease for any reason, including, without limitation, as a result of

a tender offer, proxy contest, merger or similar transaction, to constitute at

least a majority of the Board, provided that any person becoming a director of

the Company subsequent to the date hereof whose election or nomination for

election was</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">approved by a vote

of at least a majority of the Incumbent Directors shall, for purposes of this

Agreement, be considered an Incumbent Director; or</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the stockholders of the

Company shall approve (A) any consolidation or merger of the Company where the

shareholders of the Company, immediately prior to the consolidation or merger,

would not, immediately after the consolidation or merger, beneficially own (as

such term is defined in Rule 13d-3 under the Act), directly or indirectly,

shares representing in the aggregate 51% of the voting shares of the

corporation issuing cash or securities in the consolidation or merger (or of

its ultimate parent corporation, if any), (B) any sale, lease, exchange or

other transfer (in one transaction or a series of transactions contemplated or

arranged by any party as a single plan) of all or substantially all of the

assets of the Company or (C) any plan or proposal for the liquidation or

dissolution of the Company.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Notwithstanding

the foregoing, a &#147;Change in Control&#148; shall not be deemed to have occurred for

purposes of the foregoing clause (a) solely as the result of an acquisition of

securities by the Company which, by reducing the number of shares of Voting

Securities outstanding, increases the proportionate voting power represented by

the Voting Securities beneficially owned by any person to 51% or more of the

combined voting power of all then outstanding Voting Securities; <u>provided</u>,

<u>however</u>, that if any person referred to in this sentence shall

thereafter become the beneficial owner of any additional shares of Voting

Securities (other than pursuant to a share split, stock dividend or similar

transaction or direct purchase from the Company), then a &#147;Change in Control&#148;

shall be deemed to have occurred for purposes of the foregoing clause (a).</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Terminating Event</u>.&#160; A &#147;Terminating Event&#148; shall mean any of the

events provided in this Section&nbsp;3 occurring within twelve (12) months

subsequent to a Change in Control as defined in Section&nbsp;2:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>termination by the

Company of the employment of the Executive with the Company for any reason

other than for Cause or the death of the Executive.&#160; &#147;Cause&#148; shall mean, and shall be limited to, the occurrence of

any one or more of the following events:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>a willful act of

dishonesty by the Executive with respect to any matter involving the Company;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>conviction of the

Executive of a crime involving moral turpitude; or</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the deliberate or

willful failure by the Executive (other than by reason of the Executive=s

physical or mental illness, incapacity or disability) to substantially perform

the Executive&#146;s duties with the Company and the continuation of such failure

for a period of 30 days after delivery by the Company</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">to the Executive

of written notice specifying the scope and nature of such failure and its

intention to terminate the Executive for Cause.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A

Terminating Event shall not be deemed to have occurred pursuant to this

Section&nbsp;3(a) solely as a result of the Executive being an employee of any

direct or indirect successor to the business or assets of the Company, rather

than continuing as an employee of the Company following a Change in Control.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>termination by the

Executive of the Executive&#146;s employment with the Company for Good Reason.&#160; &#147;Good Reason&#148; shall mean the occurrence of

any of the following events:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>a substantial adverse

change in the nature or scope of the Executive&#146;s responsibilities or duties

from the responsibilities or duties exercised by the Executive immediately

prior to the Change in Control, it being understood by the parties hereto, that

so long as the Executive retains primary sales and marketing responsibilities

for the business conducted by Anika immediately prior to the Change in Control,

Good Reason shall not exist under this Section&nbsp;3(b)(i); or</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>a reduction in the

Executive=s annual base salary and/or benefits as in effect on the date hereof

or as the same may be increased from time to time except for across-the-board

salary and/or benefits reductions similarly affecting all or substantially all

management employees.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For purposes of

this Section 3, unless the context otherwise requires, Company shall mean the

Company or any successor thereto or to the business thereof in a transaction

involving a Change in Control.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Special

Termination Payments</u>.&#160; In the event

a Terminating Event occurs within twelve (12) months after a Change in Control

in lieu of any payments under the Employment Letter (as hereinafter defined),</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the Company shall pay

to the Executive, in addition to the payment, if any, required by

Section&nbsp;5, an amount equal to 100% of the Executive&#146;s annual salary as in

effect immediately prior to the Change in Control, said amount shall be paid in

one lump sum payment no later than thirty-one (31) days following the Date of

Termination (as such term is defined in Section 9(b)); and</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the Company shall

continue to provide health, dental, long-term disability, life insurance and

other fringe benefits to the Executive, on the same terms and conditions

(including any required co&#173;-payments) as though the Executive had remained an

active employee, for twelve (12)<b><font style="font-weight:bold;">  </font></b>months; and</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the Company shall

provide COBRA benefits to the Executive following the end of the period

referred to in Section 4(c) above, such benefits to be determined as though the

Executive&#146;s employment had terminated at the end of such period.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Payment Upon

Effective Date of Change in Control</u>.&#160;

Upon the effective date of a Change in Control, regardless of whether a

Terminating Event has occurred, in addition to any other payment required by

Section&nbsp;4, the Company shall pay the Executive an amount in cash

representing fifty percent (50%) of the Executive&#146;s annual salary as in effect

immediately prior to the Change in Control.&#160;

Said amount shall be paid in one lump sum payment no later than

thirty-one (31) days following the effective date of a Change in Control.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Certain

Limitations</u>.&#160; It is the intention of

the Executive and of the Company that no payments by the Company to or for the

benefit of the Executive under this Agreement or any other agreement or plan,

if any, pursuant to which the Executive is entitled to receive payments or

benefits shall be nondeductible to the Company by reason of the operation of

Section 280G of the Code relating to parachute payments or any like statutory

or regulatory provision.&#160; Accordingly,

and notwithstanding any other provision of this Agreement or any such agreement

or plan, if by reason of the operation of said Section 280G or any like statutory

or regulatory provision, any such payments exceed the amount which can be

deducted by the Company, such payments shall be reduced to the maximum amount

which can be deducted by the Company.&#160;

To the extent that payments exceeding such maximum deductible amount

have been made to or for the benefit of the Executive, such excess payments

shall be refunded to the Company with interest thereon at the applicable

Federal rate determined under Section 1274(d) of the Code, compounded annually,

or at such other rate as may be required in order that no such payments shall

be nondeductible to the Company by reason of the operation of said Section 280G

or any like statutory or regulatory provision.&#160;

To the extent that there is more than one method of reducing the payments

to bring them within the limitations of said Section&nbsp;280G or any like

statutory or regulatory provision, the Executive shall determine which method

shall be followed, provided that if the Executive fails to make such

determination within forty-five (45) days after the Company has given notice of

the need for such reduction, the Company may determine the method of such

reduction in its sole discretion.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Term</u>.&#160; This Agreement shall take effect on the date

first set forth above and shall terminate upon the earliest of (a) the

termination by the Company of the employment of the Executive for Cause; (b)

the cessation of the Executive&#146;s employment with the Company for any reason or

the resignation or termination of the Executive for any reason, in each case,

prior to a Change in Control; or (c) the resignation of the Executive after a

Change in Control for any reason other than for Good Reason.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Withholding</u>.&#160; All payments made by the Company under this

Agreement shall be net of any tax or other amounts required to be withheld by

the Company under applicable law.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Notice and Date of

Termination; Disputes; Etc.</u></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Notice of

Termination</u>.&#160; After a Change in

Control and during the term of this Agreement, any purported termination of the

Executive&#146;s employment (other than by reason of death) shall be communicated by

written Notice of Termination from one party hereto to the other party hereto

in accordance with this Section&nbsp;9.&#160;

For purposes of this Agreement, a &#147;Notice of Termination&#148; shall mean a

notice which shall indicate the specific termination provision in this

Agreement relied upon and the Date of Termination.&#160; Further, a Notice of Termination for Cause is required to include

a copy of a resolution duly adopted by the affirmative vote of not less than a

majority of the entire membership of the Board (exclusive of the Executive) at

a meeting of the Board (after reasonable notice to the Executive and an

opportunity for the Executive, accompanied by the Executive&#146;s counsel, to be

heard before the Board) finding that, in the good faith opinion of the Board,

the termination met the criteria for Cause set forth in Section&nbsp;3(a)

hereof.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Date of Termination</u>.&#160; &#147;Date of Termination,&#148; with respect to any

purported termination of the Executive&#146;s employment after a Change in Control

and during the term of this Agreement, shall mean the date specified in the

Notice of Termination.&#160; In the case of a

termination by the Company other than a termination for Cause (which may be

effective immediately), the Date of Termination shall not be less than 30 days

after the Notice of Termination is given.&#160;

In the case of a termination by the Executive, the Date of Termination

shall not be less than 15 days from the date such Notice of Termination is

given.&#160; Notwithstanding

Section&nbsp;3(a) of this Agreement, in the event that the Executive gives a

Notice of Termination to the Company, the Company may unilaterally accelerate

the Date of Termination and such acceleration shall not result in a second

Terminating Event for purposes of Section&nbsp;3(a) of this Agreement.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>No Mitigation</u>.&#160; The Company agrees that, if the Executive&#146;s

employment by the Company is terminated during the term of this Agreement, the

Executive is not required to seek other employment or to attempt in any way to

reduce any amounts payable to the Executive by the Company pursuant to Sections

4 and 5 hereof.&#160; Further, the amount of

any payment provided for in this Agreement shall not be reduced by any

compensation earned by the Executive as the result of employment by another

employer, by retirement benefits, by offset against any amount claimed to be

owed by the Executive to the Company, or otherwise.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Mediation of

Disputes</u>.&#160; The parties shall

endeavor in good faith to settle within 90 days any controversy or claim

arising out of or relating to this Agreement or the breach thereof through

mediation with J.A.M.S./Endispute or similar organizations.&#160; If the controversy or claim is not resolved

within 90 days, the parties shall be free to pursue other legal remedies in law

or equity.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Assignment; Prior

Agreements; Non-Solicitation</u>.&#160;

Except for an assignment by the Company in connection with a Change in

Control in which the successor, if other than the Company, shall assume and

agree to perform this Agreement in writing, neither the Company nor the

Executive may make any assignment of this Agreement or any interest herein, by

operation of law or otherwise, without the prior written consent of the other

party, and without such consent</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">any attempted transfer

shall be null and void and of no effect.&#160;

This Agreement shall inure to the benefit of and be binding upon the

Company and the Executive, their respective successors, executors,

administrators, heirs and permitted assigns.&#160;

In the event of the Executive&#146;s death after a Terminating Event but

prior to the completion by the Company of all payments due him under

Sections&nbsp;4 and 5 of this Agreement, the Company shall continue such

payments to the Executive&#146;s beneficiary designated in writing to the Company

prior to his death (or to his estate, if the Executive fails to make such

designation).&#160; This Agreement supercedes

all prior Agreements, whether written or oral with respect to the subject

matter hereof.&#160; Notwithstanding the

foregoing that certain Non-Disclosure and Non-Competition Agreement of June 27,

2002 by and between Executive and the Company shall remain in full force and effect

in accordance with its terms.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Executive

covenants to the Company that during his employment with the Company and until

one (1) year from the date he is no longer employed by the Company, any

affiliate thereof or any successor thereto, he will not in any manner, on his

own behalf, or as a partner, officer, director, employee, agent or entity,

directly or indirectly, induce or attempt to influence any person serving as an

employee of the Company or any successor thereto to leave its employ or hire

any such person.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Enforceability</u>.&#160; If any portion or provision of this

Agreement shall to any extent be declared illegal or unenforceable by a court

of competent jurisdiction, then the remainder of this Agreement, or the

application of such portion or provision in circumstances other than those as

to which it is so declared illegal or unenforceable, shall not be affected

thereby, and each portion and provision of this Agreement shall be valid and

enforceable to the fullest extent permitted by law.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Waiver</u>.&#160; No waiver of any provision hereof shall be

effective unless made in writing and signed by the waiving party.&#160; The failure of any party to require the

performance of any term or obligation of this Agreement, or the waiver by any

party of any breach of this Agreement, shall not prevent any subsequent

enforcement of such term or obligation or be deemed a waiver of any subsequent

breach.</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Notices</u>.&#160; Any notices, requests, demands, and other

communications provided for by this Agreement shall be sufficient if in writing

and delivered in person or sent by registered or certified mail, postage

prepaid, to the Executive at the last address the Executive has filed in

writing with the Company, or to the Company at its main office, attention of

the Board of Directors.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Effect on Other

Plans</u>.&#160; Except as provided in

Section&nbsp;10 hereof, nothing in this Agreement shall be construed to limit

the rights of the Executive under the Company&#146;s benefit plans, programs or

policies.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Amendment</u>.&#160; This Agreement may be amended or modified

only by a written instrument signed by the Executive and by a duly authorized

representative of the Company.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Governing Law</u>.&#160; This is a Massachusetts contract and shall

be construed under and be governed in all respects by the laws of the

Commonwealth of Massachusetts.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Obligations of

Successors</u>.&#160; In addition to any

obligations imposed by law upon any successor to the Company, the Company will

use its commercially reasonable efforts to require any successor (whether direct

or indirect, by purchase, merger, consolidation or otherwise) to all or

substantially all of the business or assets of the Company to expressly assume

and agree to perform this Agreement in the same manner and to the same extent

that the Company would be required to perform if no such succession had taken

place.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS

WHEREOF, this Agreement has been executed as a sealed instrument by the Company

by their duly authorized officers and by the Executive, as of the date first

above written.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="35%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:35.58%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">COMPANY</font></u>:</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="top" style="padding:0in 0in 0in 0in;width:2.28%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="33%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:33.3%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="35%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:35.58%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ANIKA THERAPEUTICS, INC.</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:32.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="32%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:32.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>

  </td>

  <td width="24%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:24.9%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Charles H.

  Sherwood</font></p>

  </td>

  <td width="7%" valign="top" style="padding:0in 0in 0in 0in;width:7.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="32%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:32.24%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Charles H. Sherwood, Ph.D.</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:32.24%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">President and

  Chief Executive Officer</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="32%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:32.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="32%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:32.24%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="35%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:35.58%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">EXECUTIVE</font></u>:</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="top" style="padding:0in 0in 0in 0in;width:2.28%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="33%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:33.3%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="2%" valign="top" style="padding:0in 0in 0in 0in;width:2.28%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="33%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:33.3%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="35%" colspan="4" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:35.58%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ William J. Knight</font></p>

  </td>

 </tr>

 <tr>

  <td width="64%" valign="top" style="padding:0in 0in 0in 0in;width:64.42%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="35%" colspan="4" valign="top" style="border:none;padding:0in 0in 0in 0in;width:35.58%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">William J. Knight</font></p>

  </td>

 </tr>

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  <td width="16" style="border:none;"></td>

  <td width="8" style="border:none;"></td>

  <td width="180" style="border:none;"></td>

  <td width="53" style="border:none;"></td>

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<div style="font-family:'Times New Roman';">



<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exhibit 10.4</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ANIKA

THERAPEUTICS, INC.</font></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">First

Amended and Restated</font></b></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Change

in Control, Bonus and Severance Agreement</font></u></b></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">FIRST AMENDMENT

AND RESTATEMENT, dated as of July 8, 2002 to that certain AGREEMENT made as of

April 26, 2000 by and among Anika Therapeutics, Inc., a Massachusetts

corporation with its principal place of business in Woburn, Massachusetts (the

&#147;Company&#148;), and Charles H. Sherwood of Sudbury, Massachusetts (the

&#147;Executive&#148;), an individual presently employed as the President and Chief

Executive Officer of the Company.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Purpose</u>.&#160; The Company considers it essential to the

best interests of its stockholders to foster the continuous employment of key

management personnel.&#160; The Board of

Directors of the Company (the &#147;Board&#148;) recognizes, however, that, as is the

case with many publicly held corporations, the possibility of a Change in

Control (as defined in Section&nbsp;2 hereof) exists and that such possibility,

and the uncertainty and questions which it may raise among management, may

result in the departure or distraction of management personnel to the detriment

of the Company and its stockholders.&#160;

Therefore, the Board has determined that appropriate steps should be

taken to reinforce and encourage the continued attention and dedication of

members of the Company&#146;s management, including the Executive, to their assigned

duties without distraction in the face of potentially disturbing circumstances

arising from the possibility of a Change in Control.&#160; Nothing in this Agreement shall be construed as creating an

express or implied contract of employment and, except as otherwise agreed in

writing between the Executive and the Company, the Executive shall not have any

right to be retained in the employ of the Company.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Change in Control</u>.&#160; A &#147;Change in Control&#148; shall mean the

occurrence of any one of the following events:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>any &#147;person,&#148; as such

term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934

(the &#147;Act&#148;) (other than the Company, any of its subsidiaries, any trustee,

fiduciary or other person or entity holding securities under any employee

benefit plan or trust of the Company or any of its subsidiaries), together with

all &#147;affiliates&#148; and &#147;associates&#148; (as such terms are defined in Rule 12b-2

under the Act) of such person, shall become the &#147;beneficial owner&#148; (as such

term is defined in Rule 13d-3 under the Act), directly or indirectly, of

securities of the Company representing 51% or more of the combined voting power

of the Company&#146;s then outstanding securities having the right to vote in an

election of the Company&#146;s Board of Directors (&#147;Voting Securities&#148;); or</p>



<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>persons who, as of the

date hereof, constitute the Company&#146;s Board of Directors (the &#147;Incumbent

Directors&#148;) cease for any reason, including, without limitation, as a result of

a tender offer, proxy contest, merger or similar transaction, to constitute at</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">least a majority

of the Board, provided that any person becoming a director of the Company

subsequent to the date hereof whose election or nomination for election was

approved by a vote of at least a majority of the Incumbent Directors shall, for

purposes of this Agreement, be considered an Incumbent Director; or</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the stockholders of the

Company shall approve (A) any consolidation or merger of the Company where the

shareholders of the Company, immediately prior to the consolidation or merger,

would not, immediately after the consolidation or merger, beneficially own (as

such term is defined in Rule 13d-3 under the Act), directly or indirectly,

shares representing in the aggregate 51% of the voting shares of the

corporation issuing cash or securities in the consolidation or merger (or of

its ultimate parent corporation, if any), (B) any sale, lease, exchange or

other transfer (in one transaction or a series of transactions contemplated or

arranged by any party as a single plan) of all or substantially all of the

assets of the Company or (C) any plan or proposal for the liquidation or

dissolution of the Company.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Notwithstanding

the foregoing, a &#147;Change in Control&#148; shall not be deemed to have occurred for

purposes of the foregoing clause (a) solely as the result of an acquisition of

securities by the Company which, by reducing the number of shares of Voting

Securities outstanding, increases the proportionate voting power represented by

the Voting Securities beneficially owned by any person to 51% or more of the

combined voting power of all then outstanding Voting Securities; <u>provided</u>,

<u>however</u>, that if any person referred to in this sentence shall

thereafter become the beneficial owner of any additional shares of Voting

Securities (other than pursuant to a share split, stock dividend or similar

transaction or direct purchase from the Company), then a &#147;Change in Control&#148;

shall be deemed to have occurred for purposes of the foregoing clause (a).</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Terminating Event</u>.&#160; A &#147;Terminating Event&#148; shall mean any of the

events provided in this Section&nbsp;3 occurring within twelve (12) months

subsequent to a Change in Control as defined in Section&nbsp;2:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>termination by the

Company of the employment of the Executive with the Company for any reason

other than for Cause or the death of the Executive.&#160; &#147;Cause&#148; shall mean, and shall be limited to, the occurrence of

any one or more of the following events:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>a willful act of

dishonesty by the Executive with respect to any matter involving the Company;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>conviction of the

Executive of a crime involving moral turpitude; or</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the deliberate or

willful failure by the Executive (other than by reason of the Executive&#146;s

physical or mental illness, incapacity or disability) to substantially perform

the Executive&#146;s duties with the Company and the continuation of such failure

for a period of 30 days after delivery by the Company to the Executive of

written notice specifying the scope and nature of such failure and its

intention to terminate the Executive for Cause.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A

Terminating Event shall not be deemed to have occurred pursuant to this

Section&nbsp;3(a) solely as a result of the Executive being an employee of any

direct or indirect successor to the business or assets of the Company, rather

than continuing as an employee of the Company following a Change in Control.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>termination by the

Executive of the Executive&#146;s employment with the Company for Good Reason.&#160; &#147;Good Reason&#148; shall mean the occurrence of

any of the following events:</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>a substantial adverse

change in the nature or scope of the Executive&#146;s responsibilities or duties

from the responsibilities or duties exercised by the Executive immediately

prior to the Change in Control, it being understood by the parties hereto, that

so long as the Executive retains primary management responsibilities for the

business conducted by the Company immediately prior to the Change in Control,

Good Reason shall not exist under this Section&nbsp;3(b)(i); or</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>a reduction in the

Executive&#146;s annual base salary and/or benefits as in effect on the date hereof

or as the same may be increased from time to time except for across-the-board

salary and/or benefits reductions similarly affecting all or substantially all

management employees.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For purposes of

this Section 3, unless the context otherwise requires, Company shall mean the

Company or any successor thereto or to the business thereof in a transaction involving

a Change in Control.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Special

Termination Payments</u>.&#160; In the event

a Terminating Event occurs within twelve (12) months after a Change in Control

in lieu of any payments under the Employment Letter (as hereinafter defined),</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the Company shall pay

to the Executive, in addition to the payment, if any, required by

Section&nbsp;5, an amount equal to 100% of the Executive&#146;s annual salary as in

effect immediately prior to the Change in Control, said amount shall be paid in

one lump sum payment no later than thirty-one (31) days following the Date of

Termination (as such term is defined in Section 9(b)); and</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



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<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the Company shall

continue to provide health, dental, long-term disability, life insurance and

other fringe benefits to the Executive, on the same terms and conditions

(including any required co&#173;-payments) as though the Executive had remained an

active employee, for twelve (12)<b><font style="font-weight:bold;">  </font></b>months; and</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the Company shall

provide COBRA benefits to the Executive following the end of the period

referred to in Section 4(c) above, such benefits to be determined as though the

Executive&#146;s employment had terminated at the end of such period.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Payment Upon

Effective Date of Change in Control</u>.&#160;

Upon the effective date of a Change in Control, regardless of whether a

Terminating Event has occurred, in addition to any other payment required by

Section&nbsp;4, the Company shall pay the Executive an amount in cash

representing one hundred percent (100%) of the Executive&#146;s annual salary as in

effect immediately prior to the Change in Control.&#160;&#160; Said amount shall be paid in one lump sum payment no later than

thirty-one (31) days following the effective date of a Change in Control.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Certain

Limitations</u>.&#160; It is the intention of

the Executive and of the Company that no payments by the Company to or for the

benefit of the Executive under this Agreement or any other agreement or plan,

if any, pursuant to which the Executive is entitled to receive payments or

benefits shall be nondeductible to the Company by reason of the operation of

Section 280G of the Code relating to parachute payments or any like statutory

or regulatory provision.&#160; Accordingly,

and notwithstanding any other provision of this Agreement or any such agreement

or plan, if by reason of the operation of said Section 280G or any like

statutory or regulatory provision, any such payments exceed the amount which

can be deducted by the Company, such payments shall be reduced to the maximum

amount which can be deducted by the Company.&#160;

To the extent that payments exceeding such maximum deductible amount

have been made to or for the benefit of the Executive, such excess payments

shall be refunded to the Company with interest thereon at the applicable

Federal rate determined under Section 1274(d) of the Code, compounded annually,

or at such other rate as may be required in order that no such payments shall

be nondeductible to the Company by reason of the operation of said Section 280G

or any like statutory or regulatory provision.&#160;

To the extent that there is more than one method of reducing the

payments to bring them within the limitations of said Section&nbsp;280G or any

like statutory or regulatory provision, the Executive shall determine which

method shall be followed, provided that if the Executive fails to make such

determination within forty-five (45) days after the Company has given notice of

the need for such reduction, the Company may determine the method of such

reduction in its sole discretion.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Term</u>.&#160; This Agreement shall take effect on the date

first set forth above and shall terminate upon the earliest of (a) the

termination by the Company of the employment of the Executive for Cause; (b)

the cessation of the Executive&#146;s employment with the Company for any reason or

the resignation or termination of the Executive for any reason, in each case,

prior to a Change in Control; or (c) the resignation of the Executive after a

Change in Control for any reason other than for Good Reason.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>





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<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Withholding</u>.&#160; All payments made by the Company under this

Agreement shall be net of any tax or other amounts required to be withheld by

the Company under applicable law.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Notice and Date of

Termination; Disputes; Etc.</u></p>



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<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Notice of Termination</u>.&#160; After a Change in Control and during the

term of this Agreement, any purported termination of the Executive&#146;s employment

(other than by reason of death) shall be communicated by written Notice of

Termination from one party hereto to the other party hereto in accordance with

this Section&nbsp;9.&#160; For purposes of

this Agreement, a &#147;Notice of Termination&#148; shall mean a notice which shall

indicate the specific termination provision in this Agreement relied upon and

the Date of Termination.&#160; Further, a

Notice of Termination for Cause is required to include a copy of a resolution

duly adopted by the affirmative vote of not less than a majority of the entire

membership of the Board (exclusive of the Executive) at a meeting of the Board

(after reasonable notice to the Executive and an opportunity for the Executive,

accompanied by the Executive&#146;s counsel, to be heard before the Board) finding

that, in the good faith opinion of the Board, the termination met the criteria

for Cause set forth in Section&nbsp;3(a) hereof.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Date of Termination</u>.&#160; &#147;Date of Termination,&#148; with respect to any

purported termination of the Executive&#146;s employment after a Change in Control

and during the term of this Agreement, shall mean the date specified in the

Notice of Termination.&#160; In the case of a

termination by the Company other than a termination for Cause (which may be

effective immediately), the Date of Termination shall not be less than 30 days

after the Notice of Termination is given.&#160;

In the case of a termination by the Executive, the Date of Termination

shall not be less than 15 days from the date such Notice of Termination is

given.&#160; Notwithstanding

Section&nbsp;3(a) of this Agreement, in the event that the Executive gives a

Notice of Termination to the Company, the Company may unilaterally accelerate

the Date of Termination and such acceleration shall not result in a second

Terminating Event for purposes of Section&nbsp;3(a) of this Agreement.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>No Mitigation</u>.&#160; The Company agrees that, if the Executive&#146;s

employment by the Company is terminated during the term of this Agreement, the

Executive is not required to seek other employment or to attempt in any way to

reduce any amounts payable to the Executive by the Company pursuant to Sections

4 and 5 hereof.&#160; Further, the amount of

any payment provided for in this Agreement shall not be reduced by any

compensation earned by the Executive as the result of employment by another

employer, by retirement benefits, by offset against any amount claimed to be

owed by the Executive to the Company, or otherwise.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Mediation of

Disputes</u>.&#160; The parties shall

endeavor in good faith to settle within 90 days any controversy or claim

arising out of or relating to this Agreement or the breach thereof through

mediation with J.A.M.S./Endispute or similar organizations.&#160; If</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">the controversy or

claim is not resolved within 90 days, the parties shall be free to pursue other

legal remedies in law or equity.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Assignment; Prior

Agreements; Non&#150;Solicitation</u>.&#160;

Except for an assignment by the Company in connection with a Change in

Control in which the successor, if other than the Company, shall assume and

agree to perform this Agreement in writing, neither the Company nor the

Executive may make any assignment of this Agreement or any interest herein, by

operation of law or otherwise, without the prior written consent of the other

party, and without such consent any attempted transfer shall be null and void

and of no effect.&#160; This Agreement shall

inure to the benefit of and be binding upon the Company and the Executive,

their respective successors, executors, administrators, heirs and permitted

assigns.&#160; In the event of the

Executive&#146;s death after a Terminating Event but prior to the completion by the

Company of all payments due him under Sections&nbsp;4 and 5 of this Agreement,

the Company shall continue such payments to the Executive&#146;s beneficiary

designated in writing to the Company prior to his death (or to his estate, if

the Executive fails to make such designation).&#160;

This Agreement supercedes all prior Agreements, whether written or oral

with respect to the subject matter hereof.&#160;

Notwithstanding the foregoing:&#160;

(A)&#160; that certain Employment

Letter dated April 15, 1998 by and between the Company and the Executive, (the

&#147;Employment Letter&#148;), shall govern any termination of the Executive&#146;s

employment with the Company (i)&nbsp;prior to the effective date of a Change in

Control or (ii)&nbsp;following the expiration of twelve (12) months after a

Change in Control; this Agreement shall govern in the event of any termination

of Executive&#146;s employment with the Company within twelve (12) months after a

Change in Control; and (B)&nbsp;that certain Non-Disclosure and Non-Competition

Agreement of May 4, 1998 by and between Executive and the Company shall remain

in full force and effect in accordance with its terms.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Executive

covenants to the Company that during his employment with the Company and until

one (1) year from the date he is no longer employed by the Company, any

affiliate thereof or any successor thereto, he will not in any manner, on his

own behalf, or as a partner, officer, director, employee, agent or entity,

directly or indirectly, induce or attempt to influence any person serving as an

employee of the Company or any successor thereto to leave its employ or hire

any such person.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Enforceability</u>.&#160; If any portion or provision of this

Agreement shall to any extent be declared illegal or unenforceable by a court

of competent jurisdiction, then the remainder of this Agreement, or the application

of such portion or provision in circumstances other than those as to which it

is so declared illegal or unenforceable, shall not be affected thereby, and

each portion and provision of this Agreement shall be valid and enforceable to

the fullest extent permitted by law.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Waiver</u>.&#160; No waiver of any provision hereof shall be

effective unless made in writing and signed by the waiving party.&#160; The failure of any party to require the

performance of any term or obligation of this Agreement, or the waiver by any

party of any breach of this</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>





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<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



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</font>



<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Agreement, shall not

prevent any subsequent enforcement of such term or obligation or be deemed a

waiver of any subsequent breach.</font></p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Notices</u>.&#160; Any notices, requests, demands, and other

communications provided for by this Agreement shall be sufficient if in writing

and delivered in person or sent by registered or certified mail, postage

prepaid, to the Executive at the last address the Executive has filed in

writing with the Company, or to the Company at its main office, attention of

the Board of Directors.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Effect on Other

Plans</u>.&#160; Except as provided in

Section&nbsp;10 hereof, nothing in this Agreement shall be construed to limit

the rights of the Executive under the Company&#146;s benefit plans, programs or

policies.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Amendment</u>.&#160; This Agreement may be amended or modified

only by a written instrument signed by the Executive and by a duly authorized

representative of the Company.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Governing Law</u>.&#160; This is a Massachusetts contract and shall

be construed under and be governed in all respects by the laws of the

Commonwealth of Massachusetts.</p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.</font><font size="1" style="font-size:8.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Obligations of

Successors</u>.&#160; In addition to any

obligations imposed by law upon any successor to the Company, the Company will

use its commercially reasonable efforts to require any successor (whether

direct or indirect, by purchase, merger, consolidation or otherwise) to all or

substantially all of the business or assets of the Company to expressly assume

and agree to perform this Agreement in the same manner and to the same extent

that the Company would be required to perform if no such succession had taken

place.</p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>





<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">



<hr size="2" width="100%" noshade color="gray" align="left">



</font></div>



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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>



<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS

WHEREOF, this Agreement has been executed as a sealed instrument by the Company

by their duly authorized officers and by the Executive, as of the date first

above written.</font></p>



<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>



<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.02%;">

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="37%" colspan="5" valign="top" style="padding:0in 0in 0in 0in;width:37.8%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">COMPANY</font></u>:</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="7%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:7.98%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="29%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:29.82%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="37%" colspan="5" valign="top" style="padding:0in 0in 0in 0in;width:37.8%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ANIKA THERAPEUTICS, INC.</font></p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="34%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:34.48%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="34%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:34.48%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>

  </td>

  <td width="26%" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:26.62%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ William J.

  Knight</font></p>

  </td>

  <td width="7%" valign="top" style="padding:0in 0in 0in 0in;width:7.86%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="6%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:6.64%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name: </font></p>

  </td>

  <td width="27%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:27.84%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">William J. Knight</font></p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="6%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:6.64%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title: </font></p>

  </td>

  <td width="27%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:27.84%;">

  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial

  Officer</font></p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="34%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:34.48%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="34%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:34.48%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="37%" colspan="5" valign="top" style="padding:0in 0in 0in 0in;width:37.8%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:avoid;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">EXECUTIVE</font></u>:</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="34%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:34.48%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.32%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

  <td width="34%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:34.48%;">

  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="29%" colspan="4" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:29.94%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Charles H. Sherwood</font></p>

  </td>

  <td width="7%" valign="top" style="padding:0in 0in 0in 0in;width:7.86%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

 </tr>

 <tr>

  <td width="62%" valign="top" style="padding:0in 0in 0in 0in;width:62.2%;">

  <p style="font-size:1.0pt;margin:0in 0in .0001pt;page-break-after:avoid;">&nbsp;</p>

  </td>

  <td width="37%" colspan="5" valign="top" style="padding:0in 0in 0in 0in;width:37.8%;">

  <p style="margin:0in 0in .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Charles H. Sherwood</font></p>

  </td>

 </tr>

 <tr height="0">

  <td width="449" style="border:none;"></td>

  <td width="24" style="border:none;"></td>

  <td width="34" style="border:none;"></td>

  <td width="14" style="border:none;"></td>

  <td width="144" style="border:none;"></td>

  <td width="57" style="border:none;"></td>

 </tr>

</table>



<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>





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