<SUBMISSION>
<ACCESSION-NUMBER>0001104659-03-010321
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20030331
<FILING-DATE>20030515
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>AEROGEN INC
<CIK>0001039160
<ASSIGNED-SIC>3841
<IRS-NUMBER>330488580
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-31913
<FILM-NUMBER>03704273
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1310 CORONADO DR
<CITY>SANTA CLARA
<STATE>CA
<ZIP>95054
<PHONE>4085432400
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1310 ORLEANS DRIVE
<CITY>SUNNYVALE
<STATE>CA
<ZIP>94089
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>j1124_10q.htm
<DESCRIPTION>10-Q
<TEXT>
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION</font></b><br>
<b><font style="font-weight:bold;">Washington, DC&#160; 20549</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="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">FORM 10-Q</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>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(Mark
One)</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="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <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="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">For
  the quarterly period ended March 31, 2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <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;">OR</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <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="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="95%" valign="top" style="padding:0in .7pt 0in .7pt;width:95.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">For
  the transition period
  from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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;">Commission
File Number:&#160; 0-31913</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>

<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;">Aerogen,
Inc.</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;">(Exact name of
Registrant as specified in its charter)</font></p>

<p style="margin:0in 0in .0001pt;"><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="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.66%;">
  <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;">Delaware</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.64%;">
  <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;">33-0488580</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.66%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(State or other
  jurisdiction of incorporation or organization)</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.64%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(I.R.S. Employer
  Identification No.)</font></p>
  </td>
 </tr>
 <tr>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.66%;">
  <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 0in .7pt;width:2.7%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.64%;">
  <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 0in .7pt;width:48.66%;">
  <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;">2071
  Stierlin Court, Mountain View, CA</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.64%;">
  <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;">94043</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.66%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Address of
  principal executive offices)</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.64%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(zip code)</font></p>
  </td>
 </tr>
 <tr>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.66%;">
  <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 0in .7pt;width:2.7%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.64%;">
  <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 style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Registrant&#146;s telephone
  number, including area code:&#160; <b><font style="font-weight:bold;">(650) 864-7300</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 style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;)
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.</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;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Yes&#160; </font><font face="Wingdings" style="font-family:Wingdings;">&#253;</font>&#160; No&#160; <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="font-size:10.0pt;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Indicate by check mark
whether the Registrant is an accelerated filed (as defined in Rule 12b-2 of the
Exchange Act):&#160; Yes&#160; </font><font face="Wingdings" style="font-family:Wingdings;">o</font>&#160; No&#160; <font face="Wingdings" style="font-family:Wingdings;">&#253;</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;">As of April 30, 2003,
there were 20,404,246 shares of the Registrant&#146;s Common Stock, par value
$0.001, outstanding.</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;"><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;"><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 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;">Aerogen,
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;">Form
10-Q</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;">Table of Contents</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="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;"><a href="#PartI_FinancialInformation" title="Click to goto Part I. Financial Information">Part&#160; I.</a></font></b></p>
  </td>
  <td width="91%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:91.56%;">
  <p style="margin:0in 0in .0001pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;"><a href="#PartI_FinancialInformation" title="Click to goto Part I. Financial Information">Financial Information</a></font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item1_CondensedConsolidatedFinancial" title="Click to goto Item 1. Condensed Consolidated Financial Statements">Item
  1.</a></font></p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item1_CondensedConsolidatedFinancial" title="Click to goto Item 1. Condensed Consolidated Financial Statements">Condensed
  Consolidated Financial Statements (unaudited)</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#CondensedConsolidatedBalanceSheets" title="Click to goto Condensed Consolidated Balance Sheets">Condensed
  Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#CondensedConsolidatedStatementsOfOpe" title="Click to goto Condensed Consolidated Statements of Operations">Condensed
  Consolidated Statements of Operations for the three months ended March 31,
  2003 and 2002</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#CondensedConsolidatedStatementsOfCas" title="Click to goto Condensed Consolidated Statements of Cash Flows">Condensed
  Consolidated Statements of Cash Flows for the three months ended March 31,
  2003 and 2002</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#NotesToCondensedConsolidatedFinancia" title="Click to goto NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS">Notes
  to Condensed Consolidated Financial Statements</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item2_ManagementsDiscussionAndAnal" title="Click to goto Item 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations">Item
  2.</a></font></p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item2_ManagementsDiscussionAndAnal" title="Click to goto Item 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations">Management&#146;s
  Discussion and Analysis of Financial Condition and Results of Operations</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item3_QuantitativeAndQualitativeDi" title="Click to goto Item 3.  Quantitative and Qualitative Disclosures About Market Risk">Item
  3.</a></font></p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item3_QuantitativeAndQualitativeDi" title="Click to goto Item 3.  Quantitative and Qualitative Disclosures About Market Risk">Quantitative
  and Qualitative Disclosures About Market Risk</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <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:6.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item4_ControlsAndProcedures" title="Click to goto Item 4.   Controls and Procedures">Item 4.</a></font></p>
  </td>
  <td width="85%" valign="top" style="padding:0in .7pt 0in .7pt;width:85.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item4_ControlsAndProcedures" title="Click to goto Item 4.   Controls and Procedures">Controls and
  Procedures</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;"><a href="#PartIi_OtherInformation" title="Click to goto Part II. Other Information">Part&#160; II.</a></font></b></p>
  </td>
  <td width="91%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:91.56%;">
  <p style="margin:0in 0in .0001pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;"><a href="#PartIi_OtherInformation" title="Click to goto Part II. Other Information">Other Information</a></font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item1_LegalProceedings" title="Click to goto Item 1. Legal Proceedings">Item
  1.</a></font></p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item1_LegalProceedings" title="Click to goto Item 1. Legal Proceedings">Legal
  Proceedings</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item2_ChangesInSecuritiesAndUseOf" title="Click to goto Item 2. Changes in Securities and Use of Proceeds.">Item
  2.</a></font></p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item2_ChangesInSecuritiesAndUseOf" title="Click to goto Item 2. Changes in Securities and Use of Proceeds.">Changes
  in Securities and Use of Proceeds</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item3_DefaultsUponSeniorSecurities_" title="Click to goto Item 3. Defaults Upon Senior Securities.">Item 3.</a></font></p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item3_DefaultsUponSeniorSecurities_" title="Click to goto Item 3. Defaults Upon Senior Securities.">Defaults Upon
  Senior Securities</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item4_SubmissionOfMattersToAVote" title="Click to goto Item 4. Submission of Matters to a Vote of Security Holders.">Item
  4.</a></font></p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item4_SubmissionOfMattersToAVote" title="Click to goto Item 4. Submission of Matters to a Vote of Security Holders.">Submission
  of Matters to a Vote of Security Holders</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item5_OtherInformation_" title="Click to goto Item 5. Other Information.">Item 5.</a></font></p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item5_OtherInformation_" title="Click to goto Item 5. Other Information.">Other Information</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item6_ExhibitsAndReportsOnForm8k" title="Click to goto Item 6. Exhibits and Reports on Form 8-K">Item 6.</a></font></p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;"><a href="#Item6_ExhibitsAndReportsOnForm8k" title="Click to goto Item 6. Exhibits and Reports on Form 8-K">Exhibits and
  Reports on Form 8-K</a></font></p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="91%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:91.56%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;"><a href="#Signatures" title="Click to goto Signatures">Signatures</a></font></b></p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.24%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="85%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:85.32%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="8%" valign="top" style="padding:0in .7pt 0in .7pt;width:8.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="91%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:91.56%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;"><a href="#Certifications" title="Click to goto CERTIFICATIONS">Certifications</a></font></b></p>
  </td>
 </tr>
 <tr height="0">
  <td width="61" style="border:none;"></td>
  <td width="45" style="border:none;"></td>
  <td width="1" style="border:none;"></td>
  <td width="615" 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;">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\ahanson\1124_3\t_1556235\j1124_10q.htm',USER='ahanson',CD='May 15 13:56 2003' -->
<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="font-size:10.0pt;margin:0in 0in .0001pt;"><a name="PartI_FinancialInformation"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Part&#160; I.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><u><font style="font-weight:bold;">Financial Information</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="font-size:10.0pt;margin:0in 0in .0001pt;"><a name="Item1_CondensedConsolidatedFinancial"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item&#160; 1.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Condensed Consolidated Financial Statements</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;">Aerogen, Inc.</font></b></p>

<h3 style="margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><a name="CondensedConsolidatedBalanceSheets"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Condensed
Consolidated Balance Sheets</font></b></a></h3>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(unaudited; in
thousands)</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="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <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;">March 31,<br>
  2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <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>
  2002</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><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" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Current assets:</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cash and cash
  equivalents</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;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 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4,477</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,266</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Available-for-sale
  securities</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,621</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts
  receivable, net</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,323</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">903</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories, net</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">465</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">374</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Prepaid expenses
  and other current assets</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">705</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">934</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total current
  assets</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6,970</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11,098</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Property and
  equipment, net</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,081</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,251</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Goodwill and
  other intangible assets, net</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,660</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,612</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Restricted cash</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,200</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,200</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other assets</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">32</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">33</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total assets</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;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 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14,943</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19,194</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">LIABILITIES
  AND STOCKHOLDERS&#146; EQUITY</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Current
  liabilities:</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts payable</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">665</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">973</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued
  liabilities</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,446</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,446</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total current
  liabilities</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,111</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,419</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other long-term
  liabilities</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,099</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,031</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total
  liabilities</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,210</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,450</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Stockholders&#146;
  equity:</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common stock</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Additional
  paid-in capital</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">109,335</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">109,497</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Notes receivable
  from stockholders</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(435</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(434</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Deferred
  stock-based compensation, net</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1,081</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1,520</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accumulated
  other comprehensive income</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">243</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">233</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accumulated
  deficit</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(96,349</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(92,052</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total
  stockholders&#146; equity</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11,733</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15,744</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total
  liabilities and stockholders&#146; equity</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;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 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14,943</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" 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 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19,194</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&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;">The accompanying
notes are an integral part of these condensed 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;"><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\ahanson\1124_3\t_1556235\j1124_10q.htm',USER='ahanson',CD='May 15 13:56 2003' -->
<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 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;">Aerogen, Inc.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="CondensedConsolidatedStatementsOfOpe"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Condensed Consolidated Statements of
Operations</font></b></a></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; in
thousands, except per share data)</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="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="26%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:26.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;text-autospace:none;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Three Months Ended<br>
  March 31,</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;text-autospace:none;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;text-autospace:none;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2002</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Revenues:</font></b></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Product sales</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,278</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Research and development</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">165</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">26</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Royalty</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">125</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">63</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total revenues</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,568</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">89</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Costs and expenses:</font></b></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cost of products sold</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">834</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">231</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Research and development</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,205</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,023</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Selling, general and administrative</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,904</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,127</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total costs and expenses</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,943</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7,381</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Loss from operations</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,375</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(7,292</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Interest income</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">38</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">221</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other income (expense), net</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">40</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,297</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" 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 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(7,072</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss per share, basic and diluted</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.21</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.35</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-autospace:none;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Weighted - average shares used in computing net loss
  per share, basic and diluted</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;text-autospace:none;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,396</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,043</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&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;">The accompanying notes
are an integral part of these condensed 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;"><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='4',FILE='C:\C2\ahanson\1124_3\t_1556235\j1124_10q.htm',USER='ahanson',CD='May 15 13:56 2003' -->
<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 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;">Aerogen,
Inc.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="CondensedConsolidatedStatementsOfCas"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Condensed Consolidated Statements of
Cash Flows</font></b></a></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; in thousands)</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="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="26%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:26.0%;">
  <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;">Three
  Months Ended<br>
  March 31,</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <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;">2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <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="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Cash
  flows from operating activities:</font></b></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,297</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(7,072</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Adjustments to
  reconcile net loss to net cash used in operating activities:</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Depreciation and
  amortization</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">334</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">194</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Changes in
  inventory reserves</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">234</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amortization of
  deferred stock-based compensation</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">278</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">382</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued interest
  on notes receivable from stockholders</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(8</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amortization of
  notes discount</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Gain) loss on
  disposal of property and equipment</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(25</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">165</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Changes in
  operating assets and liabilities:</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts
  receivable</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(420</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">141</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(100</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">25</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Prepaid expenses
  and other current assets</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(970</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">276</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other assets</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,201</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">37</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounts payable</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(308</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(607</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accrued
  liabilities</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">210</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(870</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Deferred
  revenues</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(208</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Deferred rent</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">61</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">270</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 40.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other long-term
  liabilities</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net cash used in
  operating activities</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,231</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(6,837</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Cash
  flows from investing activities:</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Acquisition of
  property and equipment</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(140</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2,233</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Proceeds from maturities
  of available-for-sale securities</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,599</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15,817</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net cash
  provided by investing activities</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,459</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13,584</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Cash
  flows from financing activities:</font></b></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Proceeds from
  issuance of common stock</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Repurchase of
  common stock</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(6</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Repayment of
  notes receivable from stockholders</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">150</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 50.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net cash
  provided by financing activities</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#151;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">147</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Effect of
  exchange rate changes on cash</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(17</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(14</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net increase in
  cash and cash equivalents</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,211</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6,880</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cash and cash
  equivalents, beginning of period</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,266</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15,714</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="71%" valign="bottom" style="padding:0in 0in 0in 0in;width:71.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cash and cash
  equivalents, end of period</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;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 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4,477</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22,594</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&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;">The accompanying notes
are an integral part of these condensed 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;">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 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;">Aerogen, Inc.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="NotesToCondensedConsolidatedFinancia"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</font></b></a></p>

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

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note
1 &#150; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</font></b></h1>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Organization
and Business of the Company</font></b></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&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;">Aerogen,&nbsp;Inc.
(&#147;Aerogen&#148; the &#147;Company&#148; or &#147;we&#148;) was incorporated in November&nbsp;1991. We
are a specialty pharmaceutical company focusing on respiratory therapy in the
acute care setting. Our core technology is based upon our proprietary aerosol
generator. Using our technology, we are developing respiratory products for marketing
by us, and products in collaboration with, and for marketing by, pharmaceutical
and biotechnology companies for both respiratory therapy and for the delivery
of drugs through the lungs to the bloodstream.&#160;
The Company's recurring net losses from operations and negative cash
flows from operations, in light of the Company's current liquidity and capital
resources, raise substantial doubt regarding the Company's ability to continue
as a going concern for a reasonable period of time.&#160; Since inception, we have financed our operations primarily
through equity financings, product revenues, research and development revenues,
and the interest earned on related proceeds.&#160;
</font>The process of developing our products will continue to require
significant research and development, clinical trials and regulatory approvals.
These activities, together with manufacturing, selling, general and
administrative expenses, are expected to result in substantial operating losses
for the next several years.</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;">T<font style="letter-spacing:-.1pt;">hese condensed
consolidated financial statements contemplate the realization of assets and the
satisfaction of liabilities in the normal course of business. The continued
operation of the Company is dependent on our ability to obtain adequate funding
and eventually establish profitable operations. </font>As of March 31, 2003, we
had $4.5&nbsp;million in cash and cash equivalents. During the first three
months of 2003, our expenditures have been approximately $1.6&nbsp;million per
month. We need to raise additional funds through public or private financings,
collaborative relationships or other arrangements by early June 2003 in order
to continue as a going concern. We cannot be certain that such additional
funding will be available on terms attractive to us, or at all. Furthermore,
additional equity or debt financing may involve substantial dilution to our
existing stockholders, restrictive covenants or high interest rates.
Collaborative arrangements, if necessary to raise additional funds, may require
us to relinquish rights to either certain of our products or technologies or
desirable marketing territories, or all of these. We will also explore other
potential options, such as a merger or sale.&#160;
If our efforts are unsuccessful, the Company will have to significantly
curtail operations even further, or cease operations altogether and explore
liquidation alternatives.</font></p>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></h1>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Basis
of Presentation</font></b></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;">The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10-01
of Securities and Exchange Commission Regulation S-X.&#160; Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.&#160; In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments (consisting of normal, recurring
adjustments) considered necessary for a fair presentation of the Company&#146;s
interim financial information.&#160; These
financial statements and notes should be read in conjunction with the audited
financial statements and notes thereto of the Company included in the Company&#146;s
Annual Report on Form 10-K for the year ended December 31, 2002, filed with the
Securities and Exchange Commission on March 31, 2003.</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 results of operations for the three months ended
March 31, 2003 are not necessarily indicative of the operating results that may
be reported for the fiscal year ending December 31, 2003, or for any other
future period.</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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Inventories</font></b></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;">Inventories are stated at the lower of cost (on a
first-in, first-out basis) or market value.&#160;
Inventories are summarized 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>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="65%" valign="bottom" style="padding:0in 0in 0in 0in;width:65.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.02%;">
  <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;">March 31,
  2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:15.0%;">
  <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, 2002</font></b></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" valign="bottom" style="padding:0in 0in 0in 0in;width:65.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="32%" colspan="5" valign="bottom" style="padding:0in 0in 0in 0in;width:32.02%;">
  <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;">(in
  thousands)</font></b></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" valign="bottom" style="padding:0in 0in 0in 0in;width:65.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.02%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.0%;">
  <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 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="65%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:65.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Raw materials</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;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 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:13.72%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">256</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="13%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;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;">333</font></p>
  </td>
  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="65%" valign="bottom" style="padding:0in 0in 0in 0in;width:65.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Work-in-process</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.02%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">87</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">31</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="65%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:65.0%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Finished goods</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <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 0in 0in 0in;width:15.02%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">122</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&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 0in 0in 0in;width:15.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>
  </td>
  <td width="0%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="65%" valign="bottom" style="padding:0in 0in 0in 0in;width:65.0%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net inventories</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;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 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="13%" valign="bottom" style="border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:13.72%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">465</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</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 0in 0in 0in;width:13.72%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">374</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in .7pt 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Warranty</font></b></h1>

<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 style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">The Company offers a warranty of
certain products and records a liability for the estimated future costs
associated with warranty claims, which is based on historical experience and
the Company&#146;s estimated level of future costs. Warranty costs are reflected in
the statement of operations as a cost of products sold. A reconciliation of the
changes in the Company&#146;s warranty liability for the three months ending
March&nbsp;31, 2003 as follows (in thousands):</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="85%" style="border-collapse:collapse;margin-left:.5in;width:85.0%;">
 <tr>
  <td width="80%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:80.46%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Warranty accrual
  at January 1, 2003</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.58%;">
  <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 0in 0in 0in;width:1.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="14%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:14.28%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">101</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="top" style="padding:0in 0in 0in 0in;width:80.46%;">
  <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 0in 0in 0in;width:2.58%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.8%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:80.46%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accruals for
  warranties issued during the period</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.58%;">
  <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;padding:0in 0in 0in 0in;width:15.8%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">73</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="top" style="padding:0in 0in 0in 0in;width:80.46%;">
  <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 0in 0in 0in;width:2.58%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:15.8%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:80.46%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Settlements made
  in kind during the period</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.58%;">
  <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 0in 0in 0in;width:15.8%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(16</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="top" style="padding:0in 0in 0in 0in;width:80.46%;">
  <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 0in 0in 0in;width:2.58%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="15%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:15.8%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="top" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:80.46%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Ending balance
  at March 31, 2003</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.58%;">
  <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 0in 0in 0in;width:1.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="14%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:14.28%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">158</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other
Comprehensive Income</font></b></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">&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;">Other comprehensive income
generally represents all changes in stockholders&#146; equity except those resulting
from investments or contributions by stockholders.&#160; The Company&#146;s unrealized gains and losses on available-for-sale
securities and foreign currency translation gains and losses represent the only
components of comprehensive income that are excluded from the Company&#146;s net
loss</font>.&#160; The components of other
comprehensive income which are excluded from net loss are not significant,
individually or in the aggregate, and therefore, no separate statement of
comprehensive loss has been presented.</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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Notes
Receivable</font></b></h1>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:normal;">&nbsp;</font></b></h1>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;text-indent:.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:normal;">On May 5, 2003, $100,526 of principal and interest
on a note receivable from a corporate officer and stockholder became due.&#160; The Company is currently negotiating
repayment of this loan with the stockholder.</font></b></h1>

<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;">
<!-- SEQ.=1,FOLIO='7',FILE='C:\C2\ahanson\1124_3\t_1556235\j1124_10q.htm',USER='ahanson',CD='May 15 13:56 2003' -->
<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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net Loss Per Share</font></b></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;">Basic net loss per share is computed by dividing the
net loss by the weighted - average number of vested shares outstanding for the
period. Diluted net loss per share is computed giving effect to all potential
dilutive shares, including options and warrants.&#160; Options and warrants are not included in the diluted net loss per
share calculations for periods in which the effect would be anti-dilutive.</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;">A reconciliation of the
numerator and denominator used in the calculation of basic and diluted net loss
per share 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>

<table border="0" cellspacing="0" cellpadding="0" width="90%" style="border-collapse:collapse;width:90.06%;">
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.9%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="26%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:26.32%;">
  <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;">Three
  Months Ended<br>
  March 31,</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.9%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.48%;">
  <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;">2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="11%" colspan="2" valign="bottom" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:11.76%;">
  <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="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.9%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" colspan="5" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <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;">(in
  thousands)</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:69.9%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss per
  share, basic and diluted:</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.48%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:11.76%;">
  <p align="right" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.9%;">
  <p style="margin:0in 0in .0001pt 30.0pt;text-indent:-12.95pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.08%;">
  <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 0in 0in 0in;width:1.36%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.12%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,297</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.36%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.4%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(7,072</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:69.9%;">
  <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;padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.48%;">
  <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;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:11.76%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.9%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Weighted -
  average common shares outstanding</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.48%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,404</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:11.76%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,142</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:69.9%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Less:&#160; Weighted - average shares subject to
  repurchase</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.48%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(8</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:11.76%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(99</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.9%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Weighted -
  average shares used in computing basic and diluted net loss per common share</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:12.48%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,396</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.76%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20,043</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in .7pt 0in;width:1.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="457" style="border:none;"></td>
  <td width="14" style="border:none;"></td>
  <td width="9" style="border:none;"></td>
  <td width="73" style="border:none;"></td>
  <td width="13" style="border:none;"></td>
  <td width="9" style="border:none;"></td>
  <td width="69" style="border:none;"></td>
  <td width="6" style="border:none;"></td>
 </tr>
</table>

<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 following outstanding options, common stock
subject to repurchase and warrants were excluded from the computation of
diluted net loss per share as they had an antidilutive effect:</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>

<table border="0" cellspacing="0" cellpadding="0" width="90%" style="border-collapse:collapse;width:90.0%;">
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.96%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="26%" colspan="3" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:26.72%;">
  <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;">March 31,</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.96%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.44%;">
  <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;">2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" valign="bottom" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:12.28%;">
  <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="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.96%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="26%" colspan="3" valign="bottom" style="padding:0in 0in 0in 0in;width:26.72%;">
  <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;">(in
  thousands)</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.96%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.44%;">
  <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 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.28%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:69.96%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Options to
  purchase common stock</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.44%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,806</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.28%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,429</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" style="padding:0in 0in 0in 0in;width:69.96%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common stock
  subject to repurchase</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.44%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0in 0in 0in 0in;width:12.28%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">64</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="69%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:69.96%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Warrants</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.44%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.28%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">32</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<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;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Accounting for
Stock-based Compensation</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;">The Company accounts for
stock-based compensation using the intrinsic value method under Accounting
Principles Board Opinion No.&nbsp;25 (&#147;APB No.&nbsp;25&#148;), &#147;Accounting for Stock
Issued to Employees,&#148; and related interpretations and complies with the
disclosure requirements of Statement of Financial Accounting Standards No. 148
(&#147;SFAS No. 148&#148;), &#147;Accounting for Stock-Based Compensation, Transition and
Disclosure an amendment of FASB Statement No.123&#148;. The following provides a
reconciliation of net loss and net loss per common share to proforma net loss
and proforma net loss per common share as if the Company had applied the fair
value recognition provisions of SFAS No.&nbsp;123 &#147;Accounting for Stock-Based
Compensation&#148;&#160; to all employee awards:</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;"><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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<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>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.18%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="28%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:28.26%;">
  <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;">Three Months Ended March 31,</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;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;">2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;width:2.18%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="border-bottom:solid windowtext .5pt;border-left:none;border-right:none;border-top:solid windowtext .5pt;padding:0in 0in 0in 0in;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="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.18%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="28%" colspan="5" valign="bottom" style="padding:0in 0in 0in 0in;width:28.26%;">
  <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;">(in thousands, except per share amounts)</font></b></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.18%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;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 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:13.04%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:68.48%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss - as
  reported</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,297</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(7,072</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <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 0in 0in 0in;width:2.18%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;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 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:13.04%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:68.48%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Add: stock-based
  compensation included in reported net loss</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;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;">263</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;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;">379</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <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 0in 0in 0in;width:2.18%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;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 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:13.04%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:68.48%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Deduct : total
  stock-based employee compensation determined under fair value based method
  for all awards</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;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;">(308</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;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;">(631</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <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 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;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 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:13.04%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:68.48%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss -
  proforma</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.18%;">
  <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 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4,342</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(7,324</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <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 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;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 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:13.04%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:68.48%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss per
  share, basic and diluted&#160; -&#160; as reported</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.18%;">
  <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 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.21</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.35</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" style="padding:0in 0in 0in 0in;width:68.48%;">
  <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 0in 0in 0in;width:2.18%;">
  <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 0in 0in 0in;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 0in 0in 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:13.04%;">
  <p align="right" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:right;">&nbsp;</p>
  </td>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="68%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:68.48%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Net loss per
  share, basic and diluted&#160; -&#160; proforma</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.18%;">
  <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 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.21</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:2.18%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.42%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="11%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:11.62%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(0.37</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#cceeff" style="background:#CCEEFF;padding:0in 0in .7pt 0in;width:1.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</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;letter-spacing:-.1pt;">The
above pro forma disclosures may not be representative of the pro forma effect
in future years because options vest over several years and additional grants
may be made each year.</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;">The Company accounts for equity
instruments issued to non-employees in accordance with the provisions of SFAS
No.&nbsp;123 and Emerging Issues Task Force EITF Issue No.&nbsp;96-18,
&#147;Accounting for Equity Instruments that are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services,&#148; which require
that such equity instruments are recorded at their fair value on the measurement
date, which is typically the date of grant. The measurement of stock-based
compensation is subject to periodic adjustment as the underlying equity
instruments vest.</font></p>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note
2 - RECENT ACCOUNTING PRONOUNCEMENTS</font></b></h1>

<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;">None.</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>

<h1 style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:auto;"><a name="Item2_ManagementsDiscussionAndAnal"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 2.</font></b></a><font size="1" style="font-size:3.0pt;font-weight:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Management&#146;s Discussion
and Analysis of Financial Condition and Results of Operations</h1>

<p style="margin:0in 0in .0001pt;text-indent:13.7pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">&nbsp;</font></i></p>

<p style="margin:0in 0in .0001pt;text-indent:13.7pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">In addition to historical
information, this report contains predictions, estimates and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended.&#160; Actual results could
differ materially from any future performance suggested in this report as a
result of many factors, including those referred to in &#147;Factors That May Affect
Future Operating Results,&#148; at the end of this Item 2.&#160; The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and notes included
elsewhere in this report and the information included in the Company&#146;s Annual
Report on Form 10-K&#160; for the year ended
December 31, 2002, filed with the Securities and Exchange Commission on March
31, 2003 (&#147;Form 10-K&#148;).</font></i></p>

<p style="margin:0in 0in .0001pt;text-indent:13.7pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Critical
Accounting Policies and Estimates</font></b></h1>

<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 critical accounting policies and estimates are
described in Item 7 of the Form 10-K for the year ended December 31, 2002, and
have not changed materially since that 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>

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<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Overview</font></b></h1>

<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;">Aerogen,&nbsp;Inc. (&#147;Aerogen&#148; the
&#147;Company&#148; or &#147;we&#148;) was incorporated in November&nbsp;1991.&#160; We are a specialty pharmaceutical company
focusing on respiratory therapy in the acute care setting.&#160; Our core technology is based upon our
proprietary aerosol generator.&#160; Using
our technology, we are developing respiratory products for marketing by us, and
products in collaboration with, and for marketing by, pharmaceutical and
biotechnology companies for both respiratory therapy and for the delivery of
drugs through the lungs to the bloodstream.</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;">In 2002, we generated significant
revenues from our planned principal operations and exited the development
stage. However, we will continue to devote substantial efforts to the
development of current and future products.&#160;
We currently have two nebulizer products on the market.&#160; We have an accumulated deficit of
approximately $96.3 million as of March&nbsp;31, 2003.&#160; The continued existence of the Company is
dependent on the Company&#146;s ability to obtain adequate funding and eventually
establish profitable operations.</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 of March 31, 2003, we had $4.5&nbsp;million in cash
and cash equivalents. During the first three months of 2003, our expenditures
have been approximately $1.6&nbsp;million per month. We need to raise
additional funds through public or private financings, collaborative
relationships or other arrangements by early June 2003 in order to continue as
a going concern. We cannot be certain that such additional funding will be
available on terms attractive to us, or at all. Furthermore, additional equity
or debt financing may involve substantial dilution to our existing
stockholders, restrictive covenants or high interest rates. Collaborative
arrangements, if necessary to raise additional funds, may require us to
relinquish rights to either certain of our products or technologies or
desirable marketing territories, or all of these. We will also explore other
potential options, such as a merger or sale.&#160;
If our efforts are unsuccessful, the Company will have to significantly
curtail operations even further, or cease operations altogether and explore
liquidation alternatives.</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;">We expect to incur significant
additional operating losses over the next several years and expect cumulative
losses to increase, primarily due to the costs associated with the
manufacturing and marketing of our products, the expansion of our research and
development activities and the general expansion of our business
activities.&#160; We anticipate that our
quarterly results will fluctuate for the foreseeable future.&#160; Therefore, period to period comparisons
should not be relied upon as predictive of the results in future periods.&#160; Our sources of working capital have been
equity financings, product revenues, research and development revenues,
interest earned on investments and, to a small extent, equipment lease financings.</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"><font style="font-size:10.0pt;letter-spacing:-.1pt;">As part of a restructuring that we
began in December 2002, we engaged in a reduction in force in January 2003,
which resulted in the termination of 26 employees (approximately 30% of our
U.S. workforce).&#160; The restructuring also
included the suspension of development of our Aerodose</font>&#174;<font style="letter-spacing:-.1pt;"> insulin inhaler product.</font></font></p>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Results
of Operations</font></b></h1>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></h1>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Revenues</font></b></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;">Total revenues for the three months ended March 31,
2003 were $1.6 million, compared with $89,000 for the same period of 2002.&#160; Total revenues include revenues from product
sales, research and development activities for unrelated third parties, and
royalties associated with the licensing of our technology for use outside of
the medical field.</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;">Product sales for the three months ended March 31,
2003 were $1.3 million, compared with none for the same period of 2002.&#160; Product sales were significantly influenced
by the launch of our second product, the Aeroneb&#174; Professional Nebulizer System
(&#147;Aeroneb Pro&#148;) in June 2002.</font></p>

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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;">Research and development revenues for the three months
ended March 31, 2003 were $165,000 compared with $26,000 for the same period of
2002.&#160; The increase for the three months
ended March 31. 2003 resulted from product development activities performed
under partner agreements signed in late 2002.&#160;
Research and development revenues can be expected to vary from period to
period based on the activities requested by partner companies in any particular
period, and therefore are not predictable.&#160;
Based on agreements we currently have in place, we expect research and
development revenues for 2003 to be lower than those for 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:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Royalty&#160;
revenues were approximately $125,000 and $63,000, for the three month
periods ended March 31, 2003 and 2002, respectively.&#160; These royalties represent a minimum royalty obligation associated
with licensing our aerosol generator technology to a consumer product company
for use in the fields of air freshener and insect repellants.&#160; The increase in the three months ended March
31, 3002 was due to an increase in the minimum royalty payable under the
agreement with the consumer product company.&#160;
The first product covered by the agreement was launched in one country
outside of the United States in January of 2003.</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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cost
of Products Sold</font></b></h1>

<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;">Cost of products sold for the three months ended March
31, 2003 and 2002 were $0.8 million and&#160;
$0.2 million, respectively.&#160;
During the fourth quarter of 2002 and the first quarter of 2003, yield
improvements in our manufacturing processes, resulted in lower costs per unit
and improvements in cost of products sold as a percent of product sales.&#160; As Aeroneb Pro volumes increase and the
manufacturing processes mature, we anticipate further improvements to the cost
of products sold as a percent of product sales.</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 three months ended March 31, 2002, cost of
products sold included costs associated with the start-up of manufacturing
production in our facility in Mountain View.&#160;
Additionally, in April 2002, we implemented a price reduction on the
Aeroneb&#174; Portable Nebulizer System to enhance our competitive position in the
home nebulizer market.&#160; For the three
months ending March 31, 2002, the cost of products sold and manufacturing
start-up costs primarily represented charges to reduce inventories to estimated
market value and accrue future losses on then current purchase commitments as a
result of the reduced selling price of that product.</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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Research
and Development Expenses</font></b></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;">Research and development expenses include our own
research and development projects, as well as the costs related to research and
development activities for our partners.&#160;
Research and development expenses for partner activities approximate our
revenues from those partners.&#160; Research
and development expenses include salaries and benefits for scientific and
development personnel, laboratory supplies, consulting services, clinical
expenses and the expenses associated with the development of manufacturing
processes, all including related overhead.&#160;
Research and development spending may increase significantly over the
next several years as we undertake new clinical trials and expand our research
and development activities to support our products and those which we develop
in our collaborations.&#160;&#160; Future research
and development and clinical expenditures cannot be predicted reliably, as they
depend, in part, upon our success in expanding existing collaborations,
entering into new partnering agreements, potential changes in our partners
priorities, and the level of internally funded research and development
efforts.</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;">Research and development expenses for the three months
ended March 31, 2003 were $3.2 million, compared with $5.0 million for the same
period of 2002.&#160; The decrease in
research and development expenses of $1.8 million for the three months ended
March 31, 2003, as compared with the same period of 2002, was primarily due to
reduced payroll and related expenses of $1.1 million associated with reductions
in force in 2002 and early 2003; non-payroll related expenses for professional
services, materials and machining services for the development of the clinical
version of our Aerodose inhaled insulin product and clinical trials of $0.2
million; non-payroll related expenses for professional and machining services
associated with our development of clinical devices for respiratory products of
$0.1 million; amortization of deferred stock-based compensation of $0.1
million; and non-payroll related expenses for professional services, machining
services, and materials for several other programs totaling $0.3 million.</font></p>

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<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Selling,
General and Administrative Expenses</font></b></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;">Selling, general and
administrative expenses for the three months ended March 31, 2003 were $1.9
million, compared with $2.1 million for the same period of 2002.&#160; The decrease for the three months ended
March 31, 2003 of $0.2 million compared with the same period of 2002 was
primarily due to payroll and related expenses decreasing by $0.4 million
associated with reductions in force in 2002 and early 2003, partially offset by
an increase in outside legal expenses of $0.2 million.</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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Interest
and Other Income (Expense), Net</font></b></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;">Interest and other income, net for the three months
ended March 31, 2003 was $78,000, compared with $0.2 million for the same
period of 2002.&#160; The decrease in interest
income, net was primarily due to lower average cash, cash equivalents and
investment balances resulting from cash used in operations and capital
expenditures and, to a lesser extent, to lower interest rates.</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>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Liquidity
and Capital Resources</font></b></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;">Since inception, we have financed our operations
primarily through equity financings, product sales, research and development
revenues and the interest earned on these funds.&#160; We have received approximately $98.5 million aggregate net
proceeds from sales of our common and preferred stock through March 31, 2003,
including approximately $44.5 million of net proceeds from our initial public
offering (&#147;IPO&#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;">As of March 31, 2003, we had cash and cash equivalents
of approximately $4.5 million.&#160; Net cash
used in operating activities during the three months ended March 31, 2003 was
$4.2 million resulting primarily from the net loss for the period of $4.3
million; increases in accounts receivable of $0.4 million; increases in
inventories of $0.1 million; and net decreased accounts payable and accrued
liabilities of $0.1 million.&#160; These uses
were partially offset by non-cash related charges of approximately $0.3 million
in depreciation and amortization and $0.3 million in amortization of deferred
stock-based compensation.&#160; Net cash used
in operating activities for the three months ended March 31, 2002, was $6.8
million resulting primarily from the net loss for the period of $7.1 million;
and a decrease in accounts payable and accrued liabilities of $1.5 million
partially offset by non-cash related charges of approximately $1.0 million and
a decrease in current assets of $0.5 million.</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;">Net cash provided by investing activities was $5.5
million for the three months ended March 31, 2003, consisting primarily of
proceeds from maturing available-for-sale securities of $5.6 million, partially
offset by $0.1 million of property and equipment acquisitions associated with
process improvements.&#160; Net cash provided
by investing activities was $13.6 million for the three months ended March 31,
2002, consisting primarily of $15.8 million for net proceeds from maturities of
available-for-sale securities partially offset by the acquisition of $2.2
million of leasehold improvements and equipment.</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;">No cash was provided by financing activities for the
three months ending March 31, 2003.&#160; For
the three months ending March 31, 2002, repayment of notes receivable from
stockholders provided $0.2 million.</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 development of our technology and products
requires a commitment of substantial funds to conduct the costly and
time-consuming product development and clinical trials that are required to
mature and expand our technology and products, and to bring any such products
to market.&#160; Our future capital requirements
and operating expenses will depend on many factors including, but not limited
to, research and development activities, the timing, cost, extent and results
of clinical trials, our success in licensing drugs for use in our products,
regulatory approvals, the status of competitive products, marketing and
manufacturing costs associated with commercialization of products, costs
involved in obtaining and maintaining patents and our ability to enter into
collaborative agreements.</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;">Based upon our current internal analyses, we need to
raise additional funds through public or private financings, collaborative
relationships or other arrangements by early June 2003 in order to continue as
a going concern. We cannot be certain that such additional funding will be
available on terms attractive to us, or at all. Furthermore, additional equity
or debt financing may involve substantial dilution to our existing
stockholders, restrictive covenants or high interest rates. Collaborative
arrangements, if necessary to raise additional funds, may require us to relinquish
rights to either certain of our products or technologies or desirable marketing
territories, or all of these. We will also explore other potential options,
such as a merger or</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>

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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">sale.&#160; If our efforts are
unsuccessful, the Company will have to significantly curtail our operations
even further, or cease operations altogether and explore liquidation
alternatives.&#160; <font style="letter-spacing:-.1pt;">Even if we are successful at raising funds to continue our operations,
our cash requirements may increase in the future because of our research and
development efforts, including clinical trials, capital expenditures and the
manufacture and marketing of our products.</font></font></p>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Recent
Accounting Pronouncements</font></b></h1>

<p style="margin:0in 0in .0001pt;text-indent:13.5pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:13.5pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None.</font></p>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Factors
That May Affect Future Operating Results</font></b></h1>

<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;">Our business and the value of our
stock are subject to a number of risks, many of which are set out below. If any
of these risks actually materialize, our business, financial condition or
operating results could be materially adversely affected, which would likely
have a corresponding impact on the value of our common stock. These risk
factors should be reviewed carefully.</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;letter-spacing:-.1pt;">We need additional capital. If we cannot secure
additional funding on acceptable terms by early June 2003, we may not be able
to continue as a going concern.</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;">As of March 31, 2003, we had $4.5&nbsp;million in cash
and cash equivalents. During the first three months of 2003, our expenditures
have been approximately $1.6&nbsp;million per month. We need to raise
additional funds through public or private financings, collaborative
relationships or other arrangements by early June 2003 in order to continue as
a going concern. We cannot be certain that such additional funding will be
available on terms attractive to us, or at all. Furthermore, additional equity
or debt financing may involve substantial dilution to our existing
stockholders, restrictive covenants or high interest rates. Collaborative
arrangements, if necessary to raise additional funds, may require us to
relinquish rights to either certain of our products or technologies or
desirable marketing territories, or all of these. We will also explore other
potential options, such as a merger or sale.&#160;
If our efforts are unsuccessful, the Company will have to significantly
curtail our operations even further, or cease operations altogether and explore
liquidation alternatives.<font style="letter-spacing:-.1pt;">&#160; Even if we are successful at raising funds
to continue our operations, our cash requirements may increase in the future
because of our research and development efforts, including clinical trials,
capital expenditures and the manufacture and marketing of our products.</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">We have a history of losses, anticipate future losses
and may never achieve or maintain profitability.</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;">We have never been
profitable.&#160; Through March 31, 2003, we
have incurred an accumulated deficit of approximately $96.3&nbsp;million.&#160; We expect to continue to incur substantial
losses over at least the next several years as we:</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">expand our research and development efforts;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">expand our preclinical and clinical testing
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="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">expand our manufacturing efforts, including our
commercial production capability; and</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">build our sales and marketing capabilities and
launch our products currently being developed.</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;">To achieve and sustain
profitability, we must, alone or with others, develop, obtain regulatory
approval for, manufacture, market and sell products. We cannot assure that we
will generate sufficient product revenues, royalties or research and
development revenues to become profitable or to sustain profitability.</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>

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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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Our operating results may fluctuate significantly and
may fail to meet the expectations of investors.</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;">We expect that our operating
results may fluctuate in the future, and may vary from investors&#146; expectations,
depending on a number of factors described in this &#147;Risk Factors&#148; section
including:</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">the availability of additional funding and the
terms of any such funding;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">the success of any restructuring actions we have
taken or may take in the future;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">changes in domestic and international economic,
business, regulatory, industry and political conditions;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">demand for our existing products and any we may
introduce in the future;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">timing of the introduction of new products and
enhancements of existing products; and</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">allocation of our resources, particularly when
they are limited.</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;letter-spacing:-.1pt;">Our 2002 reductions in force and our January&nbsp;2003
restructuring may not be sufficient to accomplish our goals.</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;">In January and June&nbsp;2002, we
engaged in reductions in force in order to reduce our operating expenses.&#160; In December&nbsp;2002, we began a
restructuring that included the suspension of development of our Aerodose
insulin inhaler product, and a workforce reduction in January&nbsp;2003.&#160; While these changes were designed to reduce
spending, align resources with long-term growth opportunities and preserve
cash, there can be no assurances that we will realize any of these expected
benefits to the extent needed. Further, we cannot predict whether we will need to
engage in additional restructuring actions, which may impact our operating
results.</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;letter-spacing:-.1pt;">Our stock price may continue to be volatile.</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;">The market prices for securities
of many companies in the life sciences industry have historically been highly
volatile, and the market from time-to-time has experienced significant price
and volume fluctuations unrelated to the operating performance of particular
companies. Prices for our common stock may be influenced by many factors,
including:</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="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;&#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><font style="letter-spacing:-.1pt;">market conditions relating to the life sciences
industry;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">investor perception of us as a 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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">securities analysts&#146; recommendations;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">delays in the development, regulatory approval or
commercialization of our products;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">announcements of technological innovations or new commercial
products by us, our partners or competitors;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">failure to establish new collaborative
relationships or termination of existing collaborative relationships;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">developments or disputes concerning patent or
intellectual property rights;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">regulatory and pricing developments in both the
United States and foreign countries;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">public concern as to the safety of drugs and drug
delivery technologies, including those of our competitors;</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>

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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="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;&#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><font style="letter-spacing:-.1pt;">period-to-period fluctuations in financial
results; and</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">economic and other external factors.</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;">Our common stock is currently
trading at a market price significantly below the initial public offering
price.&#160; There can be no assurance that
the price will increase in the future or will recover to the initial public
offering price.</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;letter-spacing:-.1pt;">Our common stock may be delisted from The Nasdaq
SmallCap Market, which may adversely affect the market liquidity and market
price of our common stock.</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;">Our common stock is currently listed
on the Nasdaq SmallCap Market and since July&nbsp;1, 2002 has had a closing bid
price of less than $1.00 per share on all but three days.&#160; Nasdaq rules do not permit listed companies
to maintain closing bid prices below $1.00 per share for more than 30 consecutive
trading days.&#160; Nasdaq has granted us a
grace period until August&nbsp;4, 2003 to regain compliance with this
requirement.</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;">If we fail to meet the minimum
bid price requirement by that date or fail to meet any of the other
requirements of the Nasdaq SmallCap Market, our stock may be delisted and the
trading of our common stock is likely to be conducted on the OTC Bulletin Board
or in the over-the-counter market in what is commonly referred to as the &#147;pink
sheets,&#148; which may have an adverse affect on the market price of our common
stock and on the ability of stockholders and investors to buy and sell the
common stock.&#160; If delisting occurs,
stockholders may lose some or all of their liquidity and/or value.</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;letter-spacing:-.1pt;">Many of our products are in research and development
stages, which makes it difficult to evaluate our business and prospects.</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;">Other than the Aeroneb Portable
Nebulizer System, which was introduced in 2001, and the Aeroneb Pro, which was
introduced in 2002, our products are in the research or development
stages.&#160; Before we can begin to sell our
other products commercially, we will need to invest in substantial additional
development activities, generally including the conduct of clinical trials.&#160; To further develop our products, we will
need to obtain additional funds and address engineering and design issues,
including ensuring that our products deliver a consistent and predictable
amount of drug to the lung and that they can be manufactured successfully. We
cannot assure that:</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">our research and development efforts will be
successful;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">any of our inhaler, nebulizer or drug products
will prove safe and 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="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">we will obtain regulatory clearance or approval to
sell any additional products; 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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">any of our existing or future products can be
manufactured in commercial quantities or at an acceptable cost or marketed
successfully.</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;letter-spacing:-.1pt;">Our technologies are relatively unproven, so they may
not work effectively or safely enough to commercialize inhalers, nebulizers or
drug-containing products.</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;">Since our pulmonary drug delivery
technologies are new and relatively unproven, many of our products are
currently in the research, development or clinical stages.&#160; Extensive additional testing will need to be
performed to demonstrate that:</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">drugs may be safely and effectively delivered
using our technologies;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">our inhalers and nebulizers are safe across a
range of drugs and formulations;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">our products consistently deliver accurate and
predictable amounts of drug over time; and</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;">15</font></p>


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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="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;&#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><font style="letter-spacing:-.1pt;">drug formulations are stable in our products.</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;">If our products do not prove to
be safe and effective, we may be required to abandon some or all of them. If we
cannot develop new products, our business will suffer.</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;letter-spacing:-.1pt;">If clinical trials of our drug products are not
successful, drug products using our Aerodose inhalers or Aeroneb nebulizers may
not be commercialized.</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;">Before either we or our partners
can file for regulatory approval for the commercial sale of combination
products using our Aerodose inhalers or our Aeroneb nebulizers, the United
Stated Food and Drug Administration (&#147;FDA&#148;), and other governmental agencies in
other countries will require extensive clinical trials to demonstrate product
safety and efficacy.&#160; We are developing
drug/inhaler and drug/nebulizer combinations, each of which will require
clinical testing.&#160; To date, we have
completed limited clinical trials using prototype Aerodose inhalers and Aeroneb
nebulizers.&#160; If we do not successfully
complete appropriate clinical trials, we will not be able to commercialize our
products.&#160; The results of initial
clinical trials do not necessarily predict the results of more extensive
clinical trials.&#160; Furthermore, we cannot
be certain that clinical trials of our products will demonstrate that they are
safe and effective to the extent necessary to obtain regulatory approvals.&#160; Many companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in advanced clinical
trials, even after achieving promising results in earlier trials.</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;letter-spacing:-.1pt;">We have limited manufacturing experience and may not be
able to manufacture our products in commercially sustainable quantities. We
will depend on key suppliers and contract manufacturers, and their failure to
supply us may delay or prevent commercialization of our products.</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;">We have built our own
manufacturing capabilities to produce key components of our products.&#160; We have manufactured only limited quantities
of our first two products, and limited clinical supplies of other products.&#160; We currently plan to produce all of our
aerosol generators for our products, partnered or not.&#160; We plan to use contract manufacturers to
produce certain other key components and subassemblies of our products.&#160; We may assemble some or all of our products
ourselves, or we may use contract manufacturers for the final assembly of some
or all of our products.&#160; We do not have
long-term supply contracts with most of our key suppliers or contract
manufacturers.&#160; In addition, most of
them are currently our sole source of supply.&#160;
We may not be able to enter into, or maintain, satisfactory contracts or
arrangements.&#160; In addition,
manufacturing of our products could be delayed by supply problems at our
suppliers or contract manufacturers.&#160; If
we need to qualify a new supplier or redesign the product, there could be
significant delay, and a regulatory filing could be required before we could
use the new supplier to provide material for our products.&#160; There can be no assurance that we, or our
contract manufacturers, can successfully manufacture in high volumes in a
timely manner, at an acceptable cost, or at all.&#160; We cannot assure that:</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">the design of our products will permit their
manufacture on a commercially sustainable scale;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">manufacturing and quality control problems will
not arise as we attempt to scale-up production; 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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">any scale-up of production can be achieved in a
timely manner or at a commercially reasonable cost.</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;">Failure to address these issues
adequately could delay or prevent clinical testing and commercialization of our
products.</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;letter-spacing:-.1pt;">During 2002, our Aerodose inhaled insulin product was
our most mature product in development for systemic drug delivery; however, we
have suspended development of that product.</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;">We have completed four small
clinical trials (two Phase 1 and two Phase 2)&nbsp;of our Aerodose insulin
inhaler product.&#160; Early studies
generally focus on the safety of a product rather than its effectiveness in
treating the disease.&#160; We cannot be sure
that the results of these and/or other additional clinical trials will prove
the safety and</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;">16</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;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;">effectiveness of our product. During 2002, we did
not sign an agreement with a marketing partner to fund the additional
development and clinical trials necessary to obtain regulatory approval and to
commercialize the product; therefore we have stopped our work on that product,
and do not expect to re-start the program until we have an acceptable partner
or sufficient funding to pay for additional clinical trials.&#160; We cannot assure that we will ever be able
to enter into a satisfactory agreement with a marketing partner, and we
currently do not have sufficient funds to conduct the necessary development and
clinical programs ourselves.</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;letter-spacing:-.1pt;">We may not be able to develop certain products if we do
not enter into additional collaborative relationships or gain access to
compounds from third parties.</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;">Our strategy depends partially on
our ability to enter into collaborative relationships with partners to conduct
and fund the clinical trials, manufacturing, marketing and sales activities
necessary to commercialize products.&#160; To
develop products to be marketed by us, we will need to purchase or license, and
possibly reformulate and package, drugs for use with our Aerodose inhalers and
Aeroneb nebulizers.&#160; We cannot assure
that we will be able to establish these kinds of arrangements on favorable
terms, or at all, or that our existing or future collaborative arrangements
will be successful.</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;letter-spacing:-.1pt;">If our products do not gain commercial acceptance, we
will not generate significant revenue.</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;">Our success in commercializing
our products depends on many factors, including acceptance by healthcare
professionals and patients.&#160; Their
acceptance of our products will depend largely on our ability to demonstrate
that our products can compete with alternative delivery systems with respect
to:</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">safety;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">efficacy;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">the benefits associated with pulmonary delivery;</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">ease of use; and</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 1.0in;text-indent:-.5in;"><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;&#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><font style="letter-spacing:-.1pt;">price.</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>

<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 cannot be sure that our
products will compete effectively, or that we, or our partners, will be able to
successfully market any products in a timely manner.</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;letter-spacing:-.1pt;">If we are unable to develop a successful sales and
marketing effort, we will not be able to sustainably commercialize our
products.</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;">We currently have a very limited
sales and marketing staff, and many of our competitors have substantial sales
and marketing infrastructure.&#160; We rely
on third party distributors to sell our products.&#160; Our success in commercializing our respiratory products in the United
States will depend on our ability to develop and execute a successful sales and
marketing effort.&#160; There can be no
assurance that our first two products, the Aeroneb Portable Nebulizer System
and the Aeroneb Professional Nebulizer System, will be successful, and, in any
event, these products are not expected to generate revenues sufficient enough
to solely support the Company&#146;s operations in the foreseeable future.&#160; We will initially have financial losses
resulting from the marketing expenditures necessary to launch and grow the
products. Successful worldwide commercialization will depend upon finding
effective marketing partners for our products outside 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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">Our corporate partners may not commercialize our
products or may develop products that compete against our products.</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;">Our business model includes
collaborations with pharmaceutical and biotechnology companies.&#160; There can be no assurance that we will be
able to enter into arrangements that result in successful commercial products.
Even if we do enter into such arrangements, we will depend on corporate
partners to commercialize the products</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>

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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;">developed in collaboration with us.&#160; If any of our existing or future corporate
partners do not complete the development and commercialization of products to
which they have obtained rights from us, our business could be impaired. In the
drug delivery industry, it is common for corporate partners to conduct
feasibility studies with multiple partners.&#160;
There can be no assurance that our existing or future corporate partners
will continue to choose our technology over their own technology or that of our
competitors.&#160; Collaboration agreements
generally provide that the partner can terminate the agreement at any 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="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;letter-spacing:-.1pt;">If we are unable to attract and retain the highly
skilled personnel necessary for our business, we may not be able to develop our
products successfully.</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;">Because of the specialized nature
of our business, we depend upon qualified scientific, engineering, technical
and managerial personnel. In particular, our business and prospects depend in
large part upon the continued employment of Dr.&nbsp;Jane E. Shaw, our Chairman
and Chief Executive Officer.&#160; We do not
have an employment agreement with Dr.&nbsp;Shaw. Even with the recent downturn
in the global economy, there is intense competition for qualified personnel in
our business. In addition, our location in northern California makes recruiting
qualified personnel from outside the San Francisco Bay area more difficult due
to the very high cost of housing.&#160;
Therefore, we may not be able to attract and retain the qualified
personnel necessary to grow our business.&#160;
The loss of the services of existing personnel, as well as the failure
to recruit additional key scientific, technical, engineering and managerial
personnel in a timely manner, would harm our research and development programs
and our business.</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;letter-spacing:-.1pt;">Our ability to market and sell our products depends
upon receiving regulatory approvals, which we may not obtain.</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;">Our products are subject to
extensive regulation by the FDA, state and local government agencies, and by
international regulatory authorities.&#160;
These agencies regulate the development, testing, manufacture, labeling,
storage, approval, advertising, promotion, sale and distribution of medical
devices, drugs and biologics.&#160; If we, or
our partners, fail to obtain regulatory clearances or approval to develop or to
market our products, our business will be harmed and we, or our collaborative
partners, will not be able to market and sell our products.&#160; Even if granted, regulatory approvals may
include significant limitations on the uses for which products may be tested or
marketed.&#160; Once obtained, required
approvals may be withdrawn, or we may not remain in compliance with regulatory
requirements.&#160; The process for obtaining
necessary regulatory approvals for drugs and biologics is generally lengthy,
expensive and uncertain.&#160; Obtaining and
maintaining foreign regulatory approvals in multiple countries is expensive,
and we cannot be certain that we will receive approvals in any foreign country
in which we or our partners plan to market our products.&#160; If we or our partners fail to obtain
regulatory approval in the United States or in any foreign country in which we
plan to market our products, our revenues will be lower. A longer than expected
regulatory process, additional or significant changes in regulatory
requirements, or more expensive clinical studies than we anticipate, may cause
us to stop development of particular products, which we did with our albuterol
and ipratropium inhaler products.</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;letter-spacing:-.1pt;">If our manufacturing facilities do not meet federal,
state and international manufacturing standards, we may not be able to sell our
products in the United States or internationally.</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;">Our manufacturing facilities are
subject to periodic inspection by regulatory authorities and our operations
will continue to be regulated by the FDA for compliance with QSR (Quality
System Regulation).&#160; We moved into a new
facility in Mountain View, California during the second quarter of 2002.&#160; Prior to transferring product manufacturing
to this facility, we underwent a successful inspection by the FDA, which was
completed in May&nbsp;2002. We received our registration in August&nbsp;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;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">We also are required to comply
with ISO 9001/EN46001 in order to produce products for sale in the European
Union. ISO, the International Organization for Standardization, is a worldwide
federation of national standards bodies. ISO has developed the ISO 9000 family
of standards to assist companies in implementing and operating quality
management systems. ISO 9001/EN46001 provides the requirements for a quality
management system that a company must meet in order for our products to satisfy
applicable regulatory requirements.&#160; We</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;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;">received ISO 9001/EN46001 certification for our
Sunnyvale facility in July&nbsp;2000.&#160;
In August&nbsp;2002, we passed the surveillance audit, updating our ISO
9001/EN46001 certification for our Mountain View facility.</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;">If we fail to maintain our
compliance with QSR requirements, ISO 9001/EN46001 or other international
regulatory requirements, we may be required to cease all or part of our
operations until we comply with the regulations.&#160; We cannot be certain that our facilities will be found to comply
on an ongoing basis with QSR, ISO 9001/EN46001 or other international
regulatory requirements.</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;">The State of California requires
that we maintain a license to manufacture medical devices, and our facilities
and manufacturing processes may be inspected from time to time to monitor
compliance with the applicable regulations.&#160;
We are subject to licensing requirements and periodic inspections by the
California Department of Health Services, the County of Santa Clara and various
environmental agencies.&#160; If we are
unable to maintain a license following any future inspections, we will be
unable to manufacture or ship any products.</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;letter-spacing:-.1pt;">Our products may not be commercially viable if
government health administration authorities, private health insurers or other
third-party payors do not provide adequate reimbursement for the cost of our
products.</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;">In both domestic and foreign
markets, sales of our potential products will depend, in part, on the
availability of reimbursement from third-party payors such as government health
administration authorities, private health insurers and other
organizations.&#160; Third-party payors often
challenge the price and cost-effectiveness of medical products and
services.&#160; There is significant
uncertainty about the reimbursement status of newly approved healthcare
products.&#160; We cannot assure that any of
our products will be reimbursed by third-party payors. In addition, we cannot
assure that our products will be considered cost-effective or that adequate
third-party reimbursement will be available to enable us to maintain price
levels sufficient to realize a profit.&#160;
Legislation and regulations affecting the pricing of health care
products may change before our products are approved for marketing, and any
such changes could further limit reimbursement.&#160; One of our first commercial products, the Aeroneb Pro, is not
currently reimbursed by insurance or government entities, which may limit its
market penetration.</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;letter-spacing:-.1pt;">Our competitors may be more successful in developing
competing technologies and gaining market acceptance.</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;">We compete with pharmaceutical,
biotechnology and drug delivery companies, research organizations, individual
scientists and nonprofit organizations engaged in the development and commercialization
of drug delivery systems and new drug research and testing.&#160; We are aware of a number of companies
currently seeking to develop pulmonary delivery devices and other non-invasive
alternatives to injectable drug delivery, including oral delivery systems,
intranasal delivery systems, transdermal systems and infusion systems.&#160; Many of these companies and entities have
greater research and development, manufacturing, marketing, financial and
managerial resources and experience than we do.&#160; Accordingly, our competitors may succeed in developing competing
technologies and products, obtaining regulatory approval for products or
gaining market acceptance more rapidly than we can.&#160; If competitors bring effective products to market before we do,
there is a risk that we may not be able to gain significant market share
because our competitors may have firmly established their products in the
market. It is also possible that a competitor may develop a technology or
product that renders our technology or products obsolete.</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;letter-spacing:-.1pt;">We may be unable to effectively protect our
intellectual property, which could enable third parties to use our technology
and impair our ability to compete effectively.</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;">Our ability to compete
effectively depends in part on developing and maintaining the proprietary
aspects of our aerosolization technology.&#160;
We cannot be sure that the patents we have obtained, or any patents we
may obtain as a result of our pending United States or international patent
applications and, in particular, our vibratory aerosolization technology, which
is technology that aerosolizes liquids by vibrating a metal plate that contains
holes, will provide any competitive advantages for our products.&#160; We also cannot assure that those patents
will not be successfully challenged, invalidated or circumvented in the future.
In addition, we cannot assure that</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;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;">competitors, many of which have substantial
resources and have made substantial investments in competing technologies, have
not already applied for, or obtained, or will not seek to apply for and obtain,
patents that will prevent, limit or interfere with our ability to make, use and
sell our products either in the United States or in international markets.&#160; Patent applications are maintained in
secrecy for a period after filing.&#160; We
may not be aware of all of the patents and patent applications potentially
adverse to our interests.</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;">A number of pharmaceutical,
medical device and other companies, as well as universities and research
institutions, have filed patent applications or have issued patents relating to
methods and apparatuses for aerosolization and pulmonary drug delivery.&#160; We have become aware of, and may become
aware of in the future, patent applications and issued patents that relate to
certain aspects of the technology employed in our products, including certain
aspects of vibratory aerosolization technology.&#160; Our pending patent applications, and those we may file in the
future, may not result in patents being issued.&#160; We do not believe that our products currently infringe any valid
and enforceable claims of the issued patents that we have reviewed.&#160; However, if third-party patents or patent
applications contain claims infringed by our products and such claims are
ultimately determined to be valid, we may not be able to obtain licenses to
those patents at a reasonable cost, if at all, or be able to develop or obtain
alternative technology.&#160; Our inability
to do either would have a material adverse effect on our business, financial
condition, results of operations and prospects.&#160; We cannot assure that we will not have to defend ourselves in
court against allegations of infringement of third-party patents, or that such
defense would be successful.</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;">In addition to patents, we rely
on trade secrets and proprietary know-how, which we seek to protect, in part,
through confidentiality and proprietary information agreements.&#160; We require our employees and key consultants
to execute confidentiality agreements upon the commencement of employment or a
consulting relationship with us.&#160; We
cannot assure that employees or consultants will not breach these agreements,
that we would have adequate remedies for any breach or that our trade secrets
will not otherwise become known to or be independently developed by
competitors.</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;letter-spacing:-.1pt;">We may become subject to patent litigation, which would
be costly to defend and could invalidate our patents.</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;">The pharmaceutical and medical
device industries have been characterized by extensive litigation regarding
patents and other intellectual property rights, and companies in these
industries have used intellectual property litigation to gain a competitive
advantage.&#160; We cannot assure that we
will not become subject to, whether within or outside of the United
States,&#160; patent infringement claims or
litigation or interference proceedings declared by the United States Patent and
Trademark Office, (the &#147;USPTO&#148;), to determine the priority of inventions. In
1999, we settled a patent interference with United States Patent
No.&nbsp;5,261,601, assigned to Bespak.&#160;
The settlement provided for a cross-license between us and Bespak, as a
result of which Bespak has a license to certain of our technology, including
the right to sublicense. The scope of the granted license was limited to
products employing technology which was disclosed by Bespak in United States
Patent No.&nbsp;5,261,601.&#160;
Additionally, in April 2003, we received notice that a German patent
infringement suit had been filed in the regional court in Munich, Germany.&#160; While the suit has not been formally
initiated by the German regional court, the Company believes that it is without
merit and intends to vigorously defend against all allegations in the suit.</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;">Our patent position involves
complex legal and factual questions and is generally uncertain. Legal standards
relating to the validity and scope of patent claims in the biotechnology and
pharmaceutical field are evolving.&#160;
Defending and prosecuting intellectual property suits, USPTO
interference proceedings and related legal and administrative proceedings are
costly and time-consuming.&#160; Further
litigation may be necessary to enforce our patents, to protect our trade
secrets or know-how or to determine the enforceability, scope and validity of
the proprietary rights of others.&#160; Any
litigation or interference proceedings will be costly and will result in
significant diversion of effort by technical and management personnel.&#160; An adverse determination in any of the
litigation or interference proceedings to which we may become a party could
subject us to significant liabilities to third parties, require us to license
disputed rights from third parties or require us to cease using such
technology, which would have a material adverse effect on our business,
financial condition, results of operations and future growth prospects.&#160; Patent and intellectual property disputes in
the medical device area have often been settled through</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>

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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;">licensing or similar arrangements, and could include
ongoing royalties.&#160; We cannot assure
that we can obtain the necessary licenses on satisfactory terms, if at all.</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;letter-spacing:-.1pt;">If we were successfully sued for product liability, we
could face substantial liabilities that may exceed our 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;">Researching, developing and
commercializing medical devices and pharmaceutical products entail significant
product liability risks.&#160; The use of our
products in clinical trials, and the commercial sale of our products may expose
us to liability claims.&#160; These claims
might be made directly by consumers or by our partner companies or others
selling such products.&#160; Companies often
address the exposure of this risk by obtaining product liability insurance.&#160; Although we currently have product liability
insurance, we cannot assure that we can maintain such insurance or obtain
additional insurance on acceptable terms in amounts sufficient to protect our
business or at all.&#160; A successful claim
brought against us in excess of our insurance coverage would have a material
adverse effect on our business.</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;letter-spacing:-.1pt;">We use hazardous and toxic materials and must comply
with environmental laws and regulations, which can be expensive and restrict
how we do 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="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:-.1pt;">Our operations involve the use of
hazardous and toxic materials and generate hazardous, toxic and other
wastes.&#160; In particular, we use a special
metal alloy to build our aerosol generators a component of which is regulated
as a hazardous material.&#160; The risk of
accidental contamination or injury from hazardous and toxic materials cannot be
completely eliminated. In the event of such an accident, we could be held
liable for any damages that result, and this liability could exceed our
resources.&#160; Our operations could be shut
down by government officials if we were not in compliance with environmental
laws.</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;letter-spacing:-.1pt;">We have implemented anti-takeover measures that could
discourage or prevent a takeover, even if an acquisition would be beneficial to
stockholders.</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;">Provisions of our Amended and
Restated Certificate of Incorporation and bylaws, as well as provisions of
Delaware law and of our stockholder rights plan (adopted in 2001 and amended in
early 2003), could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders.&#160; These provisions also may discourage bids at a premium over the
market price of our common stock and may adversely affect both the market price
of our common stock and the voting rights of our stockholders.</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;letter-spacing:-.1pt;">Concentration of ownership among our existing executive
officers, directors and entities affiliated with our directors may prevent new
investors from influencing significant corporate decisions.</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;">As of March 31, 2003, our
executive officers, directors and entities affiliated with our directors
beneficially own, in the aggregate, approximately 28% of the outstanding common
stock.&#160; As a result, these stockholders
may be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions.&#160;
This could have the effect of delaying or preventing a change of control
of the Company, and will make some transactions difficult or impossible without
the support of these stockholders.</font></p>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><a name="Item3_QuantitativeAndQualitativeDi"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 3.&#160; Quantitative and Qualitative Disclosures
About Market Risk</font></b></a></h1>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Interest
rate risk</font></b></h1>

<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;">Interest rate risk represents the risk of loss that
may impact our financial position, operating results or cash flows due to
changes in interest rates.&#160; This
exposure is directly related to our normal operating activities. We invest only
in United States government and related agency securities and money
markets.&#160; These investments are
generally of a short-term nature.&#160; As a
result, other than changes in interest income due to changes in interest rates,
we do not believe that near-term changes in interest rates will have a material
effect on our future results of operations.</font></p>

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

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exchange
rate risk</font></b></h1>

<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;">Due to our Irish operations, we have market risk
exposure to adverse changes in foreign currency exchange rates.&#160; The revenues and expenses of our subsidiary,
Aerogen (Ireland) Limited, are denominated in Eurodollars.&#160; At the end of each period, the revenues and
expenses of our subsidiary are translated into United States dollars using the
average currency exchange rate in effect for that period, and assets and
liabilities are translated into United States dollars using the exchange rate
in effect at the end of that period.&#160;
Fluctuations in exchange rates therefore impact our financial condition
and results of operations, as reported in United States dollars.&#160; Additionally, we occasionally have market
risk exposure to adverse changes in foreign currency exchange rates associated
with foreign vendors who require payment in their functional currencies.&#160; To date, we have not experienced any
significant negative impact as a result of fluctuations in foreign currency
markets.&#160; As a policy, we do not engage
in speculative or leveraged transactions, nor do we hold financial instruments
for trading or hedging purposes.</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 expand our overseas operations, our operating
results may, become subject to more significant fluctuations based on changes
in exchange rates of foreign currencies in relation to the United States
dollar.&#160; We will periodically analyze
our exposure to currency fluctuations and we may adjust our policies to allow
for financial hedging techniques to minimize exchange rate risk.</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;"><a name="Item4_ControlsAndProcedures"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item
4.&#160;&#160; Controls and Procedures</font></b></a></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;">Within 90 days prior to the
filing date of this report, we carried out an evaluation, under the supervision
and the participation of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures.&#160;&#160; Based upon
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective and timely
in alerting them to material information required to be included in our
periodic Securities and Exchange Commission (&#147;SEC&#148;) reporting.&#160; It should be noted that the design of any
system of controls is based, in part, upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.</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 addition, we reviewed our
internal controls, and there have been no significant changes in our internal
controls or in other factors that could significantly affect those controls
subsequent to the date of their last evaluation.</font></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-size:10.0pt;margin:0in 0in .0001pt;page-break-after:auto;"><a name="PartIi_OtherInformation"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Part II.</font></b></a><font size="1" style="font-size:3.0pt;font-weight:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Other Information</h1>

<h1 style="margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></h1>

<h1 style="font-size:10.0pt;margin:0in 0in .0001pt;page-break-after:auto;"><a name="Item1_LegalProceedings"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 1.</font></b></a><font size="1" style="font-size:3.0pt;font-weight:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Legal Proceedings</h1>

<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;">I<font style="letter-spacing:-.1pt;">n April 2003, we
received notice that a German patent infringement suit had been filed in the
regional court in Munich, Germany.&#160;
While the suit has not been formally initiated by the German regional
court, the Company believes that it is without merit and intends to vigorously
defend against all allegations in the suit</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="font-size:10.0pt;margin:0in 0in .0001pt;"><a name="Item2_ChangesInSecuritiesAndUseOf"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 2.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Changes in Securities and Use of Proceeds.</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 November 2000, the Securities Exchange Commission
declared our Registration Statement on Form S-1 effective.&#160; We completed our initial public offering,
including the exercise of the underwriters&#146; over-allotment option of a total of
4,140,000 shares, at an initial public offering price of $12.00 per share, for
aggregate cash proceeds of approximately $49.7 million.&#160; The managing underwriters of the offering
were Chase Securities Inc., CIBC World Markets Corporation and SG Cowen
Securities Corporation.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:45.35pt;"><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 connection with the offering, we paid a total of approximately
$3.5 million in underwriting discounts and commissions and $1.7 million in
other offering costs and expenses. After deducting 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>

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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">underwriting discounts and commissions and the offering costs and
expenses, our net proceeds from the offering, including the over-allotment
option, were approximately $44.5 million.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:45.0pt;"><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 proceeds from the offering were used for research
and development, clinical activities, marketing and manufacturing expenditures
for existing and future products, capital expenditures and general corporate
purposes beginning in January of 2001.&#160;
As of March 31, 2003, the cumulative cash used in operations since the
IPO has exceeded the proceeds from the IPO.</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;"><a name="Item3_DefaultsUponSeniorSecurities_"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 3.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Defaults Upon Senior Securities.</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 .5in;text-indent:.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None.</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;"><a name="Item4_SubmissionOfMattersToAVote"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 4.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">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 .5in;text-indent:.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None.</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;"><a name="Item5_OtherInformation_"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 5.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Other Information.</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 .5in;text-indent:.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None.</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;">23</font></p>


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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;"><a name="Item6_ExhibitsAndReportsOnForm8k"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 6.</font></b></a><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Exhibits and Reports on Form 8-K</font></b></p>

<p style="margin:0in 0in .0001pt 2.0in;text-indent:-2.0in;"><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;">(a)</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; </font>Exhibits.</p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-45.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="80%" style="border-collapse:collapse;margin-left:1.0in;width:80.0%;">
 <tr>
  <td width="14%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:14.16%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Exhibit Number</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">
  <p align="center" style="font-size:1.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>
  </td>
  <td width="83%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:83.14%;">
  <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;">Description
  of Document</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="14%" valign="top" style="border:none;padding:0in 0in 0in 0in;width:14.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.2(1)</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="83%" valign="top" style="border:none;padding:0in 0in 0in 0in;width:83.14%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amended and Restated
  Certificate of Incorporation of Aerogen, Inc.</font></p>
  </td>
 </tr>
 <tr>
  <td width="14%" valign="top" style="padding:0in 0in 0in 0in;width:14.16%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="83%" valign="top" style="padding:0in 0in 0in 0in;width:83.14%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="14%" valign="top" style="padding:0in 0in 0in 0in;width:14.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.4(2)</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="83%" valign="top" style="padding:0in 0in 0in 0in;width:83.14%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amended and Restated
  Bylaws of Aerogen, Inc.</font></p>
  </td>
 </tr>
 <tr>
  <td width="14%" valign="top" style="padding:0in 0in 0in 0in;width:14.16%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="83%" valign="top" style="padding:0in 0in 0in 0in;width:83.14%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="14%" valign="top" style="padding:0in 0in 0in 0in;width:14.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">99.1</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="83%" valign="top" style="padding:0in 0in 0in 0in;width:83.14%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Certification of Chief
  Executive Officer and Chief Financial Officer Pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt 1.0in;"><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="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><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;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Incorporated
by reference from the exhibit with corresponding number from the Company&#146;s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed August
13, 2002.</p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><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;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Incorporated
by reference to the Company&#146;s Registration Statement on Form S-1 (No.
333-44470), filed August 25, 2000.</p>

<p style="margin:0in 0in .0001pt 1.5in;"><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;">(b)</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>Reports
on Form 8-K.</p>

<p style="margin:0in 0in .0001pt 45.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">On February 25, 2003, we
filed a report on Form&nbsp;8-K concerning an amendment to the Rights Agreement
dated as of June&nbsp;5, 2001 by and between the registrant and Mellon Investor
Services, LLC, as Rights Agent.&#160;
Additionally, on April 28, 2003 , we filed a report on Form 8-K
concerning our press release announcing our financial results for the quarter ended
March 31, 2003.</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;">24</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='24',FILE='C:\C2\ahanson\1124_3\t_1556235\j1124_10q.htm',USER='ahanson',CD='May 15 13:56 2003' -->
<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 align="center" style="margin:0in 0in .0001pt;text-align:center;"><a name="Signatures"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Signatures</font></u></b></a></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;">Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended (the &#147;Exchange
Act&#148;), the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.</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="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="50%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:50.92%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Aerogen, Inc.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="50%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:50.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Registrant)</font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="4" 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="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated:&#160; May 13, 2003</font></p>
  </td>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="38%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:38.5%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; JANE E. SHAW</font></p>
  </td>
  <td width="8%" valign="top" style="padding:0in 0in 0in 0in;width:8.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.02%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="38%" valign="top" style="padding:0in 0in 0in 0in;width:38.5%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jane E. Shaw,
  Ph.D.</font></p>
  </td>
  <td width="8%" valign="top" style="padding:0in 0in 0in 0in;width:8.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.02%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="38%" valign="top" style="padding:0in 0in 0in 0in;width:38.5%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Chairman and Chief Executive
  Officer</font></i></p>
  </td>
  <td width="8%" valign="top" style="padding:0in 0in 0in 0in;width:8.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="50%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:50.92%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="50%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:50.92%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated:&#160; May 13, 2003</font></p>
  </td>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="38%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:38.5%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; ROBERT S. BREUIL</font></p>
  </td>
  <td width="8%" valign="top" style="padding:0in 0in 0in 0in;width:8.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.02%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="38%" valign="top" style="padding:0in 0in 0in 0in;width:38.5%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Robert S. Breuil</font></p>
  </td>
  <td width="8%" valign="top" style="padding:0in 0in 0in 0in;width:8.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.02%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="38%" valign="top" style="padding:0in 0in 0in 0in;width:38.5%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Chief Financial Officer</font></i></p>
  </td>
  <td width="8%" valign="top" style="padding:0in 0in 0in 0in;width:8.4%;">
  <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;">25</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='25',FILE='C:\C2\ahanson\1124_3\t_1556235\j1124_10q.htm',USER='ahanson',CD='May 15 13:56 2003' -->
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</font>

<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;"><a name="Certifications"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CERTIFICATIONS</font></b></a></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">I, Jane E. Shaw, certify
that:</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">1.</font></b><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>I
have reviewed this quarterly report on Form 10-Q of Aerogen, Inc.;</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2.</font></b><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>Based
on my knowledge, this quarterly report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this quarterly
report;</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">3.</font></b><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>Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">4.</font></b><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
registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:</p>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(a)</font></b><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; </font>designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared;</p>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(b)</font></b><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; </font>evaluated
the effectiveness of the registrant&#146;s disclosure controls and procedures as of
a date within 90 days prior to the filing date of this quarterly report (the
&#147;Evaluation Date&#148;); and</p>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(c)</font></b><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; </font>presented
in this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;</p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">5.</font></b><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
registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation, to the registrant&#146;s auditors and the audit committee of
registrant&#146;s board of directors (or persons performing the equivalent
function):</p>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(a)</font></b><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; </font>all
significant deficiencies in the design or operation of internal controls which
could adversely affect the registrant&#146;s ability to record, process, summarize
and report financial data and have identified for the registrant&#146;s auditors any
material weaknesses in internal controls; and</p>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(b)</font></b><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; </font>any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant&#146;s internal controls; and</p>

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

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">6.</font></b><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
registrant&#146;s other certifying officer and I have indicated in this quarterly
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.</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="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated:&#160; May 13, 2003</font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; JANE E. SHAW</font></p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="border:none;padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jane E. Shaw,
  Ph.D.</font></p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chairman and Chief Executive Officer</font></p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Principal
  Executive 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;">26</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;">I, Robert S. Breuil,
certify that:</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">1.</font></b><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>I have reviewed
this quarterly report on Form 10-Q of Aerogen, Inc.;</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2.</font></b><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>Based
on my knowledge, this quarterly report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this quarterly
report;</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">3.</font></b><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>Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;</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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">4.</font></b><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
registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:</p>

<p style="margin:0in 0in .0001pt 1.5in;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 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(a)</font></b><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; </font>designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared;</p>

<p style="margin:0in 0in .0001pt 1.5in;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 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(b)</font></b><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; </font>evaluated
the effectiveness of the registrant&#146;s disclosure controls and procedures as of
a date within 90 days prior to the filing date of this quarterly report (the
&#147;Evaluation Date&#148;); and</p>

<p style="margin:0in 0in .0001pt 1.5in;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 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(c)</font></b><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; </font>presented
in this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;</p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">5.</font></b><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
registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation, to the registrant&#146;s auditors and the audit committee of
registrant&#146;s board of directors (or persons performing the equivalent
function):</p>

<p style="margin:0in 0in .0001pt 1.5in;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 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(a)</font></b><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; </font>all
significant deficiencies in the design or operation of internal controls which
could adversely affect the registrant&#146;s ability to record, process, summarize
and report financial data and have identified for the registrant&#146;s auditors any
material weaknesses in internal controls; and</p>

<p style="margin:0in 0in .0001pt 1.5in;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 1.5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(b)</font></b><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; </font>any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant&#146;s internal controls; and</p>

<p style="margin:0in 0in .0001pt 1.5in;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;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">6.</font></b><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
registrant&#146;s other certifying officer and I have indicated in this quarterly
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.</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="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated:&#160; May 13, 2003</font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; ROBERT S. BREUIL</font></p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="border:none;padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Robert S. Breuil</font></p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.28%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.06%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.72%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="48%" valign="top" style="padding:0in 0in 0in 0in;width:48.94%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Principal
  Financial 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;">27</font></p>


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

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<DESCRIPTION>EX-99.1
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<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
99.1</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;">CERTIFICATION</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>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. &#167;1350, as adopted), Jane Shaw, the
Chief Executive Officer of Aerogen, Inc. (the &#147;Company&#148;), and Robert Breuil,
the Chief Financial Officer of the Company, each hereby certifies that, to the
best of his or her knowledge:</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">1</font></b>.<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 Company&#146;s
Quarterly Report on Form 10-Q for the period ended March 31, 2002, to which
this Certification is attached as Exhibit&nbsp;99.1 (the &#147;Periodic Report&#148;),
fully complies with the requirements of Section&nbsp;13(a) or
Section&nbsp;15(d) of the Securities Exchange Act of 1934, as amended (the
&#147;Exchange Act&#148;); and</p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2</font></b>.<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 information
contained in the Periodic Report fairly presents, in all material respects, the
financial condition of the Company at the end of the period covered by the
Periodic Report and results of operations of the Company for the period covered
by the Periodic Report.</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 Certification
accompanies the Periodic Report pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and shall not be deemed &#147;filed&#148; by the Company for purposes of
Section 18 of the Exchange Act.</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="44%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:44.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman"><font style="font-size:10.0pt;">Dated:&#160; </font>May 13, 2003</font></p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.7%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="44%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:44.3%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.7%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="44%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:44.3%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.7%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="38%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:38.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&nbsp;&nbsp;JANE
  SHAW&#160; </font></p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.3%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="35%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:35.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&nbsp;&nbsp;ROBERT
  BREUIL&#160; </font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in .7pt 0in .7pt;width:20.44%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="44%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:44.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jane Shaw </font></p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.7%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Robert
  Breuil </font></p>
  </td>
 </tr>
 <tr>
  <td width="44%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:44.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief
  Executive Officer</font></p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.7%;">
  <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 height="0">
  <td width="274" style="border:none;"></td>
  <td width="45" style="border:none;"></td>
  <td width="255" style="border:none;"></td>
  <td width="148" 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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