PROSPECTUS
CNS, INC.
100,000 SHARES OF
COMMON STOCK
This Prospectus relates to (i) the offering by the Company of up to
100,000 shares of Common Stock, $.01 par value per share, of CNS, Inc. (the
"Company") issuable by the Company upon the exercise of an outstanding warrant
to purchase 100,000 shares of Company Common Stock (the "Warrant"), and (ii) the
offering of up to 100,000 shares of Common Stock which may be offered from time
to time by the shareholders named herein (the "Selling Shareholders") upon the
exercise of the Warrant (the "Warrant Shares"). The Company will receive
proceeds upon the exercise of the Warrant, but will not receive any of the
proceeds from the sale of the Warrant Shares by the Selling Shareholders. See
"Use of Proceeds."
The Company will bear all expenses of the offering hereunder other than
underwriting discounts and commissions incurred in connection with the sale of
the Warrant Shares by the Selling Shareholders. The Company's Common Stock is
traded on the Nasdaq National Market under the symbol "CNXS". The closing price
of the Company's Common Stock on June 13, 1995 was $35.375.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A
HIGH DEGREE OF RISK. SEE "RISK FACTORS."
The Warrant was originally issued by the Company on April 5, 1994 to
John G. Kinnard & Company Incorporated ("Kinnard"). The Warrant entitles the
holder thereof to purchase 100,000 shares of Common Stock for a purchase price
of $7.50 per share until April 5, 1999. The Selling Shareholders have advised
the Company that they intend to sell the Warrant Shares from time to time by the
Selling Shareholders in transactions on the Nasdaq National Market at prices
prevailing at the time of the sale or otherwise as set forth below. See "Plan of
Distribution".
The Selling Shareholders have advised the Company that, as of the date
hereof, they have made no arrangement with any brokerage firm for the sale of
the Warrant Shares. The Selling Shareholders may be deemed to be "underwriters"
within the meaning of the Act, in which case any commissions received by a
broker or dealer may be deemed to be underwriting commissions or discounts under
the Act. See "Plan of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
______________________________________
THE DATE OF THIS PROSPECTUS IS JUNE 19, 1995
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information can be inspected and copied at the public
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C., and the Commission's regional offices located at 7 World Trade
Center, 14th Floor, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a registration statement
under the Securities Act of 1933 with respect to the shares offered hereby. This
Prospectus does not contain all information set forth in such registration
statement. For further information with respect to the Company and the shares
offered hereby, reference is made to such registration statement, including the
exhibits and financial schedules filed as part thereof. Such information may be
inspected in the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies thereof may be obtained from the Commission
at prescribed prices.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated by reference in this Prospectus: (i) the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994; (ii) the
Proxy Statement of the Company filed for the Annual Meeting of Shareholders held
on May 11, 1995; (iii) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995; (iv) the Company's Current Report on Form 8-K
dated June 5, 1995; and (v) the description of the Company's Common Stock
contained in the Company's Form 8-A/A Registration Statement dated May 31, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15
of the 1934 Act after the date of this Prospectus and prior to the termination
of the offering of securities contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded hereby to the extent that a
statement contained herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents which are incorporated by
reference into this Prospectus, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents.)
Requests for such copies should be directed to Mr. Ronald D. Cox, Vice President
of Finance, CNS, Inc., 1250 Park Road, Chanhassen, Minnesota 55317, telephone
number (612) 474-7600.
THE COMPANY
The Company manufactures and markets the Breathe Right(R) nasal strip,
which is a nonprescription disposable device that improves nasal breathing by
reducing nasal airflow resistance. Sales of the Breathe Right nasal strip were
$7.5 million in the first quarter of 1995 compared to $2.8 million in all of
1994. At March 31, 1995, the Company had unfilled orders for the Breathe Right
nasal strip in excess of first quarter Breathe Right nasal strip sales.
The Breathe Right nasal strip looks like a butterfly bandage and when
folded down onto the sides of the nose above the nasal crease it lifts the side
walls of the nose outward to open the nasal passages. The Breathe Right nasal
strip improves nasal breathing immediately upon application and does not include
any medication, thereby avoiding any medicinal side effects. The Breathe Right
nasal strip may be worn for up to 12 hours under normal conditions and is not
reusable.
Potential customers for the Breathe Right nasal strip include people who
suffer from nasal congestion or obstruction associated with increased airflow
resistance resulting from the following conditions: (i) allergies and sinus
disease; (ii) deviated nasal septum and other structural deficiencies; and (iii)
the common cold. The Company believes that the Breathe Right nasal strip, as
either an alternative or adjunct to decongestant drugs (including nasal sprays
and oral decongestants), can in many cases benefit those people by decreasing
nasal airflow resistance. The Company also believes that the Breathe Right nasal
strip may be effective in reducing snoring loudness and aiding in oxygen therapy
administered to patients suffering from certain chronic conditions.
The Breathe Right nasal strip is currently sold over the counter through
approximately 65,000 pharmacies, grocery stores and mass merchants in the United
States and Canada. The Breathe Right nasal strip is typically placed in the
cough-cold section next to nasal sprays or oral decongestants. The Breathe Right
nasal strip is priced competitively with these drugs on a per dose basis.
International distribution of the Breathe Right nasal strip is expected to begin
in late 1995. The Company is also developing the sporting goods market for the
Breathe Right nasal strip. In the future, the Company plans to (i) expand the
availability of the Breathe Right nasal strip in pharmacies, grocery stores and
mass merchants and develop additional distribution channels, (ii) increase
consumer awareness of the Breath Right nasal strip through advertising as well
as paid endorsement from celebrities, and (iii) expand the Breathe Right nasal
strip line and seek regulatory authorization to label the product for additional
therapeutic applications, such as relief of nasal congestion and nasal
obstruction due to specific conditions (e.g. allergies and deviated septa).
The Company is a Delaware corporation formed in 1987 as the successor to a
Minnesota corporation organized in 1982. The executive offices of the Company
are located at 1250 Park Road, Chanhassen, Minnesota 55317, and its telephone
number is (612) 474-7600.
RISK FACTORS
An investment in the Common Stock is speculative in nature and involves a
high degree of risk. In addition to other information in this Prospectus, the
following risk factors should be considered carefully by potential investors in
evaluating an investment in the Common Stock offered hereby.
SUSTAINABILITY OF CURRENT SALES LEVELS
The Company's Breathe Right nasal strip sales were $7.5 million in the
first quarter of 1995 compared to $2.8 million in all of 1994. The Company
believes that the significant increase in Breathe Right nasal strip sales
resulted in part from the extensive media coverage of the use of the product by
professional football players and the unsolicited endorsement of Rush Limbaugh
on his radio and television programs. The Company also believes that the Breathe
Right nasal strip sales to wholesalers and retailers in the first quarter of
1995 represented both an expansion and replenishment of their inventory.
Therefore, sales of the Breathe Right nasal strip during the first quarter of
1995 may not necessarily be indicative of future sales of the product. Future
sales of the Breathe Right nasal strip will depend on, among other factors,
consumer acceptance of the product, generation of repeat sales, penetration of
markets, the successful introduction of competitive products, development of
effective consumer advertising, product pricing and expansion of distribution
channels for the product. There can be no assurance that the Company will
maintain or increase its current level of sales of the product in future
periods.
UNCERTAINTY OF MARKET POTENTIAL AND PENETRATION
The Company has limited experience producing and marketing the Breathe
Right nasal strip, which is the Company's only product. The successful
introduction of any over-the-counter product is inherently uncertain. Although
the Company has experienced growth in sales of the Breathe Right nasal strip
during the past two fiscal quarters, there can be no assurance that these sales
increases represent long-term consumer acceptance of the product or that the
Company will be able to continue to achieve increased market share. The
Company's success will depend on its ability to penetrate several potential
markets for the Breathe Right nasal strip, including (i) people who suffer from
nasal congestion or obstruction resulting from allergies, the common cold and
deviated nasal septum or other nasal structural deficiencies, (ii) people who
participate in athletic activities, and (iii) people who snore. These markets
are very large and diverse and there can be no assurance that the Company will
receive regulatory approvals to market with labeling in any of these markets or
that the Company can achieve significant market penetration in any of these
markets. The failure of the Company to successfully enter one or more potential
markets could adversely affect the financial condition or results of operations
of the Company.
RELIANCE ON SINGLE PRODUCT
The Company's future revenue and profitability are dependent on the sale
of its Breathe Right nasal strip. A reduction in demand for the Breathe Right
nasal strip would have a material adverse effect on the Company's future growth
and financial condition. Although the Company has experienced initial success
with the sale of its Breathe Right nasal strip, there can be no assurance that
the Company will continue to maintain its current sales or be able to increase
its future sales of the product.
PATENTABILITY OF THE BREATHE RIGHT NASAL STRIPS
Four applications are currently pending with the United States Patent and
Trademark Office seeking patents for the Breathe Right nasal strip. The degree
to which the Company succeeds will depend, in part, on the Company obtaining
broad protection from any patent issuing from these or additional applications.
No patents on the Breathe Right nasal strip have yet been granted. The U.S.
Patent Office examiner has indicated that certain claims are allowable, but has
rejected claims of broader scope on the basis of prior art and undue breadth. An
appeal in the U.S. Patent Office of this decision of the examiner with respect
to one of the applications has been filed, but no assurance can be given that
significant patent protection for the Breathe Right nasal strip will be obtained
or will be enforceable, or that the Company will have sufficient resources to
pursue enforcement of any patents issued. If the pending applications result in
issuances of patents, there can be no assurance that they will effectively
foreclose the development of competitive products. In order to enforce any
patents issued on the Breathe Right nasal strip, the Company may have to engage
in litigation, which may result in substantial cost to the Company. Any adverse
outcome of such litigation could adversely affect the Company's business. See
"Recent Developments - Patents."
MANAGEMENT OF GROWTH
The Company has experienced rapid growth in its sales of and orders for
the Breathe Right nasal strip. This growth has resulted in increased demand for
manufacturing capacity to produce the Breathe Right nasal strip. During the
first quarter of 1995, the Company was unable to obtain sufficient quantities of
the Breathe Right nasal strip from its contract manufacturers to fill over 50
percent of the orders placed. Although the Company has obtained a significant
increase in the capacity of its contract manufacturers to produce the Breathe
Right nasal strip, no assurance can be given that the Company will not
experience delays in shipping the product in future periods. In addition, this
growth and expansion has strained the Company's physical, manufacturing and
personnel resources and resulted in an increase in the level of responsibility
of the Company's management personnel, certain of whom have not previously
managed operations of the size the Company anticipates. The growth of the
Company has also added demands on the Company's information and control systems.
The Company's ability to manage its growth effectively will require it to manage
its contract manufacturers' capacities and its distribution capacities
effectively, improve its operations, controls and manufacturing systems, and to
train, motivate and manage its employees successfully. If the Company is unable
to manage its growth effectively, the Company's results of operations could be
materially adversely affected.
REGULATION
As a manufacturer of medical devices, the Company is subject to the laws
and regulations administered by the FDA which include, but are not limited to,
regulations relating to good manufacturing practice, human investigations,
investigational device requirements, premarket requirements and labeling. While
the Company has obtained FDA authorization to market the Breathe Right nasal
strip, it is only authorized to market the Breathe Right nasal strip as a device
that diminishes nasal airway resistance, and there is no assurance that the
Company will obtain FDA clearance for promotion and advertising of the Breathe
Right nasal strip for specific uses, such as symptomatic relief of nasal
congestion from colds or allergies, for diminishment of snoring volume, to
increase endurance during athletic activities or for new products it may
develop. The failure to obtain this FDA clearance may adversely effect the
Company's ability to sell the Breathe Right nasal strip to certain markets.
Furthermore, the passage of future legislation with regard to manufacturing and
marketing of medical devices is possible. The effect of such legislation may be
to increase the cost and time necessary to begin marketing new products, and may
adversely affect the Company in other respects not presently foreseeable. Even
if new legislation is not forthcoming, the FDA may nevertheless seek to exercise
greater control over medical devices.
COMPETITION
The over-the-counter market for decongestant products and other cold,
allergy, and sinus relief products is highly competitive. Manufacturers of
products that compete with the Breathe Right nasal strip currently include (i)
manufacturers of nasal sprays and pill, capsule or tabular decongestants, many
of which have greater resources than the Company, (ii) a small number of
manufacturers who have developed or are rumored to be developing imitations of
the Breathe Right nasal strip and (iii) a small number of manufacturers of
internal nasal dilator products. While the Company believes it offers a unique
product, many of its competitors have more extensive marketing capabilities and
substantially greater financial resources than the Company. While the Company
believes no competitor has FDA approval to market competing external nasal
dilators, additional companies may develop competitive products and file
applications to obtain FDA approval to market their products or market
competitive products without FDA approval. The Company has filed suit to enjoin
the sale of one external nasal dilator device on the basis of unfair competition
and trade practices.
DEPENDENCE ON SINGLE SOURCE SUPPLIER
A primary component of the Breathe Right nasal strip is currently
available from only a single supplier. Disruption or termination of this vendor
relationship could have a material adverse effect on the Company's operations.
Although the Company has a multi-year supply agreement with this supplier and
the Company believes that this relationship will not be disrupted or terminated,
the inability to obtain sufficient quantities of this component or the need to
develop alternative sources, if and as required in the future, could adversely
affect the Company's operations until new sources of this component become
available.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock following this offering may be highly
volatile. The market price of the Common Stock has fluctuated significantly
since the fourth quarter of 1994 in response to announcements regarding the
Breathe Right nasal strip. Factors such as product announcements, variations in
the Company's revenues, earnings and cash flow, and announcements of competitive
products could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock markets have experienced price and volume
fluctuations that have particularly affected medical companies, resulting in
changes in the market prices of the stocks of many companies which may not have
been directly related to the operating performance of those companies. Such
broad market fluctuations may adversely affect the market price of the Common
Stock following this offering.
POTENTIAL PRODUCT LIABILITY
Although there are currently no product liability claims against the
Company, product liability claims brought against the Company relating to its
Breathe Right nasal strip in the future could have a material adverse effect
upon its financial condition. The Company maintains product liability insurance
in amounts which it believes are sufficient, but there is no assurance that the
current coverage is adequate to cover the Company's product liability risks, nor
can there be any assurance that it will be able to maintain or obtain substitute
insurance on commercially acceptable terms upon the expiration of its current
coverage. Conditions in the liability insurance industry may make it impossible
or extremely expensive for the Company to maintain insurance protection on its
products in the future.
USE OF PROCEEDS
The Company will receive the proceeds from the exercise of the Warrant.
The Warrant exercise price of $7.50 was determined on the basis of negotiation
between the Company and Kinnard in April 1994. If the maximum number of shares
issuable under the Warrant are exercised, the Company's proceeds therefrom,
before expenses of the offering (estimated at $12,000), will be $750,000. The
Company intends to use the net proceeds from the exercise of the Warrant for
general corporate purposes.
After the exercise of the Warrant, the Warrant Shares will be offered
solely by the Selling Shareholders and none of the proceeds of sale thereof will
be received by the Company.
RECENT DEVELOPMENTS
SALE OF ASSETS
On June 1, 1995, the Company completed the sale of the Company's assets
used in its sleep disorders diagnostics business to Aequitron Medical, Inc. for
a sales price of approximately $5.6 million. During the year ended December 31,
1994 and the quarter ended March 31, 1995, the sleep disorders diagnostics
business had net sales and gross profits of:
<TABLE>
<CAPTION>
Year end Three months ended
December 31, 1994 March 31, 1995
<S> <C> <C>
Net sales $7,057,875 $1,552,337
Gross profit $3,326,593 $ 514,132
</TABLE>
PATENTS
The company entered into a license agreement in 1992 (the "License
Agreement") pursuant to which the Company acquired from the licensor (the
"Licensor") the exclusive rights to manufacture and sell the Breathe Right nasal
strip from the Licensor. Pursuant to the License Agreement, the Company has the
exclusive right to manufacture, sell and otherwise practice any invention,
including the Breathe Right nasal strip, claimed in the patent applications and
all patents issued in any country which correspond to the applications. The
Company must pay royalties to the Licensor based on sales of the Breathe Right
nasal strip including certain minimum royalty amounts to maintain its
exclusivity. The Company is also responsible for all costs and expenses incurred
in obtaining and maintaining patents related to the Breathe Right nasal strip.
The Licensor has four patent applications currently pending with the
United States Patent and Trademark Office seeking patent protection for the
Breathe Right nasal strip. Applications have also been filed seeking patent
rights in a number of foreign countries. No patents have been granted on the
Breath Right nasal strip. The U.S. Patent Office examiner has rejected claims
under the patent applications that are of broader scope on the basis of prior
art and undue breadth, but has indicated that certain of the narrower claims
would be allowable. The Company believes that those claims that the examiner has
indicated would be allowable would, when issued, give the Company protection
against potential competitors' products that are of a sufficiently similar
nature to the Breathe Right nasal strip. The Licensor and the Company have
appealed the rejection of the broader claims by the examiner. The Company has
been advised by Kinney & Lange, patent counsel to the Company, that in its
opinion the Company will prevail in obtaining patent protection which is
significantly broader than those claims already indicated to be allowable by the
U.S. Patent Office in the application under appeal. However, no assurance can be
given that significant patent protection for the Breathe Right nasal strip will
be obtained or will be enforceable, or that the Company will have sufficient
resources to pursue enforcement of any patents issued. If the pending
applications result in issuances of patents, there can be no assurance that they
will effectively foreclose the development of competitive products. In order to
enforce any patents issued on the Breathe Right nasal strip, the Company may
have to engage in litigation, which may result in substantial cost to the
Company. Any adverse outcome of such litigation could adversely affect the
Company's business. The Company believes, however, that the position it will
establish as the first entrant in the market and the design knowledge, which it
has protected as trade secrets, will provide it with advantages over possible
competition.
LICENSE CLAIM
The Company has the exclusive rights to manufacture and sell the Breathe
Right nasal strip pursuant to a license agreement (the "License Agreement")
between the Company and a company (the "Licensor") wholly-owned by the inventor
of the Breathe Right nasal strip. In July 1994, an individual commenced a
lawsuit against the Company, the Licensor and the inventor claiming that the
plaintiff entered into an oral partnership agreement with the inventor
concerning the Breathe Right nasal strip and that the Company tortiously
interfered with this agreement. The plaintiff sought an undefined amount of
monetary damages from the Company and an order declaring the License Agreement
null and void.
In June 1995, the Company entered into a Settlement Agreement with the
plaintiff that provides for the dismissal of all claims against the Company in
return for a nominal cash payment. The Settlement Agreement does not affect the
plaintiff's claims against the Licensor or the inventor except that the
plaintiff has released all claims to overturn the License Agreement. All of the
Company's costs in defending the suit, including the settlement payment, will be
reimbursed to the Company by the Licensor.
SIGNIFICANT CUSTOMERS
Two of the Company's customers, Walgreens and McKesson, together accounted
for a total of approximately 37.1% and 29.2% of the Company's Breathe Right
nasal strip sales for the year ended December 31, 1994 and the three months
ended March 31, 1995, respectively. The Company anticipates that these customers
will individually represent less than 10% of the Company's Breathe Right nasal
strip sales for the year ended December 31, 1995. The loss or material reduction
in business from any major customer, however, could adversely affect the
Company's net revenues.
STOCK DIVIDEND
On May 16, 1995, the Company announced a two-for-one stock split in the
form of a 100 percent stock dividend payable on June 22, 1995 to shareholders of
records as of June 1, 1995. The 100,000 shares of Common Stock listed in this
Prospectus do not reflect the 100,000 additional shares that will be distributed
on June 22, 1995 to the Selling Shareholders.
SELLING SHAREHOLDERS
Kinnard acted as underwriter in the Company's public offering of its
Common Stock that was concluded in April 1994 (the "1994 Offering"). On April 6,
1994, the Company issued the Warrant to Kinnard for $50 and services rendered to
the Company in connection with the 1994 Offering. Kinnard has assigned certain
rights to the Warrant to certain employees of Kinnard.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by the Selling Shareholders
as of May 22, 1995, and as adjusted to reflect the sale of the Warrant Shares.
<TABLE>
<CAPTION>
Number of
Number of Maximum Shares to be
Shares Beneficially Number of Beneficially
Owned Prior Shares to Owned After
Name to Offering be Sold the Offering
<S> <C> <C> <C>
John G. Kinnard
and Company, Incorporated(1) 91,915 90,000 1,915
Jerald S. Johnson 4,150 4,000 150
Michael J. Norton 2,000 2,000 0
George W. Mitchell, Jr. 1,000 1,000 0
Joseph A. Radecki 1,000 1,000 0
Kim E. Elverud 1,000 1,000 0
Paul E. Edwards 1,000 1,000 0
Total 102,065 100,000 2,065
______________________
</TABLE>
(1) Of such amount, 90,000 shares represent shares to be issued upon exercise
of the Warrant which is held for Kinnard's investment account and 1,915
shares were held in Kinnard's trading account as a market maker in the
Company's Common Stock on May 22, 1995. The position of Kinnard's market
maker account fluctuates frequently and may be long or short at any given
time.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Shareholders may sell the
Warrant Shares, from time to time after the date hereof, in one or more
transactions (which may include block transactions), on the Nasdaq National
Market or otherwise, through negotiated transactions, through underwriters or
otherwise, at market prices prevailing at the time of the sale or at prices
otherwise negotiated.
The Warrant Shares may, without limitation, be sold by one or more of the
following: (i) a block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchasers.
The Company has been advised that, as of the date hereof, the Selling
Shareholders have made no arrangement with any broker for the sale of the
Warrant Shares. Underwriters, brokers or dealers may participate in such
transactions as agents and may, in such capacity, receive brokerage commissions
from the Selling Shareholders or purchasers of such securities. Such
underwriters, brokers or dealers may also purchase Warrant Shares and resell
such Warrant Shares for their own account in the manner described above. The
Selling Shareholders and such underwriters, brokers or dealers may be considered
"underwriters" as that term is defined by the Securities Act of 1933, although
the Selling Shareholders disclaim such status. Any commissions, discounts or
profits received by such underwriters, brokers or dealers in connection with the
foregoing transactions may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Lindquist & Vennum P.L.L.P., Minneapolis,
Minnesota. Patrick Delaney, a partner in Lindquist & Vennum P.L.L.P., is a
Director and a holder of Common Stock and options to purchase Common Stock of
the Company.
EXPERTS
The financial statements and financial statement schedule of the Company
incorporated by reference in the Registration Statement of which this Prospectus
is a part have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, as indicated in their reports accompanying such financial
statements and financial statement schedule, and are incorporated herein in
reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
The statements in this Prospectus under the captions "Risk Factors -
Patentability of the Breathe Right Nasal Strips" and "Recent Developments -
Patents" have been reviewed and approved by Kinney & Lange, patent counsel for
the Company, as experts in such matters, and are included herein in reliance
upon such review and approval.
INDEMNIFICATION
The Company's Articles of Incorporation eliminate or limit certain
liabilities of its directors and the Company's Bylaws provide for
indemnification of directors, officers and employees of the Company in certain
instances. Insofar as exculpation of, or indemnification for, liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such exculpation or indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
