|UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q



(Mark One)

[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES                EXCHANGE ACT OF 1934.

For the Period Ended December 31, 2002.

[    ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES                EXCHANGE ACT OF 1934.


For the Transition Period from
to



Commission File Number:   0 - 16612



CNS, INC.
(Exact name of registrant as specified in its charter)

Delaware
41-1580270
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)


P.O. BOX 39802
Minneapolis, MN  55439
(Address of principal executive offices including zip code)

(952) 229-1500
(Registrant's telephone number, including area code)




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 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.


YES
X
NO





Indicated by check mark whether the
registration is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



YES

NO X





At January 27, 2003, the Company had
outstanding 13,434,992 shares of common stock, $.01 par value per share.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---

|CNS, Inc.
FORM 10-Q
For the Period Ended December 31, 2002
Index


PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements

Item 2.
Managements Discussion and Analysis of Financial Condition                                    and Results of Operations



Item 3.
Quantitative and Qualitative Disclosures about Market Risk

Item 4.
Controls and Procedures


PART II.
OTHER INFORMATION

Item 1.
Legal Proceedings

Item 2.
Change in Securities and Use of Proceeds

Item 3.
Defaults Upon Senior Securities

Item 4.
Submission of Matters to a Vote of Securities Holders

Item 5.
Other Information

Item 6.
Exhibits and Reports on Form 8-K


SIGNATURES


CERTIFICATIONS
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|PART I  FINANCIAL INFORMATION


Item 1. Financial Statements


CNS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)
(in thousands, except per share amounts)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                         | December 31,
2002 | March 31,
2002
|-------------------------------------------------------- | ----------------- | --------------
|ASSETS                                                   |                   |               
|Current assets:                                          |                   |               
|Cash and cash equivalents                                |                   |               
|Marketable securities                                    |                   |               
|Accounts receivable, net                                 |                   |               
|Inventories                                              |                   |               
|Deferred income taxes                                    |                   |               
|Prepaid expenses and other current assets                |                   |               
|                                                         |                   |               
|Total current assets                                     |                   |               
|Property and equipment, net                              |                   |               
|Product rights, net                                      |                   |               
|Deferred income taxes                                    |                   |               
|                                                         |                   |               
|                                                         |                   |               
|                                                         |                   |               
|LIABILITIES AND STOCKHOLDERS EQUITY                     |                   |               
|Current liabilities:                                     |                   |               
|Accounts payable and accrued expenses                    |                   |               
|                                                         |                   |               
|Total current liabilities                                |                   |               
|Stockholders' equity:                                    |                   |               
|Preferred stock - authorized 8,484 shares;               |                   |               
|none issued or outstanding                               |                   |               
|Common stock - $.01 par value; authorized 50,000 shares; |                   |               
|issued, 19,295 shares                                    |                   |               
|Additional paid-in capital                               |                   |               
|Treasury shares - at cost; 5,860 at Dec. 31, 2002 and    |                   |               
|5,756 at March 31, 2002                                  |                   |               
|Retained earnings                                        |                   |               
|Accumulated other comprehensive income                   |                   |               
|                                                         |                   |               
|Total stockholders' equity                               |                   |               
|                                                         |                   |               
|                                                         |                   |               
|                                                         |                   |               

|The accompanying notes are an
integral part of the condensed consolidated financial statements.
|-----------------------------------------------------------------------------------------------

---

|CNS, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS

(unaudited)                      (in thousands, except per share amounts)
|-----------------------------------------------------------------------------------------------------------------------------------

|                                      | Three Months Ended
December 31, | Nine Months Ended
December 31,
|------------------------------------- | ------------------------------- | ------------------------------
|
|Net sales                             |                                 |                               
|Cost of goods sold                    |                                 |                               
|                                      |                                 |                               
|Gross profit                          |                                 |                               
|                                      |                                 |                               
|Operating expenses:                   |                                 |                               
|Advertising and promotion             |                                 |                               
|Selling, general and administrative   |                                 |                               
|Special charges                       |                                 |                               
|                                      |                                 |                               
|Total operating expenses              |                                 |                               
|                                      |                                 |                               
|Operating income                      |                                 |                               
|Investment income                     |                                 |                               
|                                      |                                 |                               
|Income before income taxes            |                                 |                               
|Income tax expense                    |                                 |                               
|                                      |                                 |                               
|Net income                            |                                 |                               
|                                      |                                 |                               
|Basic net income per share            |                                 |                               
|                                      |                                 |                               
|Diluted net income per share          |                                 |                               
|                                      |                                 |                               
|Weighted average number of common     |                                 |                               
|shares outstanding                    |                                 |                               
|                                      |                                 |                               
|Weighted average number of common and |                                 |                               
|assumed conversion shares outstanding |                                 |                               
|                                      |                                 |                               

|The accompanying notes are an
integral part of the condensed consolidated financial statements.
|-----------------------------------------------------------------------------------------------

---

|CNS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)
(in
thousands)
|----------------------------------------------------------------------------------

|                                                 | Nine Months Ended
December 31,
|------------------------------------------------ | ------------------------------
|
|Operating activities:                            |                               
|Net income                                       |                               
|Adjustments to reconcile net income to net cash  |                               
|from operating activities:                       |                               
|Depreciation and amortization                    |                               
|Deferred income taxes                            |                               
|Other                                            |                               
|Changes in operating assets and liabilities:     |                               
|Accounts receivable                              |                               
|Inventories                                      |                               
|Prepaid expenses and other current assets        |                               
|Accounts payable and accrued expenses            |                               
|                                                 |                               
|Net cash from operating activities               |                               
|                                                 |                               
|Investing activities:                            |                               
|Net change in marketable securities              |                               
|Payments for purchases of property and equipment |                               
|Payments for product rights                      |                               
|                                                 |                               
|Net cash from investing activities               |                               
|                                                 |                               
|Financing activities:                            |                               
|Proceeds from issuance of common stock           |                               
|under stock plans                                |                               
|Purchase of treasury shares                      |                               
|                                                 |                               
|Net cash from financing activities               |                               
|                                                 |                               
|Net change in cash and cash equivalents          |                               
|Cash and cash equivalents:                       |                               
|Beginning of period                              |                               
|                                                 |                               
|End of period                                    |                               
|                                                 |                               

|The accompanying notes are an
integral part of the condensed consolidated financial statements.
|-----------------------------------------------------------------------------------------------

---

|NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)



The accompanying condensed
consolidated financial statements as of December 31, 2002 and 2001 and March 31, 2002 are
unaudited but, in the opinion of management, include all adjustments (consisting only of
normal, recurring accruals) necessary for a fair presentation of results for the interim
periods presented.


In 2002, the Company changed its
fiscal year-end from December 31 to March 31. The change in its fiscal year-end aligns the
Companys financial reporting period with its business and customer-planning cycle.
The Company believes this change provides a clearer picture of the Companys
financial results by including an entire cough/cold season within the same fiscal year.


Note 1  Accounting
Principles


The accounting principles followed in
the preparation of the financial information contained herein are the same as those
described in the Companys Annual Report on Form 10-K for the year ended December 31,
2001 with the exception of the following new pronouncements:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
for the quarter ended March 31, 2002, the Company implemented Emerging Issues Task Force
bulletins Number 00-14 Accounting for Certain Sales Incentives, Number 00-25
Vendor Income Statement Characterization of Consideration Paid to a Reseller
and Number 01-9 Accounting for Consideration Given by a Vendor to a Customer.
These new accounting standards had no impact on the Companys net income; however,
they did require reclassification of certain promotional costs such as sales incentives,
promotional funds, and consumer coupon redemptions that were previously reported as a
component of advertising and promotion expense as a reduction of net sales. This resulted
in a sales reduction of $3.1 million and $5.0 million in the quarter and the nine months
ended December 2002 and $1.7 million and $4.0 million in the quarter and nine months ended
December 2001, with a corresponding reduction in advertising and promotion expense during
those periods.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company implemented Statement of Financial Accounting Standards (SFAS) No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The Company adopted SFAS No. 144
effective for the quarter ended March 2002. There was no material impact on the
Companys consolidated financial position or results of operations as the result of
implementing this standard.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
July 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities which requires that costs
associated with an exit or disposal activity be recognized when the liability is
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | incurred, rather than at the date of a commitment to an exit or disposal plan. The Company adopted
SFAS No. 146 effective for the quarter ended September 2002. There was no material impact
on the Companys consolidated financial position or results of operations as the
result of implementing this standard.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Refer to the Annual Report on Form
10-K for the year ended December 31, 2001 for detailed information on accounting policies.


Note 2 
Comprehensive Income


A reconciliation of total
comprehensive income is as follows (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | Three Months Ended
December 31, | Nine Months Ended
December 31,
|------------------------------------ | ------------------------------- | ------------------------------
|
|Net income                           |                                 |                               
|Unrealized gain (loss) on marketable |                                 |                               
|securities, net of income tax        |                                 |                               
|                                     |                                
|Total comprehensive income           |                                 |                               
|                                     |                                

|Note 3  Earnings
Per Share


A reconciliation of weighted average
common and assumed conversion shares outstanding is as follows (in thousands):
|-------------------------------------------------------------------------------------------------------------------------------------------------

|                                    | Three Months Ended
December 31, | Nine Months Ended
December 31,
|----------------------------------- | ------------------------------- | ------------------------------
|
|Average common shares outstanding   |                                 |                               
|Assumed conversion of stock options |                                 |                               
|                                    |                                
|Average common and assumed          |                                 |                               
|conversion shares                   |                                 |                               
|                                    |                                

|Note 4  Income Taxes


As part of the process of preparing
financial statements, the Company is required to estimate income taxes, both state and
federal. This process involves management estimating the actual current tax exposure
together with assessing temporary differences resulting from different treatment for tax
and accounting purposes. These differences result in deferred tax assets and liabilities,
which are included within the consolidated balance sheet. Management must then assess the
likelihood that deferred tax assets will be utilized to offset future taxable income
during the periods in which these temporary differences are deductible. Management
believes that as of December 31, 2002, based on the level of historical taxable income and
projections of
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|future taxable income for the periods in which the deferred tax assets are
deductible, that it is more likely than not the Company will realize the benefits of these
deductible differences.


Item 2.    Management's Discussion
and Analysis of Financial Condition and Results of                 Operations


This Report on Form 10-Q should be
read in conjunction with the Companys Annual Report on Form 10-K for the period
ended December 31, 2001.


In 2002, the Company changed its
fiscal year-end from December 31 to March 31. The change in its fiscal year-end aligns the
Companys financial reporting period with its business and customer-planning cycle.
The Company believes this change provides a clearer picture of the Companys
financial results by including an entire cough/cold season within the same fiscal year.


The Companys revenues are
derived primarily from the manufacture and sale of the Breathe Right® nasal strip,
which is a nonprescription, disposable device designed to improve nasal breathing and
temporarily relieve nasal congestion, and to reduce or eliminate snoring and breathing
difficulties due to a deviated nasal septum. The Company began marketing FiberChoice®
chewable tablets, an innovative bulk fiber supplement in the June quarter of 2000. Breathe
Right Snore Relief throat spray was introduced during 2002 with initial shipments to
retailers during the September quarter.


The Company has experienced in the
past, and expects to experience in the future, quarterly fluctuations in both domestic and
international sales and earnings. These fluctuations are due in part to seasonality of
sales and advertising levels, as described below, as well as increases and decreases in
purchases by retailers and distributors in anticipation of future demand by consumers.


Results of Operations


Net sales for the December 2002
quarter increased 21.3% to $25.9 million compared to $21.4 million for the same quarter of
2001 and increased 9.6% to $57.8 million for the nine months ended December 2002 compared
to $52.8 million for the same period of 2001.


Domestic net sales were $19.1 million
for the December quarter of 2002 compared to $16.4 million for the same quarter of 2001,
an increase of 16.5%. The growth in quarterly sales was primarily driven by shipments of
Snore Relief spray. Sales of nasal strips were flat for the quarter as a result of a
slower start to the cough cold season and cough cold advertising not beginning until
December. For the nine months ended December 2002, domestic net sales increased 13.5% to
$47.1 million compared to $41.5 million for the same period of 2001. The increase is
primarily the result of Snore Relief throat spray sales.


International sales for the December
2002 quarter were $6.8 million compared to $5.0 million for the same quarter of 2001, an
increase of 36.0%. The higher international sales for the quarter were the result of the
Japanese distributor returning to normal ordering in October and then purchasing most of
the product that will be sold by them during the current cold and allergy
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|season.
International sales for the nine months ended December 2002 were $10.7 million compared to
$11.3 million for the same period of 2001. Lower international sales for the nine month
period ended December 2002 are primarily due to the Japanese distributor having excess
inventory at the end of last years cold and allergy season, resulting in lower
purchases for the nine months ended December 2002.


Gross profit for the December 2002
quarter was $17.8 million compared to $14.0 million for the same quarter of 2001, and was
$38.5 million for the nine months ended December 2002 compared to $33.8 million for the
same period of 2001. Gross profit as a percentage of net sales increased to 68.7% for the
December quarter of 2002 compared to 65.4% for the same quarter of 2001, and was 66.5% for
the nine months ended December 2002 compared to 64.0% for the same period of 2001. The
higher gross profit percentage resulted from the mix of products sold, primarily greater
domestic Breathe Right sales including Snore Relief throat spray.


Advertising and promotion expense for
the December quarter of 2002 was $13.4 million compared to $9.6 million for the same
period of 2001. The increase for the current quarter was due to advertising and public
relations expenditures relating to the launch of Snore Relief throat spray and additional
advertising in international markets. For the nine months ended December 2002, advertising
and promotion expense was $20.4 million compared to $20.3 million for the previous
comparable period. The increase in advertising and promotion expense for the December
quarter of 2002 was off set by lower spending in the June quarter of 2002. Spending for
the Breathe Right brand declined by $1.9 million in the June quarter of 2002, due
primarily to dropping the allergy-focused advertising that the Company tested during the
quarter ended June 2001. Advertising and promotion expense for the FiberChoice brand was
also down by $1.7 million in the June 2002 quarter, as the Company reduced spending levels
following the launch year.


Selling, general and administrative
expenses were $3.2 million for the December quarter of 2002 compared to $3.1 million for
the same quarter of 2001, and were $8.9 million for the nine months ended December 2002
compared to $9.8 million for the same period of 2001. In June 2001, the Company
restructured, including a workforce reduction, in order to focus its resources on building
the core businesses. The Company incurred a special charge of $930,000 during the nine
months ended December 2001 relating to the restructuring.


Operating income for the December
quarter of 2002 was $1.2 million compared to $1.5 million for the same quarter of 2001,
and was $9.1 million for the nine months ended December 2002 compared to $2.7 million for
the same period of 2001.


Investment income for the December
quarter of 2002 was $240,000 compared to $330,000 for the same quarter of 2001, and was
$709,000 for the nine months ended December 2002 compared to $944,000 for the same period
of 2001. The decrease was due to significantly lower interest rates offset by an increase
in the amount of funds invested.


Net income for the December quarter
of 2002 was $874,000 or 6 cents per diluted share compared to $1.8 million or 12 cents per
diluted share in the same quarter of 2001, with no
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|income tax expense. Pro-forma net
income for the prior year quarter, adjusted for a 38% income tax rate, would have been
$1.1 million or 8 cents per diluted share. Net income for the nine months ended December
2002 rose to $5.9 million or 42 cents per diluted share compared to net income of $3.7
million or 25 cents per diluted share for the nine months ended December 2001, with no
income tax expense. Pro-forma net income for the nine months ended December 2001 would
have been $2.3 million or 16 cents per diluted share, adjusted for a 38% income tax rate.
An effective income tax rate of 38% was used for the quarter and nine months ended
December 2002 and for the pro-forma information in order to show comparative after-tax
results. The Company provided a valuation allowance against the net deferred tax assets as
of December 31, 2001 as the result of the uncertainty relating to the future realization
of these assets. No income tax expense was recognized for the quarter and nine months
ended December 31, 2001 as the result of this valuation allowance.


Seasonality The Company believes that a portion
of Breathe Right nasal strip use is for the temporary relief of nasal congestion and
congestion-related snoring. Sales of nasal congestion remedies are higher during the fall
and winter seasons because of increased use during the cold and allergy seasons.


Liquidity and Capital
ResourcesAt December 31, 2002, the Company had
cash, cash equivalents and marketable securities of $36.5 million and working capital of
$46.3 million.


The Company believes that its
existing funds and funds generated from operations will be sufficient to support its
planned operations for the foreseeable future. The Company intends on utilizing the cash
and marketable securities for normal operating needs, repurchases of the Companys
common stock and potential future acquisitions.


The Company generated cash from
operations of $13.1 million for the nine months ended December 2002 compared with $8.6
million for the same period of 2001. Net income, that included non-cash tax expense of
$3.9 million, and an increase in accounts payable partially offset by an increase in
accounts receivable provided the positive impact on cash for the nine months ended
December 2002.


The Company had net purchases of $5.6
million of marketable securities, consisting of primarily cash equivalents, corporate
bonds, and U.S. Government obligations, and $403,000 of purchases for property and
equipment and product rights in the nine months ended December 2002.


The Company issued 225,667 shares of
common stock for $951,000 during the nine months ended December 31, 2002 under its
employee stock ownership plans. The Company repurchased 328,900 shares of common stock
for $1.9 million during the nine months ended December 31, 2002. There remain 660,800
shares of common stock that can be repurchased by the Company in connection with the
repurchase program that was authorized by the board of directors. The shares of common
stock repurchased by the Company are available for use by the Company to
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|meet obligations under its employee
stock ownership plan and stock option plans, and for possible future acquisitions.


Accounting Policies and
Recent Accounting Pronouncements In preparing the consolidated
financial statements in conformity with accounting principles generally accepted in the
United States, management must make decisions which impact the reported amounts and
related disclosures. Such decisions include the selection of the appropriate principles to
be applied and the assumptions on which to base accounting estimates. In reaching such
decisions, management applies judgement based on its understanding and analysis of the
relevant circumstances. Note 1 to the condensed consolidated financial statements and the
Companys Annual Report on Form 10-K for the year ended December 31, 2001 provide
important information about the significant accounting policies followed in the
preparation of the Companys financial statements and accounting pronouncements
applicable to the Company.


Forward-Looking StatementsCertain
statements contained in this Report on Form 10-Q and other written and oral statements
made from time to time by the Company do not relate strictly to historical or current
facts but provide current expectations or forecasts of future events. As such, they are
considered forward-looking statements under the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties that could cause
actual results to differ materially from those presently anticipated or projected. Such
forward-looking statements can be identified by the use of terminology such as may, will, expect, plan, intend, anticipate, estimate, or
continue or similar words or expressions. It is not possible to foresee or
identify all factors affecting the Companys forward-looking statements and
investors therefore should not consider any list of factors to be an exhaustive statement
of all risks, uncertainties or potentially inaccurate assumptions. Factors that could
cause actual results to differ from the results discussed in the forward-looking
statements include, but are not limited to, the following factors: (i) the Companys
revenue and profitability is reliant on sales of Breathe Right nasal strips; (ii) the
Company currently has a seasonal pattern of sales that is typically higher in the March
and December quarters of each year due to increased nasal strip usage during the
cough/cold season and its revenues and earnings may be impacted by the relative severity
of such season; (iii) the Companys success and future growth will depend
significantly on its ability to effectively market Breathe Right nasal strips and upon
its ability to develop and achieve markets for additional products; (iv) the Companys
competitive position will, to some extent, be dependent on the enforceability and
comprehensiveness of the patents on its Breathe Right nasal strip technology which have
been, and in the future may be, the subject of litigation and could be narrowed as a
result of the outcome of the reexamination of one such patent by the United States Patent
and Trademark Office; (v) the Company has faced and will continue to face challenges in
successfully developing and introducing new products; (vi) the Company operates in
competitive markets where recent and potential entrants into the nasal dilator segment
pose competitive challenges; (vii) the Company is dependent upon contract manufacturers
for the production of all of its products; and (viii) the Company currently purchases
most of its major components for its
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|nasal strip products from different
contract manufacturers that obtain the raw materials from a single supplier.


Item 3. Quantitative and
Qualitative Disclosures about Market Risk


The Companys market risk
exposure is primarily interest rate risk related to its cash and cash equivalents and
investments in marketable securities. The Companys risk to interest rate
fluctuations has not materially changed since December 31, 2001. See Item 7A of the
Companys Annual Report on Form 10-K for the year ended December 31, 2001.


Item 4. Controls and
Procedures
Evaluation of Disclosure
Controls and Procedures The Companys Chief Executive
Officer, Marti Morfitt, and Chief Financial Officer, David Byrd, have reviewed the
Companys disclosure controls and procedures within 90 days prior to the filing of
this Report. Based upon this review, these officers believe that the Companys
disclosure controls and procedures are effective in ensuring that material information
related to the Company is made known to them by others within the Company.


Changes in Internal
Controls There were no significant changes in
the Companys internal controls or in other factors that could significantly affect
these controls during the quarter covered by this report or from the end of the reporting
period to the date of this Form 10-Q.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|PART II  OTHER
INFORMATION


Item 1.        Legal Proceedings
|--------------------------------------------------------------

| | Not
Applicable
| | --------------

|Item 2.        Change in
Securities and Use of Proceeds
|-------------------------------------------------------

| | Not
Applicable
| | --------------

|Item 3.        Defaults Upon
Senior Securities
|----------------------------------------------

| | Not
Applicable
| | --------------

|Item 4.        Submission of
Matters to a Vote of Security Holders
|------------------------------------------------------------------

| | Not
Applicable
| | --------------

|Item 5.        Other Information
|--------------------------------

| | Not
Applicable
| | --------------

|Item 6.        Exhibits and
Reports on Form 8-K
|-----------------------------------------------

| |  | (a) |  | The
following exhibits are filed as part of this Report:
| |  | --- |  | --------------------------------------------------------

| | 99.1
Certification pursuant to 18 U.S.C. Section 1350.
| | ------------------------------------------------------

| |  | (b) |  | Reports
on Form 8-K
| |  | --- |  | -------------------

| | None
| | ----

---

|SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



CNS, Inc.

Registrant





Date:
February 4, 2003

By:
/s/  Marti Morfitt

Marti Morfitt
President & Chief Executive Officer





Date:
February 4, 2003

By:
/s/  David J. Byrd

David J. Byrd
Vice President of Finance, Chief
Financial Officer and Treasurer
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|CERTIFICATIONS


I, Marti Morfitt, certify
that:


     1.
          I have reviewed this quarterly report on Form 10-Q of CNS, Inc.;


2. 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;


3. 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;


4.           The registrants
other certifying officers 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:


a)           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;


b) evaluated the
          effectiveness of the registrants disclosure controls and procedures as of
          a date within 90 days prior to the filing date of this quarterly report (the
          Evaluation Date); and


c) 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;


5. The registrants
          other certifying officers and I have disclosed, based on our most recent
          evaluation, to the registrants auditors and the audit committee of
          registrants board of directors:


a) all significant deficiencies in
the           design or operation of internal controls which could adversely affect the
          registrants ability to record, process, summarize and report financial
          data and have identified for the registrants auditors any material
          weaknesses in internal controls; and


b) any fraud, whether or not
material, that           involves management or other employees who have a significant
role in the           registrants internal controls; and


6. The registrants other
          certifying officers 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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 4, 2003 | By: s/ Marti MorfittMarti MorfittPresident
& Chief Executive Officer
|---------------------- | --------------------------------------------------------------------

---

|I, David Byrd, certify
that:


     1.
          I have reviewed this quarterly report on Form 10-Q of CNS, Inc.;


2. 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;


3. 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;


4.           The registrants
other certifying officers 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:


a)           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;


b) evaluated the
          effectiveness of the registrants disclosure controls and procedures as of
          a date within 90 days prior to the filing date of this quarterly report (the
          Evaluation Date); and


c) 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;


5. The registrants
          other certifying officers and I have disclosed, based on our most recent
          evaluation, to the registrants auditors and the audit committee of
          registrants board of directors:


a) all significant deficiencies in
the           design or operation of internal controls which could adversely affect the
          registrants ability to record, process, summarize and report financial
          data and have identified for the registrants auditors any material
          weaknesses in internal controls; and


b) any fraud, whether or not
material, that           involves management or other employees who have a significant
role in the           registrants internal controls; and


6. The registrants other
          certifying officers 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.
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|Date: February 4, 2003 | By: s/ David J. ByrdDavid J. Byrd
President of Finance, ChiefFinancial Officer and Treasurer
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