8-K

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

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): May 1, 2006

CNS, Inc.
(Exact name of Registrant as Specified in its Charter)

Delaware
(State Or Other Jurisdiction Of Incorporation)

0-16612	41-1580270
(Commission File Number)	(I.R.S. Employer Identification No.)

7615 Smetana Lane Eden Prairie, MN	55344
(Address Of Principal Executive Offices)	(Zip Code)

(952) 229-1500
Registrant’s Telephone Number, Including Area Code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Items under Sections 3 through 7 are not applicable and therefore omitted.

Item 1.01   Entry Into A Material Definitive Agreement.

Executive Officer Compensation

        On May 1, 2006, the Compensation Committee (the “Committee”) of the Board of Directors of CNS, Inc. (the “Company”) approved the salaries for fiscal year 2007 for the Company’s Chief Executive Officer, Marti Morfitt, and each of the other four most highly compensated executive officers of the Company for fiscal year 2006 (the “Executive Officers”). The Committee also approved bonus amounts for the Executive Officers under the Company’s 2006 Incentive Plan and grants of options to purchase the Company’s common stock to the Executive Officers for the Company’s fiscal year 2006 performance.

        Under the 2006 Incentive Plan, Executive Officers are eligible for cash bonuses based upon the Company’s achievement of objectives in three areas: (a) operating income; (b) net sales and (c) strategic goals, with performance weighted 60%, 30% and 10%, respectively. The Company’s achievement against the minimum, target and maximum levels for each area determines the level of bonus. Depending upon the Company’s performance against the established measures of the 2006 Incentive Plan, the Executive Officers (other than the Chief Executive Officer) were eligible for bonuses ranging from 0% to 60% of their base salaries. Under the 2006 Incentive Plan, the Chief Executive Officer of the Company was eligible for a cash bonus ranging from 0% to 100% of her base salary.

        For fiscal year 2006, the Company’s performance in net sales and operating income exceeded the maximum level established under the 2006 Incentive Plan for those objectives. In fiscal year 2006, the Company also met all strategic goals established under the 2006 Incentive Plan. Based upon this performance, Executive Officers will receive the maximum amounts for which they are eligible under the 2006 Incentive Plan. Executive Officers (other than the Chief Executive Officer) were awarded a cash bonus of 60% of their respective base salaries and Marti Morfitt, the Chief Executive Officer of the Company, was awarded a cash bonus of 100% of her base salary. The Chairman did not participate in the 2006 Incentive Plan.

        The following table summarizes the salaries for fiscal year 2007 of the Executive Officers, bonus amounts awarded to the Executive Officers under the 2006 Incentive Plan and options to purchase common stock granted to the Executive Officers for fiscal year 2006 performance:

Executive Officer and Title	2007 Annual Base Salary	2006 Incentive Plan Bonus	Shares of Common Stock Underlying Option
Marti Morfitt,       Chief Executive Officer	$480,000	$460,000	75,000
Samuel Reinkensmeyer,       Chief Financial Officer	220,100	120,060	17,604
John Keppeler,       Vice President of Worldwide Sales	234,000	135,000	17,604
Larry Muma,       Vice President of Operations	226,886	130,896	17,604
Linda Kollofski,       Vice President, Domestic Marketing	208,000	120,000	17,604

        Mr. Reinkensmeyer also received a discretionary bonus of $8,500 in recognition of his achievements during the 2006 fiscal year. Every employee through the vice president level is eligible for an award under the discretionary plan.

2007 Incentive Plan

        On May 1, 2006, the Committee established goals for fiscal year 2007 for the Company’s cash incentive compensation program for executive officers. Executive officers are eligible for cash bonuses based upon the Company’s achievement of objectives in three areas: (a) operating income; (b) net sales and (c) strategic goals, with performance weighted 60%, 30% and 10%, respectively. The Company’s achievement against the minimum, target and maximum levels for each area will determine the level of bonus. Depending upon the Company’s performance against the established measures, executive officers (other than the Chairman and Chief Executive Officer) are eligible for cash bonus awards ranging from 0% to 70% of their base salaries. Under the 2007 Incentive Plan, the Chief Executive Officer of the Company is eligible for a cash bonus award ranging from 0% to 120% of her base salary. In addition, as with the 2006 Incentive Plan, the Chairman is not eligible for a cash bonus award under the 2007 Incentive Plan.

Director Compensation

        On May 1, 2006, the Board of Directors established guidelines for equity compensation to non-employee directors. Under these guidelines, non-employee directors serving a continuing term will receive an annual grant of stock options with a value equal to $51,000, determined using the Black-Scholes method. These options will vest over a period of three years on the anniversary date of grant and have a term of seven years. The exercise price of the option is the fair market value of the Company’s common stock on the date of grant. In all other respects, the options are subject to the Company’s 2000 Stock Option Plan, as amended. Under these new equity compensation guidelines, the Board of Directors granted an option to purchase 5,985 shares of the Company’s common stock to all non-employee directors. Additionally, for fiscal 2007, director Patrick Delaney will receive an additional quarterly director retainer of $5,000 for his service as a director in attending all Board and committee meetings and preparing the minutes of those meetings. The Committee recommended these changes in director compensation.

Employment Agreements

        On May 3, 2006, the Company entered into an employment agreement (the “Agreement”) with three of its executive officers (the “Executives”): Samuel E. Reinkensmeyer, the Company’s Vice-President and Chief Financial Officer; Susan Horvath, the Company’s Vice President and Team Leader, International and Nicole Strait, the Company’s Vice President of Human Resources. The Committee approved the Agreement on May 1, 2006. Under the Agreements, each executive officer will continue to serve in his or her existing position with the base salary noted above for fiscal year 2007 for Mr. Reinkensmeyer, base salary of $160,500 for Ms. Horvath and base salary of $140,000 for Ms. Strait. As with other executive officers of the Company, the Executives are eligible for a cash bonus under the annual incentive plan. The 2007 Incentive Plan is described above. The Executives will receive paid time off, expense reimbursement and those benefits available to other employees such as insurance and participation in the Company’s 401(k) program.

        Under the Agreement, the Executive may resign upon 30 days’ written notice and while the Company has the right to terminate the Executive’s employment at any time during such 30 day period, the Company will continue to pay such Executive’s annual base salary and the employer portion of insurance premiums through such 30 day period. The Executive will also receive any accrued and unused paid time off. The Company may also terminate the Executive’s employment upon written notice. However, if the Company terminates the Executive’s employment without Good Cause (as defined in the Agreement) and prior to a Change In Control (also as defined in the Agreement), the Company must pay the Executive his or her annual base salary at regular payroll intervals for a period of one year following the termination. The salary continuation serves as additional consideration for the Executive’s obligations with respect to confidentiality, disclosure and assignment of intellectual property, non-competition and solicitation of customers. The Company will pay the employer’s portion of the premium costs for any group health, dental, and life insurance benefits during such period and for certain out-placement assistance for the Executive for a period of six months. These payments are in addition to

payments to the Executive of such Executive’s then-current base salary through the date of the termination notice and accrued unused paid time off. Mr. Reinkensmeyer is also entitled to receive a pro rata portion of his incentive compensation at the target level upon his termination prior to a Change in Control if his employment is terminated without Good Cause. As a condition to receiving these benefits, the Executive must sign a standard release agreement with the Company. If, at any time, the Company terminates the Executive’s employment for Good Cause or because of a Disability or if the Agreement terminates because of the Executive’s death, the Company will pay the Executive’s annual base salary through the date of termination of employment for Good Cause, disability or death.

        If, within 24 months following a Change In Control, the Executive’s employment is terminated by the Company (or its successor) without Good Cause or is terminated by the Executive for Good Reason (as defined in the Agreement), the Company must pay the Executive a severance payment equal to 24 months of such Executive’s compensation, which will be calculated based upon the average monthly compensation of any type or form paid to the Executive during the 24 months prior to the date of termination. One-half of the total severance payment will be paid by the Company in a lump-sum within 60 days of the termination date. As additional consideration for the Executive’s obligations with respect to confidentiality, disclosure and assignment of intellectual property, non-competition and solicitation of customers, the remaining one-half will be paid in 12 equal monthly installments. The Company will also continue to pay the employer’s portion of the premium cost for any group insurance benefits during such period, or such shorter continuation period required by law. The Agreement of Ms. Horvath and Ms. Strait will automatically expire at the end of a 24-month period following a Change In Control. The provisions of Mr. Reinkenmeyer’s Agreement relating to benefits upon a Change In Control will automatically terminate at the end of a 24-month period following a Change In Control, with the other provisions of the Agreement surviving. The severance payment following a Change in Control is in addition to payment of the Executive’s then-current base salary through the date the termination notice and any applicable incentive bonus, commensurate with the performance of the Executive and the performance of the Company.

        All stock options granted to the Executive will vest immediately prior to a Change In Control. In the event that the vesting of the options, together with all other payments and the value of any benefit received or to be received by the Executive, would result in all or a portion of such payment being subject to federal excise tax, then payments to the Executive shall be either the full payment or a lesser amount that would result in no portion of the payment being subject to excise tax, whichever results in the receipt by the Executive, on an after-tax basis, of the greatest amount of payment.

        The Company may discontinue salary continuation or severance payments under the Agreement if the Executive breaches any provisions of the Agreement relating to the treatment of confidential information, disclosure and assignment of certain intellectual property, prohibition on competition and prohibition on solicitation of customers.

        Effective May 3, 2006, we entered into an Amended and Restated Employment Agreement with Daniel E. Cohen, our Chairman. The Amended and Restated Employment Agreement contains the same terms as our prior employment agreements with Mr. Cohen, as amended, but extends the term of his employment an additional year to June 30, 2007. In addition, on May 1, 2006, the Board of Directors granted Mr. Cohen an option to purchase 5,985 shares of the Company’s common stock. The option will vest over a period of three years on the anniversary date of grant and have a term of seven years. The exercise price of the option is the fair market value of the Company’s common stock on the date of grant. In all other respects, the option is subject to the Company’s 2000 Stock Option Plan, as amended. The Committee recommended the option grant to Mr. Cohen.

      Employee Stock Purchase Plan Amendments

        On May 1, 2006, the Committee approved certain technical amendments to the Company’s 1989 Employee Stock Purchase Plan (the “ESPP”) to conform the plan to the changes in Internal Revenue Code rules and regulations since the adoption of the plan and to clarify certain eligibility and administrative provisions of the Plan. A copy of the ESPP, as amended, is attached hereto as Exhibit 10.1.

Item 2.02   Results Of Operations And Financial Condition.

        The Company hereby furnishes a press release issued on May 4, 2006 disclosing material non-public information regarding its results of operations for the quarter and year ended March 31, 2006. A copy of the press release is attached hereto as Exhibit 99.1.

Item 8.01   Other Events

        On May 3, 2006, the Company issued a press release, attached hereto as Exhibit 99.2, announcing a seven-cent per share quarterly dividend payable on June 9, 2006 to shareholders of record as of May 26, 2006.

Item 9.01   Financial Statements And Exhibits

Exhibit No. Description

10.1 1989 Employee Stock Purchase Plan, as amended

99.1 Press Release issued on May 4, 2006

99.2 Press Release issued on May 3, 2006

SIGNATURE

        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.
By:	/s/   Marti Morfitt
	Marti Morfitt President and Chief Executive Officer

Date:   May 4, 2006

EX-10.1

Exhibit 10.1

CNS, INC.

1989 EMPLOYEE STOCK PURCHASE PLAN

As Amended Effective July 1, 1999 and July 1, 2006

1. Establishment of Plan.   CNS, Inc. (hereinafter referred to as the “Company”) proposes to grant to certain employees of the Company the opportunity to purchase common stock of the Company. Such common stock shall be purchased pursuant to the plan herein set forth, which shall be known as the “CNS 1989 EMPLOYEE STOCK PURCHASE PLAN” (hereinafter referred to as the “Plan”). The Company intends that the Plan shall qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended, and shall be construed in a manner consistent with the requirements of said Section 423 and the regulations thereunder.

2. Purpose.   The Plan is intended to encourage stock ownership by all employees of the Company, and as an incentive to them to remain in employment, improve operations, increase profits, and contribute more significantly to the Company’s success.

3. Administration.   The Plan shall be administered by the Compensation Committee of the Board of Directors (hereinafter referred to as the “Committee”) or in the absence of such Committee, a committee designated by the Board of Directors of the Company (hereinafter referred to as the “Board of Directors”). The Board of Directors shall fill all vacancies in the Committee and may remove any member of the Committee at any time, with or without cause. The Committee shall select its own chairman and hold its meetings at such times and places as it may determine. All determinations of the Committee shall be made by a majority of its members. Any decision that is made in writing and signed by a majority of the members of the Committee shall be effective as fully as though made by a majority vote at a meeting duly called and held. The determinations of the Committee shall be made in accordance with its judgment as to the best interests of the Company, its employees and its shareholders and in accordance with the purposes of the Plan; provided, however, that the provisions of the Plan shall be construed in a manner consistent with the requirements of Section 423 of the Internal Revenue Code, as amended. Such determination shall be binding upon the Company and the participants in the Plan unless otherwise determined by the Board of Directors. The Company shall pay all expenses of administering the Plan. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it.

4. Duration and Phases of the Plan.

a) The Plan was originally effective and commenced on July 1, 1989; effective as of July 1, 1999 the Plan is extended and will thereafter terminate July 1, 2009, except that any phase commenced prior to such termination shall, if necessary, be allowed to continue beyond such termination until completion. Notwithstanding the foregoing, this Plan shall be considered of no force or effect and any options granted shall be considered null and void unless the holders of a majority of all of the issued and outstanding shares of the common stock of the Company approve the Plan within twelve (12) months before or after the date of its adoption by the board of Directors.

b) The Plan shall be carried out in one or more phases, each phase being for a period of six months. No phase shall run concurrently, but a phase may commence immediately after the termination of the preceding phase. The existence and date of commencement of a phase (the “Commencement Date”) shall be determined by the Committee, provided that the commencement of the first phase shall be within twelve (12) months before or after the date of approval of the Plan by the shareholders of the Company. In the event all of the stock reserved for grant of options hereunder is issued pursuant to the terms hereof prior to the commencement of one or more phases scheduled by the Committee or the number of shares remaining is so small, in the opinion of the Committee, as to render administration of any succeeding phase impracticable, such phase or phases shall be cancelled. Phases shall be numbered successively Phase 1, Phase 2, Phase 3, etc.

5. Eligibility.   All Employees who are employed by the Company on the Commencement Date of a phase shall be eligible to participate in such phase. For purposes of this Plan, effective July 1, 2006, “Employee” shall mean any employee, including an officer, of the Company who as of the Commencement Date of a phase is customarily employed by the Company for more than twenty (20) hours per week and more than five (5) months per year.

6. Participation.   Participation in the Plan is voluntary. An eligible Employee may elect to participate in any phase of the Plan, and thereby become a “Participant” in the Plan, by completing the Plan payroll deduction form provided by the Company and delivering it to the Company or its designated representative prior to the Commencement Date or that phase. Payroll deductions for a Participant shall commence on the first payday after the Commencement Date of the phase and shall terminate on the last payday immediately prior to or coinciding with the termination date of that phase unless sooner terminated by the Participant as provided in Paragraph 9 hereof.

7. Payroll Deductions.

a) Upon enrollment, a Participant shall elect to make contributions to the Plan by payroll deductions (in amounts calculated to be as uniform as practicable throughout the period of the phase), in the aggregate amount not in excess of 10% of such Participant’s Base Pay for the term of the phase. For purposes of this Plan, “Base Pay” is the regular pay for employment for each employee as annualized for a twelve (12) month period, exclusive of overtime, commissions, bonuses, disability payments, shift differentials, incentives and other similar payments, determined as of the Commencement Date of each phase. The minimum authorized payroll deduction must aggregate at least $10 per month.

b) In the event that the Participant’s compensation for any pay period is terminated or reduced from the compensation rate for such a period as of the Commencement Date of the phase for any reason so that the amount actually withheld on behalf of the Participant as of the termination date of the phase is less than the amount anticipated to be withheld over the phase year as determined on the Commencement Date of the phase, then the extent to which the participant may exercise his or her option shall be based on the amount actually withheld on his or her behalf. In the event of a change in the pay period of any Participant, such as from bi-weekly to monthly, an appropriate adjustment shall be made to the deduction in each new pay period so as to ensure the deduction of the proper amount authorized by the Participant.

c) All payroll deductions made for Participants shall be credited to their accounts under the Plan. The Participant may not make any separate cash payments into such account.

d) Except for his or her right to discontinue participation in the Plans as provided in Paragraph 9, no Participant shall be entitled to increase or decrease the amount to be deducted in a given phase after the Commencement Date.

8. Options.

a) Grant of Option.

i) A Participant who is employed by the Company as of the Commencement Date of a phase shall be granted an option as of such date to purchase a number of full shares of Company common stock to be determined by dividing the total amount to be credited to that Participant’s account under Paragraph 7 hereof by the option price set forth in Paragraph 8(a)(ii) hereof (not to exceed 15,000 shares per Participant), subject to the limitations of Paragraph 10 hereof.

ii) The option price for such shares of common stock shall be the lower of:

A. Eighty-five percent (85%) of the fair market value of such shares of common stock on the Commencement Date of the phase; or

B. Eighty-five percent (85%) of the fair market value of such shares of common stock on the termination date of the phase.

iii) The fair market value of shares of common stock of the Company shall be determined by the Committee for each valuation date in a manner acceptable under Section 423, Internal Revenue Code of 1986, as amended.

iv) Anything herein to the contrary notwithstanding, no Employee shall be granted an option hereunder:

A. Which permits his or her rights to purchase stock under all employee stock purchase plans of the Company, its subsidiaries or its parent, if any, to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of the fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time;

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B. If immediately after the grant such Employee would own and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company, its parent, if any, or of any subsidiary of the Company. For purposes of determining stock ownership under this Paragraph, the rules of Section 425(d) of the Internal Revenue Code of 1986, as amended, shall apply; or

C. Which can be exercised after the expiration of 27 months from the date the option is granted.

b) Exercise of Option.

i) Unless a Participant gives written notice to the Company pursuant to Paragraph 9 prior to the termination date of a phase, his or her option for the purchase of shares will be exercised automatically as of such termination date for the purchase of the number of full shares of Company common stock which the accumulated payroll deductions in his or her account at that time will purchase at the applicable option price, subject to the limitations set forth in Paragraph 10 hereof.

ii) As promptly as practicable after the termination date of any phase, the Company will deliver to each Participation herein the common stock purchase upon the exercise of his or her option, together with a cash payment equal to the balance, if any, of his or her account which was not used for the purchase of common stock without interest thereon.

9. Withdrawal or Termination of Participation.

a) A Participant may, at any time prior to the termination date of a phase, withdraw all payroll deductions then credited to his or her account by giving written notice to the Company. Promptly upon receipt of such notice of withdrawal, all payroll deductions credited to the Participant’s account will be paid to him or her without interest thereon and no further payroll deductions will be made during that phase. In such event, the option granted the Participant under that phase of the Plan shall lapse immediately. Partial withdrawals of payroll deductions hereunder may not be made.

b) Effective beginning July 1, 2006, in the event the Participant’s participation is suspended under the CNS, Inc. Employees’ 401(k) Plan and Trust as a result of receiving a hardship withdrawal, the Participant shall be immediately and automatically suspended from the Plan, in which case the provisions of Section 9(a) shall apply. The Participant may again participate in the Plan as of the Commencement Date of the first Phase that begins no earlier than six months after the date of the hardship withdrawal.

c) In the event of the death of a Participant, the person or persons specified in Paragraph 14 may give notice to the Company within sixty (60) days of the death of the Participant electing to purchase the number of full shares which the accumulated payroll deductions in the account of such deceased Participant will purchase at the option price specified in Paragraph 8(a)(ii) and have the balance in the account distributed in cash without interest thereon. If no such notice is received by the Company within said sixty (60) days, the accumulated payroll deductions will be distributed in full in cash without interest thereon.

10. Stock Reserved for Options.

a) As of July 1, 1989, one hundred thousand (100,000) shares of the Company’s no par value common stock which may be authorized by unissued or treasury shares of the Company (or the number and kind of securities to which said one hundred thousand (100,000) shares may be adjusted in accordance with Paragraph 12 hereof) are reserved for issuance upon the exercise of options to be granted under the Plan. Shares subject to the unexercised portion of any lapsed or expired option may again be subject to option under the Plan.

b) If the total number of shares of Company common stock for which options are to be granted for a given phase as specified in Paragraph 8 exceeds the number of shares then remaining available under the Plan (after deductions of all shares for which options have been exercised or are then outstanding) and if the Committee does not elect to cancel such phase pursuant to Paragraph 4, the Committee shall make a pro rata allocation of the shares remaining available in as uniform and equitable a manner as it shall consider practicable. In such event, the options to be granted and the payroll deductions to be made pursuant to the Plan, which would otherwise be effected, may, in the discretion of the Committee, be reduced accordingly. The Committee shall give written notice of such reduction to each Participant affected.

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c) The Participant and a joint tenant named pursuant to Paragraph 10(d) hereof shall have no rights as a shareholder with respect to any shares subject to the Participant’s option until the date of the issuance of a stock certificate evidencing such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is actually issued, except as otherwise provided in Paragraph 12 hereof.

d) The shares of Company common stock to be delivered to a Participant pursuant to the exercise of an option under the Plan will be registered in the name of the Participant or, if the Participant so directs by written notice to the Committee prior to the termination date of that phase of the Plan, in the names of the participant and one other person the Participant may designate as his or her joint tenant with rights of survivorship, to the extent permitted by law.

11. Accounting and Use of Funds.   Payroll deductions for each participant shall be credited to an account established for him or her under the Plan. A Participant may not make any separate cash payments into such account. Such account shall be solely for bookkeeping purposes and no separate fund or trust shall be established hereunder and the Company shall not be obligated to segregate such funds. All funds from payroll deductions received or held by the Company under the Plan may be used, without limitation, for any corporate purpose by the Company.

12. Adjustment Provision.

a) Subject to any required action by the shareholders of the Company, the number of shares covered by each outstanding option, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of the Company common stock resulting from a subdivision or consolidation of shares or the payment of a share dividend (but only on the shares) or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company. Except as otherwise provided in this preceding sentence, the Committee, in its sole discretion, may adjust the number or price of shares subject to the option by reason of any other dissolution, liquidation, merger, consolidation or spin-off of assets or stock of another corporation or the issuance of shares of any class, or securities convertible into shares of any class of the Company.

b) Effective beginning July 1, 2006, the Board of Directors may elect to accelerate the termination date of any Phase effective on the date specified by the Board of Directors in the event of (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Stock would be converted into cash, securities or other property, other than a merger of the Company in which shareholders immediately prior to the merger have the same proportionate ownership of stock in the surviving corporation immediately after the merger; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company. Subject to any required action by the shareholders, if the Company shall be involved in any merger or consolidation, in which it is not the surviving corporation, and if the Board of Directors does not accelerate the termination date of the Phase, each outstanding option shall pertain to and apply to the securities or other rights to which a holder of the number of shares subject to the option would have been entitled.

c) A dissolution or liquidation of the Company shall cause each outstanding option to terminate, provided in such event that, immediately prior to such dissolution or liquidation, each Participant shall be repaid the payroll deductions credited to the Participant’s account without interest.

d) In the event of a change in the shares of the Company as presently constituted, which is limited to a change of all its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the shares within the meaning of this Plan.

13. Non-Transferability of Options.

a) Options granted under any phase of the Plan shall not be transferable except under the laws of descent and distribution and shall be exercisable only by the Participant during his or her lifetime and after his or her death only by his or her beneficiary of the representative of his or her estate as provided in Paragraph 9(b) hereof.

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b) Neither payroll deductions credited to a Participant’s account, nor any rights with regard to the exercise of an option or to receive common stock under any phase of the Plan may be assigned, transferred, pledged or otherwise disposed of in any way by the Participant. Any such attempted assignment, transfer, pledge or other disposition shall be null and void and without effect, except that the Company may, at its option, treat such act as an election to withdraw funds in accordance with Paragraph 9.

14. Designation of Beneficiary.   A Participant may file a written designation of a beneficiary who is to receive any cash to the Participant’s credit under any phase of the Plan in the event of such Participant’s death prior to exercise of his or her option pursuant to Paragraph 9(b) hereof, or to exercise his or her option and become entitled to any stock and/or cash upon such exercise in the event of the Participant’s death prior to exercise of the option pursuant to Paragraph 9(b) hereof. The beneficiary designation may be changed by the Participant at any time by written notice to the Company.

Upon the death of a Participant and upon receipt by the Company of proof deemed adequate by it of the identity and existence at the Participant’s death of a beneficiary validly designated under the Plan, the Company shall in the event of the Participant’s death under the circumstances described in Paragraph 9(b) hereof, allow such beneficiary to exercise the Participant’s option pursuant to Paragraph 9(b) if such beneficiary is living on the termination date of the phase and deliver to such beneficiary the appropriate stock and/or cash after exercise of the option. In the event there is no validly designated beneficiary under the Plan who is living at the time of the Participant’s death under the circumstances described in Paragraph 9(b) or in the event the option lapses, the Company shall deliver the cash credited to the account of the Participant without interest to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed to the knowledge of the Company, it may, in its discretion, deliver such cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. The Company will not be responsible for or be required to give effect to the disposition of any cash or stock or the exercise of any option in accordance with any will or other testamentary disposition made by such Participant or in accordance with the provision of any law concerning intestacy, or otherwise. No designated beneficiary shall, prior to the death of a Participant by whom he or she has been designated, acquire any interest in any stock or in any option or in the cash credited to the participant under any phase of the Plan.

15. Amendment and Termination.   The Plan may be terminated at any time by the Board of Directors provided that, except as permitted in Paragraph 12 hereof, no such termination will take effect with respect to any options then outstanding. Also, the Board may, from time to time, amend the Plan as it may deem proper and in the best interests of the Company or as may be necessary to comply with Section 423 of the Internal Revenue Code of 1986, as amended, or other applicable laws or regulations; provided, however, that no such amendment shall, without prior approval of the shareholders of the Company (1) increase the total number of shares for which options may be granted under the Plan (except as provided in paragraph 12 herein), (2) permit aggregate payroll deductions in excess of ten percent (10%) of a Participant’s compensation as of the Commencement Date of a phase, or (3) impair any outstanding option.

16. Interest.   The Plan does not provide for the payment of interest on a Participant’s payroll deductions.

17. Notices.   All notices or other communications in connection with the Plan or any phase thereof shall be in the form specified by the Committee and shall be deemed to have been duly given when received by the Participant or his designated personal representative or beneficiary or by the Company or its designated representative, as the case may be.

18. Participation of Subsidiaries.   The Board of Directors may, by written resolution, authorize the employees of any of its subsidiaries to participate hereunder. Effective as of the date of coverage of any such subsidiary, any references herein to the “Company” shall be interpreted as referring to such subsidiary as well as to CNS, Inc. For purposes of this Plan, “Subsidiary” shall include any corporation defined as a subsidiary of the Company in Section 425(f) of the Internal Revenue Code of 1986, as amended. In the event that any subsidiary that is covered under the Plan ceases to be a subsidiary of CNS, Inc., the employees of such subsidiary shall be considered to have terminated their employment for purposes of Paragraph 9 hereof as of the date such subsidiary ceases to be such a subsidiary.

Adopted by Board of Directors: January 27, 1989

Ratified and approved by shareholders: April 26, 1989

Extension and amendment adopted by Board of Directors: July 15, 1999

Amendment adopted by Board of Directors  May 1, 2006

5

EX-99.1

Exhibit 99.1

NEWS RELEASE

FOR 3:00 P.M. CT RELEASE
May 4, 2006

CONTACT:

Sam Reinkensmeyer Chief Financial Officer CNS, Inc. (952) 229-1500 sreinkensmeyer@cns.com Nasdaq Symbol: CNXS Joseph Diaz, Jr. Lytham Partners, LLC (602) 889-9700 diaz@lythampartners.com

CNS, Inc. Reports Record Fiscal 2006 Results

• Full year net sales increased 20%; net income up 26%;

• Full year diluted earnings per share increased 24% to $1.15;

• Breathe Right^® domestic sales grew 9%; Breathe Right international sales increased 32%; and Fiber Choice^® sales rose 70% for the full year;

• Fourth quarter sales rose 13%; diluted earnings per share grew 15% to $0.32;

• Company provides fiscal 2007 estimates for sales growth of 11%-16% and diluted earnings per share growth of 12%-20%, compared to proforma fiscal 2006 diluted earnings per share.

        MINNEAPOLIS, May 4 — CNS, Inc. (Nasdaq: CNXS), the Breathe Right Company, today announced results for fiscal year 2006 and the fourth quarter ended March 31, 2006.

        For the fiscal year, net sales grew to a record $112.6 million, up 20% from $93.7 million in fiscal 2005. Net income rose 26% to $17.2 million, or $1.15 per diluted share, compared to fiscal 2005 net income of $13.7 million, or $0.93 per diluted share. Included in fiscal 2005 was a pre-tax benefit of $1.1 million, or $0.05 per diluted share related to a non-recurring European import duty refund. Excluding the duty refund in fiscal 2005, diluted earnings per share for fiscal 2006 grew 31% compared to the prior year.

        Net sales for the fourth quarter of fiscal 2006 were $32.1 million, up 13% compared to $28.4 million in the same period last year. Net income for the fourth quarter grew 14% to $4.7 million, or $0.32 per diluted share, compared to $4.1 million, or $0.28 per diluted share, for the fourth quarter of fiscal 2005.

        “We are very pleased to report 20% consolidated revenue growth and a 26% increase in net income for fiscal 2006. All of our product lines turned in strong results with our Breathe Right domestic, Breathe Right international and FiberChoice brands growing 9%, 32% and 70%, respectively,” said Marti Morfitt, President and Chief Executive Officer of CNS, Inc. “In addition to solid consumer demand trends for our existing items, we are encouraged by strong retail customer acceptance of our new FiberChoice items launched in February 2006.”

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 2

        Ms. Morfitt continued, “We were pleased with the 32% annual increase in international sales. We are still at an early stage of building brand awareness and loyalty for the Breathe Right brand overseas, and are encouraged by this year’s progress.”

        During fiscal 2006, CNS focused on a number of key initiatives to further develop the Breathe Right and FiberChoice brands. Key accomplishments in fiscal 2006 include:

• Growing consumer demand for domestic nasal strips by 9% using the proven “How it Works” advertising demonstration to attract new nasal strip users, and the launch of a 28-count mentholated nasal strip item;

• Increasing FiberChoice sales 70% with the expansion of advertising and the February 2006 introduction of two new innovative FiberChoice products — FiberChoice^® plus Calcium and FiberChoice^® Weight Management;

• Development of Breathe Right^® Snore Relief™ throat rinse, a drug-free, over-the-counter liquid that lubricates throat tissues to minimize vibrations and control snoring, with initial shipments scheduled for July 2006.

Annual and Fourth Quarter Product Sales and Operating Results
        Domestic Breathe Right sales for the 2006 fiscal year were $74.6 million, up 9% versus $68.4 million in fiscal year 2005, due to continued strong consumer demand for nasal strips. Fourth quarter domestic Breathe Right sales grew 2% to $20.0 million, compared to $19.5 million in the fourth quarter of fiscal 2005. Domestic nasal strips revenues grew 5% during the fourth quarter, but overall revenue growth was moderated by the declining sales trends on Vapor Shot!^TM and saline spray.

        Full year international Breathe Right sales totaled $17.0 million, up 32% versus fiscal 2005 sales of $12.9 million. Sales growth resulted from strong shipments to Canada and the UK, as well as the resumption of normal shipments to Japan. In the first eight months of fiscal 2005, no revenues were recorded in Japan due to high inventory levels in that market. International sales of Breathe Right products in the fiscal 2006 fourth quarter grew 5% to $5.1 million, up from international sales in the prior year period of $4.8 million.

        FiberChoice sales for fiscal 2006 totaled $20.8 million, up 70% compared to $12.2 million in fiscal 2005. Sales growth resulted from continued growth in consumer demand for the existing tablets as well as the strong initial shipments for the two new FiberChoice products launched in February 2006. Sales of FiberChoice products in the 2006 fourth quarter were $7.1 million, up 73% compared to sales of $4.1 million in last year’s fourth quarter.

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 3

        The gross profit rate for the fourth quarter of fiscal 2006 was 71%, up one percentage point compared to the prior year period, attributable to lower product costs and higher average pricing on the FiberChoice brand. Advertising and promotion expense for the 2006 fourth quarter of $10.7 million rose 23% compared to $8.7 million in the year earlier period, primarily due to increased advertising levels for both the FiberChoice and Breathe Right brands.

        CNS generated $15.8 million in cash from operations in fiscal 2006, up from $14.7 million in fiscal 2005. As of March 31, 2006, the company had $52.6 million in cash and marketable securities. During fiscal 2006, CNS repurchased 655,105 shares of its common stock for $13.9 million.

        In January 2006, CNS purchased from Onesta Nutrition, Inc. a portfolio of domestic and international patents and patents pending related to the FiberChoice brand for approximately $8 million. The purchase reflects CNS’ commitment to further develop and grow the FiberChoice brand. The purchase was funded by CNS’ existing cash balances, and is expected to be earnings neutral in the fiscal year ending March 31, 2007.

        Yesterday, the company announced a 17% increase in its quarterly cash dividend from $0.06 per share to $0.07 per share, payable on June 9, 2006 to shareholders of record as of May 26, 2006.

Company Provides Fiscal 2007 Outlook
        For the year ending March 31, 2007, CNS expects sales of $125 million to $131 million, up 11% to 16% versus the 2006 fiscal year.

        As of April 1, 2006, CNS adopted Statement of Financial Accounting Standards SFAS No. 123R, which requires the expensing of all stock based compensation. CNS anticipates diluted earnings per share for fiscal 2007 to be in the range of $1.19 to $1.27, including the impact of adopting SFAS No. 123R. Total stock based compensation expense for fiscal 2007 is expected to be approximately $.08 to $.10 per share. Fiscal 2006 diluted earnings per share would have been reduced by $.09 per share as a result of stock based compensation expense, resulting in proforma diluted earning per share of $1.06. The estimated range of diluted earnings per share for fiscal 2007 represents 12% to 20% growth compared to proforma fiscal 2006 diluted earnings per share (see attached reconciliation of GAAP to Non-GAAP disclosures).

        During fiscal 2007, CNS plans to spread its Breathe Right advertising and promotional spending more evenly throughout the year as part of the company’s strategy to promote year-round usage of nasal strips to address consumers’ chronic nasal breathing problems. As a result, operating profit in the first quarter of fiscal 2007 is expected to decline slightly compared to the prior year, but increase nicely for the remainder of the year.

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 4

        “We are energized by our plans to continue strong revenue and profit growth in fiscal 2007. Our team will leverage our pipeline of proven growth tactics to maintain momentum as we enter fiscal 2007,” concluded Ms. Morfitt.

Conference Call Webcast
A conference call to review the fourth quarter results is scheduled today at 4 p.m. CT (5 p.m. ET). Interested participants may listen to the live conference call or replay over the Internet by logging onto CNS’ Web site at www.cns.com. A replay of the fourth quarter conference call may also be accessed by dialing 800-405-2236 (international callers please dial 303-590-3000), conference call ID 11059197, between 6 p.m. CT on May 4, 2006, and 6 p.m. CT on May 11, 2006.

About CNS, Inc.
CNS, based in Minneapolis, designs and markets consumer health care products, including Breathe Right^® nasal strips and FiberChoice^® dietary fiber supplements. The company focuses on products that address important consumer needs within the aging well/self-care market, including better breathing and digestive health. Its common stock is listed on the Nasdaq National Market under the ticker symbol “CNXS.” More information about CNS and its products is available at www.cns.com.

Some of the statements contained in this news release contain forward-looking statements that are subject to certain business risks, including those risks described in the Company’s Annual Report on Form 10-K for the year ended March 31, 2005, as well as other filings with the Securities and Exchange Commission. The Company undertakes no duty or obligation to update any of the forward-looking statements after the date of this release.

FINANCIAL TABLES ON FOLLOWING PAGES

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 5

CNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (unaudited)

	Three Months Ended March 31,				Twelve Months Ended March 31,
	2006		2005		2006		2005
Net sales	$	32,118	$	28,421	$	112,644	$	93,732
Cost of goods sold		9,191		8,496		33,185		26,704
Gross profit		22,927		19,925		79,459		67,028
Operating expenses:
Advertising and promotion		10,684		8,720		34,945		29,684
Selling, general and administrative		5,140		5,131		18,914		17,293
Total operating expenses		15,824		13,851		53,859		46,977
Operating income		7,103		6,074		25,600		20,051
Investment income		256		265		1,219		935
Income before income taxes		7,359		6,339		26,819		20,986
Income tax expense		2,659		2,200		9,576		7,284
Net income	$	4,700	$	4,139	$	17,243	$	13,702
Diluted net income per share	$	.32	$	.28	$	1.15	$	.93
Weighted average number of common and
potential common shares outstanding		14,831		15,021		15,001		14,758

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 6

CNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)

	March 31, 2006		March 31, 2005
Current assets:
Cash and cash equivalents	$	4,152	$	4,814
Marketable securities		48,439		55,936
Accounts receivable, net		17,667		15,030
Inventories		5,766		4,531
Other current assets		3,277		3,403
Total current assets		79,301		83,714
Long-term assets		11,173		3,501
Total assets	$	90,474	$	87,215
Current liabilities		15,211		16,064
Stockholders’ equity		75,263		71,151
Total liabilities and stockholders’ equity	$	90,474	$	87,215

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 7

CNS, INC.
Consolidated Statements of Cash Flows
(in thousands)

	Twelve Months Ended March 31,
	2006			2005
Operating activities:
Net income	$	17,243		$	13,702
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		964			797
Deferred income taxes		180			299
Other		0			1
Changes in operating assets and liabilities:
Accounts receivable		(2,636	)		(3,636	)
Inventories		(1,234	)		(399	)
Prepaid expenses and other current assets		(52	)		1,402
Accounts payable and accrued expenses		1,314			2,576
Net cash provided by operating activities		15,779			14,742
Investing activities:
Purchases of marketable securities		(59,513	)		(80,795	)
Sales and maturities of marketable securities		67,105			64,846
Payments for purchases of property and equipment		(637	)		(52	)
Payments for product rights		(8,003	)		(557	)
Net cash used in investing activities		(1,048	)		(16,558	)
Financing activities:
Proceeds from the issuance of common stock
under Employee Stock Purchase Plan		194			158
Proceeds from the exercise of stock options		1,745			1,749
Purchase of treasury shares		(13,929	)		(1,351	)
Dividends paid		(3,403	)		(2,797	)
Net cash used in financing activities		(15,393	)		(2,241	)
Net decrease in cash and cash equivalents		(662	)		(4,057	)
Cash and cash equivalents:
Beginning of period		4,814			8,871
End of period	$	4,152		$	4,814

CNS, Inc. Reports Fiscal 2006 Fourth Quarter Results
Page 8

Use of Non-GAAP financial measures
The non-GAAP financial measures used in this press release quantify the impact of adopting Financial Accounting Standards Board (FASB) Statement of Accounting Standards No. 123R related to the expensing of stock option compensation and the one-time European import duty refund. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We view these non-GAAP financial measures to be helpful in assessing the Company’s on-going operating results and allow for greater transparency related to supplemental information. Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures as provided with the financial statements attached to this press release.

CNS, INC.
RECONCILIATION OF GAAP TO NON GAAP DISCLOSURES
(in thousands) (unaudited)

	Twelve Months Ended March 31, 2005
Diluted earnings per share, as reported	$	0.93
Proforma adjustment, net of income taxes (1)		0.05
Diluted earnings per share excluding favorable impact of European import duty refund	$	0.88

(1) The Company received a $1.1 million pre-tax refund of previously paid European Community import duties on Breathe Right^® nasal strips relating to an import duty appeal recorded in fiscal 2005.

	Twelve Months Ended March 31, 2005
Diluted earnings per share, as reported	$	1.15
Deduct: Total stock based compensation expense
determined under fair value method, net of related tax effects		0.09
Proforma diluted earnings per share	$	1.06
Fiscal 2007 estimated range of diluted earnings per share	$	1.19 to $1.27
Percent change		12% to 20%

EX-99.2

Exhibit 99.2

NEWS RELEASE

May 3, 2006

CONTACT:

Sam Reinkensmeyer Chief Financial Officer CNS, Inc. (952) 229-1500 sreinkensmeyer@cns.com Nasdaq: CNXS Joseph Diaz, Jr. Lytham Partners, LLC (602) 889-9700 diaz@lythampartners.com

CNS, Inc. Increases Quarterly Dividend

MINNEAPOLIS, May 3, 2006 – CNS, Inc. (Nasdaq: CNXS), the Breathe Right^® company, today announced that its board of directors has increased the company’s quarterly cash dividend from six to seven cents per share of common stock, a 17% increase. The dividend is payable on June 9, 2006, to shareholders of record as of May 26, 2006.

“Due to our continued strong financial performance, we are pleased to increase the dividend for the third time in three years” said Marti Morfitt, president and chief executive officer of CNS. “This action reflects the board’s confidence in our financial performance and the long term-prospects of CNS”.

CNS declared its first quarterly dividend in August 2003 and then raised the dividend payment in June 2004 and June 2005. The company has approximately 14 million shares outstanding.

About CNS, Inc.

CNS, based in Minneapolis, designs and markets consumer health care products, including Breathe Right^® nasal strips and FiberChoice^® dietary fiber supplements. The company focuses on products that address important consumer needs within the aging well/self-care market, including better breathing and digestive health. Its common stock is listed on the Nasdaq National Market under the ticker symbol “CNXS.” More information about CNS and its products is available at www.cns.com.

Some of the information contained in this news release is forward-looking and subject to certain business risks as described in the company’s filings with the Securities and Exchange Commission, including those referred to in its Annual Report on Form 10-K for the year ended March 31, 2005. This news release contains forward-looking statements, which involve risks and uncertainties.

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