Preferred Stock

          Our Board of Directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue up to 20,000,000 shares of Preferred Stock, par value $0.0001, in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the Preferred Stock, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences.  As of July 27, 2005 there were zero shares of Preferred Stock outstanding.  The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of holders of any Preferred Stock that may be issued in the future.  Issuance of Preferred Stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock.

          Options

          As of July 27, 2005, options to purchase 45,000 shares of Common Stock were issued and outstanding at a weighted average exercise price of $5.67 per share.

          Warrants

          We have no outstanding warrants to purchase Common Stock.

          Debt Securities

          We have no outstanding debt securities.

          Anti-Takeover Provisions

                    Charter and Bylaw Provisions.  Certain provisions of our certificate of incorporation and bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us.  Such provisions could limit the price that certain investors might be willing to pay in the future for shares of our Common Stock.  Certain of these provisions allow us to issue Preferred Stock without any vote or further action by the stockholders and eliminate cumulative voting in the election of directors.  In addition, our bylaws provide that special meetings of the stockholders may be called only by the board of directors.  These provisions may make it more difficult for stockholders to take certain corporate actions and could have the effect of delaying or preventing a change in control of the registrant.

                    Delaware Law.  We are subject to Section 203 of the Delaware General Corporation Law.  This law prohibits a publicly held Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless any of the following conditions are met.  First, this law does not apply if prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder’s becoming an interested stockholder.   Second, the law does not apply if upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer.  Third, the law does not apply if at or after the date of the transaction, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

          The NASDAQ Small Cap Market

          Our Common Stock is traded on the NASDAQ Small Cap Market under the symbol “CAAS.”