North Carolina		56-1469825
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1040 Swabia Court, Durham, NC		27703
(Address of principal executive offices)		(Zip Code)

				Page
Part I    Financial Information:
Item 1:		Consolidated Financial Statements
		Consolidated Balance Sheets		3  of  14
		Consolidated Statements of Operations		4  of  14
		Consolidated Statements of Cash Flows		5  of  14
		Notes to Consolidated Financial Statements		6  of  14
Item 2:		Management’s Discussion and Analysis of Financial Condition and Results of Operations		7  of  14
Item 3:		Quantitative and Qualitative Disclosures About Market Risk		11  of  14
Part II    Other Information:
Item 1:		Legal Proceedings		12  of  14
Item 2:		Changes in Securities		12  of  14
Item 3:		Defaults Upon Senior Securities		12  of  14
Item 4:		Submission of Matters to a Vote of Security Holders		12  of  14
Item 5:		Other Information		13  of  14
Item 6:		Exhibits and Reports on Form 8-K		13  of  14
Signatures				14  of  14

		June 30, 2002				December 31, 2001
		(unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	7,654			$	3,907
Restricted cash			351				275
Accounts receivable—trade, net			5,377				7,128
Inventories:
Materials and supplies			1,595				1,361
Product			976				900
Other current assets			1,642				800
Total Current Assets			17,595				14,371
Inovoject® Systems Under Construction			1,783				1,560
Inovoject® Systems			33,090				32,555
Less accumulated depreciation			(25,707	)			(24,754	)
			7,383				7,801
Equipment, Furniture and Fixtures			12,904				12,123
Less accumulated depreciation and amortization			(4,831	)			(4,172	)
			8,073				7,951
Other Assets:
Goodwill, patents and exclusive licenses of patentable technology (net of accumulated amortization of $152 in 2002 and $144 in 2001)			760				752
Other long-term assets			1,843				1,623
Total Assets		$	37,437			$	34,058
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	561			$	1,210
Accrued expenses			2,718				3,245
Deferred revenue			36				28
Product warranty accrual			266				218
Total Current Liabilities			3,581				4,701
Long-term debt, less current portion			44				43
Shareholders’ Equity
Common Stock,$.01 par value:
Authorized—30,000,000 shares Issued and outstanding—8,125,017 net of 1,175,216 treasury shares and 7,998,168 net of 1,175,216 treasury shares at June 30, 2002 and December 31, 2001, respectively			93				90
Additional paid-in capital			61,451				59,932
Accumulated other comprehensive loss			(1,784	)			(776	)
Accumulated deficit			(11,746	)			(15,730	)
Treasury stock			(14,202	)			(14,202	)
Total Shareholders’ Equity			33,812				29,314
Total Liabilities and Shareholders’ Equity		$	37,437			$	34,058

		Three Months Ended June 30								Six Months Ended June 30
		2002				2001				2002				2001
Revenues
Inovoject® System revenue		$	9,818			$	9,897			$	19,421			$	19,785
Product sales			722				784				1,550				1,480
Other revenue			305				78				1,231				296
Total Revenues			10,845				10,759				22,202				21,561
Cost of Product Sales and Inovoject® System Revenues			4,379				4,539				8,455				8,846
Gross Profit			6,466				6,220				13,747				12,715
Operating Expenses
General and administrative			1,369				1,501				3,033				3,394
Sales and marketing			540				632				1,201				1,236
Research and development			2,445				1,965				4,788				3,655
Total Operating Expenses			4,354				4,098				9,022				8,285
Operating Income			2,112				2,122				4,725				4,430
Other Income (Expense)
Interest income			59				54				99				98
Interest expense			(4	)			(8	)			(8	)			(14	)
Foreign Currency Gain (Loss)			0				(10	)			16				(22	)
Total Other Income			55				36				107				62
Income Before Taxes			2,167				2,158				4,832				4,492
Income Taxes			450				244				846				513
Net Income		$	1,717			$	1,914			$	3,986			$	3,979
Net Income per share of Common Stock:
Basic		$	0.21			$	0.24			$	0.49			$	0.50
Diluted		$	0.19			$	0.22			$	0.45			$	0.46
Number of Shares Used in Per Share Calculation:
Basic			8,125				8,057				8,078				7,992
Diluted			8,985				8,673				8,863				8,625

		Six Months Ended June 30
		2002				2001
Operating Activities
Net income		$	3,986			$	3,979
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,333				2,204
Gain on sale of fixed assets			(7	)			—
Changes in operating assets and liabilities:
Accounts receivable, inventories and other current assets			523				(402	)
Accounts payable, accrued expenses, deferred revenue and warranty accrual			(1,120	)