Delaware		94-3199149
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets—September 30, 2002 and December 31, 2001		3
		Condensed Consolidated Statements of Operations—three and nine months ended September 30, 2002 and 2001		4
		Condensed Consolidated Statements of Cash Flows—nine months ended September 30, 2002 and 2001		5
		Notes to Unaudited Condensed Consolidated Financial Statements		6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		20
Item 4.		Controls and Procedures		21
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings		21
Item 2.		Changes in Securities and Use of Proceeds		22
Item 3.		Defaults Upon Senior Securities		22
Item 4.		Submission of Matters to a Vote of Security Holders		22
Item 5.		Other Information		22
Item 6.		Exhibits and Reports on Form 8-K		22
SIGNATURES				23
CERTIFICATION    Certification of the President and Chief Executive Officer				24
CERTIFICATION    Certification of the Chief Financial Officer and Vice President, Finance and Administration				25
EXHIBIT INDEX				26

(In thousands, except per share amounts, unaudited)
		September 30, 2002				December 31, 2001
Assets
Current assets:
Cash and cash equivalents		$	9,484			$	7,297
Marketable securities			5,766				11,887
Accounts and note receivable, net of allowance for doubtful accounts of $1,308 at September 30, 2002 and $629 at December 31, 2001			3,966				5,056
Inventories, net			3,096				3,645
Prepaid assets and other current assets			1,205				1,282
Total current assets			23,517				29,167
Long term securities			—				4,353
Long term note receivable, net			414				—
Property and equipment, net			1,586				1,934
Intangibles and other assets			1,562				380
Total assets			$27,079			$	35,834
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	955			$	822
Accrued liabilities			2,737				2,675
Capital lease obligations			45				192
Total liabilities			3,737				3,689
Contingencies (Note 5)
Stockholders’ equity
Common stock, $0.001 par value			15				15
Additional paid-in capital			88,359				88,459
Deferred stock compensation			(159	)			(1,905	)
Receivable from stockholders			(49	)			(99	)
Accumulated other comprehensive income			16				70
Accumulated deficit			(64,840	)			(54,395	)
Total stockholders’ equity			23,342				32,145
Total liabilities and stockholders’ equity			$27,079			$	35,834

(In thousands, except per share data, unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2002				2001				2002				2001
Sales		$	4,454			$	3,707			$	13,679			$	10,780
Cost of goods sold			1,730				1,472				5,773				4,912
Gross profit			2,724				2,235				7,906				5,868
Operating expenses
Research and development			1,218				1,627				3,882				4,837
Selling, general and administrative			4,311				4,016				14,837				11,539
Total operating expenses			5,529				5,643				18,719				16,376
Loss from operations			(2,805	)			(3,408	)			(10,813	)			(10,508	)
Interest income and other expense, net			85				324				368				1,309
Net loss		$	(2,720	)		$	(3,084	)		$	(10,445	)		$	(9,199	)
Net loss per share, basic and diluted		$	(0.18	)		$	(0.21	)		$	(0.70	)		$	(0.64	)
Shares used in computing basic and diluted net loss per share			14,996				14,406				14,816				14,299

(In thousands, unaudited)
		Nine Months Ended September 30,
		2002				2001
Operating activities:
Net loss		$	(10,445	)		$	(9,199	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1,021				704
Stock-based compensation			308				1,417
Allowance for doubtful accounts			823				389
Allowance for inventory reserve			517				223
Changes in operating assets and liabilities
Accounts and note receivable			(147	)			(2,316	)
Inventories			32				(1,090	)
Prepaid and other current assets			77				(289	)
Accounts payable and accrued liabilities			195				370
Net cash used in operating activities			(7,619	)			(9,791	)
Cash flows from investing activities:
Purchase of property and equipment			(614	)			(1,364	)
Purchases of short term investments			—				(16,647	)
Maturities of investments			10,420				27,499
Capitalization of patent litigation costs			(1,245	)			(88	)
Other assets			4				5
Net cash provided by investing activities			8,565				9,405
Cash flows from financing activities:
Proceeds from issuance of common stock			1,389				682
Proceeds from revolving term loan			—				25
Payments on revolving term loan			—				(858	)
Payments on capital lease obligations			(148	)			(212	)
Net cash provided by (used in) financing activities			1,241				(363	)
Net increase (decrease) in cash and cash equivalents			2,187				(749	)
Cash and cash equivalents at beginning of period			7,297				12,676
Cash and cash equivalents at end of period		$	9,484			$	11,927