North Carolina		56-2098302
(State or other jurisdiction of Incorporation or organization)		(IRS Employer Identification Number)

9401 Globe Center Drive, Suite 140 Morrisville, North Carolina		27560
(Address of Principal Executive Office)		(Zip Code)

Class		Outstanding as of November 8, 2002
Common Stock, no par value		9,610,070

						PAGE
PART I.		FINANCIAL INFORMATION
		Item 1.		Financial Statements
				Consolidated Balance Sheets as of September 30, 2002 (unaudited) and December 31, 2001		3
				Consolidated Statements of Operations for the Three Months and Nine Months ended September 30, 2002 and 2001 (unaudited)		4
				Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2002 and 2001 (unaudited)		5
				Notes to Unaudited Consolidated Financial Statements		6
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
		Item 3.		Quantitative and Qualitative Disclosures About Market Risk		12
		Item 4.		Controls and Procedures		12
PART II.		OTHER INFORMATION
		Item 6.		Exhibits and Reports on Form 8-K		13
SIGNATURES						14
CERTIFICATIONS

		September 30, 2002				December 31, 2001
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	8,721			$	14,883
Accounts and other receivables			825				462
Inventories			2,434				2,223
Other current assets			355				242
Total current assets			12,335				17,810
Property and equipment, net			8,373				8,503
Patents and intellectual property, net			559				551
Other noncurrent assets			93				150
Total assets		$	21,360			$	27,014
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK, CONTINGENTLY REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	482			$	741
Accrued expenses			665				723
Deferred revenue, current portion			709				487
Current portion of long-term debt and capital lease obligations			29				23
Total current liabilities			1,885				1,974
Noncurrent liabilities:
Deferred revenue, less current portion			2,257				1,346
Long-term debt and capital lease obligations, less current portion			55				66
Total noncurrent liabilities			2,312				1,412
Total liabilities			4,197				3,386
Series A convertible redeemable preferred stock, no par value; authorized 120,000 shares; 90,500 shares issued and outstanding at September 30, 2002 and December 31, 2001 (aggregate liquidation value at September 30, 2002 of $9,050)			7,520				7,520
Contingently redeemable common stock			13,376				8,538
Shareholders’ equity:
Common stock, no par value; authorized 40,000,000 shares; 9,610,070 and 9,485,294 issued and outstanding at September 30, 2002 and December 31, 2001, respectively			52,985				57,186
Accumulated deficit			(56,718	)			(49,616	)
Total shareholders’ equity			(3,733	)			7,570
Total liabilities, convertible redeemable preferred stock,contingently redeemable common stock and shareholders’ equity		$	21,360			$	27,014

		Three Months Ended								Nine Months Ended
		September 30 2002				September 30 2001				September 30 2002				September 30 2001
Net sales		$	1,176			$	1,235			$	2,918			$	3,359
Cost of goods sold			922				1,004				2,548				2,865
Gross profit			254				231				370				494
Operating expenses:
General and administrative			808				1,094				2,610				3,322
Sales and marketing			281				336				816				928
Research and development			1,475				1,007				4,139				2,752
Total operating expenses			2,564				2,437				7,565				7,002
Operating loss			(2,310	)			(2,206	)			(7,195	)			(6,508	)
Other income (expense):
Interest expense			(2	)			(3	)			(7	)			(69	)
Interest income			25				138				105				347
Grant/royalty income			—				—				25				12
Development income			131				50				359				150
Other expense			(29	)			(5	)			(51	)			(52	)
Total other income			125				180				431				388
Net and comprehensive loss			(2,185	)			(2,026	)			(6,764	)			(6,120	)
Dividends on preferred stock			108				134				337				425
Net loss applicable to common shareholders		$	(2,293	)		$	(2,160	)		$	(7,101	)		$	(6,545	)
Basic and diluted net loss per common share		$	(0.24	)		$	(0.23	)		$	(0.74	)		$	(0.75	)
Weighted average common shares outstanding			9,578				9,369				9,552				8,694

		Nine Months Ended
		September 30, 2002				September 30, 2001
Cash flows from operating activities:
Net loss		$	(6,764	)		$	(6,120	)
Adjustments to reconcile net loss to net cash used in operating activities:
(Gain) Loss on sale of property and equipment			(1	)			49
Depreciation			1,136				925
Amortization of intangible and other assets			110				144
Amortization of discount on investments			—				(31	)
Loss on trading securities			53				5
Provision for inventory obsolescence			303				110
Change in operating assets and liabilities:
Accounts receivable			(363	)			(43	)
Inventories			(514	)			(816	)
Other current and non-current assets			(165	)			(60	)
Accounts payable and accrued expenses			(318	)			(733	)
Deferred revenue			1,132				326
Net cash used in operating activities			(5,391	)