FOR THE QUARTER ENDED JUNE 30, 2002

COMMISSION FILE NUMBER: 000-26273

WASHINGTON		91-1350484
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

PART I.		FINANCIAL INFORMATION		PAGE
ITEM 1.		Condensed Consolidated Financial Statements (Unaudited)
		•  Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001		3
		•  Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001		4
		•  Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2002		5
		•  Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001		6
		•  Notes to Condensed Consolidated Financial Statements		7
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk		39
PART II.		OTHER INFORMATION
ITEM 1.		Legal Proceedings		40
ITEM 2.		Change in Securities		40
ITEM 6.		Exhibits and Reports on Form 8-K		40

		June 30, 2002				December 31, 2001
ASSETS
Current assets:
Cash, cash equivalents and short-term investments		$	15,018			$	18,499
Accounts receivable, net of allowance for doubtful accounts of $610 and $1,524 at June 30, 2002 and December 31, 2001, respectively			4,173				5,932
Prepaid expenses and other current assets			812				1,120
Total current assets			20,003				25,551
Property and equipment, net of accumulated depreciation and amortization of $5,143 and $4,020 at June 30, 2002 and December 31, 2001, respectively			3,443				4,473
Goodwill, net of amortization of $550 at December 31, 2001			—				2,281
Note receivable from related party			750				750
Other assets			247				239
Total assets		$	24,443			$	33,294
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	704			$	1,683
Accrued and other liabilities			1,580				1,756
Compensation-related accruals			1,603				1,392
Deferred revenue, including related party amounts of $395 and $353 at June 30, 2002 and December 31, 2001, respectively			6,475				6,432
Total current liabilities			10,362				11,263
Shareholders’ equity:
Common stock, $.025 par value, 50,000,000 shares authorized, issued and outstanding 19,036,904 and 18,945,513 shares at June 30, 2002 and December 31, 2001, respectively			476				474
Additional paid-in-capital			110,242				110,178
Accumulated other comprehensive (loss) income			(12	)			17
Accumulated deficit			(96,625	)			(88,638	)
Total shareholders’ equity			14,081				22,031
Total liabilities and shareholders’ equity		$	24,443			$	33,294

		Three Months Ended June 30,								Six Months Ended June 30
		2002				2001				2002				2001
Revenue:
License:
Third party		$	1,108			$	2,129			$	3,344			$	6,806
Related party—Primus KK			—				247				221				1,537
			1,108				2,378			$	3,565			$	8,343
Service:
Third party			2,985				3,861				6,330				7,686
Related party—Primus KK			147				280				372				566
			3,132				4,141				6,702				8,252
Total revenue			4,240				6,517				10,267				16,595
Cost of revenue:
License			44				68				117				202
Service			1,148				2,206				2,443				4,592
Total cost of revenue			1,192				2,274				2,560				4,794
Gross profit			3,048				4,243				7,707				11,801
Operating expenses:
Sales and marketing			2,925				4,966				5,992				11,239
Research and development			2,099				3,323				4,484				6,298
General and administrative			1,282				1,657				2,635				3,547
Amortization of goodwill			—				79				—				79
Restructuring charges			—				—				435				—
Total operating expenses			6,306				10,025				13,546				21,163
Loss from operations			(3,258	)			(5,782	)			(5,839	)			(9,362	)
Other income, net			93				388				203				915
Loss before income taxes and cumulative effect of change in accounting principle			(3,165	)			(5,394	)			(5,636	)			(8,447	)
Income tax expense			—				(43	)			(70	)			(269	)
Loss before cumulative effect of change in accounting principle			(3,165	)			(5,437	)			(5,706	)			(8,716	)
Cumulative effect of change in accounting principle			—				—				(2,281	)			—
Net loss		$	(3,165	)		$	(5,437	)		$	(7,987	)		$	(8,716	)
Basic and diluted loss per common share:
Loss before cumulative effect of change in accounting principle		$	(0.17	)		$	(0.30	)		$	(0.30	)		$	(0.48	)
Cumulative effect of change in accounting principle			—				—				(0.12	)			—
Net loss		$	(0.17	)		$	(0.30	)		$	(0.42	)		$	(0.48	)
Weighted average shares used in computing basic and diluted loss per common share			18,949,722				18,356,093				18,947,723				18,210,908

Common stock

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated deficit