Washington		91-1190085
(State of incorporation)		(I.R.S. Employer Identification Number)

						Page
PART I.		Financial information
		Item 1.		Financial Statements (unaudited)		4
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
		Item 3.		Quantitative and Qualitative Disclosures about Market Risk		25
PART II.		Other Information
		Item 1.		Legal Proceedings		26
		Item 4.		Submission of Matters to a Vote of Security Holders		26
		Item 6.		Exhibits and Reports on Form 8-K		26
Signatures						27

		June 30, 2002				December 31, 2001 (as restated – see Note 12)
		(in thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	9,658			$	12,726
Short-term investments, available for sale			64,332				64,446
Accounts receivable, net			14,303				14,597
Inventories			5,881				5,022
Deferred and prepaid income taxes			7,698				8,267
Prepaid expenses and other assets			1,632				1,304
Total current assets			103,504				106,362
Equipment and leasehold improvements, net			6,198				7,463
Goodwill, net			8,374				12,104
Intangibles and other assets, net			3,230				9,632
Deferred income taxes			3,203				2,769
Total assets		$	124,509			$	138,330
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,175			$	4,941
Accrued compensation and benefits			5,917				7,985
Deferred revenue			8,959				7,433
Other accrued liabilities			4,008				3,356
Current portion of note payable			—				527
Total current liabilities			24,059				24,242
Deferred tax liability			1,366				3,301
Note payable, net of current portion			—				882
Total liabilities			25,425				28,425
Shareholders’ equity:
Preferred stock, par value $.01 per share, 2,000,000 authorized; none outstanding			—				—
Common stock, par value $.01 per share, 120,000,000 authorized; 31,907,848 and 31,746,067 shares outstanding, respectively, and additional paid-in capital			64,578				66,260
Retained earnings			34,990				44,173
Accumulated other comprehensive loss			(484	)			(528	)
Total shareholders’ equity			99,084				109,905
Total liabilities and shareholders’ equity		$	124,509			$	138,330

		Quarter ended June 30,								Six months ended June 30,
		2002				2001 (as restated – see Note 12)				2002				2001 (as restated – see Note 12)
		(in thousands, except per share data)
Net sales		$	22,748			$	23,550			$	44,291			$	43,977
Cost of sales			8,184				9,026				16,348				16,375
Gross profit			14,564				14,524				27,943				27,602
Operating expenses:
Research and development			2,749				4,113				5,447				7,503
Sales, general and administrative			12,970				15,100				25,452				30,435
Stock compensation			(410	)			—				(614	)			—
Impairment of intangible assets			5,529				—				5,529				—
Non-recurring charges			—				—				2,994				2,942
Total operating expenses			20,838				19,213				38,808				40,880
Operating loss			(6,274	)			(4,689	)			(10,865	)			(13,278	)
Other income, net			508				952				882				1,817
Loss before income taxes and cumulative effect of change in accounting principle			(5,766	)			(3,737	)			(9,983	)			(11,461	)
Income tax benefit			(2,018	)			(1,310	)			(3,495	)			(4,011	)
Loss before cumulative effect of change in accounting principle			(3,748	)			(2,427	)			(6,488	)			(7,450	)
Cumulative effect of change in accounting principle			—				—				(2,695	)			—
Net loss		$	(3,748	)		$	(2,427	)		$	(9,183	)		$	(7,450	)
Net loss per common share, basic and diluted:
Prior to cumulative effect of change in accounting principle		$	(0.12	)		$	(0.08	)		$	(0.20	)		$	(0.23	)
Cumulative effect of change in accounting principle			—				—				(0.09	)			—
Net loss per common share, basic and diluted		$	(0.12	)		$	(0.08	)		$	(0.29	)		$	(0.23	)
Weighted average common shares outstanding, basic and diluted			31,890				32,104				31,858				32,168

		Six months ended June 30,
		2002				2001 (as restated – see Note 12)
		(in thousands)
Cash flows from operating activities:
Net loss		$	(9,183	)		$	(7,450	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,859				3,669
Loss on disposal of assets			353
Deferred income taxes			(2,369	)			(3,028	)
Stock compensation			(614	)			—
Purchased in-process research and development, expensed			—				1,900
Impairment of intangibles			5,529				—
Cumulative effect of change in accounting principle			2,695				—
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable			294				3,998
Inventories			(859	)			607
Prepaid income taxes			569				—
Prepaid expenses and other assets			(328	)			(428	)