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

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PART I.    FINANCIAL INFORMATION
ITEM 1.		Condensed Consolidated Financial Statements (Unaudited)
		•		Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001		3
		•		Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2002 and 2001		4
		•		Condensed Consolidated Statements of Shareholders’ Equity and Comprehensive (Loss) Income for the three and nine months ended September 30, 2002		5
		•		Condensed Consolidated Statements of Cash Flows for the nine months ended September 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				16
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk				41
ITEM 4.		Controls and Procedures				42
PART II.    OTHER INFORMATION
ITEM 1.		Legal Proceedings				42
ITEM 2.		Change in Securities				43
ITEM 6.		Exhibits and Reports on Form 8-K				43

		September 30, 2002				December 31, 2001
ASSETS
Current assets:
Cash, cash equivalents and short-term investments		$	13,057			$	18,499
Accounts receivable, net of allowance for doubtful accounts of $485 and $1,524 at September 30, 2002 and December 31, 2001, respectively			4,822				5,932
Prepaid expenses and other current assets			748				1,120
Total current assets			18,627				25,551
Property and equipment, net of accumulated depreciation and amortization of $5,631 and $4,020 at September 30, 2002 and December 31, 2001, respectively			2,750				4,473
Goodwill, net of amortization of $550 at December 31, 2001			—				2,281
Note receivable from related party			750				750
Other assets			250				239
Total assets		$	22,377			$	33,294
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	933			$	1,683
Accrued and other liabilities			2,221				1,756
Compensation-related accruals			1,294				1,392
Deferred revenue, including related party amounts of $361 and $353 at September 30, 2002 and December 31, 2001, respectively			5,441				6,432
Total current liabilities			9,889				11,263
Shareholders’ equity:
Common stock, $.025 par value, 50,000,000 shares authorized, issued and outstanding 18,999,404 and 18,945,513 shares at September 30, 2002 and December 31, 2001, respectively			475				474
Additional paid-in-capital			110,168				110,178
Accumulated other comprehensive income			46				17
Accumulated deficit			(98,201	)			(88,638	)
Total shareholders’ equity			12,488				22,031
Total liabilities and shareholders’ equity		$	22,377			$	33,294

		Three Months Ended September 30,								Nine Months Ended September 30,
		2002				2001				2002				2001
Revenue:
License:
Third party		$	2,545			$	730			$	5,889			$	7,536
Related party—Primus KK			400				280				621				1,817
			2,945				1,010				6,510				9,353
Service:
Third party			3,019				3,524				9,349				11,210
Related party—Primus KK			148				196				520				762
			3,167				3,720				9,869				11,972
Total revenue			6,112				4,730				16,379				21,325
Cost of revenue:
License			147				53				264				255
Service			1,144				1,591				3,587				6,183
Total cost of revenue			1,291				1,644				3,851				6,438
Gross profit			4,821				3,086				12,528				14,887
Operating expenses:
Sales and marketing			2,898				4,863				8,890				16,102
Research and development			1,790				3,742				6,274				10,040
General and administrative			843				1,840				3,478				5,387
Amortization of goodwill			—				235				—				314
Restructuring charges			827				—				1,262				—
Total operating expenses			6,358				10,680				19,904				31,843
Loss from operations			(1,537	)			(7,594	)			(7,376	)			(16,956	)
Other income (expense), net			(15	)			135				188				1,050
Loss before income taxes, extraordinary item and cumulative effect of change in accounting principle			(1,552	)			(7,459	)			(7,188	)			(15,906	)
Income tax expense			(24	)			(75	)			(94	)			(344	)
Loss before extraordinary item and cumulative effect of change in accounting principle			(1,576	)			(7,534	)			(7,282	)			(16,250	)
Extraordinary gain on disposal of assets			—				566				—				566
Loss before cumulative effect of change in accounting principle			(1,576	)			(6,968	)			(7,282	)			(15,684	)
Cumulative effect of change in accounting principle			—				—				(2,281	)			—
Net loss		$	(1,576	)		$	(6,968	)		$	(9,563	)		$	(15,684	)
Basic and diluted loss per common share:
Loss before extraordinary item and cumulative effect of change in accounting principle		$	(0.08	)		$	(0.40	)		$	(0.38	)		$	(0.88	)
Extraordinary gain on disposal of assets			—				0.03				—				0.03
Cumulative effect of change in accounting principle			—				—				(0.12	)			—