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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

Or

Commission File Number: 000-29037

eMerge Interactive, Inc.

(Exact name of registrant as specified in its charter)

10305 102nd Terrace

Sebastian, Florida 32958

(Address of principal executive offices)

(772) 581-9700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.008

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES  x  NO  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES  ¨  NO  x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant was approximately $5.7 million as of June 28, 2002, based upon the closing sale price per share of the common stock as quoted on the NASDAQ National Market. For the purposes of determining this amount only, the Company has excluded shares of common stock held by directors, officers and stockholders with representatives on the board of directors whose ownership exceeds five percent of the common stock outstanding at June 28, 2002. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant.

The number of shares of the registrant’s common stock, $0.008 par value, outstanding as of March 17, 2003 was 38,780,439. There were 33,085,994 shares of Class A common stock outstanding and 5,694,445 shares of Class B common stock outstanding as of this date.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of eMerge Interactive, Inc.’s definitive proxy statement for its 2003 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K Report are incorporated by reference into Part III of this Report.

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eMerge Interactive, Inc.

FORM 10-K ANNUAL REPORT

(For Fiscal Year Ended December 31, 2002)

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PART I

ITEM 1.    BUSINESS

ITEM 1(A).    GENERAL DEVELOPMENT OF THE BUSINESS

COMPANY OVERVIEW

Incorporated in 1994, we are a Delaware corporation and a technology company providing food-safety, individual-animal tracking and supply-management services to the beef production industry. Through December 31, 2002, our primary revenue source was cattle marketing – both cattle brokerage and auction barn activities. In the first half of 2002, we determined the best way to improve our productivity and the use of our working capital would be to sell or dispose of all of our cattle operations and focus primarily on food-safety and supply chain management. During the second half of 2002, we aggressively divested ourselves of these cattle operations and as of January 24, 2003, completed the divestiture of all our cattle operations.

The company is structured into two operating groups, a Food Safety Group and Beef Supply Chain Management Group. These two operating groups and the associated products and services generated revenues of $575,000 and $849,000 in 2002 and 2001, respectively, which represents less than 5% of the total revenues in each of these years. We expect these revenues to significantly increase in the future and these products and services will constitute 100% of our continuing revenues in 2003. As a result of our change in focus, historical operations have limited relevance in assessing the Company’s future prospects.

The Food Safety Group’s patented VerifEYE^™ Food Safety Technology is a unique machine vision technology, which instantly detects microscopic levels of organic contamination, which can harbor deadly pathogens. The VerifEYE technology is available in several applications for the meat processing, food processing and food services industries.

The Supply Chain Management Group is comprised of three inter-related products and services, all designed to allow cattle producers, meat packers and retailers to better manage their product supply chains:

FOOD SAFETY GROUP

eMerge’s Food Safety Group products have been under development for the past two years and will soon provide meat processors with a level of quality assurance that has previously been unavailable. The patented new VerifEYE Food Safety Technology is a real-time machine vision technology, which instantly detects microscopic levels of organic contamination including ingesta and fecal material, which can harbor pathogens such as E. coli 0157:H7, salmonella, listeria and others. By utilizing wavelength-specific spectroscopy and image processing, the simple-to-use VerifEYE system provides instant verification of the absence or presence of contamination on meat products without the use of chemicals or radiation. See “Factors Affecting Our Business, Financial Condition and Results of Operations” for a discussion of the risk factors associated with these new products.

VerifEYE Solo^™

The portable VerifEYE Solo is a lightweight unit that can be used in meat-processing, distribution and grocery environments to help trimmers zero in on contamination, maintaining a safe and wholesome meat product. The portable VerifEYE Solo, available with a battery pack, can be used in any location, or permanently installed on the processing line to augment an existing Hazard Analysis and Critical Control Points (“HACCP”) program. We expect to begin delivery of this product during the first half of 2003.

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VerifEYE Carcass Inspection System

With the increasingly stringent requirements of the USDA Food Safety & Inspection Service, the VerifEYE Carcass Inspection System (“CIS”) provides beef slaughter and processing plants the added confidence to meet requirements, while enhancing their food safety program. Designed to accommodate the space limitations in many of today’s beef plants, CIS provides automated inspection of each carcass at line speeds up to 450 head or 900 sides per hour. The visual displays provide a virtual roadmap to aid employees in identifying and removing contamination, while reducing overzealous trimming. Long-term processing improvements can be maintained through the use of detailed reports, helping to identify trends as they occur. As of this filing, we have licensed one commercial CIS unit at Excel for delivery in the first half of 2003.

BEEF SUPPLY CHAIN MANAGEMENT GROUP

The Supply Chain Management division is comprised of three inter-related products and services, two of which (CattleLog and Premium Sale Services) have been available since the first half of 2002. The third, PCC, was acquired in 1999. All of these products and services are designed to allow cattle producers, meat packers and retailers to better manage their product supply chains.

CattleLog

CattleLog includes a suite of products and services designed to allow producers to capture and analyze individual animal data. These products include data collection software that operates on a user’s PC and a separate online data reporting service that allows users to view and analyze data they and others have collected on their cattle. CattleLog is available in four basic packages:

In addition, CattleLog allows users easy, secure access to an array of sophisticated, web-based reports to streamline decision-making. Users simply log on to www.emergeinteractive.com to access an array of interactive reports—both standardized and customizable accommodating more than 1,600 fields of data. Here, they will find their own operations’ data presented in easy-to-interpret formats. They can manipulate this information for detailed analysis and benchmarking of their operations’ performance, print out the resulting reports, even e-mail them to suppliers or customers.

Premium Sale Services

Since 2000, we have helped return over $2 million to producers by conducting special Premium Sales across the country which utilizes specific cattle criteria and animal specific data to enhance sales. Held in association with a producer group or existing livestock market, these sales present a unique opportunity for cattle buyers to find large numbers of weaned, health-certified cattle sold in uniform lots.

PCC Feedyard Benchmarking Services

PCC has led the industry in feedlot data management since 1973. Subscribers to PCC receive proprietary comparative analysis tools and market information for the feedyard industry. Information provided by PCC helps users identify and understand areas of their operation that may be out of line with industry averages and take targeted actions to correct those problems. The industry leader in cattle data handling, PCC has recorded and analyzed data on more than 130 million head in the past 30 years.

COMPANY BACKGROUND

In February 2000, we completed our initial public offering (“IPO”) of 7,175,000 common shares and a private placement of 500,000 common shares, which generated net proceeds of $107.1 million. In 2000,

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approximately $12.8 million of the proceeds were used to pay amounts due to related parties and Turnkey Computer Systems, Inc. (“Turnkey”), $37.7 million was used for acquisitions of other businesses and $16.3 million was used for capital expenditures and general working capital purposes. In 2001, an additional $10.3 million of the proceeds were used for the acquisitions of other businesses or as additional payments for the businesses acquired during 2000, $7.9 million was used for capital expenditures and the balance was used for general working capital.

During 2000 and 2001, we acquired thirteen cattle brokerage companies, which represented 10% of the cattle trading market. These acquisitions increased our revenues to $1.2 billion in 2001, but required significant use of capital and we incurred a net loss of $92.4 million in 2001. Subsequently, in 2002, we determined that we would sell or close all the cattle operations. Accordingly, the assets of the operations to be sold were adjusted to the estimated fair value, which resulted in a non-cash asset impairment charge of $7.0 million for the year ended December 31, 2002. Both the write-down of these assets and the results of operations for these businesses are included in discontinued operations. The values of the intangible assets of the operations to be liquidated were also evaluated and we determined that estimated future undiscounted cash flows expected to result from the use and eventual disposition of the assets were below the carrying value of the assets. We adjusted the carrying value of these assets to their estimated fair value of $0, resulting in a non-cash impairment loss of approximately $1.8 million, which is included in continuing operations for the year ended December 31, 2002. The discussion of these acquisitions and divestitures is incorporated by reference under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as set forth in Item 7 of this Form 10-K Report.

In 2001 and 2002, under new management, we began to focus our efforts on primarily two business groups, supply-chain management and food safety technology. Accordingly, a series of restructurings occurred in an effort to fund our operations from existing cash flows. We implemented initiatives to further reduce our cost structure and streamline our corporate operations to better position the Company to achieve profitability. As a result of these initiatives, we reduced our workforce several times, incurring $319,000 and $1.8 million in severance and related employee costs and $84,000 and $757,000 in other closure, employee and professional costs for the years ended December 31, 2002 and 2001, respectively. We also reviewed all our intangible assets and adjusted their carrying values to estimated fair values, based on discounted cash flows, which resulted in noncash asset impairment charges of $1.6 million and $10.3 million included in continuing operations for the years ended December 31, 2002 and 2001, respectively. In addition, $44.6 million of non-cash asset impairment charges are included in discontinued operations for the year ended December 31, 2001.

In August 2001, we structured a strategic technology alliance with two privately held companies: 1) Allflex Holdings Inc, the global leader in visual and electronic animal-identification systems, and 2) Farmexpress S.A. from Europe, a provider of livestock-industry information technology, for the purpose of creating the industry standard in individual animal tracking solutions for the beef industry. As part of this alliance, we sold four million restricted common shares to Allflex and received $2.7 million in cash. Although the industry has been slow to adopt a standardized animal identification system, in light of the 2002 Farm Bill (discussed below), which requires country of origin labeling for beef products beginning in September 2004, we believe that our CattleLog suite of individual animal data collection and management products, together with Allflex’s electronic identification systems and readers will provide industry producers, feedyards and packers with a means to effectively comply with this new law.

In 2002, we announced an agreement to integrate our VerifEYE meat inspection system into Excel Corporation’s beef operations to finalize specifications for commercialization. Excel Corporation is a leading U.S. beef processor and a wholly-owned subsidiary of Cargill Incorporated, an international marketer, processor and distributor of agricultural, food, financial and industrial products and services with 90,000 employees in 57 countries. On March 14, 2003, Excel signed an equipment and technology license agreement for the installation of a VerifEYE CIS in the Schuyler, Nebraska beef processing plant. We plan to move ahead with an aggressive commercialization schedule during 2003.

In September 2002, we launched a study to establish the efficacy of our VerifEYE food safety technology for detecting human bio-hazardous contamination including feces, a study which paves the way for developing

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VerifEYE-based tools to help reduce the spread of viral and bacterial infections in restaurants, daycare facilities, hospitals and other environments where workers come in contact with food. This application would complement our other VerifEYE products.

ITEM 1(B).    FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Information for the Company’s two operating segments for the three-year period ended December 31, 2002, is contained in note 18 to the Consolidated Financial Statements on page F-27.

ITEM 1(C).    NARRATIVE DESCRIPTION OF BUSINESS

INDUSTRY BACKGROUND

BEEF INDUSTRY

According to the National Cattlemen’s Beef Association, or NCBA, the cattle industry is the largest single segment of the American agricultural economy, generating $95 billion in annual sales. The U.S. Department of Agriculture reports that sales of cattle account for approximately $34 billion in annual sales. At the retail level, the cattle industry generates over $51 billion in sales of beef. Furthermore, the NCBA estimates that worldwide cattle production is three times greater than U.S. production.

The U.S. beef production chain can be classified into three primary segments: producers, feedlots and packers.

PRODUCERS

According to the NCBA, there are approximately one million producers comprised of ranchers and small farm owners who breed and raise cattle. Most of the producers are independently owned and are dispersed throughout the United States. Each year these producers market approximately 35 million head of cattle that are eventually harvested for food, of which approximately 27 million are processed through feedlots. These cattle, raised for 12-18 months in an average herd size of approximately 35 head, are often located in different geographic regions, aggregated into larger herds and then sold to centralized feedlots to increase their weight and value.

FEEDLOTS

Feedlots typically purchase cattle weighing 300 to 900 pounds and manage the health and growth of the cattle for a period of 110 to 250 days. We estimate that during this time, each animal is fed on average 20-30 lbs. of grain per day. There are approximately 700 major feedlot operations concentrated in 10 midwestern states. These feedlots can manage from 4,000 to 115,000 head of cattle at any given time. After reaching a weight of approximately 900 to 1,400 pounds, the animal is typically sold to a packer for harvesting.

PACKERS

Packers usually hold the cattle for two to 24 hours before harvesting and fabricating them for sale and eventual consumption. In addition to processing beef, packers inspect beef for cleanliness in preparation for quality grading. There are currently 64 major beef packing operations in the United States, which in total process approximately 35 million head of cattle into roughly 25 billion pounds of beef annually. Approximately 82% of the beef processed in the United States is processed by beef packing operations owned by IBP, Inc., Cargill, ConAgra, Inc. and Farmland Industries, Inc.

2002 FARM BILL

On May 13, 2002, President Bush signed into law the Farm Security and Rural Investment Act of 2002, more commonly known as the 2002 Farm Bill. One of its many initiatives requires country of origin labeling (“COOL”) for beef, lamb, pork, fish, perishable agricultural commodities and peanuts. Based on many of our customers’ and partners’ opinions, and Agricultural Marketing Services’ (“AMS”) interpretations of this law (AMS will be responsible for enforcing this portion of the law), the consequences on the industries subjected to

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this regulation could be substantial. The COOL regulations are currently scheduled to go into effect on September 30, 2004. However, for the entire supply chain to comply with the regulations, farmers and ranchers must begin recording data on their livestock this spring.

Since 1998, eMerge has been collecting and managing individual animal data in a manner similar to that which will be required by COOL. Our customers include Ranchers Renaissance, Beef Marketing Group, Five States Beef Initiative, and several other organizations, researchers, and independent producers who rely on our CattleLog suite of individual animal data collection and management products to provide them with high quality, easy to use, auditable data systems. We believe CattleLog will be instrumental in providing producers, feedyards and packers with a readily available, cost effective means for collecting data on their cattle relevant to COOL, animal health and production performance.

Most analysts estimate the cost of implementing COOL in the production sector at $4-6/head or $80 to $120 million, comprised primarily of record keeping systems and devices, inventory management, and additional personnel costs.

Market Demographics

The entire beef supply chain will likely be subject to new procedures due to the COOL law. About 60% of the steer/heifer slaughter as well as calf slaughter may need to be tracked or have additional data collected in order to comply with COOL. Because the regulations are staggered towards providing verifiable source information after the animal is harvested, we can roughly estimate total yearly throughput as seen in the table below.

Each animal in the 60% category presents an opportunity for data collection with an associated fee. Given the realities of the supply chain and the concentration points for cattle moving through the system, the feed yard and packer emerge as the most logical places for data collection.

LIMITATIONS OF THE CURRENT SYSTEM

The current cattle production chain contains a number of inefficiencies that reduce livestock quality and increase cost. These inefficiencies include multiple transaction costs, exposure to stress and disease, and, most importantly, the loss of important feeding and medication information.

As cattle move through the beef production chain, from an individual producer’s ranch to a feedlot to a meat packing facility, the cattle may be bought, sold and transported three or four times. Due to the highly fragmented nature of the cattle producer segment, the majority of cattle are sold through traditional livestock sales and auctions, which bring together regional buyers and sellers. The cattle are then sold either directly to feedlots or sold once again to larger buyers and then to feedlots. Typically, cattle sales and auctions are hosted at sale barns, where livestock brokers act as agents in the buying and selling of animals. The livestock broker is paid a fee or commission each time an individual lot of cattle is bought or sold. As a result of the geographic dispersion of

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producers and sale barns, buyers often purchase cattle from livestock brokers without having the opportunity to visually survey the cattle. In addition, this current method of exchange does not facilitate easy access to real-time price information or a geographically broad marketplace for the product.

The combination of the method of exchange used in traditional cattle sales and auctions and the fragmentation of the producer segment of the industry results in the repetitive transportation and handling of cattle. As cattle are moved from one environment to another throughout the production chain, they are commingled multiple times and can be exposed to contagious diseases. In addition, the transportation, handling and commingling of cattle often results in a predictable stress response, which may cause significant health deterioration.

We believe that industry participants generally collect and analyze information on cattle that go through the beef production process inconsistently and in a manual and time-consuming manner. Due to the nature of data collection and dissemination, cattle industry participants are unable to exchange critical information in an efficient and timely manner to optimize performance and beef quality. We believe that businesses in the cattle industry have not maximized the use of information to effectively address health, quality and performance issues.

We believe that an improved information flow between and within the three main groups of industry participants can significantly enhance product quality. There is currently no network or method for compiling and communicating information rapidly throughout all stages of the cattle production chain. There is also a growing retail demand for verified processed beef that has created an opportunity for our supply chain management operations to be the logistical provider of this type of product. Therefore, our products and services are directed at individual-animal tracking, supply-chain procurement and food safety in order to facilitate the safe, timely flow of source- and process-verified cattle and beef products within the beef-production supply chain. We believe our products and services can improve the industry’s productivity and profitability and help its participants enhance beef quality, safety and market share.

OUR PRODUCTS AND SERVICES

BEEF SUPPLY CHAIN MANAGEMENT

CattleLog

The CattleLog individual-animal data-collection and reporting system is designed to help cattle operations process-verify and “de-commoditize” electronically tracked animals and therefore, deliver cattle offering predictable performance.

CattleLog users can create continuously updated profiles that follow animals from birth through harvest, including specifications covering everything from genetics to health management. Prior and subsequent owners can then easily access the information via a password-protected area of eMerge’s web site in order to:

In addition, CattleLog is designed to help maintain consumer confidence in the safety of U.S. beef in the unlikely event that a large-scale bovine-health issue should arise in this country. If wide-scale adoption is achieved, we believe CattleLog would help officials quickly trace disease sources, focus remedial action only where it’s needed, and ensure consumers that the beef they’re buying is safe.

Components of CattleLog range from the affordable CattleLog ME to the highly automated CattleLog Pro. The portfolio combines our proprietary, Internet-based data-transfer architecture with advanced livestock management features. Our information-management system integrates Sun^® servers, Oracle^® RDBMS database  

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systems, and electronic-identification ear tags embedded with radio-frequency transponders. Our data-collection tools include data-acquisition software written for desktop PCs, and, to support data collection in the field, for Hewlett-Packard Jornada hand-held computers.

Web-based reports

CattleLog allows users easy, secure access to an array of sophisticated, web-based reports to streamline decision-making. Users simply log on to www.emergeinteractive.com to access an array of interactive reports. Both standardized and customizable reports accommodate more than 1,600 fields of data. Here, customers will find their own operations’ data presented in easy-to-interpret formats. They can manipulate this information for detailed analysis and benchmarking of their operations’ performance, print out the resulting reports, even e-mail them to their suppliers or customers.

Premium Sale Services

eMerge Premium Sales are a special type of cattle sale conducted at a traditional livestock market. Premium Sales have specific benefits for all participants whether seller, buyer or livestock market. We believe these sales are the single best way for producers of all sizes to earn more money for their cattle. We have helped return over $2 million in price premiums to producers, as well as provide individual sale summaries to each producer through the use of EID tags and CattleLog. Additionally, these sales present a unique opportunity for cattle buyers to find large numbers of weaned, health-certified cattle sold in uniform lots. The cattle sold at an eMerge Premium Sale all meet the following requirements:

Data Management

We also offer tools to help industry participants understand the data they have collected. Our PCC group, which we acquired in 1999, can provide customers with accurate analysis and market information for the feeding industry. PCC is in the business of collecting, calculating and disseminating feedlot data. PCC has spent 30 years refining its comparative analysis program and our staff has a complete understanding of the modern feeding industry—ensuring collected data is accurate and complete.

We provide customers with easy-to-read tables and graphs monthly as a comparative analysis report allowing them to compare the performance of their yard with regional averages. The analysis also helps customers see a broader view of the feedlot industry. Customers get detailed information on feed ingredient costs, industry profits and market trends.

FOOD SAFETY SOLUTIONS

VerifEYE

VerifEYE is our food safety technology that was originally developed and patented by scientists at Iowa State University and the Agricultural Research Service of the USDA for which we hold exclusive rights to its commercialization. For the past two years, we have been developing two commercial products that use our VerifEYE technology. These include the CIS unit and the Solo handheld inspection unit.

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The VerifEYE CIS is a real-time, electronically controlled, optical inspection system that creates image maps of potentially contaminated areas and displays them on a nearby monitor in real-time. The system also collects, displays and archives data as to the contaminated locations for each carcass as they are processed at line speeds. This data can also be integrated into an overall food safety, quality or HACCP program. The patented technology promises to help meat processors detect contamination and verify extensive safeguards already in place to minimize the possibility of outbreaks of such bacterial infections as E. coli 0157:H7, listeria and salmonella.

The Solo handheld inspection unit is a portable instrument, incorporating the VerifEYE imaging technology. The Solo System can be used to verify the absence of any trace levels of organic material on meat products and other objects or environments, which could harbor potentially deadly pathogens. We plan to introduce the Solo in early 2003 and have received orders for this product.

The USDA Agricultural Research Service, in trials conducted at Oklahoma State University and at the University of Florida, has confirmed that this breakthrough imaging technology can detect even microscopic traces of fecal material on freshly harvested beef—including beef that has been subjected to such pathogen interventions as acid washes and steam pasteurization.

In 2002, we announced an agreement to integrate our VerifEYE meat inspection system into Excel Corporation’s beef operations to finalize specifications for commercialization. Excel Corporation is a leading U.S. beef processor and a wholly-owned subsidiary of Cargill Incorporated, an international marketer, processor and distributor of agricultural, food, financial and industrial products and services with 90,000 employees in 57 countries. We licensed one commercial CIS unit at Excel in March 2003.

In September 2002, we launched a study to establish the efficacy of our VerifEYE food safety technology for detecting human bio-hazardous contamination including feces, a study which paves the way for developing VerifEYE -based tools to help reduce the spread of viral and bacterial infections in restaurants, daycare facilities, hospitals and other environments where workers come in contact with food. This application would complement our other VerifEYE products.

TECHNOLOGY AND DEVELOPMENT

We intend to continue to devote time and resources to enhance our current core technology, to improve our existing products, expand our product line and enter into other market segments. However, because CattleLog and VerifEYE are nearing completion, we expect our technology and development expenditures to continue to decrease in 2003. Approximately $2.9 million, $4.5 million and $7.7 million for the years ended December 31, 2002, 2001 and 2000, respectively, were related to technology and development spending. Our current technology and development activities are primarily focused on developing our CattleLog product to further support the COOL requirements and expanding our VerifEYE products, as discussed above.

SALES AND MARKETING

Our sales organization is structured around a direct sales team and domestic and international distributors. We have a staff of account managers who are responsible for sales of products and services to producer, feedlot and packer customers in given geographic territories.

We seek to establish broad customer awareness of our technologies, products and services within the industries we serve. Our marketing efforts include direct advertising through trade journals, press, and at local, state and national industry meetings and events. We also participate in professional societies and university programs and have developed strategic marketing relationships with industry professionals and academic institutions. Much of the initial interest in our products and services has been created through the extensive network of relationships we have in the cattle industry as well as through our sales organization.

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OUR CUSTOMERS

Our customer focus is the cattle cow/calf producer, the stocker and backgrounder, the feedyard operator, the packer or beef processor, various state beef quality assurance programs and branded beef alliances supporting retailers within the entire beef production chain.

INTELLECTUAL PROPERTY

Our ability to protect and utilize our intellectual property rights is important to our continued success. We currently have multiple patent applications that are pending before the U.S. Patent and Trademark Office relating to:

The U.S. patent number 5,914,247, relating to technology for detecting organic contamination on meat carcasses during and after slaughter is licensed to us by the Iowa State University Research Foundation and the USDA under a license agreement entered into in August 1999. The license provides us with an exclusive worldwide license, until the patents expire on a country-by-country basis, to develop and sell products and services that utilize the inventions contained in the patents. In exchange for the license, we are obligated to pay Iowa State University a royalty on revenues we receive from the sale of products and services related to the license.

We believe our commercial success depends on our ability to protect our proprietary technology and enforce our rights in the technology we license to other parties. We currently rely on a combination of patents, copyrights and trade secrets to protect our proprietary technology. We are not aware of any patents held by others that would prevent us from manufacturing and commercializing our technology in the United States and abroad.

We have filed an application to register eMerge Interactive^™, VerifEYE^™ and Solo^™ and related service marks with the U.S. Patent and Trademark Office.

COMPETITION

We compete against other companies in the information services segment, including established cattle and livestock information services. We also face competition from cattle industry product manufacturers who use information technology to promote the effectiveness of their products. These services are often provided in connection with the sale of products to industry participants. We believe that the primary competitive factors in the information services market include:

We believe that we compete based on these factors particularly due to the size and quality of our proprietary database, the timeliness of our service offerings, the expertise of our professionals and the convenience and ease of use of our Web sites.

We believe that no one directly competes against our VerifEYE technology, which was developed and patented by scientists at Iowa State University and The Agricultural Research Service. We hold the exclusive rights to its commercialization.

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EMPLOYEES

As of December 31, 2002, we employed a total of 52 persons, all of whom work with us on a full-time basis. We are not subject to any collective bargaining agreements and we believe that our relationship with our employees is good.

ITEM 1(D).    FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

We do not currently have foreign sales and do not believe geographic sales are significant to obtaining an understanding of our business operations during the three-year period ended December 31, 2002.

ITEM 2.    PROPERTIES

The location and general description of our properties as of March 1, 2003, are as follows:

Corporate Headquarters

Our corporate facility is located at 10305 102^nd Terrace in Sebastian, Florida, where we currently occupy approximately 32,000 square feet of office, administrative and data center space. Beginning April 1, 2003, we will occupy 20,240 square feet. We lease our facilities from XL Realty Corp., a subsidiary of Safeguard. Our lease for this facility expires on March 31, 2003 and we plan to enter a new lease for the reduced square footage through March 31, 2006.

Other Facilities

We maintain sales and support offices in Weatherford, Oklahoma, which we rent on a month-to-month basis, to support our PCC operation.

ITEM 3.    LEGAL PROCEEDINGS

We have been named as a defendant in a lawsuit filed by Central Biotech, Inc. on January 12, 2000 in the Queen’s Bench Judicial Centre of Regina, Province of Saskatchewan, Canada. The complaint alleges that E-Y LABORATORIES INC. and we were each subject to confidentiality agreements with the plaintiff, and subsequently engaged in discussions concerning a potential business arrangement allegedly in violation of these agreements. The complaint asserts damages, including punitive damages, from the defendants in the aggregate amount of $18 million (Canadian dollars), as well as injunctive relief.

In 2000, our motion to dismiss the case based on jurisdiction and venue was denied at the trial court level in Saskatchewan, as was the similar motion by co-defendant E-Y Laboratories. Both defendants have appealed that decision, and are in the process of presenting their position to the appeals court. We continue to believe that the matter should be dismissed, but it is not possible to predict whether the appellate court in Canada will reverse the lower court decision. If the case is not dismissed, it will proceed in Canada. We believe the case to be without merit and intend to defend it vigorously.

On January 18, 2002, we were named as a defendant in a lawsuit by Stonebridge Acquisition, Inc. in the County Court of Dallas County at Law No. 2, Dallas County, Texas. On August 22, 2002, we entered into a compromise settlement agreement in which we agreed to pay $150,000 and were released from any and all claims.

We are involved in various other claims and legal actions arising in the ordinary course of business. Our opinion is that the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 2002.

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PART II

Our common stock trades in the NASDAQ National Market under the symbol “EMRG.” Prior to our February 4, 2000, IPO there was no established public trading market for any of our securities. The price range per share reflected in the table below is the highest and lowest sale price for our stock as reported by the NASDAQ National Market during each quarter of the last two fiscal years:

As of March 17, 2003, the last reported sale price for our common stock on the NASDAQ National Market was $0.34 per share and we had 593 registered holders of record of our common stock.

We have never declared or paid any dividends on our common stock. We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and the expansion of our business. Any future determination to pay cash dividends will be at the discretion of the board of directors and will be dependent upon our financial condition, operating results, capital requirements and such other factors as the board of directors deems relevant.

Recent Sales of Unregistered Securities