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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

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FORM 10-Q

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------
|  |                                                                                        
|  | For the quarterly period ended September 30, 2002                                      

or

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------
|  |                                                                                         
|  | For the transition period from __________ to __________                                 

Commission File No.
0-22958

INTERPORE INTERNATIONAL, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 95-3043318                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification number)
|                                                               |  |                                        
|181 Technology Drive, Irvine, California                       |  | 92618-2402                             
|(Address of Principal Executive Offices)                       |  | (Zip Code)                             

Registrants telephone number, including area
code:  (949) 453-3200

|Not applicable
|--------------
|              
|              

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 proceeding 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 | o
|--- | - | -- | -

As of November 8, 2002, there were 17,286,161 shares of
the registrants common stock issued and outstanding.

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Interpore International, Inc.

Index

|                                                                         |                                                                                       | Page(s)                                                                                                                                            
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                         |                                                                                       |                                                                                                                                                    
|PART I.                                                                  | FINANCIAL INFORMATION                                                                 |                                                                                                                                                    
|                                                                         |                                                                                       |                                                                                                                                                    
|Item 1.                                                                  | Financial Statements                                                                  |                                                                                                                                                    
|                                                                         |                                                                                       |                                                                                                                                                    
|                                                                         |                                                                                       | Condensed Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002 (unaudited)                                                   
|                                                                         |                                                                                       |                                                                                                                                                    
|                                                                         |                                                                                       | Condensed Consolidated Statements of Income (unaudited) for the  three month and nine month periods ended September 30, 2001 and September 30, 2002
|                                                                         |                                                                                       |                                                                                                                                                    
|                                                                         |                                                                                       | Condensed Consolidated Statements of Cash Flows (unaudited) for the nine month periods ended September 30, 2001 and September 30, 2002             
|                                                                         |                                                                                       |                                                                                                                                                    
|                                                                         |                                                                                       | Notes to Condensed Consolidated Financial Statements                                                                                               
|                                                                         |                                                                                       |                                                                                                                                                    
|Item 2.                                                                  | Managements Discussion and Analysis of Financial Condition and Results of Operations | 9                                                                                                                                                  
|                                                                         |                                                                                       |                                                                                                                                                    
|Item 3.                                                                  | Quantitative and Qualitative Disclosures about Market Risk                            | 19                                                                                                                                                 
|                                                                         |                                                                                       |                                                                                                                                                    
|Item 4.                                                                  | Controls and Procedures                                                               | 19                                                                                                                                                 
|                                                                         |                                                                                       |                                                                                                                                                    
|PART II.                                                                 | OTHER INFORMATION                                                                     |                                                                                                                                                    
|                                                                         |                                                                                       |                                                                                                                                                    
|Item 1.                                                                  | Legal Proceedings                                                                     | 20                                                                                                                                                 
|                                                                         |                                                                                       |                                                                                                                                                    
|Item 6.                                                                  | Exhibits and Reports on Form 8-K                                                      | 20                                                                                                                                                 
|                                                                         |                                                                                       |                                                                                                                                                    
|Signatures                                                               | 21                                                                                   
|                                                                         |                                                                                      
|Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 22                                                                                   

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Interpore International, Inc.Condensed Consolidated Balance Sheets(in thousands, except share data)

|                                           |                                                                                                                                                                              | December 31, 2001 |        | September 30, 2002 |  
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------ | ------------------ | -
|                                           |                                                                                                                                                                              |                   |        |                    |  
|                                           |                                                                                                                                                                              |                   |        | (unaudited)        |  
|Assets                                     |                                                                                                                                                                              |                   |        |                    |  
|Current assets:                            |                                                                                                                                                                              |                   |        |                    |  
|                                           | Cash and cash equivalents                                                                                                                                                    |                   | $      | 6,538              |  
|                                           | Accounts receivable, less allowance for doubtful accounts of $688 and $800 in 2001 and 2002, respectively                                                                    |                   |        | 13,051             |  
|                                           | Inventories                                                                                                                                                                  |                   |        | 16,479             |  
|                                           | Prepaid expenses                                                                                                                                                             |                   |        | 763                |  
|                                           | Deferred income taxes                                                                                                                                                        |                   |        | 1,964              |  
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Total current assets                       |                                                                                                                                                                              |                   | 38,795 |                    |  
|Property, plant and equipment, net         |                                                                                                                                                                              |                   | 2,354  |                    |  
|Deferred income taxes                      |                                                                                                                                                                              |                   | 1,022  |                    |  
|Intangible assets, net                     |                                                                                                                                                                              |                   | 22,130 |                    |  
|Other assets                               |                                                                                                                                                                              |                   | 261    |                    |  
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Total assets                               |                                                                                                                                                                              | $                 | 64,562 |                    | $
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Liabilities and stockholders equity       |                                                                                                                                                                              |                   |        |                    |  
|Current liabilities:                       |                                                                                                                                                                              |                   |        |                    |  
|                                           | Accounts payable                                                                                                                                                             |                   |        | 1,981              |  
|                                           | Accrued compensation and related expenses                                                                                                                                    |                   |        | 1,969              |  
|                                           | Accrued royalties                                                                                                                                                            |                   |        | 474                |  
|                                           | Income taxes payable                                                                                                                                                         |                   |        | 664                |  
|                                           | Other accrued liabilities                                                                                                                                                    |                   |        | 544                |  
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Total current liabilities                  |                                                                                                                                                                              |                   | 5,632  |                    |  
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Long-term debt                             |                                                                                                                                                                              |                   |       |                    |  
|Commitments and contingencies              |                                                                                                                                                                              |                   |        |                    |  
|Stockholders equity:                      |                                                                                                                                                                              |                   |        |                    |  
|                                           | Series E convertible preferred stock, voting, par value $.01 per share: Authorized shares - 594,000; issued and outstanding shares - none                                    |                   |        |                   |  
|                                           | Preferred stock, par value $.01 per share: Authorized shares - 4,406,000; outstanding shares - none                                                                          |                   |        |                   |  
|                                           | Common stock, par value $.01 per share: Authorized shares - 50,000,000; issued and outstanding shares  17,543,605 at December 31, 2001 and 17,891,161 at September 30,
2002 |                   |        | 175                |  
|                                           | Additional paid-in-capital                                                                                                                                                   |                   |        | 62,717             |  
|                                           | Retained earnings (accumulated deficit)                                                                                                                                      |                   |        | (853               | )
|                                           |                                                                                                                                                                              |                   |        |                    |  
|                                           |                                                                                                                                                                              |                   | 62,039 |                    |  
|                                           | Less treasury stock, at cost - 605,000 shares at December 31, 2001 and September 30, 2002                                                                                    |                   |        | (3,109             | )
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Total stockholders equity                 |                                                                                                                                                                              |                   | 58,930 |                    |  
|                                           |                                                                                                                                                                              |                   |        |                    |  
|Total liabilities and stockholders equity |                                                                                                                                                                              | $                 | 64,562 |                    | $
|                                           |                                                                                                                                                                              |                   |        |                    |  

See accompanying notes.

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Interpore International, Inc.Condensed Consolidated Statements of Income(in thousands, except per share data) (unaudited)

|                                               |                            | Three months ended September 30, |        | Nine months ended September 30, |  
|---------------------------------------------- | -------------------------- | -------------------------------- | ------ | ------------------------------- | -
|                                               |                            |                                  |        |                                 |  
|                                               |                            | 2001                             |        | 2002                            |  
|                                               |                            |                                  |        |                                 |  
|Net sales                                      |                            | $                                | 12,230 |                                 | $
|Cost of goods sold                             |                            |                                  | 3,457  |                                 |  
|                                               |                            |                                  |        |                                 |  
|Gross profit                                   |                            |                                  | 8,773  |                                 |  
|                                               |                            |                                  |        |                                 |  
|Operating expenses:                            |                            |                                  |        |                                 |  
|                                               | Research and development   |                                  |        | 1,600                           |  
|                                               | Selling and marketing      |                                  |        | 4,588                           |  
|                                               | General and administrative |                                  |        | 1,487                           |  
|                                               |                            |                                  |        |                                 |  
|Total operating expenses                       |                            |                                  | 7,675  |                                 |  
|                                               |                            |                                  |        |                                 |  
|Income from operations                         |                            |                                  | 1,098  |                                 |  
|                                               |                            |                                  |        |                                 |  
|Interest income                                |                            |                                  | 80     |                                 |  
|Interest expense                               |                            |                                  | (7     | )                               |  
|Other income                                   |                            |                                  | 151    |                                 |  
|                                               |                            |                                  |        |                                 |  
|Total interest and other income, net           |                            |                                  | 224    |                                 |  
|                                               |                            |                                  |        |                                 |  
|Income before taxes                            |                            |                                  | 1,322  |                                 |  
|Income tax provision (benefit)                 |                            |                                  | 509    |                                 |  
|                                               |                            |                                  |        |                                 |  
|Net income                                     |                            | $                                | 813    |                                 | $
|                                               |                            |                                  |        |                                 |  
|Net income per share:                          |                            |                                  |        |                                 |  
|                                               | Basic                      |                                  | $      | .05                             |  
|                                               | Diluted                    |                                  | $      | .05                             |  
|Shares used in computing net income per share: |                            |                                  |        |                                 |  
|                                               | Basic                      |                                  |        | 16,436                          |  
|                                               | Diluted                    |                                  |        | 17,020                          |  

See accompanying notes.

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Interpore International, Inc.Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

|                                                                                            |                                               | Nine months ended September 30, |       
|------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------------------- | ------
|                                                                                            |                                               |                                 |       
|                                                                                            |                                               | 2001                            |       
|                                                                                            |                                               |                                 |       
|Cash flows from operating activities                                                        |                                               |                                 |       
|Net income                                                                                  |                                               | $                               | 3,047 
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                               |                                 |       
|                                                                                            | Depreciation                                  |                                 |       
|                                                                                            | Amortization                                  |                                 |       
|                                                                                            | Compensation expense from stock option grants |                                 |       
|                                                                                            | Changes in operating assets and liabilities:  |                                 |       
|                                                                                            | Accounts receivable                           |                                 |       
|                                                                                            | Inventories                                   |                                 |       
|                                                                                            | Prepaid expenses                              |                                 |       
|                                                                                            | Other assets                                  |                                 |       
|                                                                                            | Accounts payable and accrued liabilities      |                                 |       
|                                                                                            |                                               |                                 |       
|Net cash provided by (used in) operating activities                                         |                                               |                                 | 2,509 
|                                                                                            |                                               |                                 |       
|Cash flows from investing activities                                                        |                                               |                                 |       
|Net cash paid for American OsteoMedix Corporation                                           |                                               |                                 | (8,413
|Capital expenditures                                                                        |                                               |                                 | (738  
|Expenditures for patent rights and other intangible assets                                  |                                               |                                 | (73   
|                                                                                            |                                               |                                 |       
|Net cash used in investing activities                                                       |                                               |                                 | (9,224
|                                                                                            |                                               |                                 |       
|Cash flows from financing activities                                                        |                                               |                                 |       
|Proceeds from long-term debt                                                                |                                               |                                 |      
|Proceeds from exercise of stock options                                                     |                                               |                                 | 3     
|Proceeds from employee stock purchase plan                                                  |                                               |                                 | 40    
|Repayment of capital lease obligations                                                      |                                               |                                 | (10   
|                                                                                            |                                               |                                 |       
|Net cash provided by financing activities                                                   |                                               |                                 | 33    
|                                                                                            |                                               |                                 |       
|Net decrease in cash and cash equivalents                                                   |                                               |                                 | (6,682
|Cash and cash equivalents at beginning of period                                            |                                               |                                 | 14,610
|                                                                                            |                                               |                                 |       
|Cash and cash equivalents at end of period                                                  |                                               | $                               | 7,928 
|                                                                                            |                                               |                                 |       
|                                                                                            |                                               |                                 |       

See accompanying notes.

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Interpore International, Inc.Notes to Condensed Consolidated Financial Statements September 30, 2002(unaudited)

1.     Organization and Description of
Business

Interpore International, Inc., doing business as Interpore Cross International, together with
its subsidiaries, unless the context implies otherwise (Interpore Cross), operates in one business segment: the design, manufacture and marketing of medical devices for the orthopedic marketplace.   Interpores products
are distributed in the United States and internationally.

2.     Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to Securities and Exchange Commission
regulations.  In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position
at September 30, 2002 and the consolidated results of operations and cash flows for the periods ended September 30, 2001 and 2002.

The accompanying condensed consolidated financial statements include the accounts of Interpore Cross and its subsidiaries after
elimination of all significant intercompany transactions.  On July 10, 2001, Interpore Cross completed the acquisition of American OsteoMedix Corporation, (AOM), a developer, manufacturer and marketer of minimally invasive surgery
products.  The transaction has been accounted for using the purchase method of accounting.  Results of operations of AOM are included in our consolidated results of operations beginning on July 10, 2001.

The results of operations and cash flows for the periods ended September 30, 2002 are not necessarily indicative of results to be
expected for future quarters or the full year.

These consolidated financial statements should be read in
conjunction with the financial statements included in Interpore Cross Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the Securities and Exchange Commission.

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3.     Earnings Per Share

Basic earnings per share (EPS) is calculated by dividing net earnings by the weighted average number of common shares outstanding for
the period.  Diluted EPS reflects the assumed conversion of all dilutive securities, consisting of employee stock options and warrants.  The following table presents the computation of net income per share (in thousands, except per share
data):

|                                                        |                                                | Three months ended September 30, |        | Nine months ended September 30, |  
|------------------------------------------------------- | ---------------------------------------------- | -------------------------------- | ------ | ------------------------------- | -
|                                                        |                                                |                                  |        |                                 |  
|                                                        |                                                | 2001                             |        | 2002                            |  
|                                                        |                                                |                                  |        |                                 |  
|Net income                                              |                                                | $                                | 813    |                                 | $
|                                                        |                                                |                                  |        |                                 |  
|Shares used in computing net income per share - basic:  |                                                |                                  |        |                                 |  
|                                                        | Weighted average common shares outstanding     |                                  |        | 16,436                          |  
|Effect of dilutive securities:                          |                                                |                                  |        |                                 |  
|                                                        | Shares issuable pursuant to stock option plans |                                  |        | 584                             |  
|                                                        |                                                |                                  |        |                                 |  
|Shares used in computing net income per share - diluted |                                                |                                  | 17,020 |                                 |  
|                                                        |                                                |                                  |        |                                 |  
|Net income per share - basic                            |                                                | $                                | .05    |                                 | $
|Net income per share - diluted                          |                                                | $                                | .05    |                                 | $

4.     Inventories

Inventories are stated at the lower of first-in, first-out average cost or market.  Inventories are comprised of the following (in
thousands):

|                |  | December 31, 2001 |        | September 30, 2002 |  
|--------------- |  | ----------------- | ------ | ------------------ | -
|                |  |                   |        |                    |  
|Raw materials   |  | $                 | 1,503  |                    | $
|Work-in-process |  |                   | 742    |                    |  
|Finished goods  |  |                   | 14,234 |                    |  
|                |  |                   |        |                    |  
|                |  | $                 | 16,479 |                    | $
|                |  |                   |        |                    |  

5.     Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards (SFAS) No. 141,
Business Combinations and No. 142, Goodwill and Other Intangible Assets.  SFAS No. 141 addresses financial accounting and reporting for business combinations and requires all business combinations to be accounted for using the
purchase method.  SFAS No. 142 addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination.  Goodwill and other intangible assets with indefinite lives are no longer
amortized, but instead subject to impairment tests at least annually.  The impairment test is comprised of two parts.  The first step compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the
carrying amount exceeds the fair value of a reporting unit, the second step of the goodwill impairment test must be performed.  The second step compares the implied fair value of the reporting units goodwill with the respective carrying
amount in order to determine the amount of impairment loss, if any.  In July 2001, upon the acquisition of AOM, Interpore Cross early adopted SFAS No. 141 and SFAS No. 142.  In connection with the acquisition, approximately $20 million of
the purchase price was allocated to goodwill.  Prior to July 2001, Interpore Cross had no goodwill or other intangible assets with indefinite lives.  In accordance with SFAS No. 142, Interpore performed the first part of the two-step
goodwill impairment test.  For Interpore Cross subsidiary, AOM, for which goodwill was recorded, Interpore Cross determined that the fair value

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exceeded the carrying amount as of January 1, 2002.  As a result, the second step of the impairment test was not
required.  Interpore Cross performed the annual impairment test during the quarter ending September 30, 2002 and found no impairment of goodwill.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets.  SFAS No. 144 Supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of and other related accounting guidance.  SFAS No. 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged.  The provisions of SFAS No. 144 generally are to be applied prospectively.  Interpore
Cross adopted the statement on January 1, 2002 and believes no impairment of the carrying value of its long-lived assets existed upon adoption and at September 30, 2002.

In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities.  SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to
Exit and Activity (including Certain Costs Incurred in a Restructuring).The principal difference between SFAS 146 and EITF 94-3 relates to the timing of the recognition of a liability for a cost associated with an exit or disposal
activity.  SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  Under EITF 94-3, a liability for an exit cost as generally defined in EITF 94-3 is to be
recognized at the date of an entitys commitment to an exit plan.  SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002.

6.     Contingencies

On September 5, 2000, Interpore
Cross wholly-owned subsidiary, Cross Medical Products, Inc. (Cross), filed suit in the U.S. District Court, Central District of California, against DePuy AcroMed, Inc., a Johnson & Johnson company and Biedermann Motech GmbH,
which suit alleges that DePuy AcroMed has infringed and continues to infringe Cross U.S. Patent Nos. 5,466,237 and 5,474,555.  These patents relate to screw technology embodied in certain components of the SYNERGY Spinal System.  The
Complaint seeks damages for willful past and continuing infringement of the patents.  The Complaint also seeks a declaratory judgment against DePuy AcroMed and Biedermann Motech that Cross is not infringing Biedermann Motechs Patent No.
5,207,678.  DePuy AcroMed has responded to the Complaint alleging that Cross patents are invalid and unenforceable, and alleging that it does not infringe.

On May 21, 2001, the Court dismissed Cross declaratory judgment claim, ruling that Biedermann Motech is not subject to personal
jurisdiction in California and is indispensable to the claim.  On January 30, 2002, the Court granted Cross motion for summary judgment of infringement of certain claims of the 237 Patent.  On February 11, 2002, the Court
granted Cross motion for summary judgment of infringement of certain claims of the 555 Patent.  On March 20, 2002, the Court granted DePuy AcroMeds motion for summary judgment of invalidity of the 237 Patent, ruling that
this patent is partially invalid.  Cross is exploring strategies in response to this ruling and currently plans to challenge it.  However, there can be no assurance that Cross will be successful in any such challenge.  The trial is
currently scheduled for March 2003.  On October 31, 2002, DePuy AcroMed filed a motion for summary judgment of invalidity of the 555 Patent.  That motion is currently scheduled to be heard on November 25, 2002, however, the parties
have requested that the court postpone the hearing to December 23, 2002.

Aside from the patent litigation,
the nature of Interpore Cross business subjects it to product liability and various other legal proceedings from time to time.  Interpore Cross is currently involved in legal proceedings incidental to the normal conduct of its
business.  It does not believe that any liabilities relating to the legal proceedings to which it is a party are likely to be, individually or in the aggregate, material to its consolidated financial condition or results of
operations.

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Item 2.  
Managements Discussion and Analysis of Financial Condition and Results of Operations

Financial Overview

Our revenues are generated from the sale of medical devices in three principal categoriesspine products, orthobiologic products
and minimally invasive surgery products.  Our spine products consist of titanium or stainless steel hooks, rods, plates, spacers and screws and related instruments required for the surgeon to assemble a construct which restores the natural
anatomy of the spine, keeping it immobilized while a bone graft eventually fuses the vertebrae.  Our orthobiologic products consist of synthetic bone graft substitute materials and products used to derive Autologous Growth Factors
(AGF).  AGF fibrinogen-rich extract is used to provide faster, more complete bone growth and enhance the performance of our bone graft products.  Our minimally invasive surgery products consist of instruments and devices used to
deliver biocompatible materials into bony structures in a minimally invasive procedure.  The products in this category were obtained in our July 10, 2001 acquisition of American OsteoMedix Corporation (AOM), a developer,
manufacturer and marketer of minimally invasive surgery products.

All of our operations are located in
the United States, however, we sell our products to customers both within and outside the United States.  Within the United States, we distribute our products primarily through independent agents.  These independent agents provide a
delivery and consultative service to our surgeon and hospital customers and receive commissions based on sales in their territories.  The commissions are reflected in our income statement within selling and marketing expense.

For our spine products and minimally invasive surgery products, we invoice hospitals directly following a surgical
procedure in which our products are used.  These products are made available to hospitals from consignment inventories maintained by our independent agents, or from loaner implant sets that we ship from our facility.  For our orthobiologic
products, we generally ship directly to hospitals from our facility, and we invoice hospitals upon shipment.

Outside the United States, we sell our products directly to distributors who maintain an inventory of our products.  We record
revenue at the time of shipment to the distributor at prices reflecting a discount from our U.S. list prices.  The distributors service the surgeons and hospitals, deliver products and invoice hospitals directly at prices determined by the
distributors.

Because our revenues from U.S. hospitals are primarily at list price, and our revenues
from international distributors are at a discount to U.S. list prices, our overall gross margin is subject to fluctuation based on our domestic versus international sales mix, with domestic gross margins being somewhat higher than international
gross margins.  Additionally, the mix between spine products sales and orthobiologic products sales also affects our gross margins, with slightly higher margins in orthobiologics.

Critical Accounting Policies and Estimates

Our discussion and analysis of our
financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  On an on-going basis, we evaluate our estimates including those related to product returns, bad debts,
inventories, intangible assets, income taxes and litigation.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

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|We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial statements:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                              
|                                                                                                                                                             
|                                                                                                                                                              
|                                                                                                                                                             
|                                                                                                                                                              
|                                                                                                                                                             
|                                                                                                                                                              
|                                                                                                                                                             
|                                                                                                                                                              
|                                                                                                                                                             

Results of Operations

The following table presents our results of operations as percentages:

|                       |                            | Three months ended September 30, |       | Nine months ended September 30, |  
|---------------------- | -------------------------- | -------------------------------- | ----- | ------------------------------- | -
|                       |                            |                                  |       |                                 |  
|                       |                            | Percentage of net sales          |       | Percentage change               |  
|                       |                            |                                  |       |                                 |  
|                       |                            | 2001                             |       | 2002                            |  
|                       |                            |                                  |       |                                 |  
|Net sales              |                            |                                  | 100.0 | %                               |  
|Cost of goods sold     |                            |                                  | 28.3  | %                               |  
|                       |                            |                                  |       |                                 |  
|                       | Gross profit               |                                  |       | 71.7                            | %
|                       |                            |                                  |       |                                 |  
|Operating expense:     |                            |                                  |       |                                 |  
|                       | Research and development   |                                  |       | 13.1                            | %
|                       | Selling and marketing      |                                  |       | 37.5                            | %
|                       | General and administrative |                                  |       | 12.1                            | %
|                       |                            |                                  |       |                                 |  
|                       | Total operating expenses   |                                  |       | 62.7                            | %
|                       |                            |                                  |       |                                 |  
|Income from operations |                            |                                  | 9.0   | %                               |  
|                       |                            |                                  |       |                                 |  
|                       |                            |                                  |       |                                 |  

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Three months ended September 30, 2001 and 2002

For the quarter ended September 30, 2002, net sales of $14.7 million were $2.5 million or 20.4% higher than net sales of $12.2 million
for the same period of 2001.  The following table presents net sales by category (in thousands):

|                                         |           | Three months ended September 30, |       | Change |  
|---------------------------------------- | --------- | -------------------------------- | ----- | ------ | -
|                                         |           |                                  |       |        |  
|                                         |           | 2001                             |       | 2002   |  
|                                         |           |                                  |       |        |  
|Spine product sales                      |           | $                                | 6,969 |        | $
|Orthobiologic product sales              |           |                                  | 4,651 |        |  
|Minimally invasive surgery product sales |           |                                  | 610   |        |  
|                                         |           |                                  |       |        |  
|                                         | Net sales |                                  | $     | 12,230 |  
|                                         |           |                                  |       |        |  

Sales of
spine products for the quarter ended September 30, 2002 increased $2.6 million or 37.3% to $9.6 million, compared to $7.0 million for the quarter ended September 30, 2001.  Growth in spine product sales was primarily driven by increased sales
of the SYNERGY Spinal System, increased sales of our C-TEK® Anterior Cervical Plate System and sales of our recently released GEO STRUCTURE Device.

Sales of orthobiologic products decreased $451,000 or 9.7% to $4.2 million for the quarter ended September 30, 2002, compared to $4.7
million for the quarter ended September 30, 2001.  We believe that the declines in sales of our orthobiologic products have resulted from the focus of our independent agents on the spinal surgery market.  To combat the decline in sales of
our orthobiologic products, we recently introduced an allograft putty product, and we plan to introduce ACCESS, our improved AGF processing system in the first quarter of 2003.  Additionally, we are expanding a direct sales force and
focusing its efforts on our orthobiologic products.  We anticipate that these efforts may begin to offset the declining sales of our orthobiologic products; however, we cannot assure you that we will be able to successfully introduce ACCESS or
that ACCESS will begin to contribute to our sales or that our efforts to reverse the sales trend will be successful.

Sales of minimally invasive surgery products increased $345,000 or 56.6% to $955,000 for the quarter ended September 30, 2002 compared
with $610,000 for the third quarter of 2001.

Domestic sales for all product categories increased $2.0
million or 20.4% to $12.0 million for the quarter ended September 30, 2002, compared to $10.0 million for the same period of 2001.  International sales of $2.7 million for the quarter ended September 30, 2002 were higher by $456,000 or 20.2%,
compared to $2.3 million for the quarter ended September 30, 2001.

For the quarter ended September 30,
2002, the gross margin was 71.0% of net sales compared to 71.7% of net sales for the quarter ended September 30, 2001.

Total operating expenses for the quarter ended September 30, 2002 increased by $2.4 million or 31.2% to $10.1 million, compared to $7.7
million for the quarter ended September 30, 2001.  As a percentage of net sales, total operating expenses increased from 62.8% in the quarter ended September 30, 2001 to 68.4% in the quarter ended September 30, 2002.  Research and
development expenses increased by $255,000 or 15.9%, due primarily to efforts related to the development of potential new products.  Selling and marketing expenses increased 38.8% or $1.8 million compared to the third quarter of 2001 primarily
due to commissions on increased sales, the costs of additional product specialists in the field and the costs of our initial direct sales force for orthobiologic products.  General and administrative expenses for the quarter ended September 30,
2002 increased by $358,000 or 24.1% compared to the quarter ended September 30, 2001, primarily as a result of consulting fees associated with income tax savings projects undertaken during the quarter ended September 30, 2002.

Total interest and other income decreased $32,000 or 14.3%, to $192,000 for the quarter ended September 30, 2002, compared to
$224,000 during the same period of 2001.  The decrease in interest income resulted from lower average cash and cash equivalents balances in 2002 partially offset by increased royalty income.

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The tax savings projects undertaken
during the third quarter ended September 30, 2002 generated a significant tax benefit in the quarter, resulting in the reversal of the $811,000 tax provision that had been recorded for the first six months of 2002.  The effective tax rate for
the third quarter of 2001 was 38.5%.

Nine months ended September 30, 2001 and 2002

For the nine months ended September 30, 2002, net sales of $43.2 million were $6.6 million or 18.2% higher than net sales of $36.5
million for the same period of 2001.  The following table presents net sales by category (in thousands):

|                                         |           | Nine months ended September 30, |        | Change |  
|---------------------------------------- | --------- | ------------------------------- | ------ | ------ | -
|                                         |           |                                 |        |        |  
|                                         |           | 2001                            |        | 2002   |  
|                                         |           |                                 |        |        |  
|Spine product sales                      |           | $                               | 21,057 |        | $
|Orthobiologic product sales              |           |                                 | 14,860 |        |  
|Minimally invasive surgery product sales |           |                                 | 610    |        |  
|                                         |           |                                 |        |        |  
|                                         | Net sales |                                 | $      | 36,527 |  
|                                         |           |                                 |        |        |  

Sales of
spine products for the nine months ended September 30, 2002 increased by $5.7 million or 27.0% to $26.7 million, compared to $21.0 million for the nine months ended September 30, 2001.  Growth in spine product sales was driven primarily by
increased domestic sales of the SYNERGY Spinal System and increased sales of the C-TEK Anterior Cervical Plate System.

Sales of orthobiologic products decreased $1.5 million or 10.1% to $13.4 million for the nine months ended September 30, 2002, compared
to $14.9 million for the nine months ended September 30, 2001.  To combat the decline in sales of our orthobiologic products, we recently introduced an allograft putty product, and we plan to introduce ACCESS, our improved AGF processing system
in the first quarter of 2003.  Additionally, we are expanding a direct sales force and focusing its efforts on our orthobiologic products.  We anticipate that these efforts may begin to offset the declining sales of our orthobiologic
products; however, we cannot assure you that we will be able to successfully introduce ACCESS or that ACCESS will begin to contribute to our sales or that our efforts to reverse the sales trend will be successful.

Sales of minimally invasive surgery products were $3.1 million for the nine months ended September 30, 2002, compared to $610,000 for
the nine months ended September 30, 2001.  These products were acquired as part of the AOM acquisition on July 10, 2001, and accordingly, the 2001 period only included sales since the acquisition.

Domestic sales for all product categories increased $6.8 million or 23.5% to $35.4 million for the nine months ended September 30, 2002,
compared to $28.7 million for the same period of 2001.  International sales of $7.7 million for the nine months ended September 30, 2002 were approximately the same for the nine months ended September 30, 2001.

For the nine months ended September 30, 2002, the gross margin was 71.9% of sales compared to 71.1% of sales for the nine months ended
September 30, 2001.

Total operating expenses for the nine months ended September 30, 2002 increased by
$7.0 million or 32.1% to $28.9 million, compared to $21.9 million for the same period of 2001.  As a percentage of net sales, total operating expenses increased from 59.8% in the nine months ended September 30, 2001 to 66.9% in the same period
of 2002.  Research and development expenses increased for the nine months ended September 30, 2002 by $948,000 or 19.4% as compared to the same period in 2001 due primarily to efforts related to the development of potential new products and
expenses related to AOM.  Selling and marketing expenses for the nine months ended September 30, 2002 increased $4.6 million or 34.7% compared to the nine months ended September 30, 2001, primarily due to commissions on increased sales, the
costs of additional sales personnel and expenses related to AOM.  General and administrative expenses increased by $1.5 million or 39.4% compared to the nine months ended September 30,

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2001, primarily as a result of legal expenses associated with the DePuy AcroMed patent litigation, which expenses increased by
$891,000 to $1.2 million for the nine months ended September 30, 2002, increased products liability insurance on higher sales and expenses related to AOM.

Total interest and other income decreased $326,000 or 39.2%, to $506,000 for the nine months ended September 30, 2002, compared to
$832,000 during the same period of 2001.  The decrease in  interest income resulted from lower average cash and cash equivalents balances in 2002.

Because of the significant tax benefit in 2002 resulting from tax savings projects undertaken during the third quarter ended September
30, 2002, we recorded no income tax provision for the nine months ended September 30, 2002.  The effective tax rate for the nine month period ended September 30, 2001 was 38.5%.  We anticipate that no income tax provision will be recorded
for the year 2002, but that the effective tax rate for the year 2003 will return to a rate approximating 38%, absent any further tax savings projects.

Liquidity and Capital
Resources

At September 30, 2002, cash and cash equivalents were $1.3 million, down $5.2 million from $6.5
million at December 31, 2001.  We have a $10.0 million secured revolving bank line of credit which expires in June 2005.  At September 30, 2002, we had borrowed approximately $3.3 million under this facility to fund our working capital
needs.

During the nine months ended September 30, 2002, we invested significantly in the development
of new spine products and orthobiologic products scheduled for market launch in 2002 and 2003.  In addition to product development costs, we require substantial inventories to support the launch and future sales of these products.  This is
especially significant in our spine business, where we must build complete sets of implants in many designs and sizes together with the instruments required for their surgical implantation.  Enough complete sets must be manufactured to support
consignment inventory needs for our domestic sales agents and for some U.S. hospitals as well as for loaner sets maintained at our facilities.  As a result, in the first nine months of 2002, our inventories grew by $11.7 million.  This was
the primary reason for our $7.2 million net cash used in operations for the nine months ended September 30, 2002.

We plan to continue making significant investments in initial inventory levels for new products.  We also intend to continue to
invest in the development of our business.  We believe we currently possess sufficient resources, including our revolving bank line of credit, to meet the cash requirements of our operations for at least the next year.  In addition, we
have used and may continue to use our cash, our common stock, or a combination of both to pay for purchased technologies, product lines, mergers and acquisitions.  Some of these activities may require resources in excess of those which we
currently possess, and we cannot assure you that we will be able to raise additional capital on satisfactory terms, if at all.

At September 30, 2002, we had no material commitments for capital expenditures.

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Certain Business Considerations

Investors are cautioned that certain statements contained in or incorporated by reference into this
Quarterly Report on Form 10-Q, or which are otherwise made by us or on our behalf are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements that are
predictive in nature, which depend upon or refer to future events or conditions, which include words such as believes, plans, anticipates, estimates, expects or similar expressions. 
In addition, any statements concerning future financial performance, ongoing business strategies or prospects, and possible future actions, which may be provided by our management, are also forward-looking statements.  Forward-looking
statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our company, economic and market factors and the industry in which we do business, among other
things.  These statements are not guaranties of future performance and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a
number of factors.  Factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements, include, but are not limited to those discussed below and elsewhere in this Quarterly
Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2001.

We are dependent on a few products which may be rendered obsolete.

A majority of our revenues currently comes from SYNERGY and PRO OSTEON sales.  There can be no assurance that
we will be successful in increasing sales of our current product offering.  Additionally, there can be no assurance that our efforts to develop new products will be successful.  Even if our development efforts are successful, there can be
no assurance that we will be successful in marketing and selling our new products.  Moreover, our competitors may develop and successfully commercialize medical devices that directly or indirectly accomplish what our products are designed to
accomplish in a superior and less expensive manner.  If our competitors products prove to be more successful than ours, our products could be rendered obsolete.  As a result, we may not be able to produce sufficient sales to maintain
profitability.

If we fail to compete successfully against existing or potential competitors, our operating results may be adversely affected.

Our principal global competitors with respect to our spinal implant product line are Medtronic Sofamor Danek USA, DePuy AcroMed, Inc., a
Johnson & Johnson company, and SYNTHES-STRATEC, Inc. Our principal global competitors with respect to our orthobiologic products include DePuy AcroMed, Osteotech, Inc., Orthovita, GenSci Regeneration Sciences, Regeneration Technologies and
Wright Medical Technology. Our principal competitor with respect to our minimally invasive surgery products is Kyphon Inc.  We compete in all of our markets primarily on the basis of product performance and price, as well as customer loyalty
and service. Many of our competitors have broader product lines than we do.  Accordingly, they could substantially increase the resources they devote to the development and marketing of products that are competitive with ours.  Many of our
potential customers have existing relationships with our competitors that could make it difficult for us to continue to penetrate the markets for our products.  If we fail to compete successfully against our existing or potential competitors,
our operating results may be adversely affected.

We may not be able to develop new products that will be accepted by the market.

Our future growth will be dependent on our ability to develop and introduce new products, including enhancements to our existing
products.  We cannot assure you that we will be able to successfully develop or market new products or that any of our future products will be accepted by our customers.  If we do not develop new products in time to meet market demand or
if there is insufficient demand for these products, our revenues and profitability may be adversely affected.

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The success of any new product
offerings or enhancements to existing product offerings will depend on several factors, including our ability to:

| |  | properly identify and anticipate customer needs;                                                                                                                                      
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | commercialize new products or enhancements in a timely manner;                                                                                                                        
| |  | develop an effective marketing and distribution network for new products or product enhancements;                                                                                     
| |  | manufacture and deliver products in sufficient volumes on time;                                                                                                                       
| |  | differentiate our offerings from competitors offerings;                                                                                                                              
| |  | achieve positive clinical outcomes for new products or product enhancements;                                                                                                          
| |  | satisfy the increased demands of healthcare payors, providers and patients for lower-cost procedures;                                                                                 
| |  | innovate and develop new materials, product designs and surgical techniques;                                                                                                          
| |  | obtain the necessary regulatory approvals for new products or product enhancements; and                                                                                               
| |  | provide adequate medical and/or consumer education relating to new products and product enhancements and attract key surgeons to advocate these new products and product
enhancements.

In addition, we have spent and expect to continue to spend significant
cash on the development, product launch and continued marketing of new products and if there is insufficient demand for these new products, our cash flow could suffer and our liquidity would be adversely affected.

The long-term efficacy and market acceptance of AGF is uncertain.

Because our AGF related products were introduced under a 510(k) clearance, we lack long-term clinical data regarding the efficacy and
long-term results of AGF.  To date, we have completed no long-term clinical studies of AGF.  If long-term studies or clinical experience indicate that procedures involving AGF do not provide patients with improved clinical outcomes,
anticipated sales of our AGF related products may never materialize.  Our success in selling our AGF related products will depend, in large part, on the medical communitys acceptance of AGF.  The medical communitys acceptance
of AGF will depend upon our ability to demonstrate the efficacy of AGF and its advantages, favorable clinical performance and cost-effectiveness.  The medical communitys acceptance of AGF will also depend upon our ability to introduce
ACCESS, a new processing system for AGF that is less complex.  We cannot predict whether the medical community will accept AGF or, if accepted, the extent of its use.  If long-term studies or clinical experience indicate that AGF causes
negative effects, we could be subject to significant liability.

Our minimally invasive surgery products business may not achieve the growth we expect and our profitability could be
adversely affected.

Our minimally invasive surgery products business was obtained through our July 2001
acquisition of American OsteoMedix Corporation (AOM).  To date, our revenues from this business have been below expectation.  To address this, we are investing significantly in the hiring and training of a group of product
specialists to work directly with our independent sales agencies in obtaining new surgeon customers, training of surgeons and sales representatives, and assisting surgeons in educating the doctors that comprise their referral base about the benefits
of procedures using these products.  We believe that these efforts may allow us to achieve the expected growth in AOM revenues. We performed our annual impairment test of goodwill during the quarter ending September 30, 2002 and found no
impairment of goodwill.  However, we cannot assure you that our efforts will be successful.  We may ultimately determine that our minimally invasive surgery products must be distributed through a sales force consisting of direct sales
representatives.  If we are unsuccessful in our efforts with the product specialists, or if we ultimately decide to create a direct sales force for these products, which would require a substantial investment, our profitability could be
materially adversely affected.

We face risks related to the maintenance, upgrading and expansion of our domestic distribution network.

In domestic markets, we primarily use independent sales agents for the distribution of our spine products and orthobiologic
products.  However, because of the agents focus on selling only to spinal surgeons, our orthobiologic products sales have suffered.  Therefore, we have created an initial direct sales force to distribute our orthobiologic products in
certain underperforming territories, and we plan to significantly increase this sales force in the future.  However, we cannot assure you that we will be successful in our efforts to identify and hire qualified

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candidates for these positions, or that such candidates, upon their hiring, will be successful in distributing our orthobiologic
products.  Additionally, this effort requires a substantial investment and our profitability could be adversely affected as a result.

We expect to continue to rely primarily on independent agents for the domestic distribution of our spine
products.  Independent commissioned sales agents may represent other medical devices for a variety of manufacturers and may not dedicate enough time or attention to selling our products.  Furthermore, we expend significant resources to
train and educate new independent agents about our products and our marketing programs.  Our ability to recruit independent sales agents has been aided by some of our competitors replacement of independent agents with direct sales
representatives.  However, our competitors may not continue to utilize direct sales representatives and we cannot assure you that we will continue to be able to attract new or retain our current independent sales agents.  We also cannot
assure you that we will be able to develop an effective distribution network or that our independent agents will be able to continue to increase sales or maintain current sales levels of our products.

Product introductions or modifications may be delayed or canceled as a result of the FDA regulatory process, which could cause our sales to decline.

The medical devices we manufacture and market are subject to rigorous regulation by the FDA and numerous other federal, state and
foreign governmental authorities.  Our failure to comply with such regulations could lead to the imposition of injunctions, suspensions or loss of regulatory approvals, product recalls, termination of distribution, or product seizures.  In
the most egregious cases, criminal sanctions or closure of our manufacturing facility are possible.  The process of obtaining regulatory approvals to market a medical device, particularly from the FDA, can be costly and time-consuming, and
there can be no assurance that such approvals will be granted on a timely basis, if at all.  The regulatory process may delay the marketing of new products for lengthy periods and impose substantial additional costs or it may prevent the
introduction of new products altogether.  In particular, the FDA permits commercial distribution of a new medical device only after the FDA has cleared a 510(k) premarket notification or has approved a Premarket Approval application, or PMA,
for such device.  The FDA will clear marketing of a medical device through the 510(k) process if it is demonstrated that the new product is substantially equivalent to other 510(k)-cleared products.  The PMA approval process is more
costly, lengthy and uncertain than the 510(k) premarket notification process.  There can be no assurance that any new products we develop will be subject to the shorter 510(k) clearance process and therefore significant delays in the
introduction of any new products that we develop may occur.  We anticipate that our products that are in final development will be eligible for the 510(k) premarket notification process.  If the FDA does not clear marketing of our products
in final development through the 510(k) clearance process, we will be forced to comply with the PMA approval process in order to obtain FDA approval for these products.  If we choose to go through the PMA approval process, there will be
significant costs and delays in the introduction of our new products, if they are approved at all.  Moreover, foreign governmental authorities have become increasingly stringent and we may be subject to more rigorous regulation by foreign
governmental authorities in the future.  Any inability or failure of our foreign independent distributors to comply with the varying regulations or the imposition of new regulations could restrict such distributors ability to sell our
products internationally and thereby adversely affect our business.  All products and manufacturing facilities are subject to continual review and periodic inspection by the FDA.  The discovery of previously unknown problems with our
company or our products or facilities may result in product labeling restrictions, recall, or withdrawal of the products from the market.  In addition, the FDA actively enforces regulations prohibiting the promotion of medical devices for
unapproved indications.  If the FDA determines that we have marketed our products for off-label use, we could be subject to fines, injunctions or other penalties.

We may be subject to
product liability claims and our limited product liability insurance may not be sufficient to cover the claims, or we may be required to recall our products.

We manufacture medical devices that are used on patients in surgical procedures, and we may be subject to product liability claims and
product recalls.  The spinal implant industry has been historically litigious and we face an inherent business risk of financial exposure to product liability claims.  Since our spinal products are implanted in the human body,
manufacturing errors or design defects could result in injury or death to the patient, and could result in a recall of our products and substantial monetary damages.  Any product liability claim brought against us, with or without merit, could
result in an increase to our product liability insurance premiums or our inability to

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secure coverage in the future.  We would also have to pay any amount awarded by a court in excess of our policy
limits.  In addition, any recall of our products, whether initiated by us or by a regulatory agency, may result in adverse publicity for us that could have a material adverse effect on our business, financial condition and results of
operations.  Our product liability insurance policies have various exclusions, and we may be subject to a product liability claim or recall for which we have no insurance coverage, in which case we may have to pay the entire amount of the award
or costs of the recall.  Finally, product liability insurance is expensive and may not be available in the future on acceptable terms, or at all.

We may face challenges to our patents
and proprietary rights.

We rely on a combination of patents, trade secrets and nondisclosure
agreements to protect our proprietary intellectual property.  Our patent positions and those of other medical device companies are uncertain and involve complex and evolving legal and factual questions.  There can be no assurance that
pending patent applications will result in issued patents, that patents issued to or licensed by us will not be challenged or circumvented by competitors or that such patents will be found to be valid or sufficiently broad to protect our technology
or to provide us with any competitive advantage.  For example, one of our patents, U.S. Patent No. 5,466,237, was recently found to be partially invalid.  See Item 3 - Legal Proceedings.  Third parties could also obtain
patents that may require licensing for the conduct of our business, and there can be no assurance that the required licenses would be available.  We also rely on nondisclosure agreements with certain employees, consultants and other parties to
protect, in part, trade secrets and other proprietary technology.  There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop
substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets and proprietary knowledge.  If our intellectual property is not adequately protected, our competitors could use the
intellectual property that we have developed to enhance their products and compete more directly with us, which could result in a decrease in our market share and profits.

The medical product industry is characterized by frequent and substantial intellectual property litigation and competitors may resort to
intellectual property litigation as a means of competition.  Intellectual property litigation is complex and expensive, and the outcome of such litigation is difficult to predict.  Any future litigation, regardless of the outcome, could
result in substantial expense and significant diversion of the efforts of our technical and management personnel.  Litigation may also be necessary to enforce our patents and license agreements, to protect our trade secrets or know-how or to
determine the enforceability, scope and validity of the proprietary rights of others.  For example, we are currently involved in ongoing patent litigation against DePuy Acromed, Inc., a Johnson and Johnson company, and Biederman Motech
GmbH.  An adverse determination in any such proceeding could subject us to significant liabilities to third parties, or require us to seek licenses from third parties or pay royalties that may be substantial.  Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing or selling certain of our products which in turn would have a material adverse effect on our business, financial
condition and results of operations.

Possible denial of third-party reimbursement could have a material adverse effect on our future business, results of operations and financial
condition.

In the United States, our products are purchased by hospitals that are reimbursed for
the devices provided to their patients by third-party payors, such as governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care programs.  These third-party payors may deny reimbursement if they determine
that a device used in a procedure was not used in accordance with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication.  Also, third-party payors are increasingly challenging the
prices charged for medical products and services.  In addition, we believe the increasing emphasis on managed care in the United States may put pressure on the prices and usage of our products, which may adversely affect product sales.  In
international markets, reimbursement and healthcare payment systems vary significantly by country and many countries have instituted price ceilings on specific product lines.  There can be no assurance that our products will be considered
cost-effective by third-party payors, that reimbursement will be available or, if available, that the third-party payors reimbursement policies will not adversely affect our ability to sell our products profitably.

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We are dependent on our suppliers and the loss of any of them could adversely affect our business.

We do not manufacture the components for our spinal implants or instruments or minimally invasive surgery products;
rather, we are dependent upon several suppliers for the manufacturing of such components.  Also, the UltraConcentrator, one of our products used to collect AGF, is manufactured under an exclusive supply agreement with a vendor that itself has a
sole source of supply for filter material, a key component of the UltraConcentrator.  In the event that we are unable to obtain components for any of our products, or obtain such components on commercially reasonable terms, we may not be able
to manufacture or distribute our products on a timely and competitive basis, or at all.  Any delays in product availability or costs incurred in locating alternative suppliers could have a material adverse effect on our operations.

The harvesting of coral is subject to regulation which could affect our ability to obtain sufficient quantities of coral in the future.

The harvesting and import of the coral used for our coral-based orthobiologic products must comply with the requirements of the
Convention on International Trade of Endangered Species of Wild Fauna and Flora.  As a result, we must register and obtain licensure from the U.S. Department of Fish and Wildlife for both the import of raw coral and the export of finished
product.  In the future, regulations could make the import or export of coral or coral-derived products prohibitive and could interrupt our ability to supply product.  We cannot assure you that our supply of raw coral is sufficient, that
we will be able to obtain sufficient quantities of coral in the future or that future regulations will not prohibit its use altogether.

Our business could be materially adversely impacted
by risks inherent in international markets.

In 2001, approximately 22% of our sales were
generated outside the United States.  We expect that such sales will continue to account for a significant portion of our revenue in the future.  Our international sales subject us to other inherent risks, including the following:

| |  | fluctuations in currency exchange rates;                                                                 
| | - | ---------------------------------------------------------------------------------------------------------
| |   |                                                                                                          
| |  | regulatory, product approval and reimbursement requirements;                                             
| |   |                                                                                                          
| |  | tariffs and other trade barriers;                                                                        
| |   |                                                                                                          
| |  | greater difficulty in accounts receivable collection and longer collection periods;                      
| |   |                                                                                                          
| |  | difficulties and costs of managing foreign distributors;                                                 
| |   |                                                                                                          
| |  | reduced protection for intellectual property rights in some countries;                                   
| |   |                                                                                                          
| |  | burdens of complying with a wide variety of foreign laws;                                                
| |   |                                                                                                          
| |  | the impact of recessions in economies outside the United States;                                         
| |   |                                                                                                          
| |  | political and economic instability; and                                                                  
| |   |                                                                                                          
| |  | seasonal reductions in business activity during the summer months in Europe and other parts of the world.

If we fail to successfully market and sell our products in international markets, our business, financial condition, results of
operations, and cash flows could be materially and adversely affected.

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Future acquisitions could adversely affect our operations or financial results.

From time to time, we consider acquisition of technology product lines or businesses to supplement our current product offering. 
Any such future acquisitions involve risks such as the following:

| |  | we may be exposed to unknown liabilities of acquired companies;                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                             
| |  | our acquisition and integration costs may be higher than we anticipated and may cause our quarterly and annual operating results to fluctuate;                                              
| |   |                                                                                                                                                                                             
| |  | we may experience difficulty and expense in assimilating the operations and personnel of the acquired businesses, disrupting our business and diverting managements time and
attention; and
| |   |                                                                                                                                                                                             
| |  | our relationships with key customers of acquired businesses may be impaired, due to changes in management and ownership of the acquired businesses.                                         

The information contained in this report is as of September 30, 2002, unless expressly stated as of another date. 
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.  We also may make additional disclosures in our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K that we may file from time to time with the Securities and Exchange Commission.  Other factors besides those listed here could also adversely affect us.  This discussion is provided as permitted by
the Private Securities Litigation Reform Act of 1995.

Item 3.          
Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market
risk for changes in interest rates related primarily to our cash, cash equivalent balances, marketable securities and borrowings under our secured revolving bank line of credit.  However, as all of our investments are in short-term instruments,
we believe that we have no material market risk exposure.  In addition, our borrowings under the secured revolving bank line of credit bear interest at variable rates based on bank prime or LIBOR and we believe a hypothetical 10 percent change
in that rate would not create material market risk exposure.

Item 4.          
Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

Within 90 days prior to the
date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures.  Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

There have been no significant changes in our internal controls or in other factors that could significantly affect the internal
controls subsequent to the date we completed our evaluation.

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##### Table of Contents

|PART II -                                                                                                                                                                       |    | OTHER INFORMATION                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      
|Item 1.                                                                                                                                                                         |    | Legal Proceedings                                                                                                                                                                                                                                                    
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      
|The information set forth under Note 6 in Notes to Condensed Consolidated
Financial Statements, included in Part I, Item 1 of this report, is incorporated herein by reference.
|                                                                                                                                                                               
|Item 6.                                                                                                                                                                         |    | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                                     
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                | a. | Exhibits.                                                                                                                                                                                                                                                            
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                |    | none                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                | b. | Reports on Form 8-K.                                                                                                                                                                                                                                                 
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                |    | On August 13, 2002, Interpore filed a current report on Form 8-K containing the text of the certifications, as required by 18 U.S.C. § 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, of our Chief Executive Officer and Chief Financial Officer.
|                                                                                                                                                                                |    |                                                                                                                                                                                                                                                                      

20



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

|DATE:   November 13, 2002 | INTERPORE INTERNATIONAL, INC.
|------------------------- | -----------------------------
|                          | (Registrant)                 
|                          |                              
|                          |                              
|                          | By:                          
|                          |                              
|                          |                              
|                          |                              
|                          |                              
|                          | By:                          
|                          |                              
|                          |                              

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##### Table of Contents

INTERPORE INTERNATIONAL, INC.

Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification

I, David C. Mercer, certify that:

| | 1. | I have reviewed this quarterly report on Form 10-Q of Interpore International, Inc.;                                                                                                                                                                                                                                                                                                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | a)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | c)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
the registrants board of directors (or persons performing the equivalent function):                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | a)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 6. | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                          

|Date:  November 13, 2002 | /s/ DAVID C. MERCER                      | 
|------------------------ | ---------------------------------------- | 
|                         |                                          | 
|                         | David C. Mercer  Chief Executive Officer | 

22



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##### Table of Contents

INTERPORE INTERNATIONAL INC.

Certifications
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification

I, Richard L. Harrison, certify that:

| | 1. | I have reviewed this quarterly report on Form 10-Q of Interpore International, Inc.;                                                                                                                                                                                                                                                                                                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | a)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | c)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
the registrants board of directors (or persons performing the equivalent function):                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | d)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    | e)                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| | 6. | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| |    |                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                          

|Date:  November 13, 2002 | /s/ RICHARD L. HARRISON                      | 
|------------------------ | -------------------------------------------- | 
|                         |                                              | 
|                         | Richard L. Harrison  Chief Financial Officer | 

23