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<TITLE>March 31, 2003</TITLE>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <HR noshade size=4 color="black" ><br> <p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><b><font SIZE=4>SECURITIES AND EXCHANGE COMMISSION</font></b></p> <p style=' margin-bottom:0pt;text-align:center;
margin-top:0pt;'><b><font size=2>Washington, D.C. 20549</font></b></p> <HR noshade width=120 color="black" > <p style=' margin-bottom:0pt;text-align:center; margin-top:12pt;'><b><font SIZE=4>FORM 10-Q</font></b></p> <HR noshade width=120
color="black" > <p style=' margin-bottom:0pt; margin-top:0pt;'><b><font size=2>(Mark One)</font></b></p> <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font size=2><font face="Wingdings">x</font></font></b></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.5in;'><b><font size=2>Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2003.</font></b></p> <p style='
margin-bottom:0pt;text-align:center; margin-top:12pt;'><b><font SIZE=2>OR</font></b></p> <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font size=2><font face=Wingdings>o</font></font></b></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.5in;'><b><font size=2>Transition Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______</font></b></p> <p style='
margin-bottom:0pt;text-align:center; margin-top:12pt;'><b><font size=2>Commission File Number: 000-29037</font></b></p> <HR noshade width=120 color="black" > <p style=' margin-bottom:0pt;text-align:center; margin-top:8pt;'><b><font size=5>eMerge
Interactive, Inc.</font></b></p> <p style=' margin-bottom:0pt;text-align:center; margin-top:0pt;'><b><font size=1>(Exact name of registrant as specified in its charter)</font></b></p> <HR noshade width=120 color="black" > <p style='
margin-bottom:0pt; margin-top:0pt;'><font size=1>&nbsp;</font></p>
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<td width="50">&nbsp;</td>
<td align=center valign=top width="280"><b><font size=2>Delaware</font></b><br> <b><font size=1>(State or other jurisdiction of</font></b><br> <b><font size=1>incorporation or organization)</font></b><br></td>
<td align=center width="280">&nbsp;</td>
<td align=center valign=top width="280"><b><font size=2>65-0534535</font></b><br> <b><font size=1>(I.R.S. Employer Identification No.)</font></b><br> <font size=1>&nbsp;</font></td>
<td width="50">&nbsp;</td></tr></table><br> <p style=' margin-bottom:0pt;text-align:center; margin-top:12pt;'><b><font size=2>10305 102<sup>nd</sup> Terrace Sebastian, Florida 32958</font></b><br><b><font size=1>(Address of principal executive
offices)</font></b></p> <p style=' margin-bottom:0pt;text-align:center; margin-top:12pt;'><b><font size=2>(772) 581-9700</font></b><br><b><font size=1>(Registrant&#146;s telephone number, including area code)</font></b></p> <p style='
margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: YES <font face=Wingdings>x</font> NO <font face=Wingdings>o</font></font></p> <p
style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).</font><br><font size=2>YES <font
face=Wingdings>o</font> NO <font face=Wingdings>x</font> </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The number of shares of the registrant&#146;s common stock, $0.008 par value, outstanding as of May
12, 2003, was 38,780,439. There were 33,085,994 shares of Class A common stock outstanding and 5,694,445 shares of Class B common outstanding as of this date.</font></p> <br><HR noshade size=4 color="black" > <br><p
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>
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<a name="toc"></a></font></b></p> <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>eMerge Interactive, Inc.</font></b></p> <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><font SIZE=2>FORM 10-Q
QUARTERLY REPORT</font><br><font size=2>(For Three Months Ended March 31, 2003)</font></p> <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><font SIZE=2>TABLE OF CONTENTS</font></p> <p style=' margin-bottom:0pt;
margin-top:0pt;'><font size=2>&nbsp;</font></p>
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<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><u><b><font size=1>Page</font></b></u><b><u></u></b></p> </td> </tr>
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<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
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<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><b><font SIZE=2>PART I</font></b></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="3" valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><b><font SIZE=2>FINANCIAL INFORMATION</font></b></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
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<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
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<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
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<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 1.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Financial Statements:</font></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_1"><u><font size=2>Condensed Consolidated Balance Sheets</font></u></a><font size=2> as of March 31, 2003 and December 31, 2002</font></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>3</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_2"><u><font size=2>Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>4</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_3"><u><font size=2>Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>5</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_4"><u><font size=2>Notes to Condensed Consolidated Financial Statements</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>6</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 2.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_5"><u><font size=2>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>11</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 3.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_6"><u><font size=2>Quantitative and Qualitative Disclosures about Market Risk</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>14</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 4.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_7"><u><font size=2>Controls and Procedures</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>14</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><b><font SIZE=2>PART II</font></b></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td colspan="3" valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><b><font SIZE=2>OTHER INFORMATION</font></b></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 1.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_8"><u><font size=2>Legal Proceedings</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>15</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 4.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_9"><u><font size=2>Submission of Matters to a Vote of Security Holders</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>15</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="11%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="11%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="9%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Item 6.</font></p> </td>
<td width="1%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top > <p style='margin-top:0pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'>
<a href="#tx114_10"><u><font size=2>Exhibits and Reports on Form 8-K</font></u></a></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:right;'><font size=2>15</font></p> </td> </tr> </table> <p style='margin-bottom:0pt;text-align:center'><font
size=2>2</font></p>
<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>PART I.
<a name="tx114_1">FINANCIAL INFORMATION</a></font></b></p> <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM 1.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.75in;'><b><font SIZE=2>FINANCIAL
STATEMENTS</font></b></p> <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>eMerge Interactive, Inc.</font></b><br><b><font size=2>Condensed Consolidated Balance Sheets</font></b><br><b><font
size=2>(Unaudited)</font></b></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="13%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>March 31,</font></b><br> <b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="13%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>December 31,</font></b><br> <b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;text-align:center;'>&nbsp;</p> </td>
<td width="2%" valign=bottom > <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;text-align:center;'><b><font size=2>Assets</font></b></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Current assets:</font></p> </td>
<td width="2%" valign=bottom > <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Cash and cash equivalents</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><b><font size=2>$</font></b><b></b></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,077,604</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,278,449</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Trade accounts receivable, less allowance for doubtful accounts of $894,962 in 2003 and $929,299 in 2002 </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>136,812</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>413,875</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Inventories (note 3)</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>290,538</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>36,428</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Prepaid expenses</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>458,740</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>484,476</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Due from related parties (note 4)</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>297,451</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,281,630</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Total current assets</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>6,261,145</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>8,494,858</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Property, plant and equipment, net of accumulated depreciation of $7,258,390 in 2003 and $6,600,235 in 2002</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>4,962,981</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,347,511</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Due from related parties (note 4)</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>217,074</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>217,074</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Total assets</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>11,441,200</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>14,059,443</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;text-align:center;'>&nbsp;</p> </td>
<td width="2%" valign=bottom > <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'>&nbsp;<b></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;text-align:center;'><b><font size=2>Liabilities and Stockholders&#146; Equity</font></b></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Current liabilities:</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Current installments of capital lease obligation </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>401,772</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>315,406</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Accounts payable</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>572,869</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>568,394</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Accrued liabilities:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Salaries and benefits (note 7)</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>408,012</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>469,847</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Legal and professional</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>190,659</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>165,985</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Other</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>128,250</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>122,121</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;'><font size=2>Advance payments from customers</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>291,327</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>101,500</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Total current liabilities</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,992,889</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,743,253</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Capital lease obligation, excluding current installments </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>115,976</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>196,967</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Total liabilities</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,108,865</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,940,220</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Stockholders&#146; equity (note 6)</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;'><font size=2>Common stock, $.008 par value, authorized 100,000,000 shares:</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Class A common stock, designated 92,711,110 shares, issued 34,329,847 shares in 2003 and 2002;
outstanding 33,085,992 shares in 2003 and 2002 </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>274,638</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>274,638</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Class B common stock, designated 7,288,890 shares, 5,694,445 shares issued and outstanding in 2003 and 2002</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>45,556</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>45,556</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Additional paid-in capital</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>200,729,576</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>200,729,576</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Accumulated deficit </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(191,289,398</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(188,502,401</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Treasury stock, 1,243,855 shares, at cost</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(428,037</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(428,037</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Unearned compensation</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(109</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Total stockholders&#146; equity</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>9,332,335</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>12,119,223</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Total liabilities and stockholders&#146; equity</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>11,441,200</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>14,059,443</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style=' margin-bottom:0pt;text-align:center; margin-top:18pt;'><i><font size=2>See accompanying notes to condensed consolidated financial
statements.</font></i></p> <br><p style='margin-bottom:0pt;text-align:center'><font
size=2>3</font></p>
<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>
<a name="tx114_2">eMerge Interactive, Inc</a>.</font></b><br><b><font size=2>Condensed Consolidated Statements of Operations </font></b><br><b><font size=2>For the Three Months Ended March 31, 2003 and 2002</font></b><br><b><font
size=2>(Unaudited)</font></b></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="26%" colspan="5" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Three Months Ended March 31,</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="5" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Revenue </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p >&nbsp;<b></b></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><b><font size=2>$</font></b><b></b></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>161,542</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>230,026</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Cost of revenue </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>74,476</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>148,091</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Gross profit </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>87,066</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>81,935</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Operating expenses:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Selling, general and administrative</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,575,132</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,028,656</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Technology and development</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>511,451</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>586,161</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Impairment and related charges (note 7)</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>57,925</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Depreciation and amortization of intangibles</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>666,511</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,034,590</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Total operating expenses</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,753,094</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>3,707,332</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:25.9pt;text-indent:-8.65pt;'><font size=2>Operating loss</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,666,028</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,625,397</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Interest and other (expense) income, net </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(14,076</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>94,727</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Interest expense </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(8,382</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(308,591</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Gain on disposal of assets</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>3,513</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Equity in operations of unconsolidated investee</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,386</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Loss from continuing operations before income taxes </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (2,684,973</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (3,836,875</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Income tax expense (benefit)</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Loss from continuing operations </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,684,973</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,836,875</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Discontinued operations (note 8):</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Loss from discontinued cattle operations, net of income taxes of $0 in 2003 and 2002</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(102,024</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(251,393</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Minority interest </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(66,905</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Net loss</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,786,997</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(4,155,173</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Loss from continuing operations per common share &#150; basic and diluted</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (0.07</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (0.10</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Net loss per common share &#150; basic and diluted</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (0.07</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2> (0.10</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Weighted average number of common shares outstanding - basic and diluted</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>38,780,437</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>39,709,449</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style=' margin-bottom:0pt;text-align:center; margin-top:18pt;'><i><font size=2>See accompanying notes to condensed consolidated financial
statements.</font></i></p> <br><p style='margin-bottom:0pt;text-align:center'><font
size=2>4</font></p>
<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>
<a name="tx114_3">eMerge Interactive, Inc</a>.</font></b><br><b><font size=2>Condensed Consolidated Statements of Cash Flows </font></b><br><b><font size=2>For the Three Months Ended March 31, 2003 and 2002</font></b><br><b><font
size=2>(Unaudited)</font></b></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="12%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Cash flows from operating activities:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Net loss</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,786,997</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(4,155,173</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Adjustments to reconcile net loss to net cash provided by (used for) operating activities:</font></p>
</td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Depreciation </font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>666,511</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,136,440</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>(Gain) loss on disposal of assets</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,513</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>111</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Impairment of assets held for sale</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>233,947</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Equity in operations of unconsolidated investee</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,386</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Amortization of unearned compensation</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>109</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>4,508</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Change in fair value of financial instruments</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,218</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Minority interest</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>66,905</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Changes in operating assets and liabilities:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Trade accounts receivable, net</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>277,063</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(7,870,358</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Inventories</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(254,110</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(1,584,015</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Prepaid expenses and other assets</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>25,736</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(1,465,454</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Due from related parties, net</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,984,179</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(296,333</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Accounts payable and accrued liabilities</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(21,182</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,550,644</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Advance payments from customers</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>189,827</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>712,814</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Net cash provided by (used for) operating activities</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>77,623</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(16,771,856</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Cash flows from investing activities:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Purchases of property and equipment</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(282,120</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(327,075</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Proceeds from sale of property, plant and equipment</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>3,652</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>6,499</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Business combinations, net of cash acquired</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(687,500</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Net cash used for investing activities</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(278,468</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(1,008,076</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Cash flows from financing activities:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Net borrowings on line of credit</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>6,622,374</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Payments on capital lease obligation</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(113,406</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Capital contributed by lessee/operator to lessee/operator activity</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>100,000</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:.6in;text-indent:-8.65pt;'><font size=2>Net cash provided by financing activities</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>6,608,968</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:.6in;text-indent:-8.65pt;'><font size=2>Net change in cash</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(200,845</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(11,170,964</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Cash and cash equivalents, beginning of period</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,278,449</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>18,736,162</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Cash and cash equivalents, end of period</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,077,604</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>7,565,198</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Supplemental disclosures:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Cash paid for interest</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2,864</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>48,542</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Non-cash investing and financing activities:</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Accrued liability for Class A common stock to be issued in connection with business combination</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>30,051</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:34.55pt;text-indent:-8.65pt;'><font size=2>Issuance of Class A common stock in connection with business combinations </font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="11%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>500,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> </td> </tr> </table> <p style=' margin-bottom:0pt;text-align:center; margin-top:18pt;'><i><font size=2>See accompanying notes to condensed consolidated financial statements.</font></i></p>
<p style=' margin-bottom:0pt;text-align:center; margin-top:18pt;'><font size=2>5</font></p>

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 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>
<a name="tx114_4">eMerge Interactive, Inc</a>.</font></b><br><font size=2>Notes to Condensed Consolidated Financial Statements</font><br><font size=2>(Unaudited)</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font
size=2>(1)</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Description of Business and Summary of Significant Accounting Policies</font></b></p> <p
style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><i><font size=2>(a)</font></i></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;text-indent:0.360000014305115in;'><i><font size=2>Overview</font></i></p> <p style='
margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>eMerge Interactive, Inc. (the &#147;Company&#148;), a Delaware corporation, is a technology company providing individual-animal tracking, food safety and
supply-procurement services to the beef industry. The Company&#146;s technologies focus primarily on information-management and individual-animal tracking tools, as well as other food safety technologies. </font></p> <p style=' margin-bottom:0pt;
margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>During the second quarter of 2002, the Company announced that it was divesting its cattle operations and planned to either sell or dispose of these operations. Accordingly,
operating results for all periods presented exclude the cattle operations that have been sold or disposed and are classified as discontinued operations in the accompanying financial statements. </font></p> <p
style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><i><font size=2>(b)</font></i></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;text-indent:0.360000014305115in;'><i><font size=2>Basis of Presentation</font></i></p> <p
style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company has continued to follow the accounting policies set forth in the consolidated financial statements included in its fiscal
2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, the interim financial information provided herein reflects all adjustments (consisting of normal and recurring adjustments) necessary
for a fair presentation of the Company&#146;s consolidated financial position as of March 31, 2003, and the results of operations and cash flows for the three-month periods ending March 31, 2003 and 2002. The results of operations for the three
months ended March 31, 2003 are not necessarily indicative of the results to be expected for the full year.</font></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>These condensed consolidated
financial statements and footnotes should be read in conjunction with the Company&#146;s audited financial statements for the year ended December 31, 2002, included in the Company&#146;s Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><i><font size=2>(c)</font></i></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;text-indent:0.360000014305115in;'><i><font
size=2>Principles of Consolidation</font></i></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, as well as the activities conducted under the lease and operating agreements. The Company believes that consolidation of these activities, notwithstanding lack of technical majority ownership, is necessary to present fairly the
financial position and results of operations of the Company because of the existence of a parent-subsidiary relationship by means of the lessee/operator remaining an employee of the Company, the Company&#146;s majority share of the profits or losses
derived from the activities, certain control terms of the lease and operating agreements and the relatively short-term nature of the agreements which are terminable by either party. The results of operations of the activities conducted under the
lease and operating agreements is included in discontinued operations. As of July 31, 2002, all lease and operating agreements were no longer effective and the related assets had been sold. With the completion of the divestiture of all of the cattle
operations, the Company dissolved all of its wholly owned subsidiaries during the last quarter of 2002. All significant intercompany balances and transactions have been eliminated in consolidation. </font></p> <p style=' margin-bottom:0pt;
margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>During 2002, the Company&#146;s investment in Turnkey Computer Systems, Inc. (&#147;Turnkey&#148;), a private corporation, was accounted for by the equity method. Accordingly, the
Company&#146;s share of Turnkey&#146;s earnings or losses is reflected in the caption &#147;equity in operations of unconsolidated investee&#148; in the consolidated statements of operations. In December 2002, the Company sold the investment for
$322,000 in cash.</font></p> <p style='margin-bottom:0pt;text-align:center'><font
size=2>6</font></p>
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 <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><i><font size=2>(d)</font></i></p> <p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;text-indent:0.360000014305115in;'><i><font
size=2>Revenue Recognition</font></i></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>Revenues from the sale of all Supply Chain Management products and services are recognized as products are
shipped or services are provided. </font></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>Revenues from the sale of hand-held VerifEYE Solo&#153; units are recognized using the revenue
recognition principles of EITF 00-21, &#147;Accounting for Revenue Arrangements with Multiple Deliverables.&#148; These principles provide that revenue arrangements with multiple deliverables should be divided into separate units of accounting if
the deliverables in the arrangements meet the following criteria:</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:1.08in;'><font size=2><b><font size=2>&#149;</font></b></font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:1.44in;'><font size=2>The delivered item(s) has value to the customer on a standalone basis;</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:1.08in;'><font size=2><b><font
size=2>&#149;</font></b></font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:1.44in;'><font size=2>There is objective and reliable evidence of the fair value of the undelivered item(s); and</font></p> <p
style='margin-bottom:0;margin-top:6pt;text-indent:1.08in;'><font size=2><b><font size=2>&#149;</font></b></font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:1.44in;'><font size=2>If the arrangement includes a right of return,
delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the vendor.</font></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>In addition,
these principles provide that arrangement consideration should be allocated among the separate units of accounting based on their relative fair values. The amount allocated to the delivered item(s) is limited to that amount that is not contingent
upon the delivery of additional items or meeting specified performance conditions. Finally, these principles provide that applicable revenue recognition criteria should be considered separately for separate units of accounting. Food Safety product
sales are reviewed by management to determine the separate units of accounting and the allocation of revenues among these units of accounting. Revenue allocated to each unit of accounting is recognized as products are shipped or services are
provided.</font></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>Revenues from operating leases of VerifEYE Carcass Inspection Systems (&#147;CIS&#148;) will be reported on a straight-line
basis over the life of the lease. Upfront, nonrefundable payments will be recognized on a straight-line basis over the minimum lease term.</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><i><font size=2>(e)</font></i></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;text-indent:0.360000014305115in;'><i><font size=2>Stock-Based Compensation</font></i></p> <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font
size=2>In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 148, &#147;Accounting for Stock-Based Compensation &#150; Transition and Disclosure.&#148; This statement
amends SFAS No. 123, &#147;Accounting for Stock Based Compensation,&#148; to provide alternative methods of transition to SFAS No. 123&#146;s fair value method of accounting for stock-based employee compensation. It also amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure in the summary of significant accounting policies of the effect of an entity&#146;s accounting policy with respect to stock-based employee compensation on reported net income and earnings
per share in annual financial statements. SFAS No. 148&#146;s amendment of the transition and annual disclosure requirements are effective for fiscal years ending after December 15, 2002. </font></p> <p style=' margin-bottom:0pt; margin-left:0.36in;
text-indent:0.36in; margin-top:8pt;'><font size=2>As of March 31, 2003, the Company has one stock-based employee compensation plan. The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board
(&#147;APB&#148;) Opinion No. 25, &#147;Accounting for Stock Issued to Employees,&#148; and related interpretations including FASB Interpretation No. 44, &#147;Accounting for Certain Transactions involving Stock Compensation an interpretation of APB
Opinion No. 25&#148; issued in March 2000, to account for its fixed plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.
SFAS No. 123 established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123 and SFAS No. 148, the Company has elected to continue to apply the
intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 148.</font></p> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>7</font></p>

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 <p style=' margin-bottom:0pt; margin-left:0.36in; text-indent:0.36in; margin-top:8pt;'><font size=2>If the Company had elected to adopt the fair value-based recognition provisions of SFAS No. 123 for its stock option
plans, net loss and net loss per share would have been changed to the pro forma amounts indicated below:</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="25%" colspan="5" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Three Months Ended March 31,</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="5" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="11%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Net loss as reported</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(2,786,997</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(4,155,173</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Add: Stock-based employee compensation expense included in reported net loss</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>109</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>4,508</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Deduct: Total stock-based employee compensation expense determined under fair value based methods for
all awards</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(529,369</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(632,935</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Pro forma net loss</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(3,316,257</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(4,783,600</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Net loss per share as reported &#150; basic and diluted</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.07</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.10</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Pro forma net loss per share &#150; basic and diluted</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.09</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(0.12</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(2)</font></b></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Liquidity</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The Company has incurred losses and
negative cash flows from operations in every year since inception and has an accumulated deficit of $191.3 million as of March 31, 2003. For the three months ended March 31, 2003, the Company incurred a net loss of approximately $2.8 million,
however cash flows provided by operations was $78,000. Management expects operating losses and cash flows to improve throughout 2003. The Company expects that cash balances and cash flows generated primarily from sales of VerifEYE products will meet
its anticipated cash requirements during 2003. In addition, the Company plans to increase its revenue related to supply chain management sales, actively control operating costs and continue to evaluate the structure of its operations to improve cash
flows for the foreseeable future. However, if sales from the VerifEYE product do not meet expectations in 2003, the Company will need to seek additional sources of liquidity.</font></p> <p
style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(3)</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Inventories</font></b></p> <p style='
margin-bottom:0pt; margin-left:0.36in; margin-top:8pt;'><font size=2>Inventories consist of: </font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Cattle</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="6%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>29,348</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Raw materials</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>60,094</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="6%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Finished goods</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>230,444</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="6%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,180</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Other</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="6%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,900</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>290,538</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="6%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>36,428</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(4)</font></b></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Related Party Transactions</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>As of March 31,
2003 and December 31, 2002, amounts due from related parties were $515,000 and $2.5 million, respectively. These balances are due from shareholders&#146; related businesses. As of March 31, 2003, due from related parties includes a non-interest
bearing receivable from Eastern Livestock, LLC (&#147;Eastern&#148;) in the amount of $400,000 to be paid in two equal installments on August 5, 2003 and August 5, 2004 in compliance with the asset purchase agreement for the assets of Eastern
Livestock, Inc. Interest, at 4.75%, has been imputed on this receivable. The remaining $115,000 included in due from related parties, as of March 31, 2003, is due from an entity other than Eastern. </font></p> <p style=' margin-bottom:0pt;
text-indent:0.36in; margin-top:8pt;'><font size=2>Prior to the divestiture of the cattle operations in 2002, the Company had both cattle sales and purchase transactions with Eastern, certain employees and shareholders&#146; related businesses in the
ordinary course of business. These sales and purchases were made on trade accounts with the same credit terms of the Company&#146;s other customers and suppliers. Cattle sales to related parties amounted to $0 and $31.5 million for the three months
ended March 31, 2003 and 2002, respectively. Related accounts receivable amounted to $576,000 as of March 31, 2002. Cattle purchases from related parties amounted to $0 and $20.4 million for the three months ended March 31, 2003 and 2002,
respectively. Related accounts payable amounted to $395,000 as of March 31, 2002.</font></p> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>8</font></p>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(5)</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Segment
Information</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The Company&#146;s reportable segments consist of Supply Chain Management products and services and Food Safety products. Supply Chain
Management consists of animal tracking, data management and supply procurement services. Food Safety consists of the VerifEYE inspection systems.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The
following summarizes revenue, cost of revenue and gross profit information related to these two segments for the three months ended March 31, 2003 and 2002:</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;'><b><font size=2>Revenue:</font></b></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Supply Chain Management</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>83,269</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>230,026</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Food Safety</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>78,273</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Total</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>161,542</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>230,026</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;'><b><font size=2>Cost of revenue</font></b></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Supply Chain Management</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>27,970</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>148,091</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Food Safety</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>46,506</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Total</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>74,476</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>148,091</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;'><b><font size=2>Gross profit:</font></b></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Supply Chain Management</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>55,299</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>81,935</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Food Safety</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>31,767</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Total</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>87,066</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>81,935</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The Company&#146;s assets and other statement of operations data are not
allocated to a segment. During the three months ended March 31, 2003, approximately 25% of total revenues were from two Supply Chain Management customers and 26% of total revenues were from one Food Safety customer. During the three months ended
March 31, 2002, approximately 57% of total revenues were from two customers. </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(6)</font></b></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Stock Plan</font></b></p> <p style=' margin-bottom:0pt; margin-left:0.36in; margin-top:8pt;'><font size=2>A summary of stock option
transactions for the three months ended March 31, 2003, follows:</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Shares</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Weighted</font></b><br> <b><font size=1>Average </font></b><br> <b><font size=1>Exercise </font></b><br> <b><font
size=1>Price</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Weighted </font></b><br> <b><font size=1>Average </font></b><br> <b><font size=1>Remaining </font></b><br> <b><font size=1>Contractual
</font></b><br> <b><font size=1>Life (in years)</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Balance outstanding, December 31, 2002</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>4,728,776</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="5%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2.48</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>8.12</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="5%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Granted</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>1,016,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="5%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>0.39</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Exercised</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="5%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:17.3pt;text-indent:-8.65pt;'><font size=2>Cancelled</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(103,563</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="5%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2.04</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Balance outstanding, March 31, 2003</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF;'> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>5,641,213</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="5%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>2.11</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>8.21</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <p style='margin-bottom:0pt;text-align:center'><font size=2>9</font></p>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(7)</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Impairment,
Restructuring and Related Charges</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>A summary of activity in the restructuring liability (included in accrued salaries and benefits in the accompanying
condensed consolidated balance sheets) for the three months ended March 31, 2003 and 2002 follows:</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Balance at December 31, 2001</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>452,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>New charges</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>58,000</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Cash payments</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(255,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Balance at March 31, 2002</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>255,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Balance at December 31, 2002</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>61,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>New charges</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Cash payments</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>(55,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=2>)</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-left:0.12in;text-indent:-0.12in;margin-top:2pt;margin-bottom:0pt;' ><font size=2>Balance at March 31, 2003</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="8%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>6,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td valign=top > <hr noshade width="100%" color="black" size=3> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>In March 2002, the Company determined that McMahan Order Buying Company and
Hefley Order Buying Company, which were purchased in August 2000 and November 2000, respectively, were not performing as expected and decided the best course of action was to terminate these facilities and sever the associated employees. With the
termination of these facilities, the Company recorded impairment of the associated goodwill in the amount of $234,000, which is included in loss from discontinued cattle operations in the accompanying condensed consolidated statement of
operations.</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(8)</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Discontinued
Operations</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>SFAS No. 144 requires that in a period in which a component of an entity has been disposed of or is classified as held for sale, the income
statement of the Company for current and prior periods shall report the results of operations of the component, including any loss recognized for the initial or subsequent write-down to fair value less cost to sell of assets held for sale, in
discontinued operations. In April 2002, the Company determined that the Company&#146;s long term goals and interests were best served by divesting all remaining cattle operations, including the leased cattle operations, through sale or disposal.
Therefore, the Company has classified the results of operations of all the cattle operations sold or disposed of, for both the current and prior periods, to discontinued operations. The loss from discontinued operations includes revenues of $20,000
and $257.6 million for the three months ended March 31, 2003 and 2002, respectively. The loss included in loss from discontinued operations for the three months ended March 31, 2003 and 2002 are $102,000 and $251,000, respectively. </font></p> <p
style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>For the three months ended March 31, 2002, losses attributed to the lessee/operators&#146; noncontrolling interest in the results of operations of the leased cattle
operations is reflected in minority interest in discontinued operations.</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><b><font size=2>(9)</font></b></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0in;text-indent:0.360000014305115in;'><b><font size=2>Subsequent Events</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The Company has entered into
a new lease agreement with XL Realty Corp. effective April 1, 2003 for a period of three years. Future minimum lease payments amount to $129,000 in 2003, $172,000 in 2004, $172,000 in 2005 and $43,000 in 2006.</font></p> <br> <p
style='margin-bottom:0pt;text-align:center'><font size=2>10</font></p>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM 2.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.76in;'><b><font size=2>
<a name="tx114_5">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AN</a>D RESULTS OF OPERATIONS</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The following discussion of our financial
condition and results of operations should be read together with the condensed consolidated financial statements and the related notes included elsewhere in this report.</font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font
size=2>Company Overview</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>We are a technology company providing food-safety, individual-animal tracking and supply-management services to the beef
production industry. The Company is structured into two operating groups, a Food Safety Group and Supply Chain Management Group. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The Food Safety Group&#146;s
patented VerifEYE<sup>&#153;</sup> Food Safety Technology is a unique machine vision technology, which instantly detects microscopic levels of organic contamination, which can harbor deadly pathogens. The VerifEYE technology is available in several
applications for the meat processing, food processing and food services industries.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>The Supply Chain Management Group is comprised of three inter-related
products and services, all designed to allow cattle producers, meat packers and retailers to better manage their product supply chains: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.72in;'><font size=2><b><font
size=2>&#149;</font></b></font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:1.08in;'><font size=2>CattleLog<sup>&#153;</sup> - individual animal data-collection and reporting tools; </font></p> <p
style='margin-bottom:0;margin-top:6pt;text-indent:0.72in;'><font size=2><b><font size=2>&#149;</font></b></font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:1.08in;'><font size=2>eMerge Premium Sales &#150; sales featuring
preconditioned, commingled cattle; and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.72in;'><font size=2><b><font size=2>&#149;</font></b></font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:1.08in;'><font
size=2>Professional Cattle Consultants (&#147;PCC&#148;) Feedyard Services - operational and cattle performance data benchmarking for commercial feedyards. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font
size=2>Management has implemented significant restructuring efforts over the last two years to resize the business to focus on the VerifEYE and supply chain management business models. As a result of this change in focus, historical operations have
limited relevance in assessing both the Company&#146;s current results of operations and future prospects. </font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Results of Operations</font></b></p> <p style=' margin-bottom:0pt;
margin-top:12pt;'><b><font size=2>Three months ended March 31, 2003 and March 31, 2002</font></b></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Revenue</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in;
margin-top:8pt;'><font size=2>Revenue decreased by 30% to $162,000 for the quarter ended March 31, 2003 from $230,000 for the quarter ended March 31, 2002. This decrease is due primarily to a change in marketing strategy for electronic
identification (&#147;EID&#148;) tags in the second quarter of 2002, the nonrenewal of a feedyard data management service contract in the first quarter of 2002 and the discontinuation of the sale of web advertising at the end of 2002, which
contributed revenues of $84,000, $37,500 and $22,000, respectively during the three months ended March 31, 2002. These decreases were partially offset by an increase in revenues from CattleLog and the introduction of revenues from the sale of
VerifEYE Solo units in the current quarter.</font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Cost of Revenue</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Cost of revenue
decreased by 50% to $74,000 for the quarter ended March 31, 2003 from $148,000 for the quarter ended March 31, 2002. This decrease is due principally to the reduction in costs for EID tags from the prior year, which contributed costs of
approximately $76,000 during the three months ended March 31, 2002. In addition, indirect overhead costs, such as support personnel, facilities costs, telecommunication charges and material purchases, which are allocated between individual-animal
tracking products and services and food safety products, were reduced by approximately $21,000 in the current quarter. These decreases in cost of revenues were offset by the costs associated with the sale of VerifEYE Solo units. We generated a gross
profit of $87,000 and $82,000 for the quarters ended March 31, 2003 and 2002, respectively. The increase in gross profit is due primarily to the increase in both CattleLog and VerifEYE Solo revenues and a decrease in sales of EID tags, which
typically incur lower profit margins. </font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Selling, General and Administrative Expenses</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font
size=2>Selling, general and administrative expenses decreased 22% to $1.6 million for the quarter ended March 31, 2003 from $2.0 million for the quarter ended March 31, 2002. The decrease in selling, general and administrative expenses was primarily
associated with the cost savings initiatives that have been implemented over the last two years and include decreases</font></p> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>11</font></p>

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 <p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2> in salaries and wages, telephone, consulting, advertising and media expenses. We anticipate selling, general and administrative expenses to continue to be
reduced as the impact of our cost saving initiatives continue to become fully realized. </font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Technology and Development</font></b></p> <p style=' margin-bottom:0pt;
text-indent:0.36in; margin-top:8pt;'><font size=2>Our technology and development expenses consist primarily of salaries and related benefit costs, payments to outside consultants, software purchases and maintenance charges and project material
costs. Our expenses decreased 13% to $511,000 for the quarter ended March 31, 2003 from $586,000 for the quarter ended March 31, 2002. This decrease was primarily associated with the reduction of workforce and decreases in materials, supplies and
consulting expenses. Furthermore, the Company has fewer products under development and products such as CattleLog, our exclusive individual-animal data collection and reporting system, is essentially complete. The primary focus of our development
team is our meat inspection system, VerifEYE. We expect to continue to incur costs to develop and commercialize new products, expand our offerings and adapt our technologies to new markets. However, we anticipate that our technology and development
expenses will continue to decline in 2003 as compared to 2002.</font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Impairment and Related Charges</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in;
margin-top:8pt;'><font size=2>The impairment and related charges incurred in the quarter ended March 31, 2002 consist of costs to exit a lease.</font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Depreciation </font></b></p>
<p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Depreciation expense decreased 36% to $667,000 for the quarter ended March 31, 2003 from $1.0 million for the quarter ended March 31, 2002. The decrease is primarily due
to the disposal of approximately $459,000 of property, plant and equipment and noncash impairment of approximately $812,000 of property, plant and equipment during the last three quarters of 2002.</font></p> <p style=' margin-bottom:0pt;
margin-top:12pt;'><b><font size=2>Other Income and Expense</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Interest and other income, net decreased to $(14,000) for the quarter ended March 31, 2003 from
$95,000 for the quarter ended March 31, 2002. This decrease was primarily due to an increase in miscellaneous expense in the first quarter of 2003 of approximately $34,000 related to the settlement of disputed consulting fees incurred in a prior
period, offset by a reduction in interest income of approximately $37,000 generated by notes receivable from related parties outstanding in the first quarter of 2002 and the receipt of miscellaneous rental income of approximately $50,000 received in
the first quarter of 2002. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Interest expense decreased to $8,000 for the quarter ended March 31, 2003 from $309,000 for the quarter ended March 31, 2002. This
decrease is due primarily to the termination of a line of credit on May 1, 2002.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Due to the losses incurred, we did not recognize income tax expense for the
quarter ended March 31, 2003 or the quarter ended March 31, 2002. </font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Discontinued Operations</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in;
margin-top:8pt;'><font size=2>During the second quarter of 2002, we determined that in order to improve our productivity and our use of working capital we would sell or dispose of all of our previously acquired cattle operations. Through the
subsequent divestitures, we significantly changed our market focus and revenue source. As of January 24, 2003, the divestiture of all cattle operations is complete. The results of operations of the acquired, and subsequently disposed, entities are
included in our consolidated statements of operations under discontinued operations for all periods presented. </font></p> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>12</font></p>

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 <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:0pt;'><font size=2>The assets sold included only property and equipment. All associated goodwill was previously reduced to zero. There were no liabilities
in the disposal group. The impairment loss, revenue and pretax loss related to assets sold or disposed amounted to:</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="25%" colspan="5" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>Three Months ended March 31,</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="5" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2003</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="13%" colspan="2" valign=bottom > <p style='text-align:center;margin-top:2pt;margin-bottom:0pt;'><b><font size=1>2002</font></b></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td colspan="2" valign=top > <hr noshade width="100%" color="black" size=1> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Impairment loss</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>&#151;</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>234,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom > <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Revenue</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>20,000</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom > <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>257,561,000</font></p> </td>
<td width="2%" valign=bottom > <p ><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td valign=bottom style='background:#CCEEFF; '> <p style='margin-top:2pt;margin-bottom:0pt;margin-left:8.65pt;text-indent:-8.65pt;'><font size=2>Pretax loss</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="7%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>102,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td>
<td width="1%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>$</font></p> </td>
<td width="12%" valign=bottom style='background:#CCEEFF; '> <p style='text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size=2>251,000</font></p> </td>
<td width="2%" valign=bottom style='background:#CCEEFF; '> <p ><font size=1>&nbsp;</font></p> </td> </tr> </table> <br> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Minority interest represents the
lessee/operators&#146; share of activities conducted under the lease and operating agreements that were entered into during the fourth quarter of 2001.</font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Liquidity and Capital
Resources</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>As of March 31, 2003, our principle sources of liquidity are existing cash balances, working capital and expected sales from our VerifEYE and
CattleLog products. As a result of the Company&#146;s restructuring efforts, excluding the discontinued cattle operations, the Company has reduced its quarterly loss from continuing operations to approximately $2.7 million, which for the quarter
ended March 31, 2003, includes $667,000 of depreciation. Going forward in 2003, loss from continuing operations is expected to be reduced further by the revenue stream from VerifEYE inspection systems. We expect that our existing sources of
liquidity will meet our cash flow needs for the near term. However, if sales from our VerifEYE product do not meet our expectations in 2003, we will need to seek additional sources of liquidity.</font></p> <p style=' margin-bottom:0pt;
text-indent:0.36in; margin-top:8pt;'><font size=2>We continue to explore the need for other debt or equity financing alternatives to meet our working capital requirements. If additional funds are raised through alternative debt financing that
provides for the issuance of equity securities or through the issuance of equity securities, our stockholders may experience significant dilution. Furthermore, there can be no assurance that any additional funding will be available when needed, or
that if available, such financing will include favorable terms. See also &#147;Factors Affecting Our Business, Financial Condition and Results of Operations&#148; below.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in;
margin-top:8pt;'><font size=2>As of March 31, 2003, we had cash and cash equivalents totaling $5.1 million compared to $5.3 million at December 31, 2002. Our working capital balance as of March 31, 2003 was $4.3 million compared to $6.8 million as
of December 31, 2002.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>As of March 31, 2003, we have a receivable from Eastern Livestock, LLC in the amount of $400,000 to be paid in two equal installments on
August 5, 2003 and August 5, 2004 in compliance with the asset purchase agreement for the assets of Eastern.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>We have had significant negative cash flows from
operating activities for each fiscal and quarterly period through December 31, 2002. For the three months ended March 31, 2003, net cash provided by operating activities was $78,000, and primarily consisted of decreases in trade accounts receivable,
cattle deposits, due from related parties and an increase in advance payments from customers offset by net operating losses. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Net cash used in investing
activities was $278,000 for the three months ended March 31, 2003. Our investing activities consist primarily of capital expenditures. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Our future working
capital requirements will depend on a variety of factors including our ability to successfully implement our current business plan and reduce our net cash outflow. </font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Other
Matters</font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>There were no changes in the components of the Company&#146;s critical accounting policies and no significant changes in the components of
commercial and contractual commitments during the quarter ended March 31, 2003.</font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>We are not engaged in off-balance sheet arrangements or trading activities
that involve non-exchange traded contracts. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Our stock price has been trading below $1 since February 11, 2002 and we are currently not in compliance with the
NASDAQ&#146;s listing requirements. We have moved from the NASDAQ National Market to the NASDAQ SmallCap Market, and our bid price compliance period has been extended until June 18, 2003, if we are in compliance with certain listing </font></p> <br>
<p style='margin-bottom:0pt;text-align:center'><font size=2>13</font></p>

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 <p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>criteria. As of this filing, NASDAQ has proposed to further extend the compliance period, which, if approved, could provide us an additional 270 days, or
until March 2004, to regain compliance. This move to the SmallCap market has extended the bid price compliance period and provides us with more flexibility and additional time to regain compliance and to execute our plan while being able to maintain
NASDAQ listing status. </font></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>This transition does not impact the method in which our securities are bought and sold. Stock information is available through Yahoo,
NASDAQ Online, etc. and the NASDAQ SmallCap listing in the newspaper.</font></p> <p style=' margin-bottom:0pt; margin-top:12pt;'><b><font size=2>Factors Affecting Our Business, Financial Condition and Results of Operations </font></b></p> <p style='
margin-bottom:0pt; margin-top:12pt;'><i><b><font size=2>Cautionary Statement</font></b></i></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>This Quarterly Report on Form 10-Q contains statements that constitute
&#147;forward-looking statements&#148; within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of predictive, future tense or forward-looking terminology, such as
&#147;anticipates,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148; &#147;will&#148; and words of similar meaning. These statements include statements regarding, among other things, our
product and service development, projected capital expenditures, liquidity and capital, development of additional revenue sources, expansion into new market segments, technological advancement, ability to develop &#147;brand&#148; awareness and
market acceptance of our products. These statements are based on management&#146;s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ significantly from those described in the
forward-looking statements, including the acceptance by our customers of our products, the use of the Internet in connection with our beef supply chain management services, our ability to grow revenue, our ability to increase margins, the impact of
competition on pricing, general economic conditions, employee turnover, the impact of litigation and other factors. Other factors that may cause such a difference include, but are not limited to, those discussed in this &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations&#148; and in &#147;Factors Affecting Our Business, Financial Condition and Results of Operation,&#148; as well as those discussed elsewhere in this report and as set forth from
time to time in our other public filings and public statements. Readers of this report are cautioned to consider these risks and uncertainties and to not place undue reliance on these forward-looking statements.</font></p> <p style='
margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>In addition to the other information included in this report and our other public filings and releases, a discussion of factors affecting our business is included in our December
31, 2002 Form 10-K Annual Report and should be considered while evaluating our business, financial condition, results of operations and prospects.</font></p> <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM
3.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.76in;'><b><font size=2>
<a name="tx114_6">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</a></font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Our exposure to market risk relates to changes in interest rates and
their potential impact on our investment portfolio. We invest in marketable debt securities that meet high credit quality standards and limit our credit exposure to any one issue, issuer and type of investment. As of March 31, 2003, our investments
consisted of $100,000 in cash equivalents with maturities of less than three months. Due to the short-term, conservative nature of our investment portfolio, a 10% increase or decrease in interest rates would not have a material effect on our results
of operations or the fair value of our portfolio. The impact on our future results of operations and the future value of our portfolio will depend largely on the gross amount of our investments. </font></p> <p
style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM 4.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.76in;'><b><font size=2>
<a name="tx114_7">CONTROLS AND PROCEDURES</a></font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Within the 90-day period prior to the filing of this report, an evaluation was carried out under the
supervision and with the participation of the Company&#146;s management, including the Chief Executive Officer (&#147;CEO&#148;&#147;) and Chief Financial Officer (&#147;CFO&#148;), of the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14(c) and 15-d-14(c)). Based on that evaluation, the CEO and CFO have concluded that the Company&#146;s disclosure controls and procedures are effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. </font></p> <p style='
margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>Subsequent to the date of their evaluation, there were no significant changes in the Company&#146;s internal controls or in other factors that could significantly affect the
disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses. </font></p> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>14</font></p>

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 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font SIZE=2>PART II. OTHER INFORMATION</font></b></p> <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM
1.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.76in;'><b><font size=2>
<a name="tx114_8">LEGAL PROCEEDINGS</a></font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>There have been no material developments in the legal proceedings previously reported.</font></p> <p
style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM 4.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.76in;'><b><font size=2>
<a name="tx114_9">SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</a></font></b></p> <p style=' margin-bottom:0pt; text-indent:0.36in; margin-top:8pt;'><font size=2>No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the first quarter of 2003.</font></p> <p style='margin-bottom:0;margin-top:12pt;text-indent:0in;'><b><font SIZE=2>ITEM 6.</font></b></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.76in;'><b><font
size=2>
<a name="tx114_10">EXHIBITS AND REPORTS ON FORM 8-K</a></font></b></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>(a)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font
size=2>Exhibits</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table width="100%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><b><font size=1>Exhibit</font></b><br> <u><b><font size=1>Number</font></b></u><b></b></p> </td>
<td valign=bottom > <p style='margin-top:0pt;margin-bottom:0pt;' ><u><b><font size=1>Description</font></b></u><b></b></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><u><b><font size=1>Reference</font></b></u><b><u></u></b></p> </td> </tr>
<tr style='height:.05in'>
<td width="7%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="7%" valign=top > <p style='margin-bottom:0pt;margin-top:6.0pt;text-align:center;'><font size=2>10.57</font></p> </td>
<td valign=top > <p style='margin-left:0;margin-bottom:0pt;margin-top:6.0pt;'><font size=2>Real Property Lease between XL Realty, Corp. and eMerge Interactive, Inc. dated April 1, 2003 (Exhibit 10.57)</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>*</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="7%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-top:0pt;margin-bottom:0pt;' ><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="7%" valign=top > <p style='margin-bottom:0pt;margin-top:6.0pt;text-align:center;'><font size=2>99.1</font></p> </td>
<td valign=top > <p style='margin-left:0;margin-bottom:0pt;margin-top:6.0pt;'><font size=2>Certification by David C. Warren Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>*</font></p> </td> </tr>
<tr style='height:.05in'>
<td width="7%" valign=top style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:6.0pt;text-align:center;'><font size=1>&nbsp;</font></p> </td>
<td valign=top style=' height:.05in'> <p style='margin-left:0;margin-bottom:0pt;margin-top:6.0pt;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom style=' height:.05in'> <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="7%" valign=top > <p style='margin-bottom:0pt;margin-top:6.0pt;text-align:center;'><font size=2>99.2</font></p> </td>
<td valign=top > <p style='margin-left:0;margin-bottom:0pt;margin-top:6.0pt;'><font size=2>Certification by Juris Pagrabs Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;text-align:center;'><font size=2>*</font></p> </td> </tr> </table> <br> <p style='margin-bottom:0;margin-top:3pt;margin-left:0.18in;text-indent:0in;'><font
size=2>*</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>Filed herewith.</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>(a)</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>Reports on Form 8-K</font></p> <p style=' margin-bottom:0pt; margin-left:0.36in; margin-top:8pt;'><font size=2>There were no reports filed on Form 8-K for the quarter ended
March 31, 2003.</font></p> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>15</font></p>

<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>Pursuant to the requirements of Section 13 or 15(d) 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.</font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table align=center width="65%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td width="49%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Dated: May 13, 2003</font></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="44%" colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>eMerge Interactive. Inc.</font></p> </td> </tr>
<tr>
<td width="49%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br > <br > </p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="4%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>By:&nbsp;</font></p> </td>
<td width="40%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br > <br > <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;/s/ &nbsp;D<small>AVID</small> C. W<small>ARREN</small></font></p> </td> </tr>
<tr>
<td width="49%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="4%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td> </tr>
<tr>
<td width="49%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'>&nbsp;</p> </td>
<td width="7%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'>&nbsp;</p> </td>
<td width="4%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'>&nbsp;</p> </td>
<td width="40%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><b><font size=1>David C. Warren</font></b><br> <b><font size=1>President, Chief Executive</font></b><br> <b><font size=1>Officer and Director (Principal </font></b><br>
<b><font size=1>Executive Officer)</font></b></p> </td> </tr> </table> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table align=center width="65%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td width="49%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="44%" colspan="2" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="49%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br > <br > </p> </td>
<td width="7%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="4%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>&nbsp;</font></p> </td>
<td width="40%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br > <br > &nbsp;&nbsp;&nbsp;&nbsp;/<font size="2">s/ &nbsp;J<small>URIS</small> P<small>AGRABS</small></font></p> </td> </tr>
<tr>
<td width="49%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="4%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td> </tr>
<tr>
<td width="49%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="7%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="4%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="40%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><b><font size=1>Juris Pagrabs</font></b><br> <b><font size=1>Executive Vice President and Chief Financial </font></b><br> <b><font size=1>Officer (Principal Financial and
</font></b><br> <b><font size=1>Accounting Officer)</font></b></p> </td> </tr> </table> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>16</font></p>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>Certificate of Chief Executive Officer </font></b></p> <p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>I, David C. Warren,
President, Chief Executive Officer and Director, certify that: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>1.</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>I have
reviewed this quarterly report on Form 10-Q of eMerge Interactive, Inc. (&#147;Registrant&#148;); </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>2.</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=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; </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>3.</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>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; </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>4.</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>The Registrant&#146;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: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font size=2>a)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>designed such
disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly
report is being prepared; </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font size=2>b)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>evaluated the effectiveness of the
Registrant&#146;s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the &#147;Evaluation Date&#148;); and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font
size=2>c)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; and</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>5.</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>The Registrant&#146;s other certifying officers and I
have disclosed, based on our most recent evaluation, to Registrant&#146;s auditors and the audit committee of Registrant&#146;s board of directors: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font
size=2>a)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant&#146;s ability to record,
process, summarize and report financial data and have identified for the Registrant&#146;s auditors any material weaknesses in internal controls; and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font
size=2>b)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant&#146;s internal
controls; and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>6.</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>The Registrant&#146;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. </font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table align=center width="65%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Date: May 14, 2003</font></p> </td>
<td width="2%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br > <br > </p> </td>
<td width="2%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>&nbsp;</font></p> </td>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>&nbsp;&nbsp;&nbsp;&nbsp;/s/ &nbsp;D</font><font SIZE=1>AVID </font><font SIZE=2>C</font><font size=1>. </font><font SIZE=2>W</font><font
SIZE=1>ARREN</font></p> </td> </tr>
<tr>
<td width="43%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td> </tr>
<tr>
<td width="43%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="43%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><b><font size=1>David C. Warren</font></b><br> <b><font size=1>President, Chief Executive</font></b><br> <b><font size=1>Officer and Director</font></b></p> </td> </tr>
</table> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>17</font></p>

<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>
 <p style=' margin-bottom:0pt;text-align:center; margin-top:16pt;'><b><font size=2>Certificate of Chief Financial Officer</font></b></p> <p style=' margin-bottom:0pt; margin-top:8pt;'><font size=2>I, Juris Pagrabs,
Executive Vice President and Chief Financial Officer, certify that: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>1.</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>I
have reviewed this quarterly report on Form 10-Q of eMerge Interactive, Inc. (the &#147;Registrant&#148;); </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>2.</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=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; </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>3.</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>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; </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>4.</font></p><p
style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>The Registrant&#146;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: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font size=2>a)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>designed such
disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly
report is being prepared; </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font size=2>b)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>evaluated the effectiveness of the
Registrant&#146;s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the &#147;Evaluation Date&#148;); and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font
size=2>c)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; and</font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>5.</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>The Registrant&#146;s other certifying officers and I
have disclosed, based on our most recent evaluation, to the Registrant&#146;s auditors and the audit committee of Registrant&#146;s board of directors: </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font
size=2>a)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant&#146;s ability to record,
process, summarize and report financial data and have identified for the Registrant&#146;s auditors any material weaknesses in internal controls; and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0.36in;'><font
size=2>b)</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.72in;'><font size=2>any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant&#146;s internal
controls; and </font></p> <p style='margin-bottom:0;margin-top:6pt;text-indent:0in;'><font size=2>6.</font></p><p style='margin-bottom:0pt;margin-top:-11pt;margin-left:0.36in;'><font size=2>The Registrant&#146;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. </font></p> <p style=' margin-bottom:0pt; margin-top:0pt;'><font size=2>&nbsp;</font></p>
<table align=center width="65%" border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse; '>
<tr>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>Date: May 13, 2003</font></p> </td>
<td width="2%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td> </tr>
<tr>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br > <br > </p> </td>
<td width="2%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><font size=2>&nbsp;</font></p> </td>
<td width="43%" valign=bottom > <p style='margin-bottom:0pt;margin-top:0in;'><br> <font size=2>&nbsp;&nbsp;&nbsp;&nbsp;/s/ &nbsp;J</font><font SIZE=1>URIS </font><font SIZE=2>P</font><font SIZE=1>AGRABS</font></p> </td> </tr>
<tr>
<td width="43%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=top > <p><font size=1>&nbsp;</font></p> </td>
<td valign=top > <hr noshade width="100%" color="black" size=1> </td> </tr>
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<td width="43%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="2%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="10%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><font size=1>&nbsp;</font></p> </td>
<td width="43%" valign=top > <p style='margin-bottom:0pt;margin-top:0in;'><b><font size=1>Juris Pagrabs</font></b><br> <b><font size=1>Executive Vice President and Chief </font></b><br> <b><font size=1>Financial Officer</font></b></p> </td> </tr>
</table> <br> <p style='margin-bottom:0pt;text-align:center'><font size=2>18</font></p>
</BODY></HTML>
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{"company-data": {"conformed-name": "EMERGE INTERACTIVE INC", "cik": "0001092605", "assigned-sic": "7389", "irs-number": "650534535", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-29037", "film-number": "03697634"}, "business-address": {"street1": "10315 102ND TERRACE", "city": "SEBASTIAN", "state": "FL", "zip": "32958", "phone": "5615897331"}, "mail-address": {"street1": "10315 102ND TERRACE", "city": "SEBASTIAN", "state": "FL", "zip": "32958"}}
March 31, 2003
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2003.
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 Number: 000-29037
eMerge
Interactive, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
65-0534535
(I.R.S. Employer Identification No.)
10305 102
nd
Terrace Sebastian, Florida 32958
(Address of principal executive
offices)
(772) 581-9700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: YES
x
NO
o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES
o
NO
x
The number of shares of the registrant's common stock, $0.008 par value, outstanding as of May
12, 2003, was 38,780,439. There were 33,085,994 shares of Class A common stock outstanding and 5,694,445 shares of Class B common outstanding as of this date.
Table of Contents
eMerge Interactive, Inc.
FORM 10-Q
QUARTERLY REPORT
(For Three Months Ended March 31, 2003)
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements:
Condensed Consolidated Balance Sheets
as of March 31, 2003 and December 31, 2002
3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002
4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002
5
Notes to Condensed Consolidated Financial Statements
6
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
11
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
14
Item 4.
Controls and Procedures
14
PART II
OTHER INFORMATION
Item 1.
Legal Proceedings
15
Item 4.
Submission of Matters to a Vote of Security Holders
15
Item 6.
Exhibits and Reports on Form 8-K
15
2
Table of Contents
PART I.
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL
STATEMENTS
eMerge Interactive, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31,
2003
December 31,
2002
Assets
Current assets:
Cash and cash equivalents
$
5,077,604
$
5,278,449
Trade accounts receivable, less allowance for doubtful accounts of $894,962 in 2003 and $929,299 in 2002
136,812
413,875
Inventories (note 3)
290,538
36,428
Prepaid expenses
458,740
484,476
Due from related parties (note 4)
297,451
2,281,630
Total current assets
6,261,145
8,494,858
Property, plant and equipment, net of accumulated depreciation of $7,258,390 in 2003 and $6,600,235 in 2002
4,962,981
5,347,511
Due from related parties (note 4)
217,074
217,074
Total assets
$
11,441,200
$
14,059,443
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of capital lease obligation
$
401,772
$
315,406
Accounts payable
572,869
568,394
Accrued liabilities:
Salaries and benefits (note 7)
408,012
469,847
Legal and professional
190,659
165,985
Other
128,250
122,121
Advance payments from customers
291,327
101,500
Total current liabilities
1,992,889
1,743,253
Capital lease obligation, excluding current installments
115,976
196,967
Total liabilities
2,108,865
1,940,220
Stockholders' equity (note 6)
Common stock, $.008 par value, authorized 100,000,000 shares:
Class A common stock, designated 92,711,110 shares, issued 34,329,847 shares in 2003 and 2002;
outstanding 33,085,992 shares in 2003 and 2002
274,638
274,638
Class B common stock, designated 7,288,890 shares, 5,694,445 shares issued and outstanding in 2003 and 2002
45,556
45,556
Additional paid-in capital
200,729,576
200,729,576
Accumulated deficit
(191,289,398
)
(188,502,401
)
Treasury stock, 1,243,855 shares, at cost
(428,037
)
(428,037
)
Unearned compensation
—
(109
)
Total stockholders' equity
9,332,335
12,119,223
Total liabilities and stockholders' equity
$
11,441,200
$
14,059,443
See accompanying notes to condensed consolidated financial
statements.
3
Table of Contents
eMerge Interactive, Inc
.
Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2003 and 2002
(Unaudited)
Three Months Ended March 31,
2003
2002
Revenue
$
161,542
$
230,026
Cost of revenue
74,476
148,091
Gross profit
87,066
81,935
Operating expenses:
Selling, general and administrative
1,575,132
2,028,656
Technology and development
511,451
586,161
Impairment and related charges (note 7)
—
57,925
Depreciation and amortization of intangibles
666,511
1,034,590
Total operating expenses
2,753,094
3,707,332
Operating loss
(2,666,028
)
(3,625,397
)
Interest and other (expense) income, net
(14,076
)
94,727
Interest expense
(8,382
)
(308,591
)
Gain on disposal of assets
3,513
—
Equity in operations of unconsolidated investee
—
2,386
Loss from continuing operations before income taxes
(2,684,973
)
(3,836,875
)
Income tax expense (benefit)
—
—
Loss from continuing operations
(2,684,973
)
(3,836,875
)
Discontinued operations (note 8):
Loss from discontinued cattle operations, net of income taxes of $0 in 2003 and 2002
(102,024
)
(251,393
)
Minority interest
—
(66,905
)
Net loss
$
(2,786,997
)
$
(4,155,173
)
Loss from continuing operations per common share – basic and diluted
$
(0.07
)
$
(0.10
)
Net loss per common share – basic and diluted
$
(0.07
)
$
(0.10
)
Weighted average number of common shares outstanding - basic and diluted
38,780,437
39,709,449
See accompanying notes to condensed consolidated financial
statements.
4
Table of Contents
eMerge Interactive, Inc
.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2003 and 2002
(Unaudited)
2003
2002
Cash flows from operating activities:
Net loss
$
(2,786,997
)
$
(4,155,173
)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation
666,511
1,136,440
(Gain) loss on disposal of assets
(3,513
)
111
Impairment of assets held for sale
—
233,947
Equity in operations of unconsolidated investee
—
(2,386
)
Amortization of unearned compensation
109
4,508
Change in fair value of financial instruments
—
(2,218
)
Minority interest
—
66,905
Changes in operating assets and liabilities:
Trade accounts receivable, net
277,063
(7,870,358
)
Inventories
(254,110
)
(1,584,015
)
Prepaid expenses and other assets
25,736
(1,465,454
)
Due from related parties, net
1,984,179
(296,333
)
Accounts payable and accrued liabilities
(21,182
)
(3,550,644
)
Advance payments from customers
189,827
712,814
Net cash provided by (used for) operating activities
77,623
(16,771,856
)
Cash flows from investing activities:
Purchases of property and equipment
(282,120
)
(327,075
)
Proceeds from sale of property, plant and equipment
3,652
6,499
Business combinations, net of cash acquired
—
(687,500
)
Net cash used for investing activities
(278,468
)
(1,008,076
)
Cash flows from financing activities:
Net borrowings on line of credit
—
6,622,374
Payments on capital lease obligation
—
(113,406
)
Capital contributed by lessee/operator to lessee/operator activity
—
100,000
Net cash provided by financing activities
—
6,608,968
Net change in cash
(200,845
)
(11,170,964
)
Cash and cash equivalents, beginning of period
5,278,449
18,736,162
Cash and cash equivalents, end of period
$
5,077,604
$
7,565,198
Supplemental disclosures:
Cash paid for interest
$
2,864
$
48,542
Non-cash investing and financing activities:
Accrued liability for Class A common stock to be issued in connection with business combination
—
30,051
Issuance of Class A common stock in connection with business combinations
—
500,000
See accompanying notes to condensed consolidated financial statements.
5
Table of Contents
eMerge Interactive, Inc
.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1)
Description of Business and Summary of Significant Accounting Policies
(a)
Overview
eMerge Interactive, Inc. (the "Company"), a Delaware corporation, is a technology company providing individual-animal tracking, food safety and
supply-procurement services to the beef industry. The Company's technologies focus primarily on information-management and individual-animal tracking tools, as well as other food safety technologies.
During the second quarter of 2002, the Company announced that it was divesting its cattle operations and planned to either sell or dispose of these operations. Accordingly,
operating results for all periods presented exclude the cattle operations that have been sold or disposed and are classified as discontinued operations in the accompanying financial statements.
(b)
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company has continued to follow the accounting policies set forth in the consolidated financial statements included in its fiscal
2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, the interim financial information provided herein reflects all adjustments (consisting of normal and recurring adjustments) necessary
for a fair presentation of the Company's consolidated financial position as of March 31, 2003, and the results of operations and cash flows for the three-month periods ending March 31, 2003 and 2002. The results of operations for the three
months ended March 31, 2003 are not necessarily indicative of the results to be expected for the full year.
These condensed consolidated
financial statements and footnotes should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2002, included in the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.
(c)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, as well as the activities conducted under the lease and operating agreements. The Company believes that consolidation of these activities, notwithstanding lack of technical majority ownership, is necessary to present fairly the
financial position and results of operations of the Company because of the existence of a parent-subsidiary relationship by means of the lessee/operator remaining an employee of the Company, the Company's majority share of the profits or losses
derived from the activities, certain control terms of the lease and operating agreements and the relatively short-term nature of the agreements which are terminable by either party. The results of operations of the activities conducted under the
lease and operating agreements is included in discontinued operations. As of July 31, 2002, all lease and operating agreements were no longer effective and the related assets had been sold. With the completion of the divestiture of all of the cattle
operations, the Company dissolved all of its wholly owned subsidiaries during the last quarter of 2002. All significant intercompany balances and transactions have been eliminated in consolidation.
During 2002, the Company's investment in Turnkey Computer Systems, Inc. ("Turnkey"), a private corporation, was accounted for by the equity method. Accordingly, the
Company's share of Turnkey's earnings or losses is reflected in the caption "equity in operations of unconsolidated investee" in the consolidated statements of operations. In December 2002, the Company sold the investment for
$322,000 in cash.
6
Table of Contents
(d)
Revenue Recognition
Revenues from the sale of all Supply Chain Management products and services are recognized as products are
shipped or services are provided.
Revenues from the sale of hand-held VerifEYE Solo™ units are recognized using the revenue
recognition principles of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." These principles provide that revenue arrangements with multiple deliverables should be divided into separate units of accounting if
the deliverables in the arrangements meet the following criteria:
•
The delivered item(s) has value to the customer on a standalone basis;
•
There is objective and reliable evidence of the fair value of the undelivered item(s); and
•
If the arrangement includes a right of return,
delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the vendor.
In addition,
these principles provide that arrangement consideration should be allocated among the separate units of accounting based on their relative fair values. The amount allocated to the delivered item(s) is limited to that amount that is not contingent
upon the delivery of additional items or meeting specified performance conditions. Finally, these principles provide that applicable revenue recognition criteria should be considered separately for separate units of accounting. Food Safety product
sales are reviewed by management to determine the separate units of accounting and the allocation of revenues among these units of accounting. Revenue allocated to each unit of accounting is recognized as products are shipped or services are
provided.
Revenues from operating leases of VerifEYE Carcass Inspection Systems ("CIS") will be reported on a straight-line
basis over the life of the lease. Upfront, nonrefundable payments will be recognized on a straight-line basis over the minimum lease term.
(e)
Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation – Transition and Disclosure." This statement
amends SFAS No. 123, "Accounting for Stock Based Compensation," to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. It also amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure in the summary of significant accounting policies of the effect of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings
per share in annual financial statements. SFAS No. 148's amendment of the transition and annual disclosure requirements are effective for fiscal years ending after December 15, 2002.
As of March 31, 2003, the Company has one stock-based employee compensation plan. The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations including FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation an interpretation of APB
Opinion No. 25" issued in March 2000, to account for its fixed plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.
SFAS No. 123 established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123 and SFAS No. 148, the Company has elected to continue to apply the
intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 148.
7
Table of Contents
If the Company had elected to adopt the fair value-based recognition provisions of SFAS No. 123 for its stock option
plans, net loss and net loss per share would have been changed to the pro forma amounts indicated below:
Three Months Ended March 31,
2003
2002
Net loss as reported
$
(2,786,997
)
$
(4,155,173
)
Add: Stock-based employee compensation expense included in reported net loss
109
4,508
Deduct: Total stock-based employee compensation expense determined under fair value based methods for
all awards
(529,369
)
(632,935
)
Pro forma net loss
$
(3,316,257
)
$
(4,783,600
)
Net loss per share as reported – basic and diluted
$
(0.07
)
$
(0.10
)
Pro forma net loss per share – basic and diluted
$
(0.09
)
$
(0.12
)
(2)
Liquidity
The Company has incurred losses and
negative cash flows from operations in every year since inception and has an accumulated deficit of $191.3 million as of March 31, 2003. For the three months ended March 31, 2003, the Company incurred a net loss of approximately $2.8 million,
however cash flows provided by operations was $78,000. Management expects operating losses and cash flows to improve throughout 2003. The Company expects that cash balances and cash flows generated primarily from sales of VerifEYE products will meet
its anticipated cash requirements during 2003. In addition, the Company plans to increase its revenue related to supply chain management sales, actively control operating costs and continue to evaluate the structure of its operations to improve cash
flows for the foreseeable future. However, if sales from the VerifEYE product do not meet expectations in 2003, the Company will need to seek additional sources of liquidity.
(3)
Inventories
Inventories consist of:
2003
2002
Cattle
$
—
$
29,348
Raw materials
60,094
—
Finished goods
230,444
5,180
Other
—
1,900
$
290,538
$
36,428
(4)
Related Party Transactions
As of March 31,
2003 and December 31, 2002, amounts due from related parties were $515,000 and $2.5 million, respectively. These balances are due from shareholders' related businesses. As of March 31, 2003, due from related parties includes a non-interest
bearing receivable from Eastern Livestock, LLC ("Eastern") in the amount of $400,000 to be paid in two equal installments on August 5, 2003 and August 5, 2004 in compliance with the asset purchase agreement for the assets of Eastern
Livestock, Inc. Interest, at 4.75%, has been imputed on this receivable. The remaining $115,000 included in due from related parties, as of March 31, 2003, is due from an entity other than Eastern.
Prior to the divestiture of the cattle operations in 2002, the Company had both cattle sales and purchase transactions with Eastern, certain employees and shareholders' related businesses in the
ordinary course of business. These sales and purchases were made on trade accounts with the same credit terms of the Company's other customers and suppliers. Cattle sales to related parties amounted to $0 and $31.5 million for the three months
ended March 31, 2003 and 2002, respectively. Related accounts receivable amounted to $576,000 as of March 31, 2002. Cattle purchases from related parties amounted to $0 and $20.4 million for the three months ended March 31, 2003 and 2002,
respectively. Related accounts payable amounted to $395,000 as of March 31, 2002.
8
Table of Contents
(5)
Segment
Information
The Company's reportable segments consist of Supply Chain Management products and services and Food Safety products. Supply Chain
Management consists of animal tracking, data management and supply procurement services. Food Safety consists of the VerifEYE inspection systems.
The
following summarizes revenue, cost of revenue and gross profit information related to these two segments for the three months ended March 31, 2003 and 2002:
2003
2002
Revenue:
Supply Chain Management
$
83,269
$
230,026
Food Safety
78,273
—
Total
$
161,542
$
230,026
Cost of revenue
Supply Chain Management
$
27,970
$
148,091
Food Safety
46,506
—
Total
$
74,476
$
148,091
Gross profit:
Supply Chain Management
$
55,299
$
81,935
Food Safety
31,767
—
Total
$
87,066
$
81,935
The Company's assets and other statement of operations data are not
allocated to a segment. During the three months ended March 31, 2003, approximately 25% of total revenues were from two Supply Chain Management customers and 26% of total revenues were from one Food Safety customer. During the three months ended
March 31, 2002, approximately 57% of total revenues were from two customers.
(6)
Stock Plan
A summary of stock option
transactions for the three months ended March 31, 2003, follows:
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in years)
Balance outstanding, December 31, 2002
4,728,776
$
2.48
8.12
Granted
1,016,000
0.39
Exercised
—
—
Cancelled
(103,563
)
2.04
Balance outstanding, March 31, 2003
5,641,213
$
2.11
8.21
9
Table of Contents
(7)
Impairment,
Restructuring and Related Charges
A summary of activity in the restructuring liability (included in accrued salaries and benefits in the accompanying
condensed consolidated balance sheets) for the three months ended March 31, 2003 and 2002 follows:
Balance at December 31, 2001
$
452,000
New charges
58,000
Cash payments
(255,000
)
Balance at March 31, 2002
$
255,000
Balance at December 31, 2002
61,000
New charges
—
Cash payments
(55,000
)
Balance at March 31, 2003
$
6,000
In March 2002, the Company determined that McMahan Order Buying Company and
Hefley Order Buying Company, which were purchased in August 2000 and November 2000, respectively, were not performing as expected and decided the best course of action was to terminate these facilities and sever the associated employees. With the
termination of these facilities, the Company recorded impairment of the associated goodwill in the amount of $234,000, which is included in loss from discontinued cattle operations in the accompanying condensed consolidated statement of
operations.
(8)
Discontinued
Operations
SFAS No. 144 requires that in a period in which a component of an entity has been disposed of or is classified as held for sale, the income
statement of the Company for current and prior periods shall report the results of operations of the component, including any loss recognized for the initial or subsequent write-down to fair value less cost to sell of assets held for sale, in
discontinued operations. In April 2002, the Company determined that the Company's long term goals and interests were best served by divesting all remaining cattle operations, including the leased cattle operations, through sale or disposal.
Therefore, the Company has classified the results of operations of all the cattle operations sold or disposed of, for both the current and prior periods, to discontinued operations. The loss from discontinued operations includes revenues of $20,000
and $257.6 million for the three months ended March 31, 2003 and 2002, respectively. The loss included in loss from discontinued operations for the three months ended March 31, 2003 and 2002 are $102,000 and $251,000, respectively.
For the three months ended March 31, 2002, losses attributed to the lessee/operators' noncontrolling interest in the results of operations of the leased cattle
operations is reflected in minority interest in discontinued operations.
(9)
Subsequent Events
The Company has entered into
a new lease agreement with XL Realty Corp. effective April 1, 2003 for a period of three years. Future minimum lease payments amount to $129,000 in 2003, $172,000 in 2004, $172,000 in 2005 and $43,000 in 2006.
10
Table of Contents
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AN
D RESULTS OF OPERATIONS
The following discussion of our financial
condition and results of operations should be read together with the condensed consolidated financial statements and the related notes included elsewhere in this report.
Company Overview
We are a technology company providing food-safety, individual-animal tracking and supply-management services to the beef
production industry. The Company is structured into two operating groups, a Food Safety Group and Supply Chain Management Group.
The Food Safety Group's
patented VerifEYE
™
Food Safety Technology is a unique machine vision technology, which instantly detects microscopic levels of organic contamination, which can harbor deadly pathogens. The VerifEYE technology is available in several
applications for the meat processing, food processing and food services industries.
The Supply Chain Management Group is comprised of three inter-related
products and services, all designed to allow cattle producers, meat packers and retailers to better manage their product supply chains:
•
CattleLog
™
- individual animal data-collection and reporting tools;
•
eMerge Premium Sales – sales featuring
preconditioned, commingled cattle; and
•
Professional Cattle Consultants ("PCC") Feedyard Services - operational and cattle performance data benchmarking for commercial feedyards.
Management has implemented significant restructuring efforts over the last two years to resize the business to focus on the VerifEYE and supply chain management business models. As a result of this change in focus, historical operations have
limited relevance in assessing both the Company's current results of operations and future prospects.
Results of Operations
Three months ended March 31, 2003 and March 31, 2002
Revenue
Revenue decreased by 30% to $162,000 for the quarter ended March 31, 2003 from $230,000 for the quarter ended March 31, 2002. This decrease is due primarily to a change in marketing strategy for electronic
identification ("EID") tags in the second quarter of 2002, the nonrenewal of a feedyard data management service contract in the first quarter of 2002 and the discontinuation of the sale of web advertising at the end of 2002, which
contributed revenues of $84,000, $37,500 and $22,000, respectively during the three months ended March 31, 2002. These decreases were partially offset by an increase in revenues from CattleLog and the introduction of revenues from the sale of
VerifEYE Solo units in the current quarter.
Cost of Revenue
Cost of revenue
decreased by 50% to $74,000 for the quarter ended March 31, 2003 from $148,000 for the quarter ended March 31, 2002. This decrease is due principally to the reduction in costs for EID tags from the prior year, which contributed costs of
approximately $76,000 during the three months ended March 31, 2002. In addition, indirect overhead costs, such as support personnel, facilities costs, telecommunication charges and material purchases, which are allocated between individual-animal
tracking products and services and food safety products, were reduced by approximately $21,000 in the current quarter. These decreases in cost of revenues were offset by the costs associated with the sale of VerifEYE Solo units. We generated a gross
profit of $87,000 and $82,000 for the quarters ended March 31, 2003 and 2002, respectively. The increase in gross profit is due primarily to the increase in both CattleLog and VerifEYE Solo revenues and a decrease in sales of EID tags, which
typically incur lower profit margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased 22% to $1.6 million for the quarter ended March 31, 2003 from $2.0 million for the quarter ended March 31, 2002. The decrease in selling, general and administrative expenses was primarily
associated with the cost savings initiatives that have been implemented over the last two years and include decreases
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in salaries and wages, telephone, consulting, advertising and media expenses. We anticipate selling, general and administrative expenses to continue to be
reduced as the impact of our cost saving initiatives continue to become fully realized.
Technology and Development
Our technology and development expenses consist primarily of salaries and related benefit costs, payments to outside consultants, software purchases and maintenance charges and project material
costs. Our expenses decreased 13% to $511,000 for the quarter ended March 31, 2003 from $586,000 for the quarter ended March 31, 2002. This decrease was primarily associated with the reduction of workforce and decreases in materials, supplies and
consulting expenses. Furthermore, the Company has fewer products under development and products such as CattleLog, our exclusive individual-animal data collection and reporting system, is essentially complete. The primary focus of our development
team is our meat inspection system, VerifEYE. We expect to continue to incur costs to develop and commercialize new products, expand our offerings and adapt our technologies to new markets. However, we anticipate that our technology and development
expenses will continue to decline in 2003 as compared to 2002.
Impairment and Related Charges
The impairment and related charges incurred in the quarter ended March 31, 2002 consist of costs to exit a lease.
Depreciation
Depreciation expense decreased 36% to $667,000 for the quarter ended March 31, 2003 from $1.0 million for the quarter ended March 31, 2002. The decrease is primarily due
to the disposal of approximately $459,000 of property, plant and equipment and noncash impairment of approximately $812,000 of property, plant and equipment during the last three quarters of 2002.
Other Income and Expense
Interest and other income, net decreased to $(14,000) for the quarter ended March 31, 2003 from
$95,000 for the quarter ended March 31, 2002. This decrease was primarily due to an increase in miscellaneous expense in the first quarter of 2003 of approximately $34,000 related to the settlement of disputed consulting fees incurred in a prior
period, offset by a reduction in interest income of approximately $37,000 generated by notes receivable from related parties outstanding in the first quarter of 2002 and the receipt of miscellaneous rental income of approximately $50,000 received in
the first quarter of 2002.
Interest expense decreased to $8,000 for the quarter ended March 31, 2003 from $309,000 for the quarter ended March 31, 2002. This
decrease is due primarily to the termination of a line of credit on May 1, 2002.
Due to the losses incurred, we did not recognize income tax expense for the
quarter ended March 31, 2003 or the quarter ended March 31, 2002.
Discontinued Operations
During the second quarter of 2002, we determined that in order to improve our productivity and our use of working capital we would sell or dispose of all of our previously acquired cattle operations. Through the
subsequent divestitures, we significantly changed our market focus and revenue source. As of January 24, 2003, the divestiture of all cattle operations is complete. The results of operations of the acquired, and subsequently disposed, entities are
included in our consolidated statements of operations under discontinued operations for all periods presented.
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The assets sold included only property and equipment. All associated goodwill was previously reduced to zero. There were no liabilities
in the disposal group. The impairment loss, revenue and pretax loss related to assets sold or disposed amounted to:
Three Months ended March 31,
2003
2002
Impairment loss
$
—
$
234,000
Revenue
$
20,000
$
257,561,000
Pretax loss
$
102,000
$
251,000
Minority interest represents the
lessee/operators' share of activities conducted under the lease and operating agreements that were entered into during the fourth quarter of 2001.
Liquidity and Capital
Resources
As of March 31, 2003, our principle sources of liquidity are existing cash balances, working capital and expected sales from our VerifEYE and
CattleLog products. As a result of the Company's restructuring efforts, excluding the discontinued cattle operations, the Company has reduced its quarterly loss from continuing operations to approximately $2.7 million, which for the quarter
ended March 31, 2003, includes $667,000 of depreciation. Going forward in 2003, loss from continuing operations is expected to be reduced further by the revenue stream from VerifEYE inspection systems. We expect that our existing sources of
liquidity will meet our cash flow needs for the near term. However, if sales from our VerifEYE product do not meet our expectations in 2003, we will need to seek additional sources of liquidity.
We continue to explore the need for other debt or equity financing alternatives to meet our working capital requirements. If additional funds are raised through alternative debt financing that
provides for the issuance of equity securities or through the issuance of equity securities, our stockholders may experience significant dilution. Furthermore, there can be no assurance that any additional funding will be available when needed, or
that if available, such financing will include favorable terms. See also "Factors Affecting Our Business, Financial Condition and Results of Operations" below.
As of March 31, 2003, we had cash and cash equivalents totaling $5.1 million compared to $5.3 million at December 31, 2002. Our working capital balance as of March 31, 2003 was $4.3 million compared to $6.8 million as
of December 31, 2002.
As of March 31, 2003, we have a receivable from Eastern Livestock, LLC in the amount of $400,000 to be paid in two equal installments on
August 5, 2003 and August 5, 2004 in compliance with the asset purchase agreement for the assets of Eastern.
We have had significant negative cash flows from
operating activities for each fiscal and quarterly period through December 31, 2002. For the three months ended March 31, 2003, net cash provided by operating activities was $78,000, and primarily consisted of decreases in trade accounts receivable,
cattle deposits, due from related parties and an increase in advance payments from customers offset by net operating losses.
Net cash used in investing
activities was $278,000 for the three months ended March 31, 2003. Our investing activities consist primarily of capital expenditures.
Our future working
capital requirements will depend on a variety of factors including our ability to successfully implement our current business plan and reduce our net cash outflow.
Other
Matters
There were no changes in the components of the Company's critical accounting policies and no significant changes in the components of
commercial and contractual commitments during the quarter ended March 31, 2003.
We are not engaged in off-balance sheet arrangements or trading activities
that involve non-exchange traded contracts.
Our stock price has been trading below $1 since February 11, 2002 and we are currently not in compliance with the
NASDAQ's listing requirements. We have moved from the NASDAQ National Market to the NASDAQ SmallCap Market, and our bid price compliance period has been extended until June 18, 2003, if we are in compliance with certain listing
13
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criteria. As of this filing, NASDAQ has proposed to further extend the compliance period, which, if approved, could provide us an additional 270 days, or
until March 2004, to regain compliance. This move to the SmallCap market has extended the bid price compliance period and provides us with more flexibility and additional time to regain compliance and to execute our plan while being able to maintain
NASDAQ listing status.
This transition does not impact the method in which our securities are bought and sold. Stock information is available through Yahoo,
NASDAQ Online, etc. and the NASDAQ SmallCap listing in the newspaper.
Factors Affecting Our Business, Financial Condition and Results of Operations
Cautionary Statement
This Quarterly Report on Form 10-Q contains statements that constitute
"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of predictive, future tense or forward-looking terminology, such as
"anticipates," "believes," "estimates," "expects," "intends," "may," "will" and words of similar meaning. These statements include statements regarding, among other things, our
product and service development, projected capital expenditures, liquidity and capital, development of additional revenue sources, expansion into new market segments, technological advancement, ability to develop "brand" awareness and
market acceptance of our products. These statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ significantly from those described in the
forward-looking statements, including the acceptance by our customers of our products, the use of the Internet in connection with our beef supply chain management services, our ability to grow revenue, our ability to increase margins, the impact of
competition on pricing, general economic conditions, employee turnover, the impact of litigation and other factors. Other factors that may cause such a difference include, but are not limited to, those discussed in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and in "Factors Affecting Our Business, Financial Condition and Results of Operation," as well as those discussed elsewhere in this report and as set forth from
time to time in our other public filings and public statements. Readers of this report are cautioned to consider these risks and uncertainties and to not place undue reliance on these forward-looking statements.
In addition to the other information included in this report and our other public filings and releases, a discussion of factors affecting our business is included in our December
31, 2002 Form 10-K Annual Report and should be considered while evaluating our business, financial condition, results of operations and prospects.
ITEM
3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk relates to changes in interest rates and
their potential impact on our investment portfolio. We invest in marketable debt securities that meet high credit quality standards and limit our credit exposure to any one issue, issuer and type of investment. As of March 31, 2003, our investments
consisted of $100,000 in cash equivalents with maturities of less than three months. Due to the short-term, conservative nature of our investment portfolio, a 10% increase or decrease in interest rates would not have a material effect on our results
of operations or the fair value of our portfolio. The impact on our future results of operations and the future value of our portfolio will depend largely on the gross amount of our investments.
ITEM 4.
CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, an evaluation was carried out under the
supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO"") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14(c) and 15-d-14(c)). Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of their evaluation, there were no significant changes in the Company's internal controls or in other factors that could significantly affect the
disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
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PART II. OTHER INFORMATION
ITEM
1.
LEGAL PROCEEDINGS
There have been no material developments in the legal proceedings previously reported.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the first quarter of 2003.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits
Exhibit
Number
Description
Reference
10.57
Real Property Lease between XL Realty, Corp. and eMerge Interactive, Inc. dated April 1, 2003 (Exhibit 10.57)
*
99.1
Certification by David C. Warren Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*
99.2
Certification by Juris Pagrabs Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*
*
Filed herewith.
(a)
Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended
March 31, 2003.
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Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: May 13, 2003
eMerge Interactive. Inc.
By:
/s/  D
AVID
C. W
ARREN
David C. Warren
President, Chief Executive
Officer and Director (Principal
Executive Officer)
/
s/  J
URIS
P
AGRABS
Juris Pagrabs
Executive Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
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Certificate of Chief Executive Officer
I, David C. Warren,
President, Chief Executive Officer and Director, certify that:
1.
I have
reviewed this quarterly report on Form 10-Q of eMerge Interactive, Inc. ("Registrant");
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)
designed such
disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly
report is being prepared;
b)
evaluated the effectiveness of the
Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c)
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; and
5.
The Registrant's other certifying officers and I
have disclosed, based on our most recent evaluation, to Registrant's auditors and the audit committee of Registrant's board of directors:
a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal
controls; and
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: May 14, 2003
/s/  D
AVID
C
.
W
ARREN
David C. Warren
President, Chief Executive
Officer and Director
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Certificate of Chief Financial Officer
I, Juris Pagrabs,
Executive Vice President and Chief Financial Officer, certify that:
1.
I
have reviewed this quarterly report on Form 10-Q of eMerge Interactive, Inc. (the "Registrant");
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)
designed such
disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly
report is being prepared;
b)
evaluated the effectiveness of the
Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c)
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; and
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 Registrant's board of directors:
a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal
controls; and
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: May 13, 2003
/s/  J
URIS
P
AGRABS
Juris Pagrabs
Executive Vice President and Chief
Financial Officer
18