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UNITED STATES

SECURITIES AND
EXCHANGE COMMISSION

Washington, D. C. 20549

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FORM
10-Q

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(Mark One)

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

Commission File Number: 0-19923

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STM WIRELESS, INC.(Exact Name of
Registrant as Specified in its Charter)

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|Delaware                                                       |  | 95-3758983                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|One Mauchly, Irvine, California                                |  | 92618                               
|(Address of principal executive offices)                       |  | (Zip code)                          
|                                                               |  |                                     
|(949) 753-7864                                                
|(Registrants telephone number, including area code)          
|                                                              

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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 and (2) has been subject to such filing requirements for the last 90 days.

|Yes | x | No | o
|--- | - | -- | -

As of November 12, 2002, there were 7,168,325 shares of
Common Stock, $0.001 par value per share, outstanding. The review of our interim financial information for the quarter ended September 30, 2002 required by Statements on Auditing Standards No. 71 has not been completed by our independent public
accountants, KPMG LLP. We expect that KPMG will complete its review shortly and if necessary, we will file an amended report on Form 10-Q when the review is completed.

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STM WIRELESS, INC. INDEX

|         |                       | Page                                                                                                                                     
|-------- | --------------------- | -----------------------------------------------------------------------------------------------------------------------------------------
|         |                       |                                                                                                                                          
|Part I.  | FINANCIAL INFORMATION |                                                                                                                                          
|         |                       |                                                                                                                                          
|         | Item 1.               | Financial Statements                                                                                                                     
|         |                       |                                                                                                                                          
|         |                       | Condensed Consolidated Balance Sheets at September 30, 2002 and December 31, 2001                                                        
|         |                       |                                                                                                                                          
|         |                       | Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2002 and September 30, 2001     
|         |                       |                                                                                                                                          
|         |                       | Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2002 and September 30, 2001               
|         |                       |                                                                                                                                          
|         |                       | Notes to Condensed Consolidated Financial Statements for the three and nine month periods ended September 30, 2002 and September 30, 2001
|         |                       |                                                                                                                                          
|         | Item 2.               | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                    
|         |                       |                                                                                                                                          
|         | Item 3.               | Quantitative And Qualitative Disclosures About Market Risk                                                                               
|         |                       |                                                                                                                                          
|         | Item 4.               | Controls and Procedures                                                                                                                  
|         |                       |                                                                                                                                          
|Part II. | Other Information     | 15                                                                                                                                       
|         |                       |                                                                                                                                          
|         |                       | Item 1.                                                                                                                                  
|         |                       |                                                                                                                                          
|         |                       | Item 6.                                                                                                                                  

2



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Part I
Financial Information (Item 1
Financial Statements)

STM WIRELESS, INCCONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data) (Unaudited)

|                                     |                                                                                                                                                                       | September 30, 2002 |        | December 31, 2001 |  
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------ | ----------------- | -
|                                     |                                                                                                                                                                       |                    |        |                   |  
|Assets                               |                                                                                                                                                                       |                    |        |                   |  
|Current assets:                      |                                                                                                                                                                       |                    |        |                   |  
|                                     | Cash and cash equivalents                                                                                                                                             |                    | $      | 324               |  
|                                     | Short-term investments                                                                                                                                                |                    |        |                  |  
|                                     | Restricted cash and short-term investments                                                                                                                            |                    |        | 280               |  
|                                     | Accounts receivable, net                                                                                                                                              |                    |        | 5,860             |  
|                                     | Inventories, net                                                                                                                                                      |                    |        | 8,702             |  
|                                     | Prepaid expenses and other current assets                                                                                                                             |                    |        | 300               |  
|                                     |                                                                                                                                                                       |                    |        |                   |  
|                                     | Total current assets                                                                                                                                                  |                    |        | 15,466            |  
|Property & equipment, net            |                                                                                                                                                                       |                    | 7,214  |                   |  
|Other assets                         |                                                                                                                                                                       |                    | 67     |                   |  
|                                     |                                                                                                                                                                       |                    |        |                   |  
|                                     |                                                                                                                                                                       | $                  | 22,747 |                   | $
|                                     |                                                                                                                                                                       |                    |        |                   |  
|Liabilities and Stockholders Equity |                                                                                                                                                                       |                    |        |                   |  
|Current liabilities:                 |                                                                                                                                                                       |                    |        |                   |  
|                                     | Short-term borrowings                                                                                                                                                 |                    | $      | 1,541             |  
|                                     | Current portion of long-term debt                                                                                                                                     |                    |        | 87                |  
|                                     | Accounts payable                                                                                                                                                      |                    |        | 7,831             |  
|                                     | Accrued liabilities                                                                                                                                                   |                    |        | 2,148             |  
|                                     | Customer deposits and deferred revenue                                                                                                                                |                    |        | 999               |  
|                                     | Income taxes payable                                                                                                                                                  |                    |        | 526               |  
|                                     |                                                                                                                                                                       |                    |        |                   |  
|                                     | Total current liabilities                                                                                                                                             |                    |        | 13,132            |  
|Long-term debt.                      |                                                                                                                                                                       |                    | 6,698  |                   |  
|Other long-term liabilities          |                                                                                                                                                                       |                    | 32     |                   |  
|Stockholders equity:                |                                                                                                                                                                       |                    |        |                   |  
|                                     | Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued or outstanding                                                                            |                    |        |                  |  
|                                     | Common stock, $0.001 par value; 20,000,000 shares authorized; issued and outstanding 7,168,325 shares at September 30, 2002 and 7,248,325 shares at December 31,
2001 |                    |        | 7                 |  
|                                     | Additional paid in capital                                                                                                                                            |                    |        | 38,989            |  
|                                     | Accumulated deficit                                                                                                                                                   |                    |        | (36,111           | )
|                                     | Receivable from stockholder                                                                                                                                           |                    |        |                  |  
|                                     |                                                                                                                                                                       |                    |        |                   |  
|                                     | Total stockholders equity                                                                                                                                            |                    |        | 2,885             |  
|                                     |                                                                                                                                                                       |                    |        |                   |  
|                                     |                                                                                                                                                                       | $                  | 22,747 |                   | $
|                                     |                                                                                                                                                                       |                    |        |                   |  
|                                     |                                                                                                                                                                       |                    |        |                   |  

See accompanying notes to condensed consolidated financial statements.

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STM WIRELESS, INCCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited)

|                                                   |                                            | For the Three Months Ended September 30, |        | For the Nine months Ended September 30, |  
|-------------------------------------------------- | ------------------------------------------ | ---------------------------------------- | ------ | --------------------------------------- | -
|                                                   |                                            |                                          |        |                                         |  
|                                                   |                                            | 2002                                     |        | 2001                                    |  
|                                                   |                                            |                                          |        |                                         |  
|Revenues:                                          |                                            |                                          |        |                                         |  
|                                                   | Products                                   |                                          | $      | 2,052                                   |  
|                                                   | Services                                   |                                          |        | 680                                     |  
|                                                   |                                            |                                          |        |                                         |  
|                                                   | Total revenues                             |                                          |        | 2,732                                   |  
|                                                   |                                            |                                          |        |                                         |  
|Cost of revenues:                                  |                                            |                                          |        |                                         |  
|                                                   | Products                                   |                                          |        | 2,065                                   |  
|                                                   | Services                                   |                                          |        | 444                                     |  
|                                                   |                                            |                                          |        |                                         |  
|                                                   | Total cost of revenues                     |                                          |        | 2,509                                   |  
|                                                   |                                            |                                          |        |                                         |  
|Gross profit                                       |                                            |                                          | 223    |                                         |  
|                                                   |                                            |                                          |        |                                         |  
|Operating costs and other operating items:         |                                            |                                          |        |                                         |  
|                                                   | Selling, general & administrative expenses |                                          |        | 1,372                                   |  
|                                                   | Research & development                     |                                          |        | 1,150                                   |  
|                                                   |                                            |                                          |        |                                         |  
|                                                   | Total                                      |                                          |        | 2,522                                   |  
|                                                   |                                            |                                          |        |                                         |  
|Operating loss                                     |                                            |                                          | (2,299 | )                                       |  
|                                                   | Foreign currency gain (loss)               |                                          |        | (9                                      | )
|                                                   | Gain on disposal of affiliate              |                                          |        |                                        |  
|                                                   | Interest income                            |                                          |        | 2                                       |  
|                                                   | Interest expense                           |                                          |        | (156                                    | )
|                                                   |                                            |                                          |        |                                         |  
|Income (loss) before income taxes                  |                                            |                                          | (2,462 | )                                       |  
|                                                   | Income tax benefit (expense)               |                                          |        |                                        |  
|                                                   |                                            |                                          |        |                                         |  
|Net income (loss)                                  |                                            | $                                        | (2,462 | )                                       | $
|                                                   |                                            |                                          |        |                                         |  
|Net income (loss) per common share:                |                                            |                                          |        |                                         |  
|                                                   | Basic                                      |                                          | $      | (0.34                                   | )
|                                                   |                                            |                                          |        |                                         |  
|                                                   | Diluted                                    |                                          | $      | (0.34                                   | )
|                                                   |                                            |                                          |        |                                         |  
|Common shares used in computing per share amounts: |                                            |                                          |        |                                         |  
|                                                   | Basic                                      |                                          |        | 7,239                                   |  
|                                                   | Diluted                                    |                                          |        | 7,239                                   |  
|                                                   |                                            |                                          |        |                                         |  

See accompanying notes to condensed consolidated financial statements.

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STM WIRELESS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)

|                                                     |                                               | Nine months Ended Sept. 30, |       
|---------------------------------------------------- | --------------------------------------------- | --------------------------- | ------
|                                                     |                                               |                             |       
|                                                     |                                               | 2002                        |       
|                                                     |                                               |                             |       
|Net cash provided by (used in) operations            |                                               | $                           | (5,397
|                                                     |                                               |                             |       
|                                                     | Cash flows provided by investing activities:  |                             |       
|                                                     | Proceeds from the sale of stock in DTPI       |                             |       
|                                                     | Decrease in restricted assets                 |                             |       
|                                                     | (Increase) decrease in short-term investments |                             |       
|                                                     | Acquisition of property, plant and equipment  |                             |       
|                                                     |                                               |                             |       
|Net cash provided by investing activities            |                                               |                             | 3,049 
|                                                     |                                               |                             |       
|Cash flows from financing activities:                |                                               |                             |       
|                                                     | Repayments of short-term borrowings, net      |                             |       
|                                                     | Increase in other long-term liabilities       |                             |       
|                                                     | Repayment of long-term debt                   |                             |       
|                                                     |                                               |                             |       
|Net cash provided by (used in) financing activities  |                                               |                             | (1,986
|                                                     |                                               |                             |       
|Net increase (decrease) in cash and cash equivalents |                                               |                             | (4,334
|Cash and cash equivalents at beginning of period     |                                               |                             | 4,658 
|                                                     |                                               |                             |       
|Cash and cash equivalents at end of period           |                                               | $                           | 324   
|                                                     |                                               |                             |       
|Supplemental disclosure of cash flow information:    |                                               |                             |       
|                                                     | Interest paid                                 |                             | $     
|                                                     |                                               |                             |       
|                                                     | Income taxes paid                             |                             | $     
|                                                     |                                               |                             |       

See accompanying notes to condensed consolidated financial statements.

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STM WIRELESS, INC.NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

1.         Basis of Presentation:

These financial statements are unaudited; however, the information contained herein for STM Wireless, Inc. and its subsidiaries (the
Company or STM) gives effect to all adjustments necessary (consisting only of normal accruals), in the opinion of Company management, to present fairly the financial statements for the interim periods presented.

The results of operations for the current interim period are not necessarily indicative of the results to be expected for the current
year.

Although the Company believes that the disclosures in these financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC), and these condensed consolidated financial statements should be read in conjunction with the financial statements included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2001, which is on file with the SEC.  Certain reclassifications have been made to the 2001 condensed consolidated financial statements to conform to the 2002 presentation.

2.          Inventories:

Inventories are summarized as follows:

|                |  | September 30, 2002 |       | December 31, 2001 |  
|--------------- |  | ------------------ | ----- | ----------------- | -
|                |  |                    |       |                   |  
|Raw materials   |  | $                  | 3,768 |                   | $
|Work in process |  |                    | 285   |                   |  
|Finished goods  |  |                    | 4,649 |                   |  
|                |  |                    |       |                   |  
|                |  | $                  | 8,702 |                   | $
|                |  |                    |       |                   |  

3.          Net Income (Loss) Per
Share:

|                                                                                               |  | Three Months Ended September 30, |        | Nine months Ended September 30, |  
|---------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|                                                                                               |  |                                  |        |                                 |  
|                                                                                               |  | 2002                             |        | 2001                            |  
|                                                                                               |  |                                  |        |                                 |  
|Net income (loss)                                                                              |  | $                                | (2,462 | )                               | $
|                                                                                               |  |                                  |        |                                 |  
|Basic:                                                                                         |  |                                  |        |                                 |  
|Weighted average common shares outstanding used in computing basic net income (loss) per share |  |                                  | 7,239  |                                 |  
|                                                                                               |  |                                  |        |                                 |  
|Basic net income (loss) per share                                                              |  | $                                | (0.34  | )                               | $
|                                                                                               |  |                                  |        |                                 |  
|Diluted:                                                                                       |  |                                  |        |                                 |  
|Weighted average common shares outstanding                                                     |  |                                  | 7,239  |                                 |  
|Dilutive options outstanding                                                                   |  |                                  |       |                                 |  
|                                                                                               |  |                                  |        |                                 |  
|Shares used in computing diluted net income (loss) per share                                   |  |                                  | 7,239  |                                 |  
|                                                                                               |  |                                  |        |                                 |  
|Diluted net income (loss) per share                                                            |  | $                                | (0.34  | )                               | $
|                                                                                               |  |                                  |        |                                 |  

For the three and nine
months ended September 30, 2002, options to purchase approximately 1,176,000 shares of common stock were not included in the computation of diluted net income per share, as the effect would be antidilutive. For the three and nine months ended
September 30, 2001, options to purchase approximately 1,236,000

6



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and 1,273,000 shares of common stock, respectively, were outstanding and were excluded from the computation of diluted net income per share, as the effect would be
antidilutive.

4.         New Accounting Standards:

In October 2001, the Financial Accounting Standards Board issued Statement No. 144, Accounting for the Impairment of Disposal of Long- Lived
Assets. (Statement 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. Statement 144 supersedes Statement 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a business.Statement 144 retains the requirement in Opinion No. 30 to report separately discontinued operations and extends that reporting to a component of any entity that
either has been disposed of or is classified as held for sale.

The Company adopted Statement 144 on January 1, 2002. The adoption of Statement 144 had no effect on the Companys financial
statements.

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5.          Geographic and Business Segment Information:

The Company operates in one principal industry segment: the design, manufacture and provision of wireless-based
satellite communications infrastructures.

|                             |                         | Three Months Ended September 30, |        | Nine months Ended September 30, |  
|---------------------------- | ----------------------- | -------------------------------- | ------ | ------------------------------- | -
|                             |                         |                                  |        |                                 |  
|Revenues By Geographic Areas |                         | 2002                             |        | 2001                            |  
|                             |                         |                                  |        |                                 |  
|Total:                       |                         |                                  |        |                                 |  
|                             | Latin & South America   |                                  | $      | 370                             |  
|                             | Africa & Middle East    |                                  |        | 1,057                           |  
|                             | Asia                    |                                  |        | 977                             |  
|                             | United States           |                                  |        | 213                             |  
|                             | Europe                  |                                  |        | 115                             |  
|                             |                         |                                  |        |                                 |  
|Total                        |                         | $                                | 2,732  |                                 | $
|                             |                         |                                  |        |                                 |  
|Products:                    |                         |                                  |        |                                 |  
|                             | Latin & South America   |                                  | $      | 221                             |  
|                             | Africa & Middle East    |                                  |        | 945                             |  
|                             | Asia                    |                                  |        | 725                             |  
|                             | United States           |                                  |        | 110                             |  
|                             | Europe                  |                                  |        | 51                              |  
|                             |                         |                                  |        |                                 |  
|Total                        |                         | $                                | 2,052  |                                 | $
|                             |                         |                                  |        |                                 |  
|Services:                    |                         |                                  |        |                                 |  
|                             | Latin & South America   |                                  | $      | 149                             |  
|                             | Africa & Middle East    |                                  |        | 112                             |  
|                             | Asia                    |                                  |        | 252                             |  
|                             | United States           |                                  |        | 103                             |  
|                             | Europe                  |                                  |        | 64                              |  
|                             |                         |                                  |        |                                 |  
|Total                        |                         | $                                | 680    |                                 | $
|                             |                         |                                  |        |                                 |  
|                             | Operating loss by area: |                                  |        |                                 |  
|                             | Latin & South America   |                                  | $      |                                |  
|                             | Africa & Middle East    |                                  |        |                                |  
|                             | Asia                    |                                  |        | (5                              | )
|                             | United States           |                                  |        | (2,294                          | )
|                             | Europe                  |                                  |        |                                |  
|                             |                         |                                  |        |                                 |  
|Total                        |                         | $                                | (2,299 | )                               | $
|                             |                         |                                  |        |                                 |  
|                             |                         |                                  |        |                                 |  

In the three month period ended September 30, 2002, there were three customers to whom individual sales exceeded 10%
of total revenues, and the total of revenues to these customers represented 60% of total revenues for the period. In the corresponding period ended September 30, 2001, there was a total of two customers to which individual sales exceeded 10% of
total revenues, and the total of revenues to these customers represented 48% of total revenues. As of September 30, 2002, there were two customers in which accounts receivable balances exceeded 10% of accounts receivable.

In the nine month period ended September 30, 2002, there were three customers to whom individual sales exceeded 10% of total revenues, and the total of revenues to
these customers represented 52% of total revenues for the period. In the corresponding period ended September 30, 2001, there was a total of three customers to which individual sales exceeded 10% of total revenues and the total of revenues to these
customers represented 46% of total revenues.

8



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|                                        |                       | September 30, 2002 |   | December 31, 2001 | 
|--------------------------------------- | --------------------- | ------------------ | - | ----------------- | 
|                                        |                       |                    |   |                   | 
|Identifiable assets by geographic area: |                       |                    |   |                   | 
|                                        | United States         |                    | $ | 21,481            | 
|                                        | Asia                  |                    |   | 1,116             | 
|                                        | Latin & South America |                    |   | 150               | 
|                                        |                       |                    |   |                   | 
|                                        | Total                 |                    | $ | 22,747            | 
|                                        |                       |                    |   |                   | 
|                                        |                       |                    |   |                   | 

6.          Short-Term Borrowings:

On March 27, 2000, the Company completed a revolving line of credit for approximately $3,300,000 of which $2,800,000 is available for on-going
working capital requirements. In September 2001, the Company renewed its line of credit under this facility for $3,300,000 through March 2004. The lender was granted a security interest in substantially all of the Companys assets.

Availability to borrow the $2,800,000 is based upon a percentage of eligible inventories and accounts receivable. Borrowings under
the line of credit at September 30, 2002 and December 31, 2001, were approximately $1,541,000 and $1,464,000, respectively. At September 30, 2002, the unused credit available on this line of credit was approximately $120,000.

During the three months ended June 30, 2002, the Company retired a $2,000,000 line of credit that was fully collateralized by
restricted cash and short-term investment balances. As of December 31, 2001, the amount outstanding under this line of credit was $2,000,000 with the $2,000,000 collateralized balances included as part of restricted cash and short-term
investments.

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

General:

STM Wireless, Inc. (the Company or STM), founded in 1982, is a developer, manufacturer, supplier and provider of
wireless-based satellite communications infrastructure and user terminal products utilized in public and private telecommunications networks for broadband and telephony applications. These networks support telephone grade voice, fax, data
communication and IP based data, video communication, and are used to either bypass or extend terrestrial networks. The Companys product line is based on proprietary hardware and software and primarily consists of two-way earth stations
referred to as VSATs (very small aperture terminals), associated infrastructure equipment and software. The Companys proprietary equipment and software are utilized by telephone companies, businesses, and government agencies in Europe, the
Americas, the Middle East, Africa and Asia.

Critical Accounting Policies and Estimates:

The Companys discussion and analysis of its financial condition and results of operations are based upon the Companys
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. There are a number of critical accounting policies that are most important to the portrayal of
the Companys financial condition and results of operation.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the dates of the balance sheets and revenues and expenses for the periods presented.  Therefore, on an ongoing basis, the Company evaluates its estimates, including those for bad debts provisions,
inventory reserves and other obligations.  For estimated bad debts, the Company reviews on an individual account basis the age of the receivable, all circumstances surrounding the transaction that gave rise to the receivable and whether the
customer continues to have the financial resources to pay the receivable as of the balance sheet date and prior to the issuance of the financial statements for the respective period.  For estimated inventory reserves, the Company performs a
review of the higher value inventory items and applies the results of the review to the lower value inventory items by product category.  The respective inventory reserve is based upon the historical activity in the inventory item; its expected
future use based upon identified sales

9



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prospects and orders for a particular product, anticipated changes to the design of a particular product, whether the product into which the inventory item is incorporated
is expected to be discontinued in the near future and whether there are any lower of cost or market considerations.  For other obligations, where judgment is required, the Company reviews the circumstances surrounding the obligation and
evaluates the facts and circumstances to determine an appropriate level of accrual for such obligation.

Sales
of the Companys communication products and related installed software are generally recognized upon shipment when the title and risk of loss have been transferred to the customer.  Sales of the Companys products to distributors are
normally not subject to right of return.  Service revenues are recognized as services are completed.  Generally, the Companys sales are multiple element arrangements and sales contracts or sales orders supported by a detailed pricing
schedule for each element (including services) of the contract or sales order.  Third parties may perform the installation of the Companys equipment, although new customers generally rely on the Company to commission and install the
initial equipment.  When there are acceptance criteria to be met, generally there is an acceptance document agreed between the Company and the customer prior to the shipment, such that the Company can determine at the time of shipment if there
is any material risk of non-acceptance.  For repeat customers, the Company is very familiar with the customers network environment, such that, it can be determined if there is any material risk of non-acceptance.  If it is determined
that there is a significant risk of non-acceptance, the Company will defer revenue on all shipments of product until acceptance has occurred.  Where there is a payment installment tied to acceptance or where partial shipments of product are
allowed under the respective sales contract, revenue is recognized for shipments of product that have occurred and where the Company has a legal basis for an enforceable claim for those elements delivered irrespective of whether the Company performs
the installation and commissioning of the equipment.

Inventory valuation and the appropriate cost of sales
for product for a given period can require the exercise of judgment on an ongoing basis.  On an annual basis, the Company sets its standards based on expected purchase costs of products and components that are incorporated into the
products.  Manufacturing overhead is estimated and absorbed into the product cost based upon assumed activity levels for the year.  Such standards are recalculated on a quarterly basis.  Due to the relatively high dollar value of
individual sales in a given period and the materiality of such individual sales to the results for the period, there can be significant variations in the level of activity in a given period depending upon the timing of individual sales.  Should
the Company assume an incorrect level of activity in a given year, there may be certain quarters where the results for the period are negatively impacted by a disproportionate level of under-absorbed manufacturing overhead.

Results of Operations:

Total revenues were $2,732,000 and $12,398,000,
respectively, for the three and nine month periods ended September 30, 2002, compared to $7,766,000 and $21,111,000, respectively, for the corresponding periods of 2001, representing decreases of 65% and 41%, respectively, over the prior year
periods. Product revenues were $2,052,000 and $10,342,000, respectively, for the three and nine month periods ended September 30, 2002, compared to $6,710,000 and $18,760,000, respectively, for the corresponding periods of 2001, representing
decreases of 69% and 45%, respectively, over the prior year periods. Service revenues were $680,000 and $2,056,000, respectively, for the three and nine month periods ended September 30, 2002, compared to $1,056,000 and $2,351,000, respectively, for
the corresponding periods of 2001, representing decreases of 36% and 13%, respectively, over the prior year periods.

The 65% decrease in total revenues for the three months ended September 30, 2002 compared to the corresponding period in 2001 was
attributed primarily to a decrease of approximately $2,364,000 in the Latin and South America region, a decrease in the Africa and Middle East region of $1,051,000, a decrease in the Asia region of $877,000, and a decrease in the Europe region of
$533,000. For the nine months ended September 30, 2002, total revenues declined 41% as compared to the same period in 2001 due primarily to a decrease of approximately $6,300,000 in revenues to Latin and South America, a decrease in the Asia region
of $393,000, a decrease in the Europe region of $268,000, and a decrease in the United States region of $535,000. In fiscal 2001, the Company earned 25%, or approximately $7,400,000 of its revenues from one U.S. based customer, who serves primarily
the Latin and South America region, and that customer has not purchased significant products or services from the Company during 2002. Product revenues in the Latin and South America region in the nine months ended September 30, 2002 were also
adversely affected by a $400,000 sales incentive granted during the second quarter to a long-term

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customer to be applied as a credit against future sales orders. This incentive was accounted for as a reduction to second quarter sales.

The Companys revenues are characterized by relatively high value and low volume sales. In addition, sales to the international
market are often subject to delays, which extend sales cycles and contribute to the volatility of the Companys revenues. Management continues to be focused on increasing revenues on a quarterly basis through identifying specific projects and
regions where the Company has a competitive advantage and has established customer relationships. Management currently has a revenue target of approximately $4,000,000 to $5,000,000 in the fourth quarter of fiscal 2002; however, the Company
continues to experience difficulty in predicting the timing of individual projects, which may impact this revenue target.  Therefore, there can be no assurance that the Company will meet these targets or earn any specific level of revenues
consistent with prior periods. The Companys revenues in total, by region and by period, can vary significantly depending upon the timing of projects, the value of individual projects, the level of risk of non-acceptance for a project and other
factors.

Gross profit percentage earned in the three months ended September 30, 2002 was 8% versus 36% for
the same period ended September 30, 2001. For the three months ended September 30, 2002, the gross profit percentage for product revenues declined from 36% in 2001 to a negative 1% in 2002 and the gross profit percentage for service revenues
decreased from 36% in 2001 to 35% in 2002. Gross profit on product revenues in the three months ended September 30, 2002 was adversely affected by a sale to one large customer with an unusually low gross profit percentage, increased costs to take
into volume production the multi-channel version of the Solante family of products, volume related manufacturing variances, and certain relatively fixed direct costs that did not decrease in line with revenues. The gross profit percentage earned in
the nine months ended September 30, 2002 was 13% versus 34% for the corresponding period of 2001. The decline in gross profit percentage for product revenues from 36% in the nine months ended September 30, 2001 to 11% in 2002 is primarily attributed
to the recognition during the second quarter of 2002 of a sales incentive cost of $675,000 ($400,000 of which was a reduction in revenues and $275,000 of which was equipment with no revenue which was classified as a cost of product revenues in the
accompanying condensed consolidated statement of operations), new product introduction costs for the Companys new family of products, volume related manufacturing variances and certain relatively fixed costs that did not decrease in line with
revenues. For the nine month period ended September 30 the gross profit on service revenues increased from 21% in 2001 to 23% in 2002. The improved services gross profit percentage earned in the nine months ended September 30, 2002 compared to the
corresponding period of the prior year reflects improved margins on the Companys repair activities. The anticipated gross profit percentage for the fourth quarter can vary based on the underlying revenue magnitude and mix, and there can be no
assurance that the Company can meet the underlying revenue target. The Company has experienced intense competition during the nine months ended September 30, 2002 and the Company may be forced to reduce its selling price of its products in response
to its competitors pricing strategies or practices, in general or in any part of the world. Therefore, the level of gross profit can vary by customer, by product and by application as well as the overall volume of sales in any given
period.

Selling, general and administrative expenses (SG&A) for the three months ended
September 30, 2002 decreased by $133,000 to $1,372,000, or 50% of revenues, from $1,505,000, or 19% of revenues, in the corresponding period of 2001. For the nine-month period ended September 30, 2002, SG&A expense increased by  $735,000 to
$4,891,000, or 39% of revenues, from $4,156,000, or 20% of revenues for the corresponding period of 2001. The decrease in spending during the three-month period ended September 30, 2002 is due to costs reductions implemented during the second and
third quarters of 2002 affecting headcount levels and third party costs related to consultants and advertising and promotional activities. For the nine months ended September 30, 2002, SG&A expenses were higher during 2002 than 2001 due to the
sales related increased use of outside consultants and higher legal expenses, increased travel, headcount and related costs in 2002, and a recovery of bad debt expense recognized in the third quarter of 2001 for approximately $196,000. Beginning in
the second quarter of 2002, cost reduction programs were implemented to reduce expenditure levels and further cost reductions are being implemented in the fourth quarter. Sales efforts are currently focused on qualified sales opportunities and also
to directly target new customers that the Company has not previously done business with. Due to the cost reduction efforts throughout the current year, SG&A expense levels in the fourth quarter of 2002 will be less than the expense levels for
the third quarter of 2002.

Research and development (R&D) expenses for the three months ended
September 30, 2002 decreased to $1,150,000 (42% of revenues), from $1,422,000 (18% of revenues), for the corresponding period of the prior year.

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For the nine months ended September 30, 2002, R&D expenses decreased to $4,088,000 (33% of revenues), from $4,118,000 (20% of revenues), for the corresponding period of
the prior year. Expense reductions are due primarily to reduced headcount related expenses. R&D costs were reduced throughout 2002 and further cost reductions have been implemented in the fourth quarter which should favorably impact the overall
level of R&D expenses, such that R&D costs in the fourth quarter of 2002 are expected to be less than the third quarter expense levels for R&D. However, these costs can vary depending on the stage reached in a product development cycle.
Current development efforts are focused on the addition of new product functions and features, reducing unit product cost, optimizing product design, and improving manufacturability.

The foreign currency loss of $9,000 and gain of $12,000 recognized in the three and nine months ended September 30, 2002 were
attributable primarily to the Companys Thailand operation. The gain is the result of the Thai currency having strengthened against the U.S. Dollar since the start of fiscal 2002. The Company conducts most of its international sales in the U.S.
Dollar.

In the three and nine-month periods ended September 30, 2001 the Company disposed of shares in DTPI
resulting in a total gain of $2,510,000, which has been classified as a gain on disposal of affiliate in the accompanying condensed consolidated financial statements. No such gain was recognized in the corresponding period in 2002.

Interest income was $2,000 for the three months ended September 30, 2002, compared to $75,000 for the three months ended
September 30, 2001, and was $39,000 for the nine months ended September 30, 2002, compared to $256,000 for the corresponding period of 2001. Interest income for the nine months ended September 30, 2002 is less than the interest income recognized in
the corresponding periods of 2001 due primarily to lower average cash balances for both restricted and unrestricted cash balances and short-term investments attributable partly to the retirement of a line of credit for $2,000,000 that was fully
collateralized with cash in an interest bearing account (note 6 to the condensed consolidated financial statements).

Interest expense decreased by $81,000 to $156,000 for the three months ended September 30, 2002, compared to $237,000 for the same
period ended September 30, 2001. This reduction is attributed to several factors such as the retirement of a line of credit for $2,000,000, a reduction in the general level of interest rates, the expiration of the amortization of prepaid interest
costs in connection with warrants issued as part of the $3,300,000 revolving line of credit (note 6 to the condensed consolidated financial statements). Interest expense decreased by $280,000 to $491,000 for the nine months ended September 30, 2002,
compared to $771,000 for the same period ended September 30, 2001 for primarily the same reasons described above.

The absence of a tax provision in 2002 and 2001 is due to losses in the period.

Liquidity and Capital Resources:

For the first nine months of 2002, the Company
had a negative cash flow from operating activities of $5,397,000 as compared to a positive cash flow of $719,000 for the corresponding period of 2001. The negative cash flow for the period ended September 30, 2002 is attributable primarily to the
net loss of $7,867,000 offset by increases in accounts payable and depreciation and amortization of long-term assets. For the corresponding period of 2001, the positive cash flow from operating activities of $719,000 was due primarily to net income
of $910,000 reduced by a gain on the sale of DTPI shares for $2,510,000 (classified as an element of cash flow from investing activity) and reductions in accounts payable and accrued liabilities. Positive effects on cash flow in 2001 were an
increase in customer deposits, a decrease in accounts receivable, and amortization and depreciation of long-term assets.

Cash flows from investing activities totaled $3,049,000 and $2,089,000 for the nine months ended September 30, 2002 and September 30,
2001, respectively. The positive cash flows for 2002 consisted primarily of the release and availability of approximately $1,300,000 of funds previously classified as restricted cash in connection with a performance bond and the repayment of the
$2,000,000 line of credit with funds also previously classified as restricted (note 6 to condensed consolidated financial statements). The positive cash flow from investing activity for 2001 was due primarily to the sale of 50% of the remaining
shares in DTPI for $2,510,000 offset by $359,000 for capital expenditures and an increase of $312,000 in short-term investments

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Cash flows from financing activities totaled a negative $1,986,000 and a negative
$1,175,000 for the nine-month periods ended September 30, 2002 and 2001, respectively. The negative cash flow for 2002 consisted primarily of the repayment of the line of credit for $2,000,000 previously classified as short-term borrowings. The
negative cash flow for 2001 was due primarily to the net repayment of approximately $1,085,000 to reduce the balance owed under the existing secured line of credit (note 6 to the condensed consolidated financial statements).

Overall, the Companys cash and cash equivalents totaled $324,000 at September 30, 2002 as compared to $4,658,000 at
December 31, 2001.

At September 30, 2002, the Company was contingently liable for standby letters of credit
of approximately  $1,139,000, which reduces available borrowings under its line of credit to approximately $120,000 (see note 6 to the condensed consolidated financial statements).  At December 31, 2001, the Company was contingently liable
for standby letters of credit totaling $2,490,000 of which $1,140,000 restricted borrowings under its line of credit and the balance was cash collateralized at December 31, 2001.

At September 30, 2002, the Company had one customer with extended payment terms beyond 90 days but less than 280 days for approximately
$2,400,000.

At September 30, 2002, the Companys current assets were $15,466,000 and current liabilities
were $13,132,000, representing a current ratio of 1.18 to 1.00.  Excluding inventories of $8,702,000, the Companys quick ratio (current assets less inventories compared to current liabilities) was 0.52 to 1.00. The Company is currently
conserving cash resources by aggressively reducing operating costs to a level commensurate with current and near-term revenue expectations, focusing sales efforts on reducing current inventory, working closely with key vendors, and managing customer
receivables closely to maximize collection. In addition, the Company is focused on generating cash through shipping existing backlog and closing near term sales opportunities including the licensing the production of certain of the Companys
products for certain markets. Additionally, to increase the cash available to the business, the Company expects to sell the Companys corporate headquarters in Irvine, California on favorable terms and is in the process of arranging a new $1
million line of credit which is under negotiation and which is subject to the approval of the Companys board of directors and current lenders.The Company believes that these actions taken
collectively should improve the working capital position of the Company in the short-term. Accordingly, management expects to have sufficient cash generated from operations, through availability under its line of credit, through potential disposal
of assets, and from other external sources to meet its anticipated cash requirements for the next twelve months. If the Company is unable to generate cash from these resources, it will need to raise additional funds through available means, which
may include debt and/or equity financings. However, there can be no assurance that the Company will be successful in raising funds, or if funds are available, that they will be available on terms that will not result in substantial costs or dilution
to existing stockholders.

New Accounting Standards:

In October 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(Statement 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  Statement 144 supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a segment of a business.  Statement 144 retains the requirement in Opinion No. 30 to report separately discontinued operations and extends that reporting to a component of
an entity that either has been disposed of or is classified as held for sale.

The Company adopted Statement
144 on January 1, 2002. The adoption of Statement 144 had no effect on the Companys financial statements

Item 3
Quantitative and Qualitative Disclosures About Market Risk

To avoid the risk of
fluctuating exchange rates associated with international sales, the Company conducts most international sales in United States currency. In Thailand, the Companys subsidiary invoices most customers in local currency based on contractual prices
denominated in United States currency to minimize the risk of foreign

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exchange loss. However, there is the risk of loss on accounts receivable in that the local currency may devalue relative to the United States currency during the period of
collection. The balance in accounts receivable carried in Thailand as of September 30, 2002 and as of December 31, 2001 is approximately $134,000 and $135,000, respectively. Foreign exchange gain through the nine months ended September 30, 2002 due
primarily to the weakening of the U.S. Dollar against the Thai Baht was approximately $16,000.

The
Companys exposure to short-term interest rate fluctuations is limited to its short-term borrowings under its line of credit for $3,300,000. Such line of credit allows borrowings up to $2,800,000 and therefore a 1% increase in interest rates
would increase annual interest expense by $28,000.

The Company does not use derivative financial instruments
in its investment portfolio.

Risk Factors and Forward Looking Statements:

THIS DOCUMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE RISKS AND UNCERTAINTIES. IN ADDITION, THE COMPANY MAY FROM TIME TO TIME MAKE FORWARD LOOKING STATEMENTS, ORALLY OR IN WRITING. THE WORDS ESTIMATE,
PROJECT, POTENTIAL, INTENDED, EXPECT, BELIEVE AND SIMILAR EXPRESSIONS OR WORDS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED OR SUGGESTED IN ANY FORWARD LOOKING STATEMENTS AS A RESULT OF A WIDE VARIETY OF FACTORS AND CONDITIONS, AMONG OTHERS, LACK OF LIQUIDITY AND WORKING CAPITAL, INABILITY TO RAISE DEBT OR EQUITY FINANCING, LONG TERM CYCLES INVOLVED IN
COMPLETING MAJOR CONTRACTS, PARTICULARLY IN FOREIGN MARKETS, INCREASING COMPETITIVE PRESSURES, DEPENDENCE ON EMERGING MARKETS AND A LIMITED NUMBER OF CUSTOMERS, GENERAL ECONOMIC CONDITIONS, TECHNOLOGICAL ADVANCES, THE TIMING OF NEW PRODUCT
INTRODUCTIONS, POLITICAL AND ECONOMIC RISKS INVOLVED IN FOREIGN MARKETS AND FOREIGN CURRENCIES AND THE TIMING OF OPERATING AND OTHER EXPENDITURES, AND POSSIBLE VOLATILITY OF STOCK PRICES AND NASDAQ LISTING REQUIREMENTS. REFERENCE IS HEREBY MADE TO
RISK FACTORS IN THE COMPANYS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001.

BECAUSE OF
THESE AND OTHER FACTORS THAT MAY AFFECT THE COMPANYS OPERATING RESULTS, PAST FINANCIAL PERFORMANCE SHOULD NOT BE CONSIDERED AN INDICATOR OF FUTURE PERFORMANCE, AND INVESTORS SHOULD NOT USE HISTORICAL TRENDS TO ANTICIPATE RESULTS OR TRENDS IN
FUTURE PERIODS.

On August 13, 2002, Nasdaq notified the Company that it is not in compliance with several
Nasdaq National Market continued listing standards including a minimum bid price of $1.00 per share, a minimum shareholders equity of $10 million, and a minimum market value of publicly held shares of $5 million, all of which are required for
continued listing on the Nasdaq National Market. On November 7, 2002, the Company submitted an application to Nasdaq to transfer to the Nasdaq SmallCap Market. Such application is currently under review. If the application to transfer to the Nasdaq
SmallCap Market is not approved, the Company will be delisted from Nasdaq and trading in the Companys stock, if any, would be conducted in the over-the-counter market or, if available, the Nasdaqs Electronic Bulletin Board. As a result,
investors would find it more difficult, to dispose of, or to obtain accurate quotations as to the value of the Companys common stock and the trading price per share could decline.

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Part II
Other Information

Item 1 
Legal Proceedings

From time to time, the Company is involved in litigation
relating to claims arising out of its operations in the normal course of business. The Company does not expect that these matters will individually or in the aggregate have a material adverse effect on the Companys results of operations,
liquidity or its financial condition.

Item 6
Exhibits and Reports On Form 8-K

(a)     Exhibits

99.1 Certificate of Chief Executive Officer

99.2 Certificate of Chief Financial Officer

(b)     Reports on Form 8-K

None

Items 1, 2, 3, 4, and 5 are not
applicable and have been omitted.

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SIGNATURES

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

|                         | STM WIRELESS, INC.
|------------------------ | ------------------
|                         |                   
|Date:  November 13, 2002 | By:               
|                         |                   
|                         |                   

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Item 4
Controls and Procedures

Within 90 days prior to the date of this quarterly report,
the Company carried out an evaluation under the supervision of management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and
procedures. Based upon the evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information required to be
included in our periodic SEC filings. There were no significant changes to the Companys internal controls or in other factors that could significantly affect such internal controls subsequent to the date that the Company carried out its
evaluation.

CERTIFICATION

|I,  Emil Youssefzadeh, certify that:
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CERTIFICATION

|I, Joseph Wallace, certify that:
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