<PAGE>

================================================================================
                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                 --------------

                                    FORM 10-Q

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
     Act of 1934

                       For the Period Ended March 31, 2002

                                       or

[_]  Transition Report Pursuant to Section 13 or 15(d) of The Securities
     Exchange Act of 1934

                           Commission File No. 0-19923

                                 --------------

                               STM WIRELESS, INC.
             (Exact name of Registrant as specified in its charter)

               Delaware                                       95-3758983
       (State or other jurisdiction                       (I.R.S. Employer
    of incorporation or organization)                  Identification number)

       One Mauchly, Irvine, California                          92618
  (Address of principal executive offices)                   (Zip code)

                                 (949) 753-7864
              (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 and (2) has been subject to such filing
requirements for the last 90 days. Yes [X] No [_]

     As of May 14, 2002, there were 7,248,325 shares of Common Stock, $0.001 par
value per share, outstanding.

================================================================================

<PAGE>


                               STM Wireless, Inc.
                                      Index

                                                                            Page
                                                                            ----

Part I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Condensed Consolidated Balance Sheets at
                  March 31, 2002 and December 31, 2001....................     3

                  Condensed Consolidated Statements of Operations
                  for the three month periods ended March 31, 2002
                  and March 31, 2001......................................     4

                  Condensed Consolidated Statements of Cash Flows
                  for the three month periods ended March 31, 2002
                  and March 31, 2001......................................     5

                  Notes to Condensed Consolidated Financial Statements....   6-8

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.....................  8-12

         Item 3.  Quantitative and Qualitative Disclosures
                  About Market Risk.......................................    12

Part II. Other Information................................................    13

         Item 1.  Legal Proceedings
         Item 6.  Exhibits and Reports on Form 8-K

                                       2

<PAGE>


PART I - FINANCIAL INFORMATION (Item 1 - Financial Statements)


                                STM WIRELESS, INC
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                   (unaudited)

                                     ASSETS
<TABLE>
<CAPTION>

                                                                     March 31,       December 31,
                                                                       2002              2001
                                                                    ----------       ------------
<S>                                                                 <C>              <C>
Current assets:
     Cash and cash equivalents.................................      $   3,958        $   4,658
     Short-term investments....................................            160              148
     Restricted cash and short-term investments................          3,361            3,350
     Accounts receivable, net..................................          6,426            6,788
     Inventories...............................................          7,169            7,516
     Prepaid expenses and other current assets.................            710              499
                                                                     ---------        ---------
         Total current assets..................................         21,784           22,959

Property & equipment, net......................................          7,756            7,556
Other assets...................................................             49               46
                                                                     ---------        ---------
                                                                     $  29,589        $  30,561
                                                                     =========        =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Short-term borrowings.....................................      $   3,502        $    3,464
     Current portion of long-term debt.........................             84                85
     Accounts payable..........................................          6,689             6,008
     Accrued liabilities.......................................          2,083             2,067
     Customer deposits and deferred revenue....................          1,315               857
     Income taxes payable......................................            545               533
                                                                     ---------        ----------
         Total current liabilities.............................         14,218            13,014
Long-term debt.................................................          6,743             6,763
Other long-term liabilities....................................             32                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 7,248,325 shares
       at March 31, 2002 and December 31, 2001.................              7                 7
     Additional paid in capital................................         39,289            39,289
     Accumulated deficit.......................................        (30,400)          (28,244)
     Receivable from stockholder...............................           (300)             (300)
                                                                     ---------        ----------
         Total stockholders' equity............................          8,596            10,752
                                                                     ---------        ----------
                                                                     $  29,589        $   30,561
                                                                     =========        ==========
</TABLE>
      See accompanying notes to condensed consolidated financial statements

                                       3

<PAGE>


                               STM WIRELESS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                   March 31,
                                                             2002            2001
                                                           ---------       ---------
<S>                                                       <C>             <C>
Revenues:
     Products..........................................    $   4,925       $   5,565
     Services..........................................          727             669
                                                           ---------       ---------
         Total revenues................................        5,652           6,234
Cost of revenues:
     Products..........................................        3,811           3,589
     Services..........................................          622             644
                                                           ---------       ---------
         Total cost of revenues........................        4,433           4,233

Gross profit...........................................        1,219           2,001
Operating costs and other operating items:
     Selling, general & administrative expenses........        1,711           1,215
     Research & development............................        1,510           1,375
                                                           ---------       ---------
         Total.........................................        3,221           2,590

Operating loss.........................................       (2,002)           (589)

     Foreign currency devaluation costs................           (1)             --
     Interest income...................................           24              97
     Interest expense..................................         (177)           (272)
                                                           ---------       ---------
Loss before income taxes...............................       (2,156)           (764)
     Income tax expense................................           --              --
                                                           ---------       ---------
Net loss...............................................    $  (2,156)      $    (764)
                                                           =========       ==========

Net loss per common share:
     Basic.............................................    $   (0.30)      $   (0.11)
                                                           =========       ==========
     Diluted...........................................    $   (0.30)      $   (0.11)
                                                           =========       ==========
Common shares used in computing per share amounts:

     Basic.............................................        7,248           7,248
     Diluted...........................................        7,248           7,248

</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                       4

<PAGE>


                               STM WIRELESS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                  2002        2001
                                                                -------     ---------
<S>                                                             <C>         <C>
Net cash used in operations.................................    $   (526)   $   (164)
                                                                --------    ---------
Cash flows from investing activities:
     Increase in short-term investments.....................         (12)       (109)
     (Increase)/decrease in restricted assets...............         (11)        100
     Acquisition of property and equipment..................        (168)       (168)
                                                                ---------   ---------
Net cash used in investing activities.......................        (191)       (177)

Cash flows from financing activities:
     Net increase in short-term borrowings..................          38         238
     Repayment of long-term debt............................         (21)        (68)
                                                                --------    --------
Net cash provided by financing activities...................          17         170
                                                                --------    --------

Net decrease in cash and cash equivalents...................        (700)       (171)
Cash and cash equivalents at beginning of period............       4,658       2,903
                                                                --------    --------
Cash and cash equivalents at end of period..................    $  3,958    $  2,732
                                                                ========    ========

Supplemental disclosure of cash flow information:
      Interest paid.........................................    $    197    $    238
                                                                ========    ========
      Income taxes paid.....................................    $     --    $     --
                                                                ========    ========
</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                       5

<PAGE>



                               STM WIRELESS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   Three Months Ended March 31, 2002 and 2001
                                   (Unaudited)

1.   Basis of Presentation:

     These financial statements are unaudited; however, the information
contained herein for STM Wireless, Inc. (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:
<TABLE>
<CAPTION>
                                                                  March 31,       December 31,
                                                                    2002             2001
                                                              --------------     --------------
<S>                                                            <C>               <C>
Raw materials..............................................      $   3,718          $   3,440
Work in process............................................            969              1,600
Finished goods.............................................          2,482              2,476
                                                                 ---------          =========
                                                                 $   7,169          $   7,516
                                                                 =========          =========
</TABLE>

3.   Net Loss per Share:
<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                                   2002             2001
                                                               ------------     -------------
<S>                                                            <C>              <C>
Net loss...................................................      $  (2,156)        $     (764)
                                                                 =========         ==========
Basic:
-----
Weighted average common shares outstanding used
     in computing basic net loss per share.................          7,248              7,248
                                                                 =========         ==========
Basic net loss per share...................................      $   (0.30)        $    (0.11)
                                                                 =========         ==========
Diluted:
-------
Weighted average common shares outstanding.................          7,248              7,248
Dilutive options outstanding...............................             --                 --
                                                                 ---------         ----------
Shares used in computing diluted net loss per share........          7,248              7,248
                                                                 =========         ==========
Diluted net loss per share.................................      $   (0.30)        $    (0.11)
                                                                 =========         ==========
</TABLE>
                                       6

<PAGE>

     Options to purchase 1,224,204 and 1,358,787 shares of common stock were
outstanding at March 31, 2002 and March 31, 2001, respectively, and were
excluded from the computation of diluted net loss per share, as the effect would
have been 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.

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.
<TABLE>
<CAPTION>
                                                             Three Months Ended March 31,
Revenues by geographic area:                                    2002              2001
                                                           ---------------    --------------
                                                                (dollars in thousands)
<S>                                                         <C>                <C>
Total:
     Latin & South America..............................      $    3,129         $    3,440
     United States......................................             237                442
     Asia...............................................           1,179                919
     Africa & Middle East...............................             933                896
     Europe.............................................             174                537
                                                              ----------         ----------
Total revenues..........................................      $    5,652         $    6,234
                                                              ==========         ==========
<CAPTION>
                                                             Three Months Ended March 31,
                                                                2002              2001
                                                           ---------------    --------------
                                                                (dollars in thousands)
<S>                                                         <C>                <C>
Products:
     Latin & South America..............................      $    3,079         $    3,263
     United States......................................             152                188
     Asia...............................................             687                746
     Africa & Middle East...............................             895                891
     Europe.............................................             112                477
                                                              ----------         ----------
Total revenues..........................................      $    4,925         $    5,565
                                                              ==========         ==========
<CAPTION>
                                                             Three Months Ended March 31,
                                                                2002              2001
                                                           ---------------    --------------
                                                                (dollars in thousands)
<S>                                                         <C>                <C>
Services:
     Latin & South America..............................      $       50         $      177
     United States......................................              85                254
     Asia...............................................             492                173
     Africa & Middle East...............................              38                  5
</TABLE>

                                       7

<PAGE>
<TABLE>
<CAPTION>
<S>                                                         <C>                <C>
     Europe.............................................              62                 60
                                                              ----------         ----------
Total revenues..........................................      $      727         $      669
                                                              ==========         ==========
<CAPTION>
                                                             Three Months Ended March 31,
                                                                2002              2001
                                                           ---------------    --------------
                                                                (dollars in thousands)
<S>                                                         <C>                <C>
Operating income (loss) by geographic area:
     Latin & South America..............................      $       --         $       --
     United States......................................          (2,145)              (601)
     Asia...............................................             143                 12
     Africa & Middle East...............................              --                 --
     Europe.............................................              --                 --
                                                              ----------         ----------
Total operating income (loss)...........................      $   (2,002)        $     (589)
                                                              ==========         ===========
<CAPTION>
                                                             March 31,        December 31,
                                                                2002              2001
                                                           ---------------    --------------
                                                                (dollars in thousands)
<S>                                                         <C>                <C>
Identifiable assets by geographic area:
     Latin & South America..............................      $      150         $      149
     United States......................................          27,917             29,222
     Asia...............................................           1,522              1,190
     Africa & Middle East...............................              --                 --
     Europe.............................................              --                 --
                                                              ----------         ----------
Total assets............................................      $   29,589         $   30,561
                                                              ==========         ==========
</TABLE>

     In the three month period ended March 31, 2002, there were two customers to
which individual sales exceeded 10% of total revenues, and the total of revenues
to these customers represented 62% of total revenues for the period. In the
corresponding period ended March 31, 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 63% of total revenues. As of March 31,
2002, there were two customers in which accounts receivable balances exceeded
10% of accounts receivable.

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.

         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 March 31, 2002, and December 31, 2001, were approximately $1,502,000
and $1,464,000, respectively. At March 31, 2002, the unused credit available on
this line of credit was $23,000. The lender was granted a security interest in
substantially all of the Company's assets. As of March 31, 2002 and December 31,
2001, the Company had a $2,000,000 bank line of credit that is fully
collateralized by cash balances included as part of restricted cash and
short-term investments on the condensed consolidated financial statements.

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 IP based data, fax, voice and 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 sometimes referred to as VSATs (very small aperture terminals),
associated infrastructure equipment and software. The Company's proprietary
equipment and software are utilized by businesses, government agencies and
telephone companies in Europe, the Americas, Africa and Asia.

                                       8

<PAGE>

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 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 are 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 reevaluated on a quarterly
basis based on the level of variance experienced. 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:

                                       9

<PAGE>


     Total revenues were $5,652,000 for the three-month period ended March 31,
2002, compared to $6,234,000 for the corresponding period of 2001, a decrease of
9%. Product revenues were $4,925,000 for the three-month period ended March 31,
2002, compared to $5,565,000 for the corresponding period in 2001, a decrease of
12%. Service revenues were $727,000 for the three-month period ended March 31,
2002, compared to $669,000 for the corresponding period of 2001, an increase of
9%.

     The 9% decrease in total revenues for the three months ended March 31, 2002
compared to the corresponding period in 2001 was attributed primarily to
decreases of $311,000 and $363,000 in revenues for the Latin and South America
region and the Europe region, respectively. These decreases were positively
offset by a $260,000 increase in revenues in the Asia region. Prior to the
decrease of 9% in total revenues in the first quarter of 2002, the Company had
achieved six consecutive quarters of revenue growth through the fourth quarter
of 2001, in which revenues were $8,490,000. The reduction in revenues in the
first quarter of 2002 compared with the prior recent quarters reflects delays in
closing two specific sales orders that were expected through established
customer relationships. Furthermore, in fiscal 2001, the Company earned 25% of
its revenues from one customer that is not expected to purchase significant
products from the Company during 2002 due to the overall decline in the
telecommunications sector. Delays are not uncommon in the international markets
in which the Company operates and such customer concentrations have occurred in
prior years as the Company's revenues are characterized by relatively high value
and low volume sales. 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.
However, there can be no assurance that the Company will earn any specific level
of revenue as 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-month period ended March 31,
2002 was 22% versus 32% for the corresponding period ended March 31, 2001.
Comparing the same periods, gross margin for product revenues declined by 13
percentage points and gross margin for service revenues improved from 4% to 14%.
The reduction in the gross profit percentage for product revenues during the
three-months ended March 31, 2002 as compared to the corresponding period in
2001 was attributed primarily to higher manufacturing costs (associated with the
first build of the Company's new Olante and Solante products that were released
for manufacture at the end of the fourth quarter of 2001, the build of the
Company's last generation SES and SpaceWeb products and volume related
variances). The increase in gross profit percentage for service revenues as
compared with the corresponding period of 2001 is reflective of increased
revenue focus on services-related opportunities. With the on-going manufacture
of the Company's new lower cost Solante and Olante Products, the Company's
competitive position will have improved; however, 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 region 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-month
period ended March 31, 2002 increased by $496,000 to $1,711,000 or 30% of
revenues, from $1,215,000, or 19% of revenues, in the corresponding period of
2001. The increase in spending is attributed to increased expenditures for
headcount related expenses, advertising and promotional programs, and outside
professional services related to sales and marketing programs. Selling
expenses, in general, increased throughout 2001 in line with increased sales
opportunities and expectations. Sales personnel have been deployed to those
regions of the world where the Company believes such opportunities exist and
where a dedicated sales presence is justified. Travel expenses, advertising and
promotional expenses have increased accordingly due to the fact that the Company
competes in many regions of the world. Professional fees increased in connection
with a Peruvian court injunction against OSIPTEL, a Peruvian government entity,
and Gilat-To-Home ("Gilat"), controlled by Gilat Satellite Networks, Ltd. of
Israel in connection with a $27,800,000 contract to provide a VSAT network for
phone services in Peru.

     Research and development ("R&D") expenses for the three-month period ended
March 31, 2002 increased by $135,000 to $1,510,000, or 27% of revenues, from
$1,375,000, or 22% of revenues, in the corresponding period of 2001. Increased
expenditures in R&D during the period ended March 31, 2002 were attributed to
higher expenses for headcount related costs and travel for new product
development and sustaining engineering activities. Headcount increased during
2001 to support R&D projects particularly in areas critical to new product
introduction activities. Travel expenses increased in response to increased
sustaining engineering activities, and also due to the fact that the Company
supports customers in many regions of the world. Development efforts continue to
be focused on reducing unit product cost, optimizing product design, improving
manufacturability, and introducing the next generation of products. Management
believes that these efforts will yield future positive results in terms of
higher gross margins and improved inventory control.

     Interest income decreased by $73,000 to $24,000 for the period ended March
31, 2002, compared to $97,000 for the period ended March 31, 2001. This decline
was attributed primarily to lower interest rates prevailing in the three months
ended March 31, 2002 as compared to the same period of 2001.

                                       10

<PAGE>


     Interest expense decreased by $95,000 to $177,000 for the period ended
March 31, 2002, compared to $272,000 for the period ended March 31, 2001.
Interest costs were less during the three-month period ended March 31, 2002 as
compared to the same period in 2001 due to lower interest rates, which affects
interest costs incurred under the revolving line of credit, and a decrease of
approximately $1,362,000 in short-term borrowings outstanding at March 31,
2002 as compared to the balance at March 31, 2001.

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

Liquidity and Capital Resources:

     For the first three months of 2002, the Company had negative cash from
operations of $526,000, compared to a negative $164,000 in the same period of
2001. The negative cash in the first three months of 2002 was attributed
primarily to the losses for the period, partially offset by decreases in
accounts receivable and inventories and increases in customer deposits and
accounts payables. For the same period of 2001, the negative cash flow of
$164,000 consisted of losses for the period and a decrease of accounts payable,
partially offset by a decrease in accounts receivable and an increase in
customer deposits.

     Cash from investing activities in the first three months of 2002 totaled a
negative $191,000, comprising an increase in short-term investments and the
acquisition of property, plant and equipment offset by a reduction in restricted
cash. For the corresponding period of 2001, cash from investing activities
totaled a negative $177,000, comprising an increase in short-term investments
and the acquisition of property plant and equipment, partially offset by a
decrease in restricted cash.

     Cash provided by financing activities during the first three months of 2002
totaled $17,000, comprising primarily of an increase in the line of credit (see
note 6 to the condensed consolidated financial statements). For the three months
ended March 31, 2001, cash provided by financing activities was $170,000,
consisting primarily of the borrowings under the same line of credit, partially
offset by the repayment of long-term debt.

     Overall, the Company's cash and cash equivalents totaled $3,958,000 at
March 31, 2002 as compared to $4,658,000 at December 31, 2001.

     At March 31, 2002, the Company was contingently liable for standby letters
of credit of $2,625,000, of which $1,275,000 restricts borrowings under its line
of credit (see note 6 to the condensed consolidated financial statements) and
the balance of $1,350,000 was cash collateralized at March 31, 2002. Such
$1,350,000 was included in restricted cash and short-term investments but will
become available for use in operations once the standby letter of credit expires
during the second quarter of 2002. 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 the line of credit and the balance of
$1,350,000 was cash collateralized at December 31, 2001.

     At March 31, 2002, the Company had unused availability under its line of
credit of approximately $23,000.

     At March 31, 2002, the Company had two customers with extended payment
terms beyond 90 days but less than or equal to 180 days for approximately
$3,000,000 in total.

     On March 31, 2002, the Company's current assets were $21,784,000 and
current liabilities were $14,218,000 representing a current ratio of 1.53 to
1.00. Excluding inventories of $7,169,000, the Company's quick ratio (current
assets less inventories compared to current liabilities) was 1.03 to 1.00.
Management expectations are that the Company's financial performance can improve
relative to the first quarter of 2002 based on current backlog and known sales
opportunities, which the Company believes it can be successful in winning. In
addition, the Company has implemented certain cost reduction measures in the
second quarter of 2002 in response to the Company's poor financial performance
in the first quarter of 2002. The Company will take additional corrective
actions if considered necessary to preserve the Company's cash resources,
depending on the Company's results and financial condition in future periods.
Accordingly, management expects to have sufficient cash generated from

                                       11

<PAGE>


operations, through availability under its lines of credit, and from other
external resources to meet its anticipated cash requirements for the next twelve
months.

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. 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 March 31, 2002 and December 31, 2001 was approximately $248,000 and $135,000,
respectively. Foreign exchange gain and all losses in 2001 were immaterial. The
Company does not use derivative financial instruments in its investment
portfolio.

         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 interest expense by $28,000.

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, 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. REFERENCE IS HEREBY MADE TO "RISK FACTORS"
IN THE COMPANY'S FOR 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.

                                       12

<PAGE>


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

         None

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

                                       13

<PAGE>


                                   SIGNATURES

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

                                        STM Wireless, Inc.

Date:    May 15, 2002                   By: /s/JOSEPH J. WALLACE
                                            ------------------------------------
                                            Joseph J. Wallace
                                            Vice President, Finance and
                                            Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer and Duly Authorized Officer)


                                       14