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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2002

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from                               to                               .

Commission file number: 0-31659

Registrant’s telephone number, including area code: (858) 320-8800

Securities registered pursuant to Section 12(b) of the Act: None

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

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

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

      The number of shares of the Registrant’s common stock outstanding as of March 10, 2003 was 6,984,823.

      The aggregate market value of the voting common stock held by non-affiliates of the registrant, based on the closing price of the Common Stock on March 10, 2003 as reported by The Nasdaq National Market, was approximately $5,445,790. For the purposes of this calculation, shares owned by officers, directors (and their affiliates) and 5% or greater shareholders, based on Schedule 13G filings, have been excluded. This exclusion is not intended, nor shall it be deemed, to be an admission that such persons are affiliates of the Registrant. The Registrant does not have any non-voting stock issued or outstanding.

Documents Incorporated by Reference

      The Registrant’s Definitive Proxy Statement for the 2003 Annual Meeting of Stockholders (the “Proxy Statement”) is incorporated by reference into Part III of this Form 10-K to the extent stated herein.

      Certain exhibits filed with the Registrant’s prior registration statements and reports on Forms 10-K, 10-Q, S-1, S-3, S-8 and 8-K.

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      As used in this report on Form 10-K, unless the context otherwise requires, the terms “we,” “us,” “our,” “the Company” and “Novatel Wireless” refer to Novatel Wireless, Inc., a Delaware corporation and its wholly-owned subsidiaries.

Forward Looking Statements

      This report contains forward-looking statements based on our current expectations, assumptions, estimates and projections about Novatel Wireless and our industry. These forward-looking statements involve risks and uncertainties. Novatel Wireless’ actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, as more fully described in this section and elsewhere in this report. For a detailed discussion of these risks and uncertainties, see “Business — Business Risks and Uncertainties” section of this Form 10-K. Novatel Wireless undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as otherwise required pursuant to the Company’s on-going reporting obligations under the Securities Exchange Act of 1934, as amended.

Trademarks

      The Novatel Wireless logo, “Minstrel,” “Merlin,” “Sage,” “Lancer,” and “Expedite” are trademarks of Novatel Wireless, Inc. “Minstrel” and “Sage” are registered with the U.S. Patent and Trademark Office. All other brands, products and company names mentioned herein are trademarks of their respective holders.

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Item 1. Business

Overview

      We are a provider of wireless data access solutions, including wireless data modems and software for use with portable personal computers and with handheld computing devices. We deliver innovative and comprehensive solutions that enable businesses and consumers to access personal, corporate and public information through e-mail, enterprise networks and the Internet. We also offer wireless data modems and custom software and hardware engineering services and systems integration services to our customers to facilitate use of our products.

      Our current product portfolio includes the following:

	•	The Merlin Family of Wireless PC Card Modems for portable and desktop PCs and handheld computing devices;
	•	The Minstrel Family of Wireless Handheld Modems, for handheld computing devices; and
	•	The Expedite Family of Wireless OEM Modems for custom integration with computers and other devices.

      Our core modem technology is easily customized to address a broad range of vertical applications. Our customers include wireless telecommunications operators such as Sprint, T-Mobile and MMO2 (formerly BT Cellnet). We also have OEM customers such as, @Road and Remec and we have entered into strategic technology and development relationships within the wireless communications industry with TTP Communications, Sprint PCS, Dell, Lucent Technologies and T-Mobile. We also sell our products through domestic and international distributors such as Hugh Symons, Asia Wireless, Ingram Micro, Global Wireless Data and Cellcom.

Product Benefits

     Breadth of Wireless Access Products

      Our products enable both portable PCs and handheld computing devices to access the Internet and enterprise networks wirelessly. We also produce wireless modems which enable connections to a broad range of appliances for vertical applications. We are developing additional capabilities for emerging wireless networks in order to afford our customers maximum flexibility in choosing their wireless data access solutions.

     Price Performance Leadership

      We have designed our products to provide high levels of performance and functionality at an attractive price to drive widespread adoption among users. We use software solutions where others still use hardware and we build our products around a common core hardware and software platform.

     Productivity

      Our products improve productivity by enabling portable PCs and handheld computing devices to be continuously connected to the Internet and enterprise networks with a focus on ease-of-use and real-time access to e-mail, messaging, online content and critical personal and professional information. Our products for handheld computing devices also enable wireless synchronization to enable users to backup and access personal and professional data from remote locations. These features allow mobile professionals to access and manage data even while they are away from traditional work settings, thereby significantly increasing their productivity.

     Customized Solutions

      Our technology platform enables us to provide wireless data solutions for a wide range of specialized applications and to adapt our products to specific customer needs. We enable our OEM customers to provide their clients with tailored solutions for vertical market applications such as securities trading, public safety,

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Our Strategy

      Our objective is to be the leading global provider of wireless data access products. The key elements of our strategy are to:

     Extend Our Technology Leadership

      We intend to continue developing higher speed integrated wireless data access solutions to capitalize on the expansion of global wireless data access technologies. We plan to develop new modem technologies based on evolving wireless data standards and to offer customers a comprehensive range of wireless access products for mobile computing devices. We also intend to continue to apply our technological expertise to reduce the overall size, weight, cost and power consumption of our products, while increasing their capabilities and performance.

     Drive Widespread Adoption of Our Products and Increased Market Penetration

      We intend to drive widespread adoption of our products through increased global marketing activities, strategic pricing and expansion of our sales team and sales distribution networks. We believe these efforts will increase our revenue and our brand recognition. Our product pricing is an important part of this strategy and we will adjust our prices to ensure market penetration by offering value to our customers.

     Expand and Develop Strategic Relationships

      We plan to build and expand on strategic relationships to improve the design and functionality of our wireless access products and gain market share. We intend to establish and maintain relationships with a strategic focus on:

	•	Wireless communications companies, and laptop manufacturers such as our existing relationships with Dell, Sprint PCS, MMO2 (formerly BT Cellnet), and T-Mobile, to extend our platform and expand distribution of our products;
	•	Distribution companies including Brightpoint, Asia Wireless and Hugh Symons;
	•	Technology companies, such as our existing relationships with Qualcomm, Lucent, and TPP Communications Ltd. to accelerate the time to market and expand the capabilities of our new products.

     Continue to Target Key Vertical Markets

      We market our products to key vertical industry segments by offering them products that increase productivity, reduce costs and create operational efficiencies. We are currently working with, among others, Commerciant in retail/ point of sale and @Road in vehicle tracking. We believe that continuing improvements in wireless computing technologies will create additional vertical markets and more applications for our products.

Products

      We currently offer a variety of wireless data access solutions to Original Equipment Manufacturers, commonly referred to as OEMs, Value Added Resellers, referred to as VARs, systems integrators, wireless telecommunications operators, enterprise, mobile professionals and consumers. We offer Type II PC Card modems for portable personal computers and Windows Pocket PC mobile computing devices which operate on CDMA, GSM/ GPRS, and CDPD data wireless networks.

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      The following table lists our principal product lines and applications:

     Wireless PC Cards and Modems

      Our Merlin Wireless PC Card Modem, which was designed for Windows 95/98/2000/ NT Millennium Edition and XP / Pocket PC computers, allows mobile professionals and consumers to send and receive e-mail, including attachments, and to connect wirelessly to their enterprise networks and to the Internet.

      The Merlin C201^TM is a single band (1900 MHz) wireless PC card modem based on CDMA2000 1X technology. Like the Merlin G100 and G201, the Merlin C201^TM is also slightly larger than a credit card and slides inside your Type II PC Card slot. The Merlin C201 provides access to email, corporate databases and the Internet at maximum speeds up to 153.6 kbps in CDMA2000 1X coverage areas and 14.4 kbps in IS-95A coverage areas. Equipped with a built-in antenna for maximum network coverage and enhanced portability, the Merlin C201 enables Short Messaging Service (SMS) capabilities allowing users to send and receive text messages for quick person-to-person or group chats from their laptop or handheld devices.

      Merlin G100^TM is a single band (1900) wireless PC Card modem based on GSM/ GPRS technology. Slightly larger than a credit card, Merlin G100 slides inside a computer’s Type II PC Card slot, providing access to email, corporate databases and the Internet at maximum speeds up to 53.6 kbps in GPRS coverage areas and 14.4 kbps in GSM coverage areas. With user-friendly wireless modem manager software, the Merlin G100 is compatible with a wide range of laptops, handheld devices and operating systems including Microsoft Windows 98, 2000, Millennium Edition, XP and Pocket PC operating systems.

      The Merlin G201^TM is a dual band (900/1800) wireless PC Card modem based on GSM/ GPRS technology. Like the Merlin G100, the Merlin G201^TM is slightly larger than a credit card, slides inside a computer’s Type II PC Card slot and provides access to email, corporate databases and the Internet at maximum speeds up to 53.6 kbps over GPRS and 14.4 kbps over GSM. Equipped with a robust removable antenna to enhance portability, the Merlin G201 also enables Short Messaging Service (SMS) capabilities allowing users to send and receive text messages for quick person-to-person or group chats from their laptop or handheld device.

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      The Merlin G300^TM Series enables access to 900/1800/1900 GSM and GPRS networks globally. The Merlin G300 Series PC Card enables wireless data at speeds up to 53.6 kbps over GPRS networks for a range of applications, including Internet, email, and corporate database access, as well as wireless data transfer over circuit switched GSM networks, SMS, fax, and voice applications.

      The Merlin U530 Wireless PC Card modem is a high-speed data device designed to enable mobile users to access the Internet and corporate networks over third-generation (3G) Universal Mobile Telecommunications System (UMTS) networks. This product was unveiled in March 2003 and has been created under the joint development agreement between us and Lucent Technologies.

      Our Sage Wireless Modem is a self-powered, external, wireless modem for desktop PCs. The key strengths of Sage include its low price, extended battery life and versatility. Sage provides its users with wireless access to e-mail, enterprise networks and the Internet. Sage is also well suited for fixed installations, particularly in situations where telephone lines are unavailable or inconvenient.

     OEM Products

      The Expedite C201 is a single wireless component ideally-suited for integration into industrial and mobile devices to enable wireless applications such as telemetry, inventory monitoring, automated banking, vending machines, vehicle tracking, security, point of sale and more. Complete with SMS text messaging, the Expedite C201 can also enhance laptop computers, handheld devices, tablet PCs, and smart phones with high-speed access to the Internet, email, corporate networks, calendars, tasks and contact information. The modem has two separate firmware options to enable high-speed wireless data access at peak speeds of up to 144 kbps in CDMA2000 1X or 14.4kbps in IS-95A circuit switched coverage areas.

      The Expedite Wireless Embedded Modem for CDPD offers 0.6-watt full-duplex wireless modem capabilities with minimal power requirements and a form factor almost four times smaller than its predecessor. The Expedite’s 3.6 volt power supply has an extended battery life and is compatible with more integrated products. The Expedite is currently used in numerous applications, including wireless telemetry monitoring, inventory monitoring, point-of-sale terminals, automated teller machines and automated vehicle location and tracking. The Expedite is also priced below comparable products offered by our competitors, making it extremely attractive to OEMs, VARs and systems integrators that require wireless CDPD solutions. The Expedite’s small form factor, standards-based interfaces and adherence to specifications, together with its simple design, make it easy for OEM customers to incorporate a wireless CDPD solution into their existing or new product lines.

      With its exclusive design, the Expedite G301 uses packet switching techniques based on the global GPRS standard to deliver wireless data at speeds up to 53.6 kbps (multi-slot class 10). It also supports GSM circuit switched data communication to 14.4 kbps, as well as SMS text messaging, very low power consumption including a Sleep Mode feature and the smallest form factor in the industry. The Over-the-Air-Download feature helps reduce life cycle cost and keep all products operating at peak performance by allowing firmware upgrades without having to recall the unit. These key features make it a compelling choice for wireless data applications.

     Wireless Cradle Devices

      Our Minstrel Family of wireless data modems adds two-way communications capability to the Palm Family of handheld computing devices and private labeled derivatives. The Minstrel wireless “cradles” maintain the key advantages of these devices: size, ease-of-use, synchronization and customization. Minstrel provides users with complete portable access to enterprise networks, e-mail and the Internet without the limitation of wired connections. Minstrel can also be used with most third-party software developed for the Palm Family of handheld computing devices.

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Our Technology Focus

      In addition to developing products based on the technology standards mentioned above, we have developed and continue to build on the following key technology areas:

	Advanced Radio Frequency Design. Advanced Radio Frequency (RF) design is the key technology that determines the performance of wireless devices. We have specialized in the 800/ 900 MHz designs for analog and digital cellular, packet data and spread spectrum systems. Our proprietary RF technology contributes to the performance, small size and low cost of products. We are currently developing the 900, 1800 and 1900 MHz RF technology for future high speed wireless systems including UMTS, GPRS and CDMA technologies.
	Miniaturization and System Integration. Small systems integration is the integration of application specific integrated circuits, RF, baseband and packaging technologies. The complete wireless modem is packaged into a sub-credit card module with the advent of proprietary integrated circuit design, embedded software modem and multi-layer RF stripline technologies. We have one of the smallest wireless modems available, the only pocket-sized wireless modem for the Palm family of personal computing devices, and a Type II PC card modem. We will continue to augment the miniaturization technology, working to reduce the size and cost of current and future products.

Customers

      Our customers include wireless telecommunications operators, distributors, wireless data content and service providers, OEM customers, professionals and consumers. The following is a representative selection of our customers:

      Sprint, @Road, T-Mobile, and Asia Wireless accounted for 46.5%, 7.0%, 6%, and 4.6% of our revenue, respectively, for the year ended December 31, 2002. In addition, revenue received in the Metricom bankruptcy settlement of approximately $1.4 million accounted for 4.8% of our revenue for the year ending December 31, 2002. Hewlett Packard, Metricom, @Road and Hugh Symons accounted for 13%, 12.4%, 8.9% and 7.4% of our revenue, respectively, for the year ended December 31, 2001. OmniSky, @Road and Go America accounted for 45.4%, 8.7% and 5.6% of our revenue, respectively, for the year ended December 31, 2000. As discussed in “Business Risks and Uncertainties — We depend upon a small number of our customers for a substantial portion of our revenue,” Metricom filed for bankruptcy in July 2001 and Omnisky filed for bankruptcy in December 2001.

      Many of our customer relationships provide us with the opportunity to expand our customer base and market reach. Among those mutually beneficial relationships that augment our sales opportunities are the following:

Wireless Telecommunications Operators. We work closely with our carrier customers to generate demand for our products. Our carrier customers serve as an important sales channel for our products. This approach allows us to combine our wireless data expertise with the carriers’ vast end-customer relationships and broad sales reach. Our carrier customers also provide us and our customers with important services, including field trial participation, first-tier technical support, wireless data marketing and access to additional indirect distribution channels. To leverage these services, we provide carriers

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	with early access to new products, technical training and co-marketing resources. Examples of our other wireless telecommunications operators include T-Mobile, Sprint and MMO2 (formerly BT Cellnet).
	Distributors. In North America, we sell our products through dedicated distributors, which include Global Wireless Data, Ingram Micro, and Tech Data. Our international distributors include Asia Wireless and Opticom-Latin America.
	OEM Customers. Our OEM customers integrate our products into devices that they manufacture and sell to end-users through their own direct sales forces and indirect distribution channels. Our products are integrated into a broad range of devices, including but not limited to, handheld computing devices, laptops, vehicle location devices (AVLs), electric meters, vending machines, industrial equipment, wireless credit processing and point of sale (POS). Examples of our OEM customers include Remec, Dell, @Road, AirLink, and Lipman Electronic Engineering. We build strong relationships with our OEM customers because they rely heavily on our application engineering support during the process of integrating our products into theirs.

Strategic Alliances

      We intend to continue to develop and maintain strategic relationships within the wireless communications industry which complement and expand our existing distribution network and extend our technology and market reach. These arrangements include strategic technology and marketing relationships with providers of next generation wireless technology, application software developers focused on wireless products, OEM customers which integrate our products into other devices, value-added resellers, distributors, systems integrators and cellular carriers. These strategic relationships allow us to develop the most compelling wireless data products and provide us with access to additional markets, channels of distribution and increased sales opportunities. Our principal strategic alliances to date include the following:

	Sprint PCS. Sprint PCS operates the largest all-digital, all-PCS, voice and data nationwide wireless network in the United States. In February 2002, we entered into a two-year agreement under which we will develop and provide Sprint PCS with a wireless PC Card modem that runs on the CDMA 1XRTT network.
	Lucent. In August, 2002, we entered into a Joint Development Agreement with Lucent Technologies to create next-generation, high-speed wireless data products designed to allow mobile users to access the internet and corporate networks over the 3G Universal Mobile Telecommunications System (UMTS) networks. Under the terms of the agreement, we are developing multi-mode, multi-band UMTS/ GPRS wireless PC card modems, while Lucent is contributing research, development and marketing support. The agreement is an important step in Lucent’s strategy to accelerate the introduction of third-generation (3G) high-speed data solutions for mobile operators.

Sales and Marketing

      As of December 31, 2002, our sales and marketing organization consisted of 13 employees.

      We sell our products using a multi-channel distribution model which includes both direct and indirect sales. In order to maintain strong sales relationships, we provide co-marketing, trade show, low-cost sales demo units and joint press release support. In addition to our direct sales relationships with carriers and service providers, OEMs and VARs, we also sell our products through domestic and international distributors.

Product Development

      Our product development efforts are focused on developing innovative products and improving the functionality, design and performance of our existing products. We intend to continue to identify and respond to our customers’ needs by introducing new product designs with an emphasis on innovations in the ease-of-use, performance, size, weight, cost and power consumption of our products. We are also currently developing technology and products for high bandwidth wireless applications to address opportunities presented by the next generation packet networks.

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      Our product development effort is driven by a highly skilled and experienced team. While we have developed most new products and enhancements to existing products internally, we have also licensed technology from third parties.

      We manage our products through a structured life cycle process, from identifying customer requirements through development and commercial introduction to eventual phase-out. Product development emphasis is placed on time-to-market, meeting industry standards and end-item product specifications, ease of integration, cost reduction, manufacturability, quality and reliability.

      We believe that our future success will depend, in part, on our ability to identify and respond to emerging technological trends in our target markets, develop and maintain competitive products, enhance our existing products by adding features and functionality that differentiate them from those of our competitors, and bring products to market on a timely basis. As a result, we have devoted a significant portion of our resources to product development, and we intend to continue making substantial investments in research and development.

      For the year ended December 31, 2002, our research and development expense totaled $13.4 million, excluding amortization of deferred compensation. In 2002 and 2001, we capitalized $100,000 and $2.3 million, respectively, related to the development of our CDMA and GPRS products. Our research and development expense totaled approximately $20.8 million for the year ended December 31, 2001 and $13.5 million for the year ended December 31, 2000. As of December 31, 2002, we had 62 engineering and technical professionals in product development and manufacturing, which includes purchasing, fulfillment, quality assurance, quality control, reliability, technical documentation and technical publication.

Manufacturing

      We currently outsource our manufacturing to LG Innotek Co., Ltd, a wholly-owned subsidiary of LG Group, and Solectron de Mexico, S.A. de C.V., a subsidiary of Solectron Corporation. Under our contract manufacturing agreements, LG and Solectron provide component procurement, product manufacturing, final assembly, testing, quality control, fulfillment and delivery services for us and we agree, among other things, to provide our contract manufacturers with firm purchase orders.

      Our outsourced manufacturing activity allows us to:

	•	focus on our core competencies;
	•	minimize our capital expenditures;
	•	participate in contract manufacturer economies of scale and achieve production scalability by adjusting to manufacturing volumes to meet changes in demand;
	•	access best-in-class manufacturing resources; and
	•	operate without dedicating space to manufacturing operations.

      We believe that additional assembly line efficiencies are realized due to our product architecture and our commitment to process design. The components that make up our products are supplied by a number of vendors. Direct materials for our products consist of tooled parts such as printed circuit boards, molded plastic components, unique metal components and application-specific integrated circuits (ASICs), as well as industry-standard components such as transistors, integrated circuits, piezo-electric filters, duplexers, inductors, resistors and capacitors, many of which are similar to components used in cellular telephone handsets. Although we generally use standard components for our products and try to maintain alternative sources of supply, some components, such as printed-circuit boards, molded plastic components, unique metal components and ASICs, are purchased from suppliers for which alternative sources are not currently available in the quantities and at the prices we require.

      We employ our own manufacturing staff that focuses on managing the relationship with our third-party manufacturers and particularly on design-for-manufacturing, test procedures, quality, procurement and cost optimization, production scheduling and continuous improvement. We also perform certain manufacturing

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Government Regulation

      Our products are subject to certain mandatory regulatory approvals. In the United States, the FCC regulates many aspects of communications devices, including radiation of electromagnetic energy, biological safety and rules for devices to be connected to the telephone networks. Radio frequency devices, which includes our modems, must be approved under the above regulations by obtaining FCC equipment authorization prior to being offered for sale. FCC equipment authorization is obtained by submitting a technical description of the product and report showing compliance with FCC technical standards. We have obtained from the FCC all necessary equipment authorization for all products we currently manufacture and sell.

Competition

      The wireless data communications market is intense, rapidly evolving and highly competitive. It is subject to technological changes and is significantly affected by new product introductions and the market activities of industry participants. We compete in this market on the basis of price, form factor, time to market, functionality, quality and variety of product offerings. Moreover, we expect that this market will experience several new entrants in the future. To maintain and improve our competitive position, we must continue to develop new products, expand our customer base, grow our distribution network and leverage our strategic partnerships.

      Our current and prospective competitors generally fall within the following categories:

	•	Wireless modem manufacturers, such as Sierra Wireless, Wavecom, Airprime and Nokia;
	•	Wireless device manufacturers, such as Palm and Research In Motion; and
	•	Wireless handset manufacturers and next generation wireless technology providers, such as Ericsson, Motorola, and Nokia;

      We believe the principal competitive factors impacting the market for our products are functionality, features, performance, convenience, availability, brand and price. We believe that we compete better than many of our current competitors with respect to some or all of these factors due to the broad range of products we offer, the ease-of-use in design and engineering of our products, our ability to adapt our products to specific customer needs and our price leadership.

      There can be no assurance that our current or potential competitors will not develop products comparable or superior to those developed by us or adapt more quickly to new technologies, evolving industry standards, new product introductions, or changing customer requirements. As a result, we must continuously introduce new products and educate existing and prospective customers as to the advantages of our products versus those of our competitors.

      Many of our current and potential competitors have had longer operating histories and significantly greater financial, manufacturing, technical, sales, customer support, marketing and other resources, as well as greater name recognition and a larger installed products and technologies base. In addition, the global acceptance of our products could lead to increased competition as third parties develop products competitive with our own. Any of these competitors may be able to respond faster than we can to new or emerging technologies and changes in customer requirements and to devote greater resources to the development, promotion and sale of their products than we can. Our current or potential competitors may develop products comparable or superior to those that we develop or adapt more quickly than we do to new technologies, evolving industry trends or changing customer requirements.

      In addition, as the wireless data communications product market develops, a number of companies with significantly greater resources than we have could attempt to increase their presence in the market by acquiring or forming strategic alliances with our competitors, resulting in increased competition.

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Proprietary Technology

      Our software, hardware and operations rely on and benefit from an extensive portfolio of intellectual property. We currently hold 15 United States patents issued for our technology and have 31 United States patent applications pending. We also have four foreign patents issued and four foreign patent applications pending.

      We own a number of trademarks and servicemarks, including Contact®, Expedite^TM, Lancer^TM, Lancer  3W^TM, Merlin^TM, Minstrel®, Minstrel III^TM, Minstrel IIIc^TM, Minstrel V^TM, Minstrel Plus^TM, Minstrel S^TM, Minstrel 540^TM, MissionONE^TM, Sage® and Viking^TM, each with its accompanying designs, and the Novatel Wireless logo.

      We license CDMA technology from QUALCOMM, Incorporated for integration into our products. This license allows us to manufacture CDMA-based wireless modems and sell or distribute them worldwide. The license does not have a specified term and may be terminated by us or by QUALCOMM for cause or upon the occurrence of other specified events. In addition, we may terminate the license for any reason upon 60 days’ prior written notice. We have also granted to QUALCOMM a nontransferable, worldwide, nonexclusive, fully paid and royalty-free license to use, in connection with wireless communications applications, certain intellectual property of ours that is used in our products which incorporate the CDMA technology licensed to us by QUALCOMM. This license allows QUALCOMM to make, use, sell or dispose of such products and the components therein.

      We primarily rely on a combination of copyright, trade secret and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution to protect our proprietary technology. In addition, as part of our confidentiality procedures, we generally enter into nondisclosure agreements with our employees, consultants, distributors and corporate partners and limit access to and distribution of our software, documentation and other proprietary information. It may be possible for a third party to copy or otherwise obtain and use our products or technology without authorization, or to develop similar technology. In addition, our products are licensed in foreign countries and the laws of such countries may treat the protection of proprietary rights differently from and may not protect our proprietary rights to the same extent as do laws in the United States.

Employees

      As of December 31, 2002, we had a total of approximately 92 employees, including 13 in sales and marketing, 62 in engineering, manufacturing, research and development and 17 in general and administrative functions. Our future performance depends, in significant part, upon our ability to retain existing personnel in key areas including engineering and sales. Competition for qualified technical personnel has been intense, especially in the San Diego area where we are headquartered, and we cannot be sure that we will be successful in attracting or retaining qualified technical personnel in the future. Our employees are not represented by any collective bargaining unit, and we consider our relationship with our employees to be good.

Risks Related to Our Business

We need to receive shareholder approval to receive all the funds provided for under the transaction we entered into on March 12, 2003.

      We currently do not have sufficient working capital to continue operations through the second quarter of 2003. As a consequence, on March 12, 2003, we entered into a private placement transaction in which we issued $1.2 million in convertible debt securities and related common stock purchase warrants and agreed, subject to stockholder approval, to issue additional convertible debt as well as convertible preferred stock, and common stock purchase warrants.

      If stockholder approval is not obtained, we would not be able to complete this transaction and our working capital would be insufficient to continue operations. In addition, if stockholder approval of this transaction is not obtained, the holders of the $1.2 million convertible debt that we issued would be entitled to require that we repay the indebtedness either in cash or in shares of Common Stock, subject to Nasdaq’s rules

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We have incurred significant operating losses since our inception and without the increase of revenues and gross margins and if we are unable to increase our revenue and gross margins, we may continue to incur significant net losses and negative cash flows.

      We have incurred significant operating losses and net losses in each quarterly and annual period since our inception. We incurred net losses of $46.9 million for the year ended December 31, 2000, $90.9 million for the year ended December 31, 2001 and $28.3 million for the year ended December 31, 2002. In addition, we had negative cash flows from operations of $41.0 million for the year ended December 31, 2000, $55.4 million for the year ended December 31, 2001 and $28.7 million for the year ended December 31, 2002. As of December 31, 2002, we had an accumulated deficit of $230.4 million. If we are unable to increase our revenue and gross margins sufficiently to offset our expenses, we will not achieve profitability and our operating losses, net losses and negative cash flows will continue.

If we continue to experience negative cash flow, we may need to raise additional capital to fund our working capital requirements and anticipated capital expenditures.

      We currently anticipate that current working capital, including cash and debt relief from the March 12, 2003 transaction, assuming shareholder approval, budgeted cash flow and available borrowings under our credit facility, will be sufficient to meet our working capital requirements and anticipated capital expenditures through the point at which we achieve break-even cash flows, which is forecasted to be in the second half of 2003. However, the forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary. Our budgeted cash flows include assumptions about increased volumes and decreased expenditures. We currently do not have orders from customers that equal the revenues assumed in our budget. If we are unable to increase our revenue and gross margins sufficiently to offset our operating expenses, we will continue to experience negative cash flow and may be required to raise additional funds through the private or public sale of additional debt or equity securities or through commercial bank borrowings to fund our working capital requirements and anticipated capital expenditures. Our ability to obtain additional capital will depend on financial market conditions, investor expectations for the wireless technology industry, the national economy and other factors outside our control. If we are able to obtain funds through the issuance of equity securities, our stockholders will experience dilution and such newly-issued equity securities may have rights, preferences or privileges senior to the current holders of our capital stock. There can be no assurance that such additional financing will be available on acceptable terms, or at all. If needed, the failure to secure additional financing would have a material adverse effect on our business, financial condition and operating results and may impair our ability to continue our operations at their current level. Our auditors’ report on our 2002 Consolidated Financial Statements was modified to highlight an uncertainty about our ability to continue as a going concern.

We have been operating only since 1996 and our historic operating results may not be an indication of future operations.

      We launched our first wireless modem in 1996 and we have a limited operating history. We are subject to risks, expenses and uncertainties that young and growing companies like ours face, particularly in the evolving wireless communications market. These considerations include our ability to continue to expand our customer base, maintain our current strategic-relationships and develop new ones, deliver products associated with our key contracts in a profitable and timely manner, attract and retain qualified personnel and manage our growth.

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If we cannot deliver products associated with our supply contracts in a profitable and timely manner, our reputation could be harmed and our revenue and profit margins may decrease.

      Our ability to generate future revenue under any of our supply contracts depends upon our ability to manufacture and supply products that meet defined specifications. To realize the benefits of these contracts, we will have to manage the following risks successfully:

	•	We have priced these contracts on our estimate of future production costs. If we incur higher costs than anticipated, our gross margins on these contracts will decrease and these contracts may not be as profitable as anticipated.
	•	If we are unable to commit the necessary resources or are unable to deliver our products as required by the terms of these contracts, our customers may cancel the contracts. In that event, we might not recover any costs that we incurred for research and development, sales and marketing, production and otherwise and we may incur additional costs including contractual penalties.
	•	If we fail to meet a delivery deadline, or a customer determines that the products we delivered do not meet the agreed-upon specifications, we may have to reduce the price we can charge for our products, or we may be liable to pay damages to the customer.

If we are unable to successfully manage these risks or meet required deadlines in connection with one or more of our key contracts, our reputation could be harmed and our business, financial condition, results of operations and liquidity could be materially adversely affected.

If the demand for wireless access to the enterprise networks and Internet does not increase, our revenue and gross margins may not be sufficient to cover our operating expenses.

      The markets for wireless internet products and services are relatively new and rapidly evolving, both technologically and competitively. Market demand for our products has not generated sufficient revenues to cover our operating costs.

      Our financial condition, results of operations and cash flows have been adversely affected since 2000 as a result of market demand for both wireless products and wireless access services for the transmission of data developing at a slower rate than we anticipated. A significant amount of our revenue is generated by our products for portable PCs and handheld computing devices. In addition, certain recent models of portable PCs and handheld computing devices include internal wireless modems installed by the manufacturer which reduce the need for consumers to purchase our wireless modem products. Our failure to generate significant revenue from new or existing products, whether due to the purchase by more consumers of portable PCs and handheld computing devices with internal wireless modems, lack of market acceptance, competition, technological change or otherwise, or the inability to reduce manufacturing or operating costs, will adversely impact our business, financial condition and results of operations.

We are applying to transfer the listing of out common stock the The Nasdaq SmallCap Market and we cannot provide assurance that the average daily trading volume for our common stock while listed on the SmallCap Market will be as great as the average daily trading volume of our common stock while it was listed on the National Market.

      On March 27, 2003, we applied to transfer the listing of our common stock to The Nasdaq SmallCap Market because we no longer complied with The Nasdaq National Market’s minimum stockholder equity requirement of $10 million. Securities listed on the SmallCap Market may have less visibility and demand than securities listed on the National Market. As a result, we cannot provide assurance that the average daily trading volume for our common stock while listed on the SmallCap Market will be as great as the average daily trading volume of our common stock while it was listed on the National Market. In addition, we cannot assure whether or by when we might qualify to return the listing of our common stock to the National Market.

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The marketability of our products may suffer if wireless telecommunications operators do not deliver acceptable wireless services.

      The success of our business depends on the capacity, affordability and reliability of wireless data access provided by various wireless telecommunications operators. Currently, various wireless telecommunications operators such as Sprint, either directly or jointly with us, sell our products in connection with the sale of their wireless data access services to their customers. Growth in demand for wireless data access may be limited if wireless telecommunications operators cease operations, fail to offer services which customers consider valuable, fail to maintain sufficient capacity to meet demand for wireless data access, delay the expansion of their wireless networks and services, fail to offer and maintain reliable wireless network services or fail to market their services effectively. If any of these occurs, or if for any other reason the demand for wireless data access fails to grow, sales of our products will decline and our business, financial condition, results of operations could be materially adversely affected.

      In addition, our future growth depends on the successful deployment of next generation wireless data networks by third parties, including those networks for which we currently are developing products. If these next generation networks are not deployed or widely accepted, or if deployment is delayed, there will be no market for the products we are developing to operate on these networks. As a result, we will not be able to recover our research and development expenses and our financial condition and results of operations and liquidity could be materially adversely affected.

We currently rely exclusively on third-party manufacturers to produce our products, and our ability to control their operations is limited.

      We currently outsource our manufacturing to LG Innotek Co., Ltd., a subsidiary of LG Electronics, Inc. and to Solectron de Mexico, S.A. de C.V., a subsidiary of Solectron Corporation. We expect to continue to depend exclusively on third-party manufacturers to produce our products in a timely fashion and at satisfactory quality levels. None of these third-party manufacturers is obligated to supply products to us for any specific quantity, except as may be provided in particular purchase orders which we submit to them from time to time. If our third-party manufacturers experience delays, disruptions, capacity constraints or quality control problems in their manufacturing operations, then product shipments to our customers could be delayed, which would negatively impact our revenues and our competitive position and reputation. The cost, quality and availability of third-party manufacturing operations are essential to the successful production and sale of our products. Our reliance on our third-party manufacturers exposes us to a number of risks, which are outside our control:

	•	unexpected increases in manufacturing costs;
	•	interruptions in shipments if our third-party manufacturers are unable to complete production in a timely manner;
	•	inability to control quality of finished products;
	•	inability to control delivery schedules;
	•	inability to control production levels and to meet minimum volume commitments to our customers;
	•	inability to control manufacturing yield;
	•	inability to maintain adequate manufacturing capacity; and
	•	inability to secure adequate volumes of components.

      If we are unable to manage successfully our relationships with these third-party manufacturers, the quality and availability of our products may be harmed. If any of our third-party manufacturers stopped manufacturing our products for any reason or reduced its manufacturing capacity, we may be unable to replace the lost manufacturing capacity on a timely basis. In addition, if any of our third-party manufacturers negatively changes the terms under which they agree to manufacture for us, and we are unable to locate a suitable alternative manufacturer, our manufacturing costs could significantly increase.

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      We generally place orders with our third-party manufacturers at least three months prior to scheduled delivery of products to our customers. Accordingly, if we inaccurately anticipate demand for our products, we may be unable to obtain adequate quantities of components to meet our customers’ delivery requirements or, alternatively, we may accumulate excess inventories. If one or more of these events were to occur, our business, financial condition and results of operations could be materially adversely affected by increased costs, reduced revenue and lower product margins.

If we fail to adopt new technology and fail to develop and introduce new products successfully, we may not be able to compete effectively.

      We operate in a highly competitive environment, characterized by rapidly changing technology and industry standards. New products based on emerging technologies or evolving industry standards may quickly render an existing product obsolete and unmarketable. Our growth and future operating results depend in part upon our ability to enhance existing products and introduce newly developed products that conform to prevailing and evolving industry standards, meet or exceed technological advances in the marketplace, meet changing customer requirements, achieve market acceptance and respond to our competitors’ products.

      The development of new products can be very difficult and requires technological innovation. The development process is also lengthy and costly. In addition, wireless communications service providers require that wireless data systems deployed on their networks comply with their own standards, which may differ from the standards of other providers. If we fail to anticipate our customers’ needs and technological trends accurately or are otherwise unable to complete the development of products on time and within budgeted amounts, we will be unable to introduce new products into the market on a timely basis, if at all. If we are unsuccessful at developing and introducing new products that are sufficiently appealing to enterprise customers or consumers, we may be unable to recover our significant research and development costs associated with those products and our business, financial condition and results of operations could be materially adversely affected. In addition, as we introduce new versions of our existing products or new products altogether, our current customers may not require the technological innovations of these products and may not purchase them.

      To grow our revenue and achieve profitability, we must retain our current customers and develop new ones. If consumers view our competitors’ products as superior to ours, or if our products are unable to meet their expectations or requirements, we may be unable to retain our existing customers or to develop new customers which would materially and adversely effect our business, financial condition and results of operations.

The fluctuation of our quarterly operating results may cause our stock price to decline.

      Our future quarterly operating results may fluctuate significantly and may not meet the expectations of securities analysts or investors. If this occurs, the market price of our stock would likely decline. The following factors may cause fluctuations in our operating results:

	•	Decreases in revenue or increases in operating expenses. We budget our operating expenses based on anticipated sales, and a significant portion of our sales and marketing, research and development and general and administrative costs are fixed, at least in the short term. If revenue decreases and we are unable to reduce our operating costs quickly and sufficiently, our operating results could be materially adversely affected. We have entered into and expect to continue to enter into significant customer contracts for the development and supply of our products. We expect to incur significant research and development, sales and marketing and other costs relating to the development, manufacture and sale of these products prior to receiving revenue from these contracts, if any.
	•	Product mix. The product mix of our sales affects profit margins in any given quarter. As our business evolves and the revenue from the product mix of our sales varies from quarter to quarter, our operating results will likely fluctuate.

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	•	New product introductions. As we introduce new products, the timing of these introductions will affect our quarterly operating results. We may have difficulty predicting the timing of new product introductions and the market acceptance of these new products. If products and services are introduced earlier or later than anticipated, or if market acceptance is unexpectedly high or low, our quarterly operating results may fluctuate unexpectedly. Our quarterly operating results also fluctuate because we incur substantial upfront research and development, sales and marketing, production and other costs to support new product introductions prior to the periods in which we will recognize revenue from those products.
	•	Lengthy sales cycle. In addition, the length of time between the date of initial contact with a potential customer and the execution of a contract may take several months, and is subject to delays over which we have little or no control. The sale of our products is subject to delays from our customers’ budgeting, approval and competitive evaluation processes that typically accompany significant information technology purchasing decisions. For example, customers frequently begin by evaluating our products on a limited basis and devote time and resources to testing our products before they decide whether or not to purchase a product. We commit substantial time and resources to educate potential customers on the use and benefits of our products. Customers may also defer orders as a result of anticipated releases of newer or enhanced products by us or our competitors. As a result, our ability to anticipate the timing and volume of sales to specific customers is limited, and the delay or failure to complete one or more large transactions could cause our operating results to vary significantly from quarter to quarter.

      We believe that quarter-to-quarter comparisons of our operating results will not necessarily be meaningful in predicting our future performance.

We depend upon a small number of our customers for a substantial portion of our revenue.

      A significant portion of our revenue comes from a small number of customers. Our top ten customers for the year ended December 31, 2002 accounted for approximately 84.6% of our revenue and our ten top customers for the year ended December 31, 2001 accounted for approximately 66.6% of our revenue. For the year ended December 31, 2002, Sprint accounted for 46.5% and @Road accounted for 7.0% of our revenue. In addition, revenue from cash received in the Metricom bankruptcy settlement of approximately $1.4 million accounted for 4.8% of our revenue for the year ended December 31, 2002. For the year ended December 31, 2001, Hewlett-Packard accounted for 13.0%, Metricom accounted for 12.4%, @Road accounted for 8.9% and Hugh Symons accounted for 7.4% of our revenue. We expect that a small number of customers will continue to account for a substantial portion of our revenue. Our business was impacted adversely by the bankruptcy of Metricom, which filed for bankruptcy in July 2001 and the bankruptcy of OmniSky which filed for bankruptcy in December 2001. If there is a downturn in the business of one or more of these customers, if one or more of these customers files for bankruptcy or becomes insolvent, if we are unable to continue to retain their business, or if we are unable to diversify our customer base, our revenue may decline.

We depend on sole source suppliers for some of our components, and our product availability and sales would be harmed if any of these suppliers is not able to meet our demand and alternative components are not available.

      Our products contain a variety of components, many of which are procured from single suppliers. These components include both tooled parts and industry-standard parts, many of which are used in cellular telephone handsets. Currently, some components and certain integrated circuits are in short supply worldwide. If the shortage of these components or any other key components persists or worsens, we may not be able to deliver sufficient quantities of our products to satisfy demand. The cost, quality and availability of components are essential to the successful production and sale of our products. Some of these components come from sole or single source suppliers for which alternative components may not be available. If suppliers are unable to meet our demand for sole source components and if we are unable to obtain an alternative source or if the price for a substitute is prohibitive, our ability to maintain timely and cost-effective production of our products would be seriously harmed.

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If we fail to develop and maintain strategic alliances, we may not be able to penetrate new markets.

      A key element of our business strategy is to penetrate new markets by developing new products through strategic alliances with leading companies.

      We are currently investing, and plan to continue to invest, significant resources to develop these relationships. We believe that our success in penetrating new markets for our products will depend in part on our ability to maintain these relationships and to cultivate additional or alternative relationships. We cannot assure you that we will be able to develop additional strategic alliances, that existing relationships will be successful in achieving their purposes or that strategic partners will not form competing arrangements.

We may not be able to maintain and expand our business if we are not able to hire, retain and manage additional qualified personnel.

      Our success in the future depends in part on the continued contribution of our executive, technical, engineering, sales, marketing, manufacturing and administrative personnel. Recruiting and retaining skilled personnel, including software and hardware engineers, is highly competitive, especially in the San Diego area.

      Most of our senior management and other key personnel are not bound by employment agreements. If we are not able to attract or retain qualified personnel in the future, or if we experience delays in hiring required personnel, particularly qualified engineers, we will not be able to maintain and expand our business.

Any acquisitions we make could disrupt our business and harm our financial condition and results of operations.

      As part of our business strategy, we intend to review on an ongoing basis acquisition opportunities that we believe would be advantageous to the development of our business. While we have no current agreements or plans with respect to any acquisitions, we may acquire businesses, products, or technologies in the future. If we make any acquisitions, we could take any or all of the following actions, any one of which could adversely affect our business, financial condition, results of operations and the price of our common stock:

	•	issue equity securities that would dilute existing stockholders’ percentage ownership;
	•	use a substantial portion of our available cash, if any;
	•	incur substantial debt, which may not be available to us on favorable terms and may adversely affect our liquidity;
	•	assume contingent liabilities; and
	•	take substantial charges in connection with acquired assets.

      Acquisitions also entail numerous other risks, including: difficulties in assimilating acquired operations, products and personnel; unanticipated costs; diversion of management’s attention from other business concerns; adverse effects on existing business relationships with suppliers and customers; risks of entering markets in which we have limited or no prior experience; and potential loss of key employees from either our preexisting business or the acquired organization. We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future, and our failure to do so could harm our business and operating results.

Our future results could be harmed by risks associated with international sales and operations.

      We may expand our international sales and marketing activities in the future. We have limited experience in marketing, selling, distributing and manufacturing our products and services internationally. International sales accounted for approximately 7% of our revenue for the year ended December 31, 2000, approximately 16% of our revenue for the year ended December 31, 2001 and approximately 11% of our revenue for the year ended December 31, 2002. If we expand international sales, we would become subject to a number of risks,

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	•	changes in international currency exchange rates;
	•	changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets, and changes in diplomatic and trade relationships;
	•	less effective protection of intellectual property;
	•	trade protection measures and import or export licensing requirements;
	•	potentially negative consequences from changes in tax laws;
	•	increased expenses associated with customizing products for international countries;
	•	unexpected changes in regulatory requirements resulting in unanticipated costs and delays;
	•	longer collection cycles and difficulties in collecting accounts receivable; and
	•	difficulty in managing widespread sales and research and development operations.

      Our sales and invoices are generally denominated in U.S. dollars. In the future, however, we may record sales and invoice customers in the applicable local international currency. If that occurs, we may be exposed to international currency fluctuations.

The wireless communications market is highly competitive and we may be unable to compete effectively.

      The markets for wireless data access products are highly competitive and we expect competition to increase. Many of our competitors or potential competitors have significantly greater financial, technical and marketing resources than we do. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They also may devote greater resources than we do to the development, promotion and sale of their respective products.

      Many of our competitors have more extensive customer bases and broader customer relationships and industry alliances that they can leverage to establish relationships with many of our current and potential customers. These companies also have significantly more established customer support and professional services organizations. In addition, these companies may adopt aggressive pricing policies or offer more attractive terms to customers, may bundle their competitive products with broader product offerings and may introduce new products and enhancements. Current and potential competitors may establish cooperative relationships among themselves or with third parties to enhance their products. As a result, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share.

      Our wireless communications products compete with a variety of devices, including wireless modems, wireless handsets, wireless handheld computing devices and other wireless devices. Our current and potential competitors include:

	•	wireless modem integrators, such as Sierra Wireless, Wavecom, Option, NextCell and Tellus;
	•	traditional wired modem manufacturers, such as 3Com and Xircom;
	•	wireless device manufacturers, such as Palm and Research in Motion (BlackBerry);
	•	wireless handset manufacturers and next generation wireless technology providers, such as Ericsson, Motorola, Kyocera and Nokia; and
	•	non-cellular digital packet data private communications network providers, such as Emotiant and Bell South.

      We expect our competitors to continue to improve the performance of their current products and to introduce new products, services and technologies. Successful new product introductions or enhancements by our competitors could reduce our sales and the market acceptance of our products, cause intense price

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Our products may contain errors or defects, which could decrease their market acceptance.

      Our products are technologically complex and must meet stringent user requirements. We must develop our software and hardware products quickly to keep pace with the rapidly changing and technologically advanced wireless communications market. Products as sophisticated as ours may contain undetected errors or defects, especially when first introduced or when new models or versions are released. Our products may not be free from errors or defects after commercial shipments have begun, which could result in the rejection of our products, damage to our reputation, lost revenues, diverted development resources, and increased customer service and support costs and warranty claims.

We could incur substantial costs defending our intellectual property from infringement or a claim of infringement.

      Our success also depends on our proprietary technology. We rely on a combination of patents, copyrights, trademarks and trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. We may be required to spend significant resources to monitor and police our intellectual property rights. Before we do so, we may not be able to detect infringement and as a consequence we may lose competitive position in the market. Intellectual property rights also may be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share. The unauthorized use of our technology by competitors could have a material adverse effect on our ability to sell our products in some markets.

      Although we are not currently involved in any intellectual property litigation, we may be a party to litigation in the future either to protect our intellectual property or as a result of an alleged infringement of others’ intellectual property. These claims and any resulting litigation could subject us to significant liability for damages or could cause our proprietary rights to be invalidated. Litigation, regardless of the merits of the claim or outcome, would likely be time-consuming and expensive to resolve and would divert management time and attention away from the operation of our business. Any potential intellectual property litigation against us could also force us to do one or more of the following:

	•	stop using the challenged intellectual property and refrain from selling our products or services that incorporate it;
	•	obtain a license to use the challenged intellectual property or to sell products or services that incorporate it, which license may not be available on reasonable terms, or at all; or
	•	redesign those products or services that are based on or incorporate the challenged intellectual property.

      If we are forced to take any of the foregoing actions, we may be unable to manufacture and sell our products, or we may be unable to do so on terms economically favorable to us, and our business, financial condition and results of operations may be materially adversely affected.

We may not be able to develop products that comply with applicable government regulations.

      Our products must comply with government regulations. For example, in the United States, the Federal Communications Commission regulates many aspects of communications devices, including radiation of electromagnetic energy, biological safety and rules for devices to be connected to the telephone networks. Radio frequency devices, which include our modems, must be approved under the above regulations by obtaining equipment authorization from the FCC prior to being offered for sale. Additionally, we cannot

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Item 2.     Properties

      Our principal executive offices are located in San Diego, California where we lease approximately 20,000 square feet under a lease that expires in July 2005. We also lease approximately 10,000 square feet in San Diego under a lease that expires in March of 2005, and 23,912 square feet in Carlsbad, California previously utilized for distribution purposes under a lease that expires in August 2003. We have subleased 9,416 square feet of said facilities. In addition, we lease approximately 42,319 square feet in Calgary, Alberta, Canada for our research and development organization under a lease that expires in September 2007 and we have subleased 9,035 square feet of our Calgary facility through the duration of this lease. In San Diego, Carlsbad and Calgary, we have 8,900, 14,496 and 10,667 square feet of idle facilities, respectively. We have subleased 1,232 square feet of the facilities in San Diego. We also lease space in various geographic locations primarily for sales and support personnel or for temporary facilities. On March 27, 2003 we agreed to sublease the current principal executive offices through the duration of the lease and, effective May 1, 2003 we are moving into the current 10,000 square foot idle facility.

Item 3.     Legal Proceedings

      We are from time to time party to various legal proceedings arising in the ordinary course of business.

      On February 28, 2003, a class action law suit was filed in the United States District Court for the Southern District of Florida against Credit Suisse First Boston and approximately 50 companies, including us, for whose respective initial public offering CSFB purportedly served as the lead underwriter. The suit purports to be on behalf of all the purchasers of the common stock of the named issuing companies and alleges violations of federal and state securities law. Specifically, the suit alleges that CSFB and each named issuer conspired to file false and misleading registration statements and other reports containing knowingly inflated financial and performance projections in order to support a knowingly inflated IPO issue price. Although we have not yet been served in this action, we have reviewed the complaint, we believe we have meritorious defenses, and we intend vigorously to defend against it.

      In January of 2003, our wholly-owned subsidiary, Novatel Wireless Technologies, Ltd. (NWT) terminated one of its Canadian employees for cause. On February 26, 2003, the employee filed suit on the judicial district of Calgary, in the Court of Queen’s Bench of Alberta, claiming that NWT had wrongfully terminated him and seeking approximately $365,000 in damages. NWT has been informed by its counsel that NWT has meritorious defenses, and NWT intends to vigorously defend against the claim.

      On April 30, 2002, we entered into an employment agreement pursuant to which the employee purportedly commenced working for us on May 8, 2002. The individual has alleged that on or about May 10, 2002, we breached our agreement with him by materially diminishing his responsibilities and, as a consequence of which, he has alleged, he terminated his employment with us for “Good Reason” as defined in the employment agreement. The employee has filed a claim with the California Department of Labor (DOL) seeking approximately $450,000. We are currently waiting for the DOL to schedule a hearing on the matter. The Company believes this claim is without merit and intends to vigorously defend against the claim.

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Item 4.     Submission of Matters to a Vote of Security Holders

      Not Applicable.

PART II

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters

      Our common stock is traded on The Nasdaq National Market under the symbol “NVTL.” The following table sets forth the high and low sale prices of our common stock as reported on Nasdaq, without retail mark-up, mark-down or commissions, since November 16, 2000, the date the shares of our common stock commenced trading:

      On March 11, 2003 the closing price per share of our common stock was $0.90, as reported by Nasdaq. At March 11, 2003 there were approximately 150 holders of record of our common stock. No cash dividends were declared or paid in 2002.

      We currently intend to retain all available funds for use in our business, and do not anticipate paying any cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, financial condition and future prospects and other factors the board of directors may deem relevant.

Item 6.     Selected Financial Data

      The following selected consolidated financial data should be read in conjunction with our consolidated Financial Statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Form 10-K. The selected consolidated statement of operations data presented below for each of the years ended December 31, 2002, 2001 and 2000, and the balance sheet data at December 31, 2002 and 2001 are derived from our consolidated financial statements that have been included elsewhere in this Form 10-K. The consolidated statement of operations data for the years ended December 31, 1999 and 1998 and consolidated balance sheet data at December 31,

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

      The following information should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in Item 8 of this form 10-K.

      Our financial condition, results of operations and cash flows were adversely affected during 2002 and 2001 by decreases in demand for both wireless products and wireless access services for the transmission of data. Our business was further impacted adversely by the bankruptcy of Metricom, which filed for protection under Chapter 11 of the Bankruptcy Code in July 2001. Sales to Metricom accounted for 12.4% of our revenue during 2001. We believe that our available cash reserves, including net proceeds of $1.1 million received, and the additional $2 million cash to be received as well as the $3.5 million debt relief to be effective pursuant to the financing transaction in March 2003 (see Liquidity), together with our budgeted operating cash flows and

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      We cannot predict with any certainty whether we will be able to maintain or improve upon our historical sales volumes with our existing customers, or whether we will be able to attract new customers for our wireless technology products. In the event that we do not achieve our budgeted sales and cash flows, there can be no assurance that we will be able to obtain additional debt or equity financing. Without such financing, we may have to cease operations.

Critical Accounting Policies

      Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. Actual results could differ from these estimates. Significant estimates include inventory adjustments for excess and obsolete balances, allowance for doubtful accounts receivable, warranty expense, sales returns allowance, the use of option pricing models to establish values of equity instruments issued in non-monetary transactions with non-employees, useful lives and realizability of long–lived assets and estimates for costs recorded in restructuring accruals.

Specifically, management must make estimates in the following areas:

      Allowance for doubtful accounts: We provide a reserve against our receivables for estimated losses that may result from our customers’ inability to pay. We determine the amount of the reserve by analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses and our customers’ credit-worthiness. Amounts later determined and specifically identified to be uncollectible are charged or written off against this reserve. To minimize the likelihood of uncollectibility, customers’ credit-worthiness is reviewed periodically based on independent credit reporting services, our experience with the customer and the economic condition of the customer’s industry. Should a customer’s account become past due, we generally place a hold on the account and discontinue further shipments to that customer, minimizing further risk of loss. Additionally, our policy is to generally fully reserve for all accounts with aged balances greater than one year. The likelihood of a material loss on an uncollectible account would be mainly dependent on deterioration in the overall economic conditions in our industry or the industry of our customers. Reserves are fully provided for all expected or probable losses of this nature. Trade accounts receivable along with accounts receivable — related parties balances were $7.2 million and $7.5 million at December 31, 2002 and December 31, 2001, respectively. The allowance for doubtful accounts was $.3 million at December 31, 2002 and December 31, 2001, respectively.

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      Inventory adjustments: Inventories are stated at lower of cost (first-in, first-out method) or market. We review the components of our inventory and our inventory purchase commitments on a regular basis for excess, obsolete and impaired inventory based on estimated future usage and sales. The likelihood of any material inventory write-down is dependent on various items, including customer demand, economic and competitive conditions, technological advances or new product introductions by us or our customers that vary from our current expectations. In 2001, we determined that certain components in inventory had been adversely impacted by the slowing economy. Accordingly, we recorded charges totaling $1.0 million and $34.5 million for excess and obsolete raw material components and finished goods during 2002 and 2001, respectively. In accordance with Emerging Issues Task Force Issue 96-9, “Classification of Inventory Markdowns and Other Costs Associated with a Restructuring,” all inventory adjustments are classified in “Cost of revenue” in the accompanying consolidated statements of operations. Inventories were stated at $4.3 million and $6.5 million at December 31, 2002 and December 31, 2001, respectively.

      Valuation of intangible and long-lived assets: We periodically assess the impairment of intangible and long-lived assets which requires us to make assumptions and judgments regarding the carrying value of these assets. The assets are considered to be impaired if we determine that the carrying value may not be recoverable based upon our assessment of the following events or changes in circumstances:

	•	the asset’s ability to continue to generate income from operations and positive cash flow in future periods;
	•	loss of legal ownership or title to the asset;
	•	significant changes in our strategic business objectives and utilization of the asset(s); or
	•	the impact of significant negative industry or economic trends.

      If the assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets. In addition, we base the useful lives and related amortization or depreciation expense on our estimate over the period that the assets will generate revenues or otherwise be used by us. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

      Software development costs: Software development costs for products sold (primarily firmware embedded in the Company’s products) incurred after technological feasibility is established are capitalized in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.” We determine the point at which technological feasibility has been established for a product (i.e., when we have completed all planning, designing, coding and testing activities that are necessary to establish that a product can be produced to meet design specifications, and the point at which a product is available for general release to customers, by creating detail program designs of the product). Such detail program designs take product function, feature and technical requirements to their most detailed, logical form and are ready for coding. Capitalized software development costs are amortized when products are available for general release to customers, over the estimated useful lives of the products, currently five years. At December 31, 2002 and December 31, 2001, our net software development costs of $1.8 million and $2.3 million, respectively, relating to costs for CDMA and GPRS, are grouped with intangible assets in our consolidated balance sheets.

      Accrued restructuring related costs: To the extent that exact amounts are not determinable, we have estimated amounts for direct costs of our expenses and liabilities related to our restructurings in accordance with the Emerging Issues Task Force Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” These estimates consist of future lease obligations offset by estimated sublease income. Our accrued restructuring related costs were $1.3 million and $1.8 million at December 31, 2002 and December 31, 2001, respectively. Such revisions in our estimates of the potential costs or expenses could materially impact our results of operations and financial position. During the fourth quarter of 2002, the Company recorded an impairment charge in the amount of $870,000 for a software license that is no longer deemed recoverable from future operations.

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      Litigation reserves: Litigation issues for claims that are probable and can be reasonably estimated are recorded as liabilities in the consolidated balance sheets. Estimates are based upon the facts and circumstances of each case and on advice from legal counsel regarding probable outcomes, if determinable. The likelihood of a material change in these estimated reserves depends on new claims as they may arise and the favorable or unfavorable outcome of the particular litigation. As additional information becomes available, we assess the potential liability related to our pending litigation and revise our estimates. Such revisions in our estimates of the potential liability could materially impact our results of operations and financial position.

      Stock-Based Compensation: In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” we account for costs of stock-based employee compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Additionally, we disclose the pro forma effect on net loss and related per share amounts as if the fair-value method prescribed by SFAS No. 123 had been used to account for its stock-based employee compensation (see Note 8). We account for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and related EITF amendments. We also follow the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” which amends SFAS No. 123.

      Valuation of deferred income taxes: We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” which requires the use of the asset and liability method of accounting for deferred income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. We have established a 100% valuation allowance against our current deferred tax assets of $6.9 million and against our long-term deferred tax assets of $52.9 million, at December 31, 2002, due to the uncertainty surrounding the realization of such assets due to various factors, including the risk that we do not attain profitability, in order to utilize net operating losses. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The likelihood of a material change in our expected realization of these assets depends on future taxable income, our ability to deduct tax loss carryforwards against future taxable income, the effectiveness of our tax planning and strategies among the various tax jurisdictions in which we operate and changes in the deductibility of interest paid on our convertible subordinated debt.

Revenue Recognition

      Our revenue is generated from the sale of wireless modems to wireless telecommunications operators, wireless data content and service providers, resellers and OEM customers. Revenue from product sales and development services is recognized upon the latest of transfer of title, shipment of the product to the customer or rendering services. Revenues from long-term supply contracts are recognized as products are shipped to customers. We record deferred revenue for cash payments received from customers in advance of product shipments. We grant price protection provisions to certain customers and track pricing and other terms offered to customers buying similar products to assess compliance with these provisions. To date, we have not incurred material price protection expenses. We establish reserves for estimated product returns allowances in the period in which revenue is recognized. In estimating our future product returns, we consider various relevant factors, including our stated return policies and practices and our historical trends. The Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, “Revenue Recognition,” (“SAB 101”) provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. We believe that our revenue recognition policy is consistent with this guidance and in accordance with generally accepted accounting principles. If our shipping policies, including the point of title transfer such as changing from Freight on Board shipping point to Freight on Board destination, were to change, materially different reported results would be likely.

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Impact of Recently Issued Accounting Standards

      In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123. The purpose of the proposed amendment is to enable companies that choose to adopt the fair value based method to report the full effect of employee stock options in their financial statements immediately upon adoption. The Company will continue to apply the disclosure-only provisions of SFAS 123. See Note 8 of the Notes to the Consolidated Financial Statements for additional information regarding the Company’s treatment of stock options. The transition provisions of the statement are effective for fiscal years ending after December 15, 2002. The disclosure provisions are effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002.

      In November 2002, the FASB published interpretation No, 45 “Guarantor’s Accounting and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. The Interpretation expands on the accounting guidance of Statements No. 5, 57, and 107 and incorporates without change the provisions of FASB Interpretation No. 34, which is being superseded. The Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor’s fiscal year-end. The disclosure requirements in the Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. We are currently evaluating what effect the adoption of the recognition and measurement provision of this statement will have on the Company’s consolidated financial statements.

      In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 applies to costs associated with an exit activity (including restructuring) or with a disposal of long-lived assets. Those activities can include eliminating or reducing product lines, terminating employees and contracts, and relocating plant facilities or personnel. Under SFAS No. 146, a company will record a liability for a cost associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. Under current rules, companies can record a liability for restructuring costs when a commitment to a plan of action is made. SFAS No. 146 will require a company to disclose information about its exit and disposal activities, the related costs, and changes in those costs in the notes to the interim and annual financial statements that include the period in which an exit activity is initiated and in any subsequent period until the activity is completed. SFAS No. 146 is effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. Under SFAS No. 146, a company may not restate its previously issued financial statements, and the new statement grandfathers the accounting for liabilities that a company had previously recorded under Emerging Issues Task Force Issue 94-3.

      In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002 (SFAS 145), which is effective for fiscal years beginning after May 15, 2002. SFAS 145 rescinds SFAS 4 and SFAS 64, which required that all gains and losses from extinguishment of debt be aggregated, and if material, classified as an extraordinary item. As a result, gains and losses from extinguishment of debt be aggregated, and if material, classified as an extraordinary item. As a result, gains and losses from debt extinguishment are to be classified as extraordinary only if they meet the criteria set forth in Accounting Principles Board 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. SFAS 145 also requires that sale-leaseback accounting be used for capital lease modifications with economic effects similar to sale-leaseback transactions. We do not expect implementation to have a significant effect on its results of operation or consolidated financial condition.

      In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which

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      In June 2001, the FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS No. 142 requires the use of a non-amortization approach to account for goodwill and other intangible assets with indefinite lives. In addition, SFAS No. 142 requires that acquired intangible assets be separately identified and amortized over their individual useful lives. We were required to adopt these statements beginning January 1, 2002. As the Company does not have goodwill or any intangible assets with indefinite useful lives, the adoption of these standards did not have an impact on our financial position or results of operations.

      In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 but retains SFAS No. 121’s fundamental provisions for recognition and measurement of impairment of long-lived assets to be held and used and measurement of long-lived assets to be disposed of by sale. SFAS No. 144 also supersedes the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30 for segments of a business to be disposed of but retains APB Opinion No. 30’s requirement to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. SFAS No. 144 became effective for the Company beginning January 1, 2002. Adoption of SFAS No. 144 as of January 1, 2002 did not have a material impact on our financial position or results of operations.

Results of Operations

      The following table sets forth our consolidated statements of operations expressed as a percentage of revenue for the periods indicated.

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Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Revenue. Revenue for the year ended December 31, 2002 decreased $14.8 million, or 34%, to $28.9 million compared to $43.6 million for the same period in 2001. For the year ended December 31, 2002, sales of our cradle products decreased by $9.6 million, OEM product sales decreased by $6.9 million, PC card product sales increased by $500,000 and non-recurring engineering revenue increased by $1.2 million compared to the same period in 2001. The overall decrease in product sales is due to the weakness in demand for wireless products and decreases in demand for wireless access services for the transmission of data during 2002 compared to 2001. Our cradle sales have decreased to insignificant levels as the market for these products has decreased significantly. New product sales amounted to $13.5 million with the introduction of the Merlin C201 PC card based on CDMA technology in January 2002. Sales of existing products decreased by $29.5 million. The results for the year ended December 31, 2002 were negatively impacted by a $1.4 million product return of GPRS units from a European distributor. The 2002 results include revenues for cash received in the Metricom bankruptcy settlement of approximately $1.4 million. Revenues related to the original product shipments that give rise to this settlement had been deferred pending the outcome of bankruptcy proceedings (See Note 11). However, the value of the inventory related to original product shipments was expensed in the period Metricom filed for bankruptcy. Consequently, the $1.4 million recognized as revenue in the third quarter of 2002 had a 100% gross margin.

      Cost of Revenue. Our cost of revenue for the year ended December 31, 2002 decreased $50.5 million, or 65%, to $26.9 million compared to $77.4 million for the same period in 2001. The decrease in cost of revenue was primarily the result of the weakness in the demand for existing products of approximately $24.0 million, a decrease of $33.5 million in charges for excess and obsolete inventory and a reduction in costs associated with our manufacturing operating capacity of approximately $3.9 million, offset by sales of new products of approximately $9.8 million and an increase in royalty costs of approximately $1.1 million due to an increase in sales of new products with higher royalty costs.

      Gross Margin. Our gross margin for the year ended December 31, 2002 increased by $35.8 million, to $2.0 million compared to negative $33.8 million during the same period in 2001. The increase in gross margin is due to the lower cost of revenues during the year ended December 31, 2002 compared to the same period in 2001 as described above.

      Research and Development. Our research and development expenses for the year ended December 31, 2002 decreased $7.4 million, or 36%, to $13.4 million compared to $20.8 million for the same period in 2001. The decrease was due to a decrease in personnel expenses of approximately $3.4 million, as a result of our restructuring efforts, a decrease in research supplies and expendable equipment of approximately $2.9 million, a decrease in depreciation and facility overhead expenses of approximately $1.0 million, a decrease in outside services of approximately $1.0 million, an increase in non-recurring engineering customer payments to us of $800,000 and a decrease in travel costs of approximately $400,000. The Company reached technological feasibility on certain software development activities and capitalized $102,000 during the year ended December 31, 2002 as compared to $2.3 million during the same period in 2001.

      Sales and Marketing. Sales and marketing expenses for the year ended December 31, 2002 decreased $7.6 million, or 62%, to $4.6 million compared to $12.3 million for the same period in 2001. The decrease was due to a decrease in personnel expenses of $4.5 million, as a result of our restructuring efforts, a decrease in advertising and marketing costs of approximately $1.1 million, a decrease in facility overhead expenses of approximately $1.0 million, a decrease in travel costs of approximately $700,000 and a decrease in equipment expenses of approximately $300,000.

      General and Administrative. General and administrative expenses for the year ended December 31, 2002 decreased $2.1 million, or 27%, to $5.7 million compared to $7.8 million for the same period in 2001. This decrease was due to a decrease in personnel expenses of approximately $2.5 million, as a result of our restructuring efforts, a decrease in equipment expenses of approximately $200,000, a decrease in bad debt expense of approximately $100,000 and a decrease in insurance expense of approximately $100,000, offset by an increase in allocated facility and overhead expenses of approximately $400,000, an increase in professional fees of approximately $200,000 and a change in foreign currency transaction gain of approximately $200,000.

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      Restructuring and Impairment Charges. Restructuring and impairment charges for the year ended December 31, 2002 were $2.7 million compared to $7.1 million for the same period in 2001. The 2002 charges were incurred as a result of continued restructuring activities during 2002. The costs for 2002 are made up of personnel termination benefits of $800,000, facility closing and lease obligation costs of approximately $1.0 million and approximately $900,000 of asset impairments. The costs for 2001 were incurred during the first and third quarters of 2001 and are made up of personnel termination benefits of approximately $2.3 million and facility closing, lease obligation costs of approximately $2.7 million and approximately $2.2 million of asset impairments.

      The following table displays the activity and balances of the restructuring accrual from January 1, 2001 to December 31, 2002:

      Cash payments for employee separations of $95,000 are expected to be paid over the next six months and cash payments for facility closings of $1,236,000 are expected to be paid ratably over the next 57 months.

      Amortization of deferred stock compensation. Amortization of deferred stock compensation for the year ended December 31, 2002 decreased $6.8 million or 66% to $3.6 million compared to $10.4 million for the same period in 2001. This decrease is due to the Company’s use of the attribution method of recognizing compensation expense for deferred compensation originating in fiscal 2000 and a reduction in gross deferred compensation for stock option cancellations during 2001 and during 2002 totaling $1.5 million and $1.1 million, respectively.

      Interest Income. Interest income for the year ended December 31, 2002 decreased by approximately $1.4 million, or 86%, to $221,000 compared to $1.6 million for the same period in 2001. The decrease is primarily due to reduction in the cash balances in 2002 compared to the same period in 2001.

      Interest Expense. Interest expense of $538,000 for 2002 relates to the interest charges on our bank line of credit, including non-cash charges of $328,000 for the amortization of deferred financing costs and interest on capital leases. Interest expense of $330,000 for 2001 relates to the interest charges on our bank line of credit, including non-cash charges of $30,000 for the amortization of deferred financing costs and interest charges on capital leases.

      Net Loss. The net loss for the year ended December 31, 2002 decreased $62.6 million, or 69%, to $28.3 million compared to $90.9 million for the same period in 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Revenue. Revenue for 2001 decreased $17.6 million, or 29%, to $43.6 million compared to $61.2 million for 2000. For the year ended December 31, 2001, sales of our PC cards increased by $13.9 million, while sales of our cradle products decreased by $30.2 million and OEM product sales decreased by $1.3 million. The

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      Cost of Revenue. Our cost of revenue for 2001 increased $17.9 million, or 30%, to $77.4 million compared to $59.6 million in 2000. The increase in cost of revenue was primarily the result of $34.5 million of charges relating to excess and obsolete inventory recorded during 2001, attributable to the industry wide decrease in demand for wireless products, costs attributable to sales of new products (approximately $7.8 million), offset by a decrease in costs associated with the production and sales of existing products (approximately $24.4 million). See Note 4 in the consolidated financial statements.

      Gross Margin. Our gross margin for 2001 decreased by $35.4 million to negative $33.8 million compared to $1.6 million in 2000.

      Research and Development. Our research and development expenses for 2001 increased $7.3 million, or 54%, to $20.8 million compared to $13.5 million in 2000 in connection with the introduction of these new products during fiscal 2001. The increase was due to an increase in personnel expenses of approximately $3.1 million, an increase in research supplies and expendable equipment of approximately $2.9 million, an increase in depreciation and facility overhead expenses of approximately $2.6 million, an increase in outside consulting services of approximately $1.0 million, an increase in travel costs of approximately $300,000, offset by non-recurring engineering customer reimbursements of approximately $500,000. During the second quarter of 2001, the Company reached technological feasibility with regards to certain software development activities and subsequently capitalized approximately $2.3 million during year ended December 31, 2001 compared to none in 2000.

      Sales and Marketing. Sales and marketing expenses for 2001 decreased $6.0 million, or 33%, to $12.3 million compared to $18.3 million in 2000. The decrease was the result of a decrease in advertising and marketing costs of $3.3 million and a decrease in facility overhead expenses of approximately $700,000, decrease in travel costs of approximately $200,000, offset by an increase in personnel expenses of approximately $500,000, an increase in consulting and outside services of approximately $100,000 and an increase of $100,000 to support new products and to expand distribution channels. In addition, included in sales and marketing expense in 2000 is a one-time non-cash charge of approximately $2.3 million for the beneficial conversion feature relating to preferred stock issued to a qualified institutional buyer in a private offering. Concurrent with this private offering, the Company entered into a product purchase and licensing agreement with the same investor.

      General and Administrative. General and administrative expenses for 2001 increased $2.8 million, or 56%, to $7.8 million compared to $5.0 million in 2000. This increase was due an increase in facility and overhead expenses of approximately $2.4 million, an increase in insurance expenses of approximately $600,000, a decrease in the foreign currency exchange gains of approximately $400,000, an increase in professional fees of approximately $200,000 and an increase in other general expenses of approximately $300,000, offset by a decrease in personnel expenses of approximately $1.1 million This change in foreign currency translation was the result of a gain of approximately $200,000 in 2001 compared to a gain of approximately $500,000 in 2000.

      Restructuring and Impairment Charges. Restructuring and impairment charges for the year ended December 31, 2001 amounted to $7.1 million as a result of the implementation of our operational restructuring plan (see Note 2 in the accompanying consolidated financial statements). These costs are made up of personnel termination benefits approximating $2.3 million, facility lease termination and other closure costs of approximately $2.6 million and approximately $2.2 million of asset impairments.

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      Amortization of deferred stock compensation. Amortization of deferred stock compensation for 2001 decreased $2.4 million to $10.4 million compared to $12.8 million in 2000. This decrease is due to the Company’s use of the attribution method for deferred compensation originating in fiscal 2000 and a reduction in gross deferred compensation for stock option cancellations in 2001 totaling $1.5 million.

      Interest Income. Interest income for 2001 increased $400,000 to $1.6 million compared to $1.2 million in 2000. The increase was due to income from the investment of proceeds from our initial public offering completed in November 2000.

      Interest Expense. Interest expense of $43,000 for 2000 relates to the interest charges on capital leases. Interest expense of $330,000 for 2001 relates to the interest charges on our bank line of credit and interest charges on capital leases.

      Net Loss. The net loss for 2001 increased $44.0 million, or 94%, to $90.9 million compared to $46.9 million in 2000.

Liquidity and Capital Resources

      During the fourth quarter of 2002, management determined that we had insufficient working capital to continue operations through the second quarter of 2003. As a consequence, on March 12, 2003, we entered into a series of agreements, including the Securities Purchase Agreement (the “Purchase Agreement”) with a group of investors (the “Investors”) in connection with the private placement of $3.25 million of convertible debt and equity securities, and the issuance of up to $3.505 of equity securities in satisfaction of outstanding third-party obligations. As a result of these agreements, we completed, or agreed to complete subject to stockholder approval, for which we have scheduled a Special Meeting of Stockholders for April 30, 2003, the following transactions which are collectively referred to as the “Private Placement Transactions”:

	•	On March 13, 2003, we received cash of $1.2 million in exchange for issuing $1.2 million of secured subordinated convertible promissory notes (the “Initial Convertible Notes”), convertible subject to stockholder approval into newly authorized Series B Stock, and Common Stock, and warrants to purchase an aggregate of 857,143 shares of Common Stock;
	•	Upon receiving Stockholder approval, we agreed to sell 2,050 additional shares of Series B Stock and warrants to purchase an aggregate of 1,983,929 shares of Common Stock in exchange for $2.05 million in cash; and
	•	Upon receiving Stockholder approval, we agreed to issue $3.505 million of secured subordinated convertible promissory notes (the “Additional Convertible Notes,”) to the Investors in satisfaction of presently outstanding third-party obligations to be acquired by the Investors from Sanmina-SCI Corporation (the “Sanmina Obligations”). The Investors agreed subsequently to convert the Additional Convertible Notes into 3,505 shares of Series B Stock. The purchase of the Sanmina Obligations by the Investors is conditioned upon us receiving stockholder approval for the Private Placement Transactions as more fully described in Note 2 to the Consolidated Financial Statements.

      Approval of the Private Placement Transactions is sought in order to satisfy the stockholder approval requirements contained in our listing agreement with The Nasdaq Stock Market (“Nasdaq”). Our listing agreement with Nasdaq requires stockholder approval for any issuance of common stock or securities convertible into or exercisable for shares of common stock when the issuance or potential issuance (i) may result in a change in control of the issuer or (ii) will result in the issuance of securities at a per share price below the then current quoted bid price or book value per share and which in the aggregate represent 20% or more of the value, or 20% or more of the voting power, of the then outstanding common shares. Upon completion of the Private Placement Transactions and conversion of the Additional Convertible Notes to equity, which is scheduled to be completed four quarters after stockholder approval, or sooner at the Investors election, and assuming we do not issue additional shares of capital stock of a material number in the interim, the Investors collectively will hold more than 50% of our capital stock and more than 50% of the voting power

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      If stockholder approval is not obtained, we would not be able to complete the Private Placement Transactions, and would not have sufficient working capital to continue operations. In addition, if stockholder approval is not obtained, the holders of the Initial Convertible Notes would be entitled to require that we repay the indebtedness evidenced by the Initial Convertible Notes within 60 days following the termination of the Purchase Agreement either in cash or in shares of Common Stock, subject to Nasdaq’s rules and regulations. Moreover, given the recent quoted market price per share of our Common Stock, stockholder approval is all but required for practically any issuance of equity securities that would generate net proceeds sufficient to maintain operations through the remainder of the calendar year. Because of the length of time required to negotiate an alternative transaction with prospective investors and assuming such transaction were an equity issuance or an issuance of securities convertible into or exercisable for our equity securities, we would have to present it to the Company’s stockholders for approval, and in light of our current financial condition, it is unlikely that we would be able to continue operations long enough to pursue an alternative source of financing.

      If we continue to experience negative cash flow, we may be required to raise additional funds through the private or public sale of additional debt or equity securities or through commercial bank borrowings to fund our working capital requirements and anticipated capital expenditures. Our ability to obtain additional capital will depend on financial market conditions, investor expectations for the wireless technology industry, the national economy and other factors outside our control. There can be no assurance that such additional financing will be available on acceptable terms, or at all. If needed, the failure to secure additional financing would have a material adverse effect on our business, financial condition and operating results and may impair our ability to continue at the current level or cause us to cease our operations. Our auditors’ report in our 2002 Consolidated Financial Statements was modified to highlight an uncertainty about our ability to continue as a going concern.

      Since our inception, we have funded our operations primarily through sales of our equity securities and the issuance of debt instruments, and to a lesser extent, capital lease arrangements and borrowings under our line of credit. To date, gross proceeds from these transactions have totaled approximately $179.3 million, including gross proceeds from our initial public offering in November 2000 of $56 million, gross proceeds from the exercise of the underwriters over-allotment option in December 2000 of $8.2 million, gross proceeds from the Series A Redeemable and Convertible Preferred Stock financing in December 2001 of approximately $27.2 million and gross proceeds from the common stock issuance in September 2002 of approximately $2.8 million. At December 31, 2002, we had approximately $1.6 million in cash and cash equivalents and borrowings under our line of credit of $2.2 million.

      We are party to a credit facility with Silicon Valley Bank, Commercial Finance Division, which allows the Company to borrow up to the lesser of $5 million at any one time outstanding or 65% of eligible accounts receivable balances. This credit facility bears interest at prime plus 2.75%, provided that the interest rate in effect shall not be less than 7% (7.00% at December 31, 2002), is secured by substantially all of the assets of the Company and expires on November 28, 2003. As of December 31, 2002, $2.2 million of borrowings, the maximum eligible borrowings, were outstanding under this facility.

      We currently anticipate the current working capital, including budgeted cash flow and available borrowings under our credit facility, will be insufficient to meet our working capital requirements and anticipated capital expenditures through approximately the end of the second quarter of 2003. As previously discussed, on March 12, 2003, we entered into a transaction to raise gross cash proceeds of $3.2 million and $3.5 million of debt forgiveness, subject to shareholder approval. If the transaction is approved by the shareholders, the debt forgiveness and cash received under this transaction is expected to provide the Company sufficient working capital until we achieve break even cash flow. There can be no assurance that the Company will achieve break-even cash flow. If we continue to experience negative cash flow, we may be required to raise additional funds through the private or public sale of additional debt or equity securities or

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      The accompanying consolidated financial statements contemplate the realization of assets and satisfaction of liabilities in the normal course of business. There can be no assurance that the plans discussed above will be successful or that we will become profitable or generate positive cash flows. If we fail to complete the Private Placement Transaction and fail to significantly increase revenues, collect accounts receivable balances and reduce costs, we will continue to experience losses and negative cash flows from operations, we might not be able to continue as a going concern. Consequently, assets and liabilities might not be realized and settled in the normal course of business.

      For the years ended December 31, 2002, 2001 and 2000, we used net cash in operating activities of $28.7 million, $55.4 million and $41.0 million, respectively. Our operating activities during the year ended December 31, 2002, included a use of cash to fund our net loss of $28.3 million, which includes depreciation and amortization expense of approximately $4.6 million and a $3.6 million non-cash charge for deferred compensation expenses related to stock options issued to employees during 2000. During the year ended December 31, 2002, we used cash by decreasing inventory purchase commitments by $6.4 million, decreasing accounts payable by $5.4 million, decreasing accrued expenses by $1.3 million and decreasing the restructuring accrual by $100,000, offset by cash generated from decreasing inventories by $1.2 million, increasing deferred revenues by $641,000, decreasing prepaid expenses and other assets by $305,000 and decreasing accounts receivable by $270,000.

      Our net cash used in investing activities during the year ended December 31, 2002 was $300,000, which included purchases of property and equipment of $200,000 and capitalized software development costs of $100,000. Our net cash used in investing activities during the year ended December 31, 2001 was $10.3 million, which included purchases of property and equipment of $5.9 million, capitalized software development costs of $2.3 million and purchases of intangibles of $2.2 million. Our net cash used in investing activities during the year ended December 31, 2000 was $11.4 million, which included purchases of property and equipment and purchases of intangibles.

      Cash provided from financing activities during the year ended 2002 was $1.5 million, which consists of net cash proceeds from the issuance of common stock of $2.4 million, borrowings on our line of credit of $700,000 and the exercise of stock options and proceeds from stock purchase plan of approximately $400,000, offset by $1.6 million of cash used to repurchase stock as part of the Sanmina litigation settlement (see Note 10), $200,000 of cash used for offering costs for the Series A preferred stock offering in December 2001 and $200,000 of payments under capital lease obligations. For the years ended December 31, 2001 and 2000, net proceeds from financing activities amounted to $28.0 million and 93.8 million, respectively.

      Our common stock is listed on The NASDAQ Stock Market’s National Market. On March 27, 2003, we applied to transfer the listing of our common stock to The Nasdaq SmallCap Market because we no longer complied with The Nasdaq National Market’s minimum stockholder equity requirement of $10 million. Securities listed on the SmallCap Market may have less visibility and demand than securities listed on the National Market. As a result, we cannot provide assurance that the average daily trading volume for our common stock while listed on the SmallCap Market will be as great as the average daily trading volume of our common stock while it was listed on the National Market. In addition, we cannot assure whether or by when we might qualify to return the listing of our common stock to the National Market.

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Contractual Obligations and Commercial Commitments

      The following summarizes our contractual obligations and other commitments at December 31, 2002, and the effect such obligations could have on our liquidity and cash flow in future periods:

Related Party Transactions

      We sell products to Airlink Communications, Inc., (“Airlink”) a wireless software infrastructure business, which integrates our modems into their products. Airlink’s Chairman of the Board and Airlink’s principal stockholder is also a member of Novatel’s Board of Directors and a stockholder of Novatel. Sales to Airlink were $47,000 and $1,746,000 for the year ended December 31, 2002 and 2001, respectively. Receivables from Airlink amounted to $276,000 as of December 31, 2002 and $778,000 as of December 31, 2001. In May 2001, Novatel and Airlink entered into a $1.6 million secured promissory note agreement for the payment of products sold to Airlink. The first payment of $300,000, plus accrued interest was paid by Airlink on September 1, 2001, and the remaining principal balance, plus accrued interest, was due in eight equal monthly installments with the final payment due May 1, 2002. The note accrued interest at prime plus 3% (7.25% at December 31, 2002) and was secured by all of Airlink’s assets. Novatel has sold similar products to other parties at unit prices similar to those under our arrangement with Airlink.

      In September 2001, we entered into a second agreement with Airlink for the payment of $1.1 million for additional products shipped to Airlink during September 2001. In December 2001, Airlink returned $750,000 of the products shipped to Airlink during September 2001. At December 31, 2002 and 2001, the receivable from Airlink under this agreement was $375,000 and $393,000, respectively, which includes accrued interest. In accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” we will record revenue under this agreement when the collection of the receivable becomes reasonably assured. No revenues were recorded pursuant to this agreement in 2002 or 2001.

      During the first quarter of 2002, Airlink became delinquent in making scheduled payments under the terms of the above agreements and after substantial negotiations and evaluating various collection alternatives, in May, 2002, Novatel and Airlink entered into an Agreement and Plan of Reformation which terminated and combined the two previous separate agreements into one secured promissory note for approximately $950,000 which is secured by substantially all of Airlink’s assets. Consistent with the previous notes, Airlink’s Chairman of the Board has also personally guaranteed this promissory note. The terms of this note provided for Airlink to pay us a first payment of $70,000 in June 2002, which was paid, as well as a specified percent of Airlink’s gross monthly cash receipts. The outstanding balance of the note at December 31, 2002 was $650,000. The note accrues interest at prime plus 3% (7.25% at December 31, 2002). No cash has been received in 2003 from Airlink. We have sold Airlink on a prepayment basis, $7,000 during the period January 1, 2003 to March 26, 2003. The balance from Airlink at February 28, 2003 is $658,000. Airlink is also delinquent in making scheduled payments under this agreement and we are evaluating our legal remedies under the guarantee agreement. In January 2003, we sent Mr. Steven Sherman demand letters requesting immediate payment under the personal guarantee. No payment has been received to date. During 2002, Mr. Sherman performed certain consulting services for the Company and was paid $55,000.

      On June 30, 2000, Aether Capital, LLC, purchased $20 million of the Company’s Series D convertible preferred stock. Aether Capital, LLC is the investment arm of Aether Systems, Inc., which is the sole member of Aether Capital, LLC. David S. Oros, one of Novatel’s directors, who joined the Company’s board

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      In December 2001, we entered into a software license, maintenance and support agreement with Aether Capital LLC. Under this agreement, we purchased a software license from Aether Capital LLC for $870,000 and a one-year maintenance and support service agreement for $130,000. During 2002, we paid $950,000 under this agreement and the remaining $50,000 is included in “Accounts Payable” at December 31, 2002 and is payable in 2003. Simultaneously with this license agreement, Aether Capital LLC purchased 3,000 shares of our Series A Preferred Stock for a purchase price of $3.0 million and received warrants to purchase up to 77,922 shares of the Company’s common stock at an exercise price of $18 per share. The terms and conditions of this investment by Aether Capital LLC were identical to those on which other investors purchased shares of our Series A Preferred Stock in December 2001. In the fourth quarter of 2002, we decided not to pursue further development of the technology related to this license, and accordingly, an impairment charge of $870,000 was recorded.

      We utilized an entity to provide technical support services for $16,000 per month through June 30, 2002. The Company’s former Chairman and Chief Executive Officer was a board member and an option holder of this entity. Payments made to this entity during the year ended December 31, 2002 and 2001 were $96,000 and $62,000, respectively.

      During 2001, we made payments of approximately $169,000 to Centurion Wireless Technologies, Inc., (“Centurion”) in connection with the purchase of certain wireless modem antennae. Centurion is a portfolio company of Cornerstone Equity Investors, LLC (“Cornerstone”.) Two of Cornerstone’s managing directors serve on Novatel’s board of directors and Cornerstone is a stockholder of Novatel. There were no purchases from Centurion during 2002. In July 2002, we paid the final payable balance of $41,000 to Centurion.

Item 7a.     Quantitative and Qualitative Disclosures About Market Risk

      We do not currently use derivative financial instruments. We generally place our cash and short-term investments in high-credit quality instruments, primarily U.S. Government obligations and corporate obligations with contractual maturities of less than one year. These investments are not held for trading or other speculative purposes. Changes in interest rates affect the investment income we earn on our investments and therefore, impact our cash flows and results of operations. The Company’s credit facility and related interest cost on borrowings is affected by the variations in the U.S. prime rate of interest. As of December 31, 2002, we had $2,234,000 outstanding under our line of credit. A 2% change in the prime rate would result in additional interest of $45,000 based on the $2.2 million outstanding under our line of credit at December 31, 2002. We do not expect any material loss from our cash and cash equivalents and therefore believe that our potential interest rate exposure is not material; however, these investments are subject to interest rate risk. We do not currently enter into foreign currency hedge transactions. Through December 31, 2002, we had a foreign currency loss of approximately $28,000 recorded in general and administrative expenses as a result of foreign currency exchange transactions related to our Canadian subsidiary. Revenues generated outside the United States, as a percentage of total revenues were 11% for the year ended December 31, 2002 and 16% for the year ended December 31, 2001. Fluctuations in foreign exchange rates could impact future operating results.

Item 8.     Financial Statements and Supplementary Data

      The index to our Consolidated Financial Statements and the Independent Auditors’ Report appears in Part IV of this form 10-K.

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Item 9.     Changes in and Disagreements With Accountants On Accounting and Financial Disclosure

      On July 17, 2002, the Board of Directors of the Company, upon the recommendation of its Audit Committee, dismissed Arthur Andersen LLP (“Arthur Andersen” or “AA”) as the Company’s independent public accountants and engaged KPMG LLP (“KPMG”) to serve as the Company’s independent public accountants for the year ending December 31, 2002.

      Arthur Andersen’s reports on the Company’s consolidated financial statements for each of the years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

      In connection with its audits for the Company’s years ended December 31, 2001 and 2000 and through July 17, 2002, there were no disagreements between the Company and Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to AA’s satisfaction, would have caused AA to make reference to the subject matter in connection with AA’s report on the Company’s consolidated financial statements for such years; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

      During the years ended December 31, 2001 and 2000 and through July 17, 2002, the Company did not consult KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, or any other matters or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

PART III

Item 10.     Directors and Executive Officers of the Registrant

      (a) Identification of Directors. The information under the caption “Election of Directors,” appearing in the Proxy Statement to be filed for the 2003 Annual Meeting of Shareholders is incorporated herein by reference.

      (b) Identification of Executive Officers. The information under the caption “Certain Information with Request to Executive Officers,” appearing in the Proxy Statement to be filed for the 2003 Annual Meeting of Shareholders is incorporated herein by reference.

      (c) Compliance with Section 16(a) of the Exchange Act. The information under the caption “Compliance with Federal Securities Laws,” appearing in the Proxy Statement to be filed for the 2003 Annual Meeting of Shareholders is incorporated herein by reference.

Item 11.     Executive Compensation

      The information under the heading “Executive Compensation and Other Information” appearing in the Proxy Statement to be filed for the 2003 Annual Meeting of Shareholders is incorporated herein by reference.

Item 12.     Security Ownership of Certain Beneficial Owners and Management

      The information under the headings “Principal Stockholders” appearing in the Proxy Statement to be filed for the 2003 Annual Meeting of Shareholders is incorporated herein by reference.

Item 13.     Certain Relationships and Related Transactions

      The information under the headings “Principal Stockholder Certain Relationships and Related Transactions,” appearing in the Proxy Statement to be filed for the 2003 Annual Meeting of Shareholders is incorporated herein by reference.

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Item 14.     Controls and Procedures

      The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports required to be filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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

      There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.

PART IV

Item 15.     Exhibits, Financial Statement Schedules and Reports On Form 8-K

      (a) 1.     Index to Consolidated Financial Statements

	See Index to Consolidated Financial Statements and financial statement schedules.

      (a) 2.     Index to Financial Statement Schedules

	The following Financial Statement Schedules for the years ended December 31, 2002, 2001 and 2000 should be read in conjunction with the Consolidated Financial Statements, and related notes thereto.

	Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or notes thereto.

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      (a) 3.     Exhibits

      The following Exhibits are filed as part of, or incorporated by reference into, this Report on Form 10-K:

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(1)	Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2000.
(2)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (No. 333-42570), filed November 14, 2000, as amended.
(3)	Incorporated by reference to the Company’s Registration Statement on Form S-8 (No. 333-53692), filed January 12, 2001.
(4)	Incorporated by reference to the Company’s current report on Form 8-K, filed January 18, 2002.
(5)	Incorporated by reference to the Company’s Registration Statement on Form S-3 (No. 333-81190), filed January 22, 2002, as amended.
(6)	Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001.
(7)	Incorporated by reference to the Company’s current report on Form 8-K, filed March 28, 2003.

	*	Management contract or compensation plan or arrangement.

      (b) Reports on Form 8-K

	Current reports on Form 8-K, filed March 28, 2003.

Supplemental Information

      No Annual Report to Stockholders or Proxy materials have been sent to stockholders as of the date of this report. The Annual Report to Shareholders and Proxy material will be furnished to the Company’s stockholders subsequent to the filing of this report and the Company will furnish such material to the Securities and Exchange Commission at that time.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	NOVATEL WIRELESS, INC.

	By:	/s/ PETER V. LEPARULO

	Peter V. Leparulo
	Chief Executive Officer

Date: March 28, 2003

POWER OF ATTORNEY

      Know all men by these presents, that each person whose signature appears below constitutes and appoints Peter V. Leparulo and Melvin L. Flowers, or either of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the securities exchange act of 1934, this annual report on form  10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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CERTIFICATIONS

      Each of the undersigned, in his capacity as the Chief Executive Officer and Chief Financial Officer of Novatel Wireless Inc., as the case may be, provides the following certifications required by 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002, and 17 C.F.R. § 240.13a-14.

Certification of Chief Executive Officer

      I, Peter Leparulo, certify that:

	1. I have reviewed this annual report on Form 10-K of Novatel Wireless Inc.;
	2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
	3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
	4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

	(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
	(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

	6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	/s/ PETER LEPARULO
	Peter Leparulo
	President and
	Chief Executive Officer

Dated: March 28, 2003

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Certification of Chief Financial Officer

      I, Melvin L. Flowers, certify that:

	1. I have reviewed this annual report on Form 10-K of Novatel Wireless Inc.;
	2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
	3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
	4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

	a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
	(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

	6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	/s/ MELVIN L. FLOWERS
	Melvin L. Flowers
	Senior Vice President and Chief Financial Officer

Dated: March 28, 2003

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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NOVATEL WIRELESS, INC.

CONSOLIDATED BALANCE SHEETS