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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[No Fee Required] For the fiscal year ended December 31, 2002

¨  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[No Fee Required]

For the transition period from                      to                     

Commission file 001-15837

WORLD WIRELESS COMMUNICATIONS, INC.

(Name of registrant in its charter)

Registrant’s telephone number    (303) 221-1944

Securities registered under Section 12(g) of the Exchange Act:

None

(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

Yes  x        No  ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K, and no disclosure will 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. ¨  Not applicable.

The aggregate market value of the voting stock held by non-affiliates of the registrant computed by reference to the average of the high and low price at which the stock was sold, as of April 30, 2003, was $2,516,796.

As of April 30, 2003 there were 31,459,945 shares of the registrant’s common stock issued and outstanding.

EXPLANATORY NOTE:

The financial statements included in this Form 10-K have not been audited by the Company’s independent auditors, nor any other independent accountants, using professional standards and procedures for conducting such audits, as established by generally accepted auditing standards. Accordingly, the Company’s independent auditors have not expressed any opinion or

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generally accepted auditing standards. Accordingly, the Company’s independent auditors have not expressed any opinion or any other form of assurance on such financial statements, assume no responsibility for, and disclaim any association with, such financial statements.

PART I

ITEM 1.    DESCRIPTION OF BUSINESS

BUSINESS

Overview

World Wireless Communications, Inc. (the “Company”, “we” or “us”) is a developer of wired and wireless telemetry (which is the monitoring, collection and transmission of data by wire or radio from remote sources) and remote control systems. By leveraging our experience developing low-cost, reliable communications systems, we have created the latest generation of technology to monitor and control various remote devices through the internet.

Our products and services allow data from remote devices to be accessed via a secure, encrypted Internet connection using a standard web browser located anywhere where there is internet access. Our technology has applications across a broad range of industries, for which it can substantially improve the efficiency and cost of access and manipulation of important data from widely dispersed equipment. For example, we are currently deploying our technology in the automatic meter reading field, whereby utility companies can read natural gas, electric, and water usage on commercial and residential meters on an immediate basis in order to better balance their energy loads, monitor usage, predict requirements, and ultimately improve service and reduce costs. Another example is remotely monitoring industrial restaurant equipment, such as a fast food restaurant grill, ice machine, fryers, and coolers, to ensure that the particular piece of equipment is functioning within desired parameters. In this example, our technology can provide maintenance notification so as to avoid malfunction during a peak time in the business day, or ensure a grill or fryer is cooking at the proper temperature.

Since January 1999, we have successfully combined all of our technologies into a functional package that not only collects data, but also transmits it and provides control from remote locations. It also enables our customers to use an ordinary browser to access the data-gathering and remote control functions from anywhere in the world through the internet, where there is internet access. Our management has been engaged principally in developing product positioning strategies, strategic planning and final development and testing of our integrated technology.

Current Status

(a)  Overview

We have completed development and testing of the core systems and sub-systems comprising our internet technology, and are currently engaged in implementing the first phase of our near-term plan—the introduction of our products and services to selected customers in major target markets to establish test installations for a variety of commercial and industrial applications.

While our X-traWeb^™ technology has a wide range of diverse applications, we originally targeted four principal areas to focus our sales: (a) vending machines; (b) facilities management and automatic meter reading;(c) security systems; and (d) food services equipment. As a result of the slower receipt of revenues from the sale of our X-traWeb^™ products, we decided in July 2001 to focus our activities principally on the sale of such products in the automatic meter reading and facilities management fields (in part due to the energy crisis then experienced in parts of the United States), although we plan to continue to market our products in the areas of (i) vending machines, (ii) security systems and (iii) food services equipment in the future. Furthermore, as a result of the continued delay of the receipt of revenues from the sale of our X-traWeb^™ products, we decided to reduce further the number of our employees, particularly in the engineering and administrative areas, during 2002 and made a further reduction in the number of our employees in late March, 2003. Thus, as of December 31, 2002, we had a total of 21 employees, a reduction of 8 from the total of 29 employees we had as of December 31, 2001. Also, in January, 2003 we decided to plan to increase the marketing and sale of our radio products.

Our former customers include FreedomPay.com (which sells cashless vending machines), Enodis Chains PLC (the largest manufacturer of equipment for fast food vendors), a subsidiary of the U.K.-based Enodis, National Gas Automation Inc. (a developer of a liquid propane gas monitoring system), RealTime Data (a vending machine operator) and Midwest United Energy (which provides natural gas to the agricultural irrigation market). Our current alliance partner is Service

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Concepts ( a provider of products and services to rural cooperatives in the western United States). Our former alliance partners include Texaco Natural Gas Inc. (for marketing to the natural gas industry), Co-operative ConNEXTions, LLC (a provider of products and services to rural distribution cooperatives in the Western United States), Novar Controls Corp. ( a supplier of advanced building automation control systems), Fracarro Radioindustrie S.p.A. (a supplier of satellite-based video distribution), and Audiotel S.p.A. (which marketed certain of our X-traWeb^TM products in Italy). We also had relationships with Kyushu Matsushita Electric Co. Ltd. (“Panasonic”), Motorola, Inc. and Williams Wireless Inc. and Williams Telemetry Services, a subsidiary of the Williams Company (“Williams”).

(b)  Financing

We entered into a conditional restructuring agreement with our two secured creditors, Lancer Offshore, Inc. and Lancer Partners L.P., who are affiliates of our largest stockholder, which requires, as a condition precedent to its effectiveness, that we receive at least $750,000 in equity (the “Restructuring Agreement”), although it is possible that another form of consideration (such as subordinated debt acceptable to such creditors) would satisfy such creditors. The Company has an oral agreement from a third party to provide a six-month loan of $4,500,000 bearing simple interest at 3% per annum, which would be subordinated to our senior secured debt totaling $7,020,000 as of February 6, 2003, have a second security interest in the assets of the Company pledged to our senior secured creditors and a first security interest in the proceeds from our sale of any of our shares of Senior Preferred Stock which the Company is offering in a private placement transaction to raise up to $4,500,000 therefrom on or before June 30, 2003. The Company hopes to be able to close such new debt financing, but since it has not been able to do so for almost three months, we cannot assure you we will be able to do so.

The terms of the Restructuring Agreement are favorable to the Company, and, if it is implemented by virtue of the Company’s satisfaction of the $750,000 funding condition, such a step should be helpful in our pursuit of additional financing in the future although we cannot assure you of such result. For a further description of the terms of the Restructuring Agreement, see “Senior Secured Indebtedness Financing—Restructuring Agreement” in Item 5 hereof.

The key terms of the Restructuring Agreement are as follows:

(a)  the Company’s payment of $1,500,000 to the two secured creditors would eliminate $2,400,000 in principal amount of the 2001 Notes and cancel all interest accrued on the 2001 Notes to date;

(b)  the maturity date of the 2001 Notes would be extended for two years until June 30, 2005;

(c)  the 2001 Notes would carry no further interest in the future;

(d)  the conversion rates of the 2001 Notes would be changed so that creditors would receive one share for each $0.50 of debt instead of the current rate of one share for each $0.05 of debt upon the mandatory conversion thereof (subject to the continued requirements that (i) the approval of such mandatory conversion by the Company’s shareholders at a meeting of shareholders (which was given up to the then applicable ceiling amount of $5,000,000 but not for any excess thereof) and (ii) the Company’s receipt of equity from unaffiliated third parties equal to the then outstanding principal amount of the 2001 Notes on or before June 30, 2005; and

(e)  such creditors would surrender 5,000,000 shares of Company’s Common Stock for the prior extensions of the maturity date of the 2001 Notes.

Industry

Commercialization of the Internet began in the mid-1980s, with e-mail providing the primary means of communication. However, it was the Internet’s World Wide Web, which provided a means to link text and pictures, which led to the blossoming of e-commerce and sparked the explosive growth of the Internet in the 1990s. Today, millions of people around the world send and receive information, and purchase products and services through the Internet. The potential of such a large

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and still-growing market has led many business analysts to consider e-commerce as a significant business opportunity. The growth of the Internet is being driven by:

We expect that corporate investment in technology using the internet will to continue to grow both in the U.S. and abroad over the long term future, despite the recent economic downturn and the recent reduction of anticipated growth in the telecommunications sector.

Our Technology

We are a developer of wired and wireless telemetry communications and remote control systems and products. We also develop digital radios in the 900 megahertz (“MHZ”)and 2.4 gigahertz (“GHZ”) bands.

At the heart of our strategy is the promotion of our communication systems designed to provide supervisory control of, and obtain data from equipment or devices in remote locations via the internet.

Our proprietary technology consists of three parts, of which the first is our “X-Node^TM”. The X-Node^TM is a miniature web server compacted into a one square inch circuit board, which often requires less than 2 kilobytes of memory. This miniature web server collects information from a remote piece of equipment (e.g., vending machine, natural gas meter, and the like) and makes that information available via the Internet.

The second part of the technology is our product for large-scale installations, the “X-Gate^TM”. The X-Gate^TM is an Internet gateway that can collect information over a wired or wireless network from a substantial number of X-Nodes^TM (e.g., an array of vending machines), and transmit the information to an information repository via the Internet. This transmission device provides the connection to the Internet and translates the data between the connected devices and formats it for use on the Internet. The X-Gate^TM offers distinct advantages over the more commonly used gateway—the personal computer—in that it requires no human intervention and incorporates advanced technologies to ensure performance and reliability.

Completing our technology is the business-to-business web site we developed, located in the Denver, Colorado area. This database-driven site has been used to collect the operations and transactional data which has been transmitted from a customer’s remote equipment, then store it securely for delivery to authorized customer personnel in raw form, or process and format it into standard or customized reports using software we employ.

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Following is an illustration of a typical design for our communication systems:

Competitive Advantages

Our technologies offer customers a number of advantages, including, without limitation:

Competitive Adaptability

Since we utilize the standard language of the Internet, our products are capable of communicating with any Internet web browser and meet current and emerging international Internet communications standards, which provide important benefits when compared to closed, proprietary solutions.

Based on our development and engineering experience, we are positioned to provide up-to-date technical solutions to customers with remote monitoring and control needs.

Strategic Growth Plan

We plan to develop and sell our products and services in three separate, but at times overlapping phases.

Phase One. During Phase One, in which we had been engaged and plan to recommence our efforts, we are debuting our unique combination of telemetry technologies by providing them to selected Fortune 1000 and other customers. During this phase, we are focused on selling the wide-ranging capabilities of our unique technological approach by working with our customers to design and configure our products and services that address their specific industrial, internet communication needs, while building a database of standardized technology configurations that can be used or easily adapted for a variety of applications. Throughout the process, we will seek to establish ourselves as a recognized “brand” for innovative,

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technologically advanced products and services. This phase will continue for each industry application until the related products reach maturity.

Phase Two.    During Phase Two, we plan to leverage our design and engineering experience to expand our market for products and services by offering product and service packages for applications in a variety of industries as described in “Current Status” above. The basic products will be designed to plug in and be ready for use or, if necessary, they can be readily configured—even by customers. During this phase, we plan to develop new applications for our technologies, along with a selection of value-added web-based services, to strengthen our ties with our established customers and extend our reach into new markets. The implementation of this phase in our strategic growth has been delayed as the result of slower than anticipated sales in our target markets and our focus on automated meter reading, as described in “Current Status” above.

Phase Three.    During Phase Three, we expect to evolve into an industry-specialized, customer-only Internet Application Service Provider, whereby our customer data can be accessed through our business-to-business website, that will focus on customer web and data hosting. We envision such a step as a natural and necessary extension of our technology products and services package in order to ensure uninterrupted 24-hour access to operations-critical remote data by our customers. We plan to offer such hosting services to customers upon sale of our products and services to such customer. We commenced such phase in 2001 on a limited basis and continued it throughout 2002 on a limited basis.

As discussed in Current Status—Overview, above, the Company has shifted its near-term strategy to emphasize the sale and marketing of its radio products. While these three phases of business development remain fundamental to our plan for the growth of our telemetry products and services, we are currently focusing our efforts on establishing profitability through the sale of our established product lines, where we have historically been competitive and realized high margins.

Products and Services

X-traWeb^TM Products

Our product strategy is to utilize our existing technologies to develop innovative solutions that enable users of telemetry technologies to leverage the power of the Internet in order to greatly enhance the efficiency and cost of controlling and monitoring remotely located equipment.

Our products and services allow standard web browsers, rather than customized host system software packages, to monitor and control equipment throughout the world where there is internet access using industry-standard Internet tools. The result is that, from any Internet-accessible location, customers in a variety of industries have real-time comprehensive, cost-efficient information available that helps them better manage their telemetry requirements.

Our existing X-traWeb^TM products which are available for sale are listed below. These typically are sold as part of a specifically-designed installation for any particular customer.

The X-Node^TM

The X-Node^TM is a small (approximately 1 inch by 1 inch printed circuit board that possesses less than 2 kilobytes of memory), fully functional micro-controller which collects, processes and transmits information, and can provide wired or wireless internet access. X-Nodes^TM are extremely durable in most environmental conditions, have low manufacturing costs, and can be attached easily to a wide variety of existing equipment for the purposes of remotely monitoring and controlling the equipment over the Internet.

Each X-Node^TM has various input and output capabilities, and allows flexible programming and extremely rapid execution speed.

The circuit board permits the installation of our flexible software programs to be done automatically during the manufacturing process. The embedded software program is also designed to allow us, from a remote location, to quickly, easily, and inexpensively update the functions of an X-Node^TM to respond to changes in customer needs.

X-Nodes^TM can be used singly by connecting one to a piece of equipment and adding a modem for Internet connection. In situations with multiple devices, where more than one X-Node^TM is required, customers can use our X-Gate^TM to link the X-Nodes^TM into a self-contained communications network and manage the network. A substantial number of X-Nodes^TM may be linked on a wired or wireless basis to a single X-Gate^TM.

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The X-Node^TM is illustrated below:

The X-Gate^TM

Our X-Gate is an approximately 4 inches by 7 inches printed circuit board with a flexible range of onboard memory reaching as much as eight megabytes. It serves as a data collecting and transmitting system, collecting data sent by one or more X-Nodes^TM and transmitting such data on a wired or wireless basis through the internet to a web and data hosting server maintained by us or our customer.

Each X-Gate has a micro-controller and various input and output capabilities. The X-Gate^TM is our proprietary communication system that serves as an alternative to the personal computer. Each is typically installed near telephone lines, network connections, or other communication lines. In the event of a power outage or brownout, the unit will automatically reboot and continue operation without human interference.

Our current X-Gate^TM models incorporate a modem interface, an ethernet interface, and wireless interfaces. Equipment that is concentrated in a single location can be hardwired directly to the X-Gate^TM. In situations where the equipment is impractical to hardwire or spread over a wide area, X-Nodes^TM can be linked together in substantial numbers to an X-Gate^TM through our wireless technologies. We have developed three different versions of our X-Gate^TM which provide different levels of functionality depending on a customer’s specific needs. Two such versions are geared toward industrial applications and the third supports energy management systems, including commercial and residential sites

The X-Gate^TM is illustrated below:

X-traWeb Internet Access Servers

We plan to offer our customers again the option to use our web servers to host their data in a secure co-location in the Denver Colorado area.

Radios

Spread spectrum radio technology has been used since the 1940s, limited mostly to military applications. Recently, an increased interest in spread spectrum modulation and its advantages has emerged, particularly concerning low-power, high-density personal communication devices. Because they are unlicensed, spread spectrum systems usually cost much less to install and troubleshoot than narrow band systems. In addition, spread spectrum modulation has the advantages of low probability of intercept, low probability of detection, low probability of interference and resistance to jamming.

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There are two methods for employing spread spectrum, frequency hopping and direct sequence. In frequency hopping systems, the carrier frequency of the transmitter abruptly changes (or “hops”) in accordance with an apparently random pattern. This pattern is in fact a pseudo-random code sequence, with the order of the frequencies taken from a predetermined set as dictated by the code sequence. The receiver employs the same pseudo-random code sequence and, once the transmitter and receiver are synchronized, the communication is essentially narrow-band on each frequency in the sequence.

In direct sequence systems, the carrier phase of the transmitter abruptly changes in accordance with a pseudo-random code sequence. This process is generally achieved by multiplying the digital information signal with a spreading code, also known as a chip sequence. The chip sequence has a much faster data rate than the information signal and so expands or spreads the signal bandwidth beyond the original bandwidth occupied by just the information signal. The term chips are used to distinguish the shorter coded bits from the longer uncoded bits of the information signal. At the receiver, the information signal is recovered by remultiplying with a locally generated replica of the spreading code. By doing so, the receiver effectively compresses the spread signal back to its original unspread bandwidth.

We currently offer three radios for sale. These products represent our Legacy product line, which we have offered continuously over the past several years.

Our line of 900 MHZ spread spectrum radios includes the 900 SS Hopper, a frequency hopping spread spectrum radio that offers reliable communications in a variety of environments. The Hopper features transmission speeds of up to 56 kilobytes per second and a range of up to 25 miles, line of sight, depending upon conditions and antenna selection. This radio received an award as the “best of show” in 1999 at a trade show in Baltimore, Maryland.

In addition, the 900 SS MicroHopper—a miniature version of the Hopper—offers a smaller form-factor and lower power-consumption for short range applications. Measuring just 2.2 inches by 1.75 inches, the MicroHopper is suited for applications where size and cost are important considerations.

Both frequency hopping spread spectrum radios employ our proprietary encrypting technology. This coding technology is a major innovation in wireless communications, which substantially reduces the overhead inherent in other coding methods. It adds security, increases throughput efficiency and provides faster effective communications speeds at a much lower cost.

We also offer the 900 SS Direct—either as a direct sequence or frequency-hopping combined transmitter and receiver (i.e. a transceiver), capable of transmitting data up to 40 kilometers, line of sight.

Antennas

We also manufacture and sell antennas. Our Gonic, New Hampshire based subsidiary, TWC Ltd., maintains approximately 80 different design executions of specialty antennae for use in law enforcement, marine, and custom applications.

Customer Support and Services

We support our customers with a range of services designed to help integrate our products into our customers’ systems. This support includes engineering consultation with every developer kit purchase, customer satisfaction and quality control programs, and in some cases complete turn-key solutions for large projects.

Sales and Marketing

We plan to capitalize on trends in many targeted segments of the telemetry market (including, without limitation, automatic meter reading, fast food services equipment, facilities management, asset management and security systems) through our ability to penetrate and establish a market presence with products and services designed to meet industry-specific needs. Our marketing strategy hinges on our establishing a strong reputation as a provider of reliable and technologically superior wireless Internet-based telemetry services to a diverse customer base. To achieve our goals of substantial growth and penetration of our target markets, we have developed a strategic marketing plan that provides for the future development of long-term sales channels through which we can sell our X-traWeb^TM solutions well into the future.

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Our marketing strategy involves a combination of in-house sales and marketing personnel, independent authorized agents, strategic marketing alliances, joint ventures and direct sales. These will be enhanced and supported by secondary direct marketing, advertising, promotions and public relations efforts.

By virtue of the monthly burn-rate (i.e. the excess of expenditures over revenue received, in each case on a cash basis) ceiling of $375,000 for each month after September, 2001 as set forth in our recent secured financing, and the delay in the receipt of revenues from the sale of our X-traWeb^™ products, we severely limited our marketing activities while the 2001 Notes remain outstanding and reduced such efforts further through employee cutbacks in March, 2003 (see “Senior Secured Indebtedness Financing” under Item 5 and Item 7—“Management’s Discussion and Analysis of Results of Operations and Financial Condition – Liquidity”).

Direct Sales Organization

During the early launch stages of our marketing program, our senior management is managing and conducting our marketing activities for our X-traWeb^TM products and services. A target market-oriented, direct sales organization has been established that has responsibility for specific geographic regions, and coordinates the activities of outside marketing partners, including value-added resellers and information technology consultants within those regions. During 2002, we had three employees focused on direct sales in the United States, but currently have no employees focused solely on such sales. We also engaged independent commission agents to market our products in the energy and other targeted markets.

If and when we expand our operations, we plan to hire additional sales personnel, or engage additional independent commission agents, to cover new markets and augment the services of sales and marketing personnel in certain larger markets.

Strategic Marketing Alliances

As an integral part of our marketing program, we are establishing strategic marketing alliances with outside companies that have strong influence within the respective target markets for our X-traWeb^TM products and services. We plan to align ourselves with partners that are capable of substantially accelerating our penetration of a target market or of adding material value to our marketing program through the reduction of costs, managerial infrastructure, and other economic advantages. During 2002, we continued to implement a sales plan targeting and pursuing prospective customers through organizations such as management consulting firms, computer networking consultants and value-added resellers.

We previously had marketing alliances in the residential security, facilities management and Internet sectors. We previously worked with Cooperative ConNEXTions, LLC and now work with its successor, Service Provider, to market our X-traWeb^TM products and services to rural electrical utilities operating in approximately 16 states west of the Mississippi River. Moreover, we have formed several such alliances to date in the natural gas and energy sectors. Our staff formerly worked with Texaco Natural Gas Inc. to market our X-traWeb^™ products to customers in the natural gas field.

Our technology offers these co-marketing partners a value-added component to the services already being provided to their existing customers. Our current and former co-marketing partners provide us with a credible avenue of introduction to other potential customers for our products and services.

Advertising and Promotions

An integral part of our long-term marketing plan is the generation of awareness within the target markets for our products and services. We previously allocated a portion of our budget toward ongoing advertising, promotions, and public relations activities, including direct mail, trade print media advertising, trade show participation and sales personnel incentives, and plan to do so in the future. To reach an even wider audience as we continue to develop widespread awareness of our portal and proprietary telemetry solutions, we plan to implement an advertising and promotional support program designed to:

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We also plan to implement advertising in trade publications on a regular basis.

We previously appointed a public relations firm, with substantial expertise in the information technology industry, to assist us in the development and execution of periodic public relations campaigns, including campaigns coordinated with new product introductions in existing markets and expanded introductions to new markets. We have also highlighted our activities through occasional articles in trade publications and national business newspapers.

We have participated in regional, national and international trade shows that are conducted for industries that comprise our target markets, including telemetry and Internet technology industry trade shows (such as the annual trade show Cibet in Hannover, Germany and Comdex in Las Vegas, Nevada). We intend to maintain a regular presence at key trade shows throughout our development, and use our presence at such events to not only attract customers, but also generate follow-on marketing opportunities, subject to budget constraints imposed by the terms of the 2001 Notes.

In the past we have invested heavily in such advertising and promotions. In 2001 we spent approximately $447,000, and in 2002 we spent approximately $262,700, in such activities. However, our budget constraints and lack of adequate funding have curtailed these advertising plans, and we plan to invest exclusively in direct sales to execute the marketing and promotion plans during 2003. Because of our limited resources, and restriction on our spending, it is possible that we will further curtail these activities.

Research and Development

We previously invested significantly in research and development activities. These activities consisted of proprietary development on our spread spectrum radios and X-traWeb^TM products and services. We plan to continue to invest in research and development in the future, subject, however, to the limitation that we cannot incur a monthly burn-rate greater than $375,000 in any month while the 2001 Notes are outstanding and provided we obtain additional funding. Thus, our research efforts will be significantly curtailed during such period. Also, in October, 2001 we closed down our Kansas City office, where our research and development activities were primarily conducted.

We will continue to engage in research and development activities for our own products, on a limited basis as discussed above. Current and future projects include a new one watt radio (which we plan to have tested for FCC certification), new spread spectrum transceivers in the 2.4GHz band, improving X-traWeb^TM products to enable plug-and-play developer kits, improved X-traWeb^™ components such as the X-traCam^TM, a camera that captures video images and transmits them to the internet without the use of a personal computer where they can be viewed using a standard browser, and similar projects.

Manufacturing

Until December 31, 1999, we also performed manufacturing services for other manufacturers and vendors of medical, communications, computer graphics and consumer electronic products at our Salt Lake City manufacturing facility, and sold antennas from our Gonic, New Hampshire facility.

We discontinued our direct manufacturing operations effective as of December 31, 1999, and now outsource the manufacturing activities of our products through third parties (except antennae which we manufacture directly). These third-party manufacturers include a Taiwan-based company and several domestic manufacturers.

Contract Design and Development

General

At the present time, we are not seeking design and development service contracts except in “partnering” situations in which we would have an ownership interest in the products and/or technology which are the subject of the contract and which promote the sale of our proprietary products, such as our X-traWeb^TM products. For example, we typically provide certain engineering services for the application of our X-traWeb^TM products for use in a specific application or applications desired by a vending machine manufacturer or a manufacturer of fast-food restaurant equipment or for installation in the monitoring of a gas pipeline or the control system in a refrigeration storage unit or office management system.

Formerly, we were engaged in providing engineering, design and development services to client specifications on a fee for services basis. Under one significant contract, we developed a low-cost spread spectrum technology for use in certain products sold by Kyushu Matsushita Electric Co., Ltd. (“KME,” which is also known as Panasonic) which is more fully

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described below. We also developed devices for use in the automatic meter reading field for Williams Wireless, Inc., a wholly owned subsidiary of the Williams Companies.

Kyushu Matsushita Electric Co. Ltd. (Panasonic) Contract

In April 1997, we acquired a corporation (by merger in 1997), which entered into a contract with Kyushu Matsushita Electric Co., Ltd. to develop low cost spread spectrum radio technology for use in certain Panasonic products. As part of our development contract with KME, we granted KME a world-wide, non-exclusive license to use or authorize the use of any patents, copyrights, technical know-how and other intellectual property rights embodied in our LCSSR technology in the manufacture of KME products, and agreed not to license others to use technology which is developed under our contract with KME in connection with any telephone-related products for a period of two years from the first shipment of KME products using the technology. In consideration for these rights and our services, KME agreed to pay royalties to us on sales of KME products using the technology above a prescribed minimum amount of sales for a period of two years from the initial shipments of any such products.

During 2000, $447,049, or about 98.0% of the $457,194 royalty income we recognized was earned under this contract and we have not received any further royalties therefrom since such contract expired in September, 2000.

Competition

We have a number of current competitors in all aspects of our business, many of which have substantially greater financial, marketing and technological resources than us, and which include such industrial giants as Panasonic, Motorola, Sony and AT&T. We intend to compete in our industry by concentrating on certain product or service niches within the overall market. However, most of our competitors offer products which have one or more features or functions similar to those offered by us, and many have the resources available to develop products with features and functions, competitive with or superior to those offered by us. We cannot assure you that such competitors will not develop superior features or functions in their products or that the we will be able to maintain a lower cost advantage for our products.

A key element of our competitive strategy is to align ourself with major manufacturers by developing proprietary products or technology for market leaders that can be incorporated into its “partner manufacturers” products. We formerly had a marketing alliance with Texaco Natural Gas Inc., and currently have such an alliance with Service Providers (the successor to Cooperative ConNEXTions, LLC) to market our X-traWeb products in the United States. We previously licensed low-cost spread spectrum technology for use in certain products sold by Panasonic (which agreement expired in September, 2000) and entered into a VAR Agreement with Motorola, Inc. to sell its MOSCAD Remote Terminal Units. We also believe that our agreements with KME (i.e., Panasonic), and Motorola, illustrate the manner in which we can “partner” with much larger, established companies to access mass markets for our proprietary wireless communications products and technology.

Our management has identified six primary competitors offering either telemetry-related products and services or web-enabled technologies:

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While each of these companies offers products and/or services that have some parallels to those provided by X-traWeb, none currently provides, to our knowledge, the type of cost-effective, total solution approach that we do. In addition, we believe we combine successfully all of the necessary technical elements with the additional capability for wireless system integration and communications.

In addition, our management has identified two key competitors in the radio products field. However, our management believes that our radios provide better performance at a lower price for comparable radios offered by such companies.

Employees

As of December 31, 2002 we had 21 employees. Of these employees, 2 were classified as executive, 5 as administrative personnel, 11 as engineering, and 3 as sales and marketing. Our employees do not belong to a collective bargaining unit, and we are not aware of any labor union organizing activity.

Patents and Intellectual Property

We believe that reliance upon trade secrets, copyrights and unpatented proprietary know-how in conjunction with the development of new products is at least as important as patent protection in our business since most patents provide fairly narrow protection, and are of limited value in areas of rapid technological change. Further, patents require public disclosure of information that may otherwise be subject to trade secret protection.

We presently have one United States patent covering our spread spectrum technology, one United States patent which covers technology relating to, among other technical matters, a method and apparatus for de-modulating “spread spectrum” wireless signals and one patent application covering a spectral diffusion spreading communication. We previously had filed three United States patent applications on various operating aspects of our X-traWeb^TM system, but these were abandoned because we were unable to obtain from individual inventors a required oath and declaration form, although such applications can be revived in the foreseeable future. We intend to obtain the necessary documentation from such inventors, although we cannot assure you that we will succeed in such attempt. In addition, we have a patent application pending relating to a system and method for data encoding, but such an international patent application of the same was not pursued. We previously owned two U.S. issued patents, but they were abandoned, although they can be revived on or before December 26, 2003 and January 10, 2004, respectively. At the present time, we have no other patents or patent applications pending in the United States or in foreign countries.

The spread spectrum de-modulation technology patent application was the subject of litigation in the State of Utah, Salt Lake County Court, in which a former joint venturer with us claimed, among other things, an ownership interest in the technology. We settled this lawsuit in November 1997. Under the settlement agreement, we agreed, among other things, to share co-ownership of the technology covered by the patent application with our former joint venture partner. “Spread spectrum” communication is a method of transmitting and receiving coded information that is resistant to interference due to the fact that the transmission is spread over a large band with. This method requires, however, that both the transmitter and the receiver have the same spreading code.

We also use confidentiality agreements with our customers and other parties to protect trade secrets and other proprietary data. We claim copyrights on the circuit boards and software used in our products. We cannot assure you that we protect sensitive information and prevent other persons from obtaining and using our technology or developing other technology which embodies our technology.

In cases where we do not have patents on our products, we cannot assure you that another company will not replicate one or more of our products. Furthermore, we cannot assure you that any patents we obtain will give us meaningful protection or provide us with any significant competitive advantages over competing products. Also, we cannot assure you that patent rights that we have or may obtain in the future will give us any competitive advantage or will not be challenged by other companies or individuals. Furthermore, we cannot assure you that other companies or individuals will not independently develop similar products, duplicate our products or design products around any of our patents.

We also presently hold a number of trademarks and/or services marks relating to our X-traWeb^TM product line and our radio product line. We intend to pursue registration of trademarks associated with our key products as they are developed and become available for general commercial use, and to protect our legal rights concerning the use of our trademarks. We intend to rely upon common law trademark rights to protect any unregistered trademarks, which do not provide us with the same level of protection afforded by a United States federal registration of a trademark. For example, unlike a registered trademark, common law trademark rights are limited to the geographic area in which the trademark is actually used.

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Williams Wireless, Inc. (“Williams”) raised a claim that we violated the non-competition provisions of their agreements by allegedly marketing X-traWeb^TM products in the telemetry meter reading applications. We, in turn, claimed that Williams Wireless, Inc. failed to satisfy all of its duties under its various agreements with us. While we believed that Williams’ claim was properly disputable, the parties orally agreed to enter into a settlement agreement and mutual release. On March 8, 2000, before such settlement agreement was concluded, Williams sold substantially all of its assets and business, including its agreements with us, to an unrelated party, Internet Telemetry Corp. (“ITC”), and thereafter we resolved this dispute amicably.

We and ITC entered into a settlement agreement and mutual release dated as of August 7, 2000, which contained the following key elements:

(a) each party released the other of any claims under the Williams’ agreements with us, and the parties terminated such agreements in all respects;

(b) we agreed to grant ITC a perpetual, non-exclusive irrevocable royalty-free worldwide license to manufacture, use and sell our MicroHopper radio, as configured on the date of our agreement, as a component of ITC’s telemetry systems or products, and to manufacture, use and sell such radio only when incorporated into ITC’s telemetry systems or products;

(c) each party agreed to allow the other party to resell the other’s products pursuant to a standard resellers agreement adopted by such party; and

(d) each party agreed to indemnify the other from any claims arising under such agreement. We believe that this agreement will have no material adverse effect on our business.

We have not filed any patent applications in foreign countries.

ITEM 2.    PROPERTIES

As of December 31, 2002, our executive offices and principal administrative offices are located at 5670 Greenwood Plaza Boulevard, Greenwood Village, Colorado in approximately 10,441 square feet of space which is leased at a monthly cost of $18,594 for base rental and allocable common area maintenance charges. We also pay for certain utility expenses. The five-year lease for these premises expires on December 31, 2005. However, our landlord commenced a lawsuit to collect the unpaid rent thereon and for our eviction from our premises and obtained a judgment of eviction and for the amount of the unpaid rent. See “Legal Proceedings” in Item 3. As a result, we will be evicted from such premises on May 7, 2003 and are attempting to find suitable alternative premises.

In addition, we continue to operate our facility in Gonic, New Hampshire of approximately 5,000 square feet at a monthly rent of $2,400. Prior to November 30, 2001 we also maintained leased offices in Overland Park, Kansas of approximately 2,850 square feet at a monthly rent of $3,444 which we discontinued at such time.

We believe that our facilities in Gonic, New Hampshire are satisfactory for our present scale of operations there, but, if we are evicted from our current principal premises, we will seek suitable alternative office space, which we hope will be satisfactory for our operations to be conducted there.

We have obligations under various equipment leases which are not material.

ITEM 3.    LEGAL PROCEEDINGS

1. On February 20, 2001 the Pinnacle Fund L.P., Barry M. Kitt and Tom and Denise Hunse filed a lawsuit against us with respect to the purchase of a total of 230,000 shares of our common stock at $3.00 per share in a private placement transaction in February 2000. The plaintiffs sought rescission of the transaction and/or damages, including treble damages, which they allege arise out of our failure to file a registration statement on or before December 31, 2000. The lawsuit had been removed to the United States District Court for the District of Utah.

In December, 2001, the District Court in Utah approved the plaintiffs’ motion for leave to amend their pleadings to commence a lawsuit against five individual defendants (David D. Singer, an officer-director, Donald I. Wallace, a former officer-director, Malcolm Thomas, a director, Charles Taylor, a director and a former officer, Kevin Childress) and to assert an additional cause of action against them for the underlying state law securities claim against the Company, and new causes of

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action against the Company for breach of the implied covenant of good faith and fair dealing and promissory estoppel, and a new cause of action for fraud against Mr. Singer (which previously had been asserted against the Company initially).

The Company settled such lawsuit in December, 2002, without its admission of any wrongdoing or liability. Such settlement did not have any material adverse impact on the Company’s business or financial position.

2. Business Software Alliance (“BSA”), a trade association, asserted a claim against us during May, 2002 alleging that we had without authorization or license installed on our computers unlicensed copies of certain products published by members of BSA (in this case, Adobe Systems Incorporated and Microsoft Corporation), and that such unauthorized use constituted copyright infringement under the Federal Copyright Act. BSA alleged that we could be held liable for statutory damages on a per product basis of between $30,000 and $150,000 per product, plus reasonable attorneys fees and court costs.

We and BSA agreed to settle such claims by our payment of the sum of $54,710 in three unequal installments and our purchased of new software for the items in question. We expect such settlement agreement to be signed by BSA in the near future, although we cannot assure you of such result. If such settlement is achieved amicably, our liability thereunder will not have a material adverse effect on our business and financial condition. If such settlement is not achieved and the matter were litigated and we lost such litigation, such loss would have a material adverse effect on our business and financial condition.

3. Our landlord, WHPTRI Real Estate, L.P., filed a lawsuit against us in March 2003, in Arapahoe County, Colorado seeking to collect unpaid rent on our executive and administrative offices in Greenwood Village, Colorado of approximately $75,000 and to evict us from such premises. The court granted the plaintiff a judgment for the unpaid rent and for eviction in late April, 2003 which the landlord agreed to stay until May 7, 2003, at which point we would be evicted from our premises. If such eviction were to occur, we plan to relocate our offices to another nearby location, although no alternative space has been leased as of the date hereof.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We submitted no matters to a vote of our shareholders during the fourth quarter of 2002.

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common Stock

Our shares of Common Stock are traded on the American Stock Exchange under the symbol “XWC”. The high and low per share price of the shares of our Common Stock and the dividends that were paid thereon for 2000 and 2001 were as follows:

At December 31, 2002 we had approximately 2,500 beneficial owners of our shares of Common Stock.

Dividend Policy

We have not paid any dividends on our shares of Common Stock to date and do not anticipate paying any dividends in the foreseeable future.