UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2002

[ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _____ to ____

Commission file number 0-24673

METAWAVE COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	91-1673152
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
10735 Willows Road NE, Redmond, WA	98052
(Address of principal executive offices)	Zip Code)

(425) 702-5600
(Registrant's telephone number, including area code)


NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

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

The number of shares outstanding of the registrant's common stock as of November 11, 2002 was 51,718,162 .

METAWAVE COMMUNICATIONS CORPORATION
FORM 10-Q

For the Quarter Ended September 30, 2002

INDEX

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets - September 30, 2002 and December 31, 2001
	Consolidated Statements of Operations - Three and Nine months ended September 30, 2002 and 2001
	Consolidated Statements of Cash Flows - Nine months ended September 30, 2002 and 2001
	Notes to Consolidated Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosure of Market Risk
Item 4.	Controls and procedures
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K
Signature
Certifications
Index to Exhibits

PART I. Financial Information

Item 1. Financial Statements

METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

			September 30,	December 31,
			2002	2001
			(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$    3,907	$   28,851
	Restricted cash		3,488	4,175
	Accounts receivable, net		3,684	11,371
	Receivable from Viasystems Group, Inc.		75	5,153
	Inventories, net		6,128	5,111
	Prepaid expenses and other assets		1,446	3,926
		Total current assets	18,728	58,587
Property and equipment, net			1,517	3,323
Goodwill			35,753	59,205
Other intangibles, net			2,657	4,297
Other noncurrent assets			17	143
		Total assets	$   58,672	$125,555
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$    2,576	$     8,715
	Payable to Viasystems Group, Inc.		-	6,762
	Other current liabilities		4,775	8,347
	Accrued compensation		1,569	2,914
	Current portion of notes payable and capital lease obligations		673	2,689
		Total current liabilities	9,593	29,427
Notes payable and capital lease obligations less current portion			524	1,268
		Total liabilities	10,117	30,695
Commitments and contingencies			-	- -
Convertible preferred stock, $.0001 par value:
	Authorized shares - 10,000,000 at September 30, 2002 and December 31, 2001; Issued and outstanding shares - 84,782 at September 30, 2002 and December 31, 2001, and warrants. Liquidation preference $20,000 plus pro rata with common stockholders to $40,000		20,000	20,000
Stockholders' equity:
Common stock, $.0001 par value, and paid-in capital:
	Authorized shares - 150,000,000 at September 30, 2002 and December 31, 2001; Issued and outstanding shares - 51,664,842 and 51,662,687 at September 30, 2002 and December 31, 2001, respectively		340,426	340,776
Deferred stock compensation			(332)	(1,430)
Accumulated other comprehensive income			167	30
Accumulated deficit			(311,706)	(264,516)
		Total stockholders' equity	28,555	74,860
		Total liabilities and stockholders' equity	$    58,672	$   125,555

See accompanying notes to consolidated financial statements.

METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share and share data)
(Unaudited)

		Three Months Ended September 30,			Nine Months Ended September 30,
		2002		2001		2002		2001
Product revenues	$	2,726	$	3,111	$	11,454	$	17,959
Service revenues		1,264		2,110		2,877		5,792
Total revenues		3,990		5,221		14,331		23,751
Cost of product revenues		1,441		1,399		6,902		20,329
Cost of service revenues		1,031		1,919		2,796		5,111
Total cost of revenues		2,472		3,318		9,698		25,440
Gross (loss) profit		1,518		1,903		4,633		(1,689)
Operating expenses:
Research and development		2,524		6,271		9,514		23,115
Sales, marketing and customer operations		1,322		2,945		7,038		8,886
General and administrative		1,085		1,361		5,068		8,362
Impairment of goodwill		- -		- -		24,000		- -
Amortization of intangibles and goodwill		419		4,455		1,253		13,815
Total operating expenses		5,350		15,032		46,873		54,178
Loss from operations		(3,382)		(13,129)		(42,240)		(55,867)
Other income (expense), net		1		(8)		(31)		673
Interest expense		(19)		(215)		(155)		(533)
Other income (expense), net		(18)		223		(186)		140
Net loss from continuing operations		(3,850)		(13,352)		(42,426)		(55,727)
Discontinued operations
Net loss from disposal of Spotlight GSM related assets		(975)		- -		(4,775)		- -
Net gain (loss) from operations discontinued business unit		1600		(1,948)		11		(5,002)
Net gain (loss) from discontinued operations		625		(1,948)		(4,764)		(5,002)
Net loss	$	(3,225)	$	(15,300)	$	(47,190)	$	(60,729)
Basic and diluted net loss per share from continuing operations	$	(0.07)	$	(0.27)	$	(0.82)	$	(1.22)
Basic and diluted net loss per share from disposal of Spotlight      GSM related assets		(.02)		- -		(.09)		- -
Basic and diluted net loss per share from discontinued operations	$	(0.03)	$	(0.04)	$	(0.00)	$	(0.11)
Basic and diluted net loss per share	$	(0.6)	$	(0.31)	$	(0.92)	$	(1.33)
Weighted average shares used in computation of basic       and diluted net loss per share		51,849		49,201		51,445		45,634

See accompanying notes to consolidated financial statements.

METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except earnings per share and share data)
(Unaudited)

	Nine Months Ended September 30,
	2002		2001
Continuing Operations:
Operating Activities
Net loss from continuing operations	$	(42,426)	$	(55,727)
Adjustments to arrive at cash provided by operating activities:
Depreciation and amortization expense		2,237		16,098
Amortization of deferred stock compensation		689		5,843
Impairment of goodwill		24,000		- -
Loss on disposal of certain assets		108		55
Changes in operating assets and liabilities:
Decrease in accounts receivable		8,224		211
Increase in inventories		(1,776)		(4,549)
Decrease (increase) in prepaids and other noncurrent assets		1,009		(468)
Decrease in accounts payable, accrued liabilities, and accrued compensation		(4,478)		(6,298)
Net cash used in operating activities		(12,413)		(44,835)
Investing Activities
Net proceeds from sale of inventory and fixed assets		- -		7,964
Purchases of equipment and intangible assets		(862)		(2,026)
Net cash provided by (used in) investing activities		(862)		5,938
Financing Activities
Net proceeds from exercise of common stock options		11		980
Net proceeds from sale of common stock		- -		21,644
Principal payments on notes payable and capital lease obligations		(1,894)		(2,002)
Net cash provided by (used in) financing activities		(1,883)		20,622
Net decrease in cash and cash equivalents		(15,158)		(18,275)
Effect of exchange rate changes on cash		62		261
Cash and cash equivalents used for continuing operations	$	(15,096)	$	(18,014)
Cash used for discontinued operations		(10,535)		(3,760)
Cash and cash equivalents at beginning of period		33,026		37,921
Cash and cash equivalents at end of period	$	7,395	$	16,147

See accompanying notes to consolidated financial statements

METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Description of the Business

Metawave Communications Corporation, a Delaware corporation (the “Company”), headquartered in Redmond, Washington, provides smart antenna products and services to wireless operators, tower operators and base station manufacturers facing capacity constraints and performance issues in the wireless communications industry. The Company believes that its smart antenna systems improve overall network performance by increasing capacity, improving or maintaining network quality, reducing network operating costs and better managing network infrastructure. Our smart antenna systems are designed to allow wireless network operators, tower operators and base station manufacturers to address wireless network challenges, allowing them to more cost-effectively keep pace with growth in subscriber rates and minutes of use and increased demand for digital voice and data services. Our technologies are designed to be implemented in a variety of market segments in the worldwide wireless communications industry and currently support various CDMA, GSM, third generation (3G) and analog standards.

2. Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of Metawave Communications Corporation have been prepared in conformity with accounting principles general accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included have been condensed or omitted. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements filed on April 15, 2002 as part of Form 10-K.

The Company uses a 52-week fiscal year ending on the Sunday closest to December 31. The 2001 fiscal year ended on December 31, 2001, with each of the fiscal quarters representing a 13-week period. The third quarter of 2002 ended on Sepetember 29, 2002. For convenience of presentation, all fiscal periods in these financial statements are treated as ending on a calendar month end.

3. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results may differ from those estimates. Significant estimates include the allowance for bad debt, inventory valuation and impairment of assets.

4. Revenue Recognition

Revenues consist of sales to end-users. Our sales agreements do not provide a right of return. Sales of our products are recognized when title to the system and risk of loss is transferred to the customer and all customer acceptance conditions, if any, have been satisfied, and collection is probable. The Company defers any portion of equipment revenue that is billable after completion of installation and optimization services.

Service revenues, generally for installation and optimization, are recognized when the services have been performed and all customer acceptance conditions, if any, have been satisfied. Our maintenance contract revenues are deferred and recognized ratably over the term of the agreement (which is typically one year). Revenues from our nonrecurring engineering contracts are recognized based on the percentage-of-completion method using a milestone method to calculate the appropriate units of work recognized. All nonrecurring engineering contracts have been completed as of September 30, 2002.

5. Termination of Manufacturing Outsourcing Agreement

During the first quarter of 2001, the Company entered into an exclusive, five-year supply agreement with Viasystems Group, Inc. (“Viasystems”) to outsource substantially all of its manufacturing operations to Viasystems, a provider of electronics manufacturing services. In August of 2002, the Company and Viasystems mutually agreed to terminate this supply agreement. The Company paid an aggrate of $3.5 million as follows: $0.1 million for all amounts owed to Viasystems, $3.1 million for remaining inventory commitments and additional inventory purchased and $0.3 million for the purchase of related fixed assets. As of September 30, 2002 the Company had paid a total of $2.9 million.

6. Recent Accounting Pronouncements

Effective January 1, 2002, the Company adopted the Statement of Financial Accounting Standard (SFAS) No. 141, "Business Combinations", which resulted in discontinuation of future amortization of goodwill.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company tested goodwill for impairment in the first quarter of 2002, which resulted in a charge of $24.0 million. Any future impairment could have an adverse effect on the future results of operations.

Prior to adoption of this statement goodwill and other intangibles were amortized using the straigh-line method over the estimated useful life of five years for financial statement purposes. Net income and earnings per share for the three and nine months periods ended September 30, 2001 are adjusted below to exclude amortization expense.

		Three Months Ended September 30, 2002		Nine Months Ended September 30, 2001
		(unaudited) (In thousands, except earnings per share and share data)
Reported net loss	$	(15,300)	$	(60,729)
Add back goodwill amoritzation		4,057		12,171
Adjusted net income		(11,243)		(48,558)
Basic and diluted net loss per share	$	(0.31)	$	(1.33)
Goodwill amortization		0.08		0.27
Adjusted basic and diluted net loss per share	$	(0.23)	$	(1.06)

In August 2001, the FASB approved SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires a single accounting model for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for financial statements after December 15, 2001. Under SFAS No. 144, the results of operations of our SpotLight GSM operating unit have been classified as discontinued operations on the Consolidated Statement of Operations.

In April 2002, the FASB issued SFAS No. 145, "Recession of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections”. Statement No. 145. recinds Statement No. 4, which required all gains and losses from extinguishments of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. Upon adoption of Statement No. 145, companies will be required to apply certain criteria in APB Opinion No. 30, "Reporting the results of Operations - reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” in determining the classification of gains and losses resulting from the extinguishment of debt. Statement No. 145 is effective for fiscal years begining after May 15, 2002. The Company is currently evaluating the requirements and impact of this statement on its results of operations and financial position.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This standard requires companies to recognize costs associated with exit of disposal activities when they are incurred rather than at the date of the commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severence costs that are associated with a restructuring, discontiued operation, plant closing or other exit or disposal activity. SFAS No 146 is to be applied prospectively to exit or disposal activies initiated after December 31, 2002. The Company is currently evaluating the requirements and impact of this statement on its results of operations and financial position.

7. Inventories

		September 30, 2002		December 31, 2001
		(In thousands)
Materials and Components	$	5,243	$	3,449
Trial Units		-		585
Completed Systems		885		1,077
	$	6,128	$	5,111

8. Net Loss Per Share

Basic and diluted net loss per share is calculated using the weighted average number of shares of common stock outstanding, less the weighted-average number of restricted shares of common stock issued that are subject to repurchase. The effect of stock options, warrants and convertible preferred stock has not been included in the calculation of diluted net loss per share as their effect is antidilutive. Securities not included in the loss per share calculation (in thousands) were 18,229 and 6,479 in 2002 and 2001, respectively ..

9. Commitments

Total noncancelable material purchase commitments outstanding at September 30, 2002 were approximately $1.0 million, of which $0.6 million relate to Viasystems. As of December 31, 2001 the Company had material purchase commitments of approximately $6.0 million, of which $3.8 million related to Viasystems.

10. International Operations

The Company sells its smart antenna systems and services domestically and internationally, and operates in a single industry segment. While expenses for sales and marketing activities are incurred in various geographical regions, substantially all of the Company’s assets are located, and the majority of its operating expenses are incurred at its corporate headquarters. Revenue information by geographic region is the only segment information presented as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,
		2002		2001		2002		2001
				(In thousands)
United States	$	3,495	$	3,765	$	13,205	$	13,795
Mexico		239		954		870		8,952
Korea		256		502		256		1,004
Total	$	3,990	$	5,221	$	14,331	$	23,751

11. Restricted Cash

The Company has $3.5 million of restricted cash as of September 30, 2002 to support letters of credit associated with leases in the United States and certain inventory purchases associated with the termination of our manufacturing agreement with Viasystems. The Company had $4.2 million of restricted cash as of December 31, 2001 to support letters of credit associated with leases in the United States and short-term notes in China.

12. Restructuring

In March of 2002, the Company implemented a restructuring plan to discontinue the SpotLight GSM product, reduce its workforce and consolidate facilities. After evaluation of the market, it was determined that the SpotLight GSM product did not have sufficient customer demand to continue with the product. While this decision was made based on market conditions in the first quarter of 2002, it was determined that these market conditions impaired the carrying value of the inventory and fixed assets associated with the product as of December 31, 2001. Accordingly, a provision for the write down of these assets was made in the year ended December 31, 2001.

The Company has recorded charges of $22.3 million relating to this restructuring, $18.1 million of which was recorded in 2001. In 2002, a $4.4 million charge was recorded in the first quarter, a $0.4 million charge was recorded in the second quarter and a $0.6 million gain was recorded in the third quarter.

		Three months ended
		September 30, 2002	June 30,    2002	March 31,    2002	December 31, 2001
		(In thousands, except earnings per share and data share)
Employee termination benefits		-	$    320	$   1,061	- -
Other charges (gain)		$  (641)	71	3,321	$  18,145
	Total restructuring charge (gain)	$  (641)	$    391	$   4,382	$   18,145
	Loss (gain) per share	$  (0.01)	$  0.01	$    0.09	$     0.35
	Total included in continuing operations	- -	136	692	- -
	Total included in discontinued operations.	(641)	255	3,690	18,145

Other charges for the three months ended September 30, 2002 included a $1.5 million gain from the reversal of an estimated liability related to the discontinued operations which was accrued in the first quarter of 2002, and a $1.0 million loss on the write-off of assets related to the Spotlight GSM product.

Employee termination benefits of $1.4 million primarily included severance costs for 147 employees. The other charges consist primarily of losses on disposal of property, equipment and inventory and costs related to exiting the SpotLight GSM product line.

13. Discontinued Operations

As a result of the restructuring discussed in note 12, the Company disposed of its SpotLight GSM related business unit. As of Septmeber 30, 2002 the business unit has been disposed of by scrap and limited sales of fixed assets and inventory components. A total of $1.0 million in accrued potential obligations remains on the balance sheet as of September 30, 2002. The amounts on the consolidated financial statements for the three and nine month periods ended September 30, 2001 have been reclassified to reflect the disposal of this business unit.

14. Subsequent Events

The Company has filed a claim with our insurance provider for business interruption losses arising out of the fire that destroyed our Taiwan facility in May of 2001. The magnitude and timing of any insurance proceeds are not known at this time.

The Company announced a restructuring of its operations in October of 2002 to realign the Company with current market expectations. As a part of this restructuring the Company reduced its workforce by approximately 30%, resulting in employee termination benefits of approximately $0.7 million. The Company is also in the process of renegotiating or terminating its operating lease for it's headquarters in Redmond, WA as a part of the restructuring. The Company expects that a charge will be taken as a result of this renegotiation or termination, although the Company is currently unable to estimate that charge.

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

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this document.

Forward-Looking Statements

Certain statements in the Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe harbors created by this law. You generally can identify these statements by our use of forward-looking words such as "plans,""estimates," "believes," "expects," "may," "will," "should" or "anticipates" or the negative or other variations of such terms or comparable terminology, or by discussion of the strategy that involves risks and uncertainties. We often use these types of statements when discussing our plans and strategies, our anticipation of revenues from the markets for our services and products, our anticipated capital expenditures, operations support systems or change in regulatory requirements and other statements contained in this report regarding matters that are not historical facts.

We caution you that these forward-looking statements are only predictions and estimates regarding future events and circumstances. All forward-looking statements included in this document are based on information available to us on the date hereof and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

Our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business, you should carefully consider various factors that might cause actual results to differ materially from stated expectations. Please see the "Risks Related to Our Business" and "Risks Related to our Stockholders" below and the various risks outlined in our filings with the Securities and Exchange Commission from time-to-time.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest pottential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we used in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for the allowance for bad debts, allowance for excess and obsolete inventory and reserve warranty expense.

Within the context of these critical accounting policies, we are not currently aware of any reasonably likely event that would result in materially different amounts being reported.

Allowance for Bad Debts

We periodically analyze our trade accounts receivable to estimate the potential impact of bad debts. We base our estimate on historical bad debt rates and the credit history of the customers in question. If actual or expected future bad debts were significantly greater or lower than the established allowance, we would record a reduction or increase to the allowance that would affect the total operating expenses reported in such a period.

Allowance for Excess and Obsolete Inventory

Inventories, which are composed of materials and components, trial units and completed systems, are valued at the lower of cost (first in, first out) or market. On a periodic basis, we compare the amount of inventory on hand and under commitment with our latest forecasted requirements to determine whether write-downs for excess or obsolete inventory are required. Actual requirements in any future periods are inherently uncertain and thus may differ from our estimates. If actual or expected requirements were significantly greater or lower than the established reserves, we would record a reduction or increase to net revenues in the period in which we made such a determination.

Reserve for Warranty Expense

As part of our revenue recognition policy, we record estimated expense from customers as reductions to revenues over the term of the warranty. We base our estimates on the historical rates of warranty expenses. Actual expenses and claims in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected warranty expenses were significantly greater or lower than the established reserves, we would record a reduction or increase to net revenues in the period in which we made such a determination.

Goodwill Impairment

The Company evaluates the valuation of its goodwill according to the provisions of SFAS 142 to determine if the current value of goodwill has been impaired. To do this the Company determines the present value of anticipated cash flows based on anticipated results of operations over a five year period. Any negative change in the Company´s projected results of operation may also lead the Company to re-evaluate its current recorded balance of $35.2 million, which may result in additional impairment charges in the future.

Company Overview

The global wireless telecommunications industry continued to experience a very challenging period during the first nine months of 2002, during which capital expenditures continued to contract. Our customers are facing slowing revenue growth, reduced access to capital and the need to carefully manage their cash flow and profitability. In response to these challenges, our customers are reducing capital expenditures and rethinking their plans to expand their networks. As a result, the Company has experienced lower revenues during 2002 as compared with prior periods. If capital investment levels continue to decline, or if the markets for our products grow at a slower pace than we anticipate, our revenues and profitability will continue to be adversely affected. We continue to focus on smart antenna solutions, and have added new smart antenna product offerings to better match the opportunities offered by the wireless equipment market.

Our SpotLight(R) smart antenna systems are appliques or add-ons to existing or new base stations and are intended to increase the capacity and improve the performance of current 2G and 2.5G CDMA networks. Our customers of SpotLight applique systems include Verizon Wireless, ALLTEL Communications and Grupo Iusacell Celular S.A. de C.V. of Mexico. As of September 30, 2002, the Company has sold approximately 425 SpotLight applique systems worldwide. As an improvement to our current SpotLight 2200 applique product, in October of 2001 we entered into an agreement with Lucent Technologies to better and more closely integrate our SpotLight 2200 CDMA smart antenna system into Lucent's Flexent(TM) Modular Cellular base station.

During 2002 we have been developing new products that we believe will expand our market base to tower and PCS wireless operators in addition to our traditional customers. SmartShare(TM) antenna sharing solution is our new antenna application that allows multiple wireless operators, who may operate at different frequencies and multiple air interface standards, to share a single set of antenna panels at a cell site. Wireless network operators benefit from this arrangement because it will provide access to more cell sites in areas where tower space is limited or zoning restrictions preclude building of new tower sites. SmartShare will provide operators with the flexibility to independently define and optimize antenna patterns to fit their particular needs. SmartShare enables tower operators to take advantage of shared antenna economies by accommodating more operators on their towers and by offering multiple operators a premium position on the tower. In February 2002, we signed an agreement with Crown Castle to develop and supply our SmartShare products for use in their tower locations. During the third quarter of 2002 we successfully completed testing the SmartShare prototype with Crown Castle.

Our SmartCell product uses our proprietary Cell Sculpting(TM) technology that enables a wireless network operator to "sculpt" or shape a cell's coverage pattern in a way that delivers greater performance, capacity and coverage benefits than off-the-shelf sector antennas. Cell Sculpting technology is used to establish an optimal antenna pattern for a cell site, which is captured in a personality module that is installed in the back of each antenna panel. Unlike the fixed patterns of conventional sector antennas, SmartCell allows wireless network operators to change antenna patterns by swapping out the personality module. Our SmartCell solution is designed to be compatible with base stations operators in the cellular and PCS frequency bands across multiple air interface standards. We successfully completed an initial trial during the third quarter of 2002 with a leading wireless operator.

We have also developed embedded adaptive smart antenna solutions, which have been field tested to demonstrate CDMA (IS-95) system performance enhancements. The same solutions can be applied to CDMA2000 and WCDMA. Our embedded solutions increase network capacity by utilizing fully adaptive beam forming techniques that track individual mobile subscribers, and hence reduce interference from surrounding users and base stations. In February 2001, we entered into an agreement with Samsung to embed our adaptive smart antenna technology into some of their base stations. During the third quarter of 2002 we completed field trials of this technology and we are currently reviewing the results.

Beginning in March of 2002 the Company implemented a restructuring plan to discontinue the SpotLight GSM product, reduce our workforce and consolidate facilities. After evaluation of the market, we determined that the SpotLight GSM product did not have sufficient customer demand to continue with the product. While this decision was made based on market circumstances in the first quarter of 2002, we determined that the discontinuance of the SpotLight GSM product impaired the carrying value of the inventory and other assets associated with the product as of December 31, 2001. Accordingly, a provision for the write down of these assets was made in the year ended December 31, 2001.

The Company has recorded charges of $22.3 million relating to this restructuring, $18.1 million of which was recorded in 2001. In 2002, a $4.4 million charge was recorded in the first quarter, a $0.4 million charge was recorded in the second and $0.6 million gain was recorded in the third quarter.

During October of 2002 we implemented a restructuring plan of its operations and has named Gary S. Flood as its chief executive officer. As part of the restructuring, Robert H. Hunsberger has resigned his position as chief executive officer and will remain as chairman of the board. The restructuring also involved a reduction in force of approximately 30 percent of the Company's workforce, resulting in employee termination benefits of approximately $0.7 million. The Company is also in the process of renegotiating or terminating its operating lease for it's headquarters in Redmond, WA as a part of the restructuring. The Company exects that a charge will be taken as a result of this renegotiation or termination, although the Company is currently unable to estimate that charge.

Liquidity and Capital Resources

Our cash and short-term investment portfolio totaled $7.4 million at September 30, 2002 as compared to $33.0 million at December 31, 2001. Our investments are composed primarily of money market funds and commercial paper with a maturity of three months or less to minimize interest rate risk and facilitate rapid deployment for immediate cash needs. We have $3.5 million of restricted cash as of September 30, 2002 to support letters of credit associated with leases in the United States and certain inventory purchases associated with the termination of our manufacturing agreement with Viasystems. We had $4.2 million of restricted cash as of December 31, 2001 to support letters of credit associated with leases in the United States and short-term notes in China.

As of September 30, 2002 we do not have any off-balance sheet arrangements.

We lease our facilities under noncancelable operating lease agreements that expire on various dates through 2005. We lease certain equipment under noncancelable capital leases that expire on various dates through 2004.

The operating lease for our headquarters in Redmond, Washington expires on May 31, 2005. We may, at our option, extend the term of this lease for two successive periods of five years each. The option to extend must be elected 12 months prior to the expiration of the initial lease term. In connection with this arrangement, we have issued a letter of credit in favor of the landlord in the amount of $2.5 million. We are in the process of renegotiating or terminating this operating lease as a part of our restructuring announced in October of 2002.

Total purchase orders and other noncancelable purchase commitments outstanding at September 30, 2002 were approximately $1.0 million.

For the nine months ended September 30, 2002, we used net cash in operating activities of $12.4 million compared to $44.8 million during the same period in 2001. In the nine months ended September 30, 2002, our operating activities included uses of cash to fund our net loss of $42.4 million, an increase in inventory of $1.8 million and a decrease in accounts payable and accrued liabilities of $4.5 million. We partially offset cash uses with a decrease of accounts receivable of $8.2 million and a decrease of $1.0 million in prepaid and other assets. We have adjusted net loss for non-cash charges for depreciation, amortization, stock compensation expenses and the impairment of goodwill totaling $27.0 million. For the nine months ended September 30, 2001, our operating activities included uses of cash to fund our net loss of $55.7 million, increased inventories of $4.5 million, an increase in prepaid and other assets of $0.5 million and a decrease in accounts payable and accrued liabilities of $6.3 million. We partially offset cash uses with a decrease in accounts receivable of $0.2 million. We have adjusted net loss for non-cash charges for depreciation, amortization and stock compensation expenses totaling $22.0 million.

Our net cash used in investing activities for the nine months ended September 30, 2002 was $1.0 million as compared to net cash provided of $5.9 million for the nine months ended September 30, 2001. Net cash used in investing activities was primarily for the purchase of test equipment, leasehold improvements, and customer support equipment to support our research and development and our customers. During 2001 we received approximately $8.0 million in payment for inventory and fixed assets pursuant to the manufacturing agreement with Viasystems.

Our net cash used for financing activities for the nine months ended September 30, 2002 was $1.9 million as compared to net cash provided of $20.6 million for the nine months ended September 30, 2001. Net cash used for financing activities was primarily principal payments on notes payable and capital lease obligations. The Company received approximately $21.6 million for issuance of common stock in the second and third quarter of 2001.

Our primary requirements for working capital over the next twelve months are to fund our operations, including spending on research and development and capital expenditures. We expect that the primary source of funds will be from operations and current working capital. It is important to note that the majority of our current inventory balance has been paid in full. If we achieve projected sales, continue to liquidate our inventory and reduce operating expenses over the next twelve months, this should be sufficient to fund our cash requirements. If we do not achieve our projected level of quarterly sales over the next 12 months, which is significantly higher than our reported quarterly sales in the first nine months of 2002, our ability to meet working capital requirements will be adversely affected.

The Company has filed a claim with our insurance provider for business interruption losses arising out of the fire that destroyed our Taiwan facility in May of 2001. While the magnitude and timing of any insurance proceeds are not known at this time, the potential impact on our liquidity may be significant.

If we are unable to meet our projections and/or if collected proceeds resulting from the claim with our insurance provider, if any, are not significant, we will require additional funds in the future to support our working capital requirements or for other purposes, and we may seek to raise such additional funds through the sale of public or private equity and/or debt financings as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable to our stockholders or us when we may require it, particularly in light of our depressed stock price and current market conditions in our industry. Any inability to obtain needed financing by us could have a materially adverse affect on our business and operating results.

Results of Operations

Revenues

Revenues consist of sales to wireless operators. Our sales agreements do not provide a right of return. Sales of our products to wireless operators are recognized when title to the system and risk of loss is transferred to the customer, all customer acceptance conditions, if any, have been satisfied, and collection is probable. The Company defers any portion of equipment revenue that is billable after completion of installation and optimization services.

Service revenues, generally for installation and optimization, are recognized when the services have been performed and all customer acceptance conditions, if any have been satisfied. Our maintenance contract revenues are deferred and recognized ratably over the term of the agreement (which is typically one year). Revenues from our nonrecurring engineering contracts are recognized based on the percentage-of-completion method using a milestone method to calculate the appropriate units of work recognized.

Our contract terms, including pricing and acceptance criteria, if any, typically vary depending on the length of the sales cycle and the applicable contract terms for the installation and optimization of the product. We expect that a limited number of customers will account for a substantial percentage of our revenues for the foreseeable future. In the third quarter of 2002, Verizon (73.4%) and ALLTEL (14.2%) accounted for 87.6% of our total revenues. The majority of our revenues were from SpotLight 2200 product and related services.

Total revenues were $4.0 million in the third quarter of 2002 and $5.2 million in the third quarter of 2001, a decrease of 23.6%. Product revenues totaled $2.7 million in the third quarter of 2002 and $3.1 million in the third quarter of 2001, a decrease of 12.4%. Service revenues totaled $1.3 million in the third quarter of 2002 and $2.1 million in the third quarter of 2001, a decrease of 40.1%.

Total revenues for the nine months ended September 30, 2002 were $14.3 million as compared to $23.8 million in the nine months ended September 30, 2001, a decrease of 39.7%. Product revenues totaled $11.5 million in the nine months ended September 30, 2002 and $18.0 million in the nine months ended September 30, 2001, a decrease of 36.2%. Service revenues totaled $2.9 million in the nine months ended September 30, 2002 and $5.8 million in the nine months ended September 30, 2001, a decrease of 50.3%.

The decreases were primarily due to a general slowdown in the worldwide economy and capital spending by wireless telecommunications companies. In addition, service revenues were impacted by lower backlogs of uninstalled systems. The Company believes that our future revenues will be derived from SpotLight CDMA, with increasing contributions from SmartShare, SmartCell and embedded technologies over the next twelve months.

Gross Margin

The cost of revenues for products is the unit price paid and certain other costs such as a provision for warranty costs. Our gross margins are generally higher for hardware revenues than for service revenues. We anticipate that our overall gross margins will fluctuate from period-to-period as a result of shifts in product mix, impact of deferred revenues, anticipated decreases in average selling prices and our ability to reduce costs as well as timing of new product introduction and overall product volume. During the third quarter of 2002 we resumed the assembly and testing of our Spotlight CDMA systems in-house. These functions have previously been performed by Viasystems since the second quarter of 2001. We have not noted a significant change in gross margin as a result of the resumption of these functions.

Gross margin was $1.5 million or 38.0% in the third quarter of 2002 and $1.9 million or 36.4% in the third quarter of 2001. Gross margin was $4.6 million or 32.31% in the nine months ended September 30, 2002 and a negative $1.7 million in the nine months ended September 30, 2001. Gross margin in the first nine months of 2001 was negatively affected by the recording of a $5.4 million inventory charge for excess and obsolete inventory, product enhancements and changes in the product mix as compared to the first nine months of 2002.

Research and Development

Our research and development expense consists principally of salaries, related personnel expenses, consultant fees and prototype expenses related to the design, development, testing and enhancement of our products. We expense all of our research and development costs as incurred. We believe that continued investment in research and development is critical to achieving our strategic product development and cost reduction objectives. However, due to our restructuring efforts in 2001 and 2002, including the discontinuation of our SpotLight GSM product, we expect research and development expenses to decrease in 2002 as compared to prior periods.

Research and development expense decreased 59.8% to $2.5 million for the third quarter of 2002 from $6.3 million for the third quarter of 2001 and decreased 58.8% to $9.5 million for the nine months ended September 30, 2002 from $23.1 million for the nine months ended September 30, 2001. The decrease in research and development expense was primarily due to our restructuring efforts in 2001 and the first quarter of 2002.

Sales, Marketing and Customer Operations

Our sales, marketing and customer operations expense consists of salaries, sales commissions and expenses for personnel engaged in marketing, sales and field service support for new installations and installed base, as well as promotional expenditures. We believe that these expenses will decrease in the future as a result of restructuring efforts in 2001 and 2002, in particular as a result of our shift from a predominatly direct sales model to a sales representative model.

Sales, marketing and customer operations expense decreased 55.1% to $1.3 million for the third quarter of 2002 from $2.9 million in the third quarter of 2001 and decreased 20.8% to $7.0 million for the nine months ended September 30, 2002 from $8.9 million for the nine months ended September 30, 2001. The decrease was primarily due to staff reductions and operational improvements made as a part of our restructuring efforts in 2001 and the first quarter of 2002, in particular as a result of our shift from a predominantly direct sales model to a sales representative model.

General and Administrative

Our general and administrative expense consists primarily of salaries and personnel related expenses, recruiting and relocation expenses, professional and consulting fees, insurance premiums and other corporate expenses. Due to our restructuring efforts in 2001 and 2002 we expect general and administrative costs to decrease in the future.

General and administrative expense decreased 20.3% to $1.1 million in the third quarter of 2002 and $1.4 million in the third quarter of 2001, and decreased 39.4% to $5.1 million in the nine months ended September 30, 2002 from $8.4 million in the nine months ended September 30, 2001. The decrease was primarily due to our restructuring efforts in 2001 and the first quarter of 2002.

Impairment of Goodwill

As of March 31, 2002, we determined that our recorded goodwill had been impaired under the provisions of SFAS 142. As a result, we recorded a $24.0 million change for the impairment of intangible assets in the first quarter of 2002. There was no other impairment based on the Company's analysis. Any significant negative change in the Company´s projected results of operations may also lead to the Company to reevaluate its current goodwill balance of $35.3, which may result in additional impairment or charges in the future.

Other Income and Expenses

Our other income and expenses are composed primarily of investment income and interest expense on our outstanding leases and notes. Our investments are composed primarily of money market funds and commercial paper with maturities of three months or less. We anticipate that investment income will continue to fluctuate with our overall cash position.

Other expenses for the third quarter of 2002 were $18,000 as compared to other income in 2001 of $223,000. Other income/expense has decreased in 2002 from prior periods due to lower market returns and lower overall cash balances during 2002.

Discontinued Operations

Discontinued operations includes the results of our discontinued SpotLight GSM business unit and disposal of SpotLight GSM related assets. We expect results from discontinued operations to continue to decrease as we conclude activities related to the discontinued business unit. Should the Company realize any significant proceeds from its business interuption claim resulting from the fire in Taiwan in the second quarter of 2001, we would expect to report a gain from discontinued operations in the future.

Discontinued operations changed to a gain of $0.6 million in the third quarter of 2002 as compared to a loss of $1.9 million in the third quarter of 2001, and decreased 4.8% to $4.8 million in the first nine months of 2002 from $5.0 million in the first nine months of 2001. The gain in the third quarter was due to the reversal of an estimated liability accrued in the first quarter of 2002, net of a loss on the disposal of Taiwan manufacturing assets.

Risks Related to Our Business

Market acceptance uncertainties

Our products may fail to achieve market acceptance among potential customers. For example, our SpotLight GSM systems did not achieve market acceptance in Asia, causing us to discontinue the product line in March of 2002. Our SpotLight CDMA product line has not achieved broad market acceptance since its introduction in 1998. In light of the rapidly evolving nature of the wireless communications industry, we cannot predict with any degree of assurance whether our future products will achieve broad market acceptance. Our future growth is dependent in part upon the acceptance and success of our embedded smart antenna solutions and products like SmartCell and SmartShare. Given the early stage of development of these products, we cannot predict whether they will achieve market acceptance. If our products do not achieve broad market acceptance among potential customers, our business and operating results will be adversely affected.

Capital spending patterns of wireless network operators and tower operators

We rely on wireless network operators and tower operators to purchase our products and services. Any substantial decrease or delay in capital spending patterns in the industry would negatively affect our revenues and business results. The demand for our products and services depends, to a significant degree, on the magnitude and timing of capital spending by these operators for constructing, building or upgrading their systems or tower portfolios. Due to the current volatility of the financial markets and slowdown in the global economy many of our customers may find it increasingly difficult to predict demand for their products and services. As a result, many of our customers continue to reduce and postpone the expansion or upgrade of their wireless networks or tower portfolios, the development of new technologies and products for both wireless and tower operators, and the demand for shared tower applications which has reduced, or can reduce, the demand for our products and services. The capital spending patterns of our customers depends on a variety of factors outside of our control, including access to financing, overall financial health, the status of federal, local and foreign government regulation and deregulation, changing standards for wireless technology, overall demand for wireless services, competitive pressures, and general economic conditions. Further, in certain circumstances the financial health of our customers could adversely affect their ability to pay for our products and services in addition to affecting their demand for such products and services. In addition, capital-spending patterns in the wireless industry can be subject to some degree of seasonality, with lower levels of spending in the first half of the calendar year, based on annual budget cycles.

Liquidity

We believe existing cash and cash equivalents, projected quarterly sales, the continued liquidation of our inventory and reduced operating expenses over the next twelve months will be sufficient to fund our working capital requirements over the next 12 months. If we do not achieve our projected level of quarterly sales over the next 12 months, which is significantly higher than our reported quarterly sales in the first nine months of 2002, our ability to meet working capital requirements will be adversely affected. In addition to existing cash and projected quarterly sales, the Company has filed a claim with our insurance provider for business interruption losses arising out of the fire that destroyed our Taiwan facility in May of 2001. While the magnitude and timing of any insurance proceeds are not known at this time, the potential impact on our liquidity may be significant.

If we are unable to meet our projections and/or if collected proceeds resulting from the claim with our insurance provider, if any, are not significant, we may have to raise funds to finance projected losses. Further, we may have to raise funds to finance growth, to develop new or enhanced services or products, to respond to competitive pressures, to acquire complementary products, businesses or technologies or otherwise respond to unanticipated requirements. If we are required to raise additional funds we may seek to raise such funds through the sale of public or private equity and/or debt financings as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable to our stockholders or us when we may require it, particularly in light of our depressed stock price and current market conditions in our industry. If adequate funds are not available or are not available on acceptable terms, we may not be able to fund our ongoing operations or take advantage of unanticipated acquisition opportunities, develop or enhance products and services or respond to competitive pressures. Any inability to obtain needed financing by us could seriously harm our business and results of operations. See Going concern consideration for more information.

Going concern consideration

At December 31, 2001, our independent auditors' report, as prepared by Arthur Andersen LLP and dated April 3, 2002, which appears in our 2001 Form 10-K, includes the following explanatory paragraph:

"The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 20 to the financial statements, uncertainties regarding asserted and potential unasserted claims exist that raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 20. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern."

As a result of this opinion, we may experience an adverse impact on future sales if customers choose not to purchase our products due to concerns about our ongoing viability. In addition, suppliers may refuse to provide product components or insist upon unacceptable payment terms. Further, we may have increased difficulty raising capital due to this opinion.

Competition and alternative capacity solutions

The market for spectrum management solutions, though relatively new, is very competitive. This market is part of the broader market for wireless infrastructure equipment, which is dominated by a number of large companies including Lucent, Ericsson, Motorola, Nortel, Nokia, Samsung, Siemens and Alcatel. Several of these companies have announced plans to introduce products that incorporate smart antenna technology. Our smart antenna systems compete with other solutions to improve network performance. These alternative solutions include other smart antenna systems and adding base stations. We believe that the principal competitive factor is the cost-effective delivery of increased capacity to wireless network operators and their acceptance of alternative solutions, such as smart antenna systems. If our products are not a cost-effective solution or are not accepted, our ability to attract and retain customers would be harmed. To date we have not achieved broad market acceptance for our smart antenna systems. We believe that base station manufacturers, which provide wireless network capacity through sales of additional base stations or the development of competitive technologies, represent the most significant competitive threat.

In addition, efficient digital technologies and enhancements to these technologies are expected to provide increased capacity and, therefore, may be substitutes for our products. The large wireless infrastructure equipment providers listed above also offer these digital technologies and various enhancements. We believe that our smart antenna technologies can be compatible with these digital technologies and their various enhancements. Our technology, and its ability to enhance capacity, is additive to the capacity enhancement provided by these digital technologies. Customers, however, may delay or cancel deployment of our smart antenna systems while they deploy these more efficient digital technologies and other enhancements.

Litigation and SEC investigation

A number of class action lawsuits have been filed against us and current and former officers of the Company in the United States District Court for the Western District of Washington. The complaints were filed on behalf of persons who purchased our common stock between April 2001 and March 2002. The complaint alleges that the Company made false and misleading statements or omissions in violation of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, and seek unspecified compensatory damages and other relief.

On November 6, 2001, a class action lawsuit was filed in the United States District Court for the Southern District of New York against us and certain of our officers and directors as well as against the underwriters who handled our April 26, 2000 initial public offering of common stock. The complaint was filed on behalf of persons who purchased our common stock during the time period beginning on April 26, 2000 and ending on December 6, 2000. The complaint alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 primarily based on the assertion that there was undisclosed compensation received by our underwriters in connection with our initial public offering. The individual defendants in this case were dismissed on October 9, 2002. The company and the underwriters remain defendants in the case.

On May 14, 2002, Hencorp Technology (Shanghai) Group Co., Inc., a former distributor of Metawave's Spotlight GSM systems in China, filed suit against Metawave Communications Corporation and its Chinese subsidiary, Metawave Communications and Trading (Shanghai) Co., Inc. in Shanghai No.1 Intermediate People's Court alleging that Metawave owes it approximately $600,000 as a result of purported verbal agreements regarding the purchase and sale of Spotlight GSM systems in China.

We intend to vigorously defend against these complaints. The results of litigation proceedings are inherently unpredictable, however, and we are unable to provide assurance regarding the outcome of these complaints or possible damages that may be incurred. The uncertainty associated with these substantial unresolved lawsuits could harm our business and financial condition. In addition, negative developments with respect to the lawsuits or the investigation could cause our stock price to decline. Moreover, although we are unable to determine the amount, if any, that we may be required to pay in connection with the resolution of these lawsuits by settlement or otherwise, any such payment could harm our financial condition.

We are cooperating with an investigation being conducted by the Securities and Exchange Commission into the events that led to our restatement of our financial results for 2001. We have provided documents requested by the SEC and former and current employees have met with SEC personnel. No formal action has been taken by the SEC against the Company, its employees or its directors as of the filing of this report on Form 10-Q.

Lower than expected growth trends in the wireless communications industry

Our future operating results will depend upon the continued growth and increased availability and acceptance of wireless communications services. Current trends in growth rates have been down. There can be no assurance that the current trends will reverse and the volume and variety of wireless services or the markets for and acceptance of such services will grow, or that any such growth will create a demand for our systems. If current trends continue, or recover at a slow rate, our sales will be lower than expected, which would adversely affect our business and operating results.

The wireless communications industry has developed different technologies and standards based on the type of service provided and geographical region. There is uncertainty as to whether all existing wireless technologies will continue to achieve market acceptance in the future. If a digital technology for which we develop a smart antenna system is not widely adopted, the potential size of the market for this system would be limited, and we may not recover the cost of development. Further, we may not be able to redirect our development efforts toward those digital wireless technologies that do sustain market acceptance in a timely manner, which would impede our ability to achieve or sustain profitability once achieved.

Development and sales delays

We are still in the development stage of our new SmartCell and SmartShare products. While we anticipate that the initial sale of SmartShare will occur in 2002 and the initial sale of SmartCell will occur in 2003, we may encounter unforeseen delays. Such delays may include unforeseen design complexities, loss of skilled personnel, failure to achieve expected performance requirements and supplier non-performance. Our agreement for the development and sale of SmartShare, signed in February 2002, requires the satisfaction of performance criteria and delivery schedules as conditions of purchases of SmartShare by Crown Castle. In the past we have experience delays in the development of our products. Should any problems or obstacles delay the commercialization of either of these products, operating results could fall significantly below our expectations.

Delays in product installation and end-user sales

We typically install our products systems for customers at cell sites for commercial operation. Timely installation of our systems is affected by a variety of factors not within our control. For example, customers may need to obtain zoning approvals for a new cell site building and tower before we may begin our installation process. With existing sites, if a customer chooses to upgrade to our antennas, permits may also be required to place the antennas on the tower. In addition, the customer is responsible for preparing the cell site for installation, including any electrical, air conditioning or tower cabling requirements. Customers often experience delays in obtaining the requisite permits and preparing the sites, which delays our ability to install the systems. Several of our supply agreements provide that, in the event that the customer purchases installation and optimization services from us, we will invoice the services fees and a portion of the systems price upon completion of the services. Consequently, if installation and optimization are delayed, payment from the customer will be delayed.

In addition, as a result of our revenue recognition policy (see note 4 to our financial statements), we will defer revenues for that portion of the revenue derived from that system until the installation and optimization services are completed. These delays could contribute to fluctuations in our revenues and margins from quarter to quarter and negatively affect our cash flow and business operations. Moreover, delays in installation may contribute to delays in obtaining new sales orders from customers as customers' inventory of uninstalled products systems increase. A significant reduction in order activity from customers could harm our business and operating results.

Complex and lengthy sales cycle

We believe that the purchase of our products is typically a strategic decision that requires approval at senior levels of customers' organizations, significant technical evaluation and a substantial commitment of customers' personnel, financial and other resources. Our contracts with new customers typically contain conditional acceptance provisions for the initial product sales, and we delay recognition of revenue until all conditions are satisfied, which causes our initial sales cycle to vary substantially from customer to customer. This variability makes predicting our revenues difficult. Typically, performance of our products must be accepted in a field trial prior to completing any sales to a particular customer. We may incur substantial expenses and expend significant management and personnel resources in the process of a field trial. This makes the sales process associated with the purchase of our products complex, lengthy and subject to a number of significant risks. If we do not satisfy conditions in these contracts or if satisfaction of these conditions were delayed for any reason, revenues in any particular period could fall significantly below our expectations.

Current financial results do not predict future results

Because of the uncertain nature of the rapidly changing wireless market we serve and the high fixed costs we incur in the short term, period-to-period comparisons of operating results are not likely to be meaningful. In addition, you should not rely on the results for any period as an indication of future performance. Factors that may cause our quarterly results to fluctuate include:

• gain or loss of significant customers;
• our ability to increase or maintain sales to our existing customers;
• delays in customer orders;
• our ability to reduce manufacturing costs of our smart antenna systems;
• our ability to introduce and successfully market new smart antenna systems and embedded solutions;
• introduction and enhancement of competitive or substitute products by our competitors;
• limitations in our suppliers or manufacturing capacity; and
• delays or changes in regulatory environments.

Concentration of customers

Due to the highly concentrated nature of the wireless industry and the recent industry consolidation, we depend on a limited number of wireless network operators for substantially all of our revenues from our SpotLight product. The loss of a customer or a delay in an order from a customer could impact our operating results. Additionally, the loss of a customer or a delay in payment by a customer could adversely affect our cash flow. We believe that the number of potential customers for future SpotLight systems sales will be limited. In the third quarter of 2002, two SpotLight customers accounted for 87.6% of our total revenues. In addition, we anticipate that sales of our SmartShare and SmartCell products and our embedded solutions will be to a limited number of customers. Currently, we have signed only one agreement to develop our embedded solutions for use in a base station manufacturer's products. Failure to retain these customers could cause our operating results to be significantly less than anticipated and lead to a decline in our stock price. Moreover, due to this customer concentration, any loss or reduced demand from our customers could cause our sales to fall significantly.

Retention of qualified personnel

The success of our business depends upon the continued contributions of each of our key technical and senior management personnel, each of whom would be difficult to replace. We have not entered into employment agreements with any of our employees other than severance arrangements Richard P. Henderson, Andy Merrill, Dr. Marty Feuerstein, Randy (Larry R.) Scheer and Gary S. Flood. We have entered into a non-competition agreement with Robert H. Hunsberger and Shimon Scherzer, our former chief executive officer and our former chief technology officer. We will also need to retain qualified engineering, financial, manufacturing, quality assurance, sales, marketing and customer support personnel to ensure our future success. In addition, the unpredictability of the wireless communications market, the volatility of the economic markets and the reduction in demand for our products caused us to reduce our workforce. These recent layoffs may make it more difficult to recruit qualified personnel if needed. The loss of any key employee, the failure of any key employee to perform in his or her current position, our inability to attract and retain skilled employees as needed or the inability of our officers and key employees to expand, train and manage our employee base could limit our ability to expand and become profitable.

Potential impairment of our goodwill and intangible assets

The adoption of SFAS No. 142, effective January 1, 2002, resulted in our discontinuation of amortization of goodwill; however, we are required to test goodwill for impairment periodically and upon the occurrence of certain events. We had no impairment of goodwill upon adoption, however, during the first quarter of 2002, we tested for impairment due to the significant drop in market capitalization, which resulted in a charge against earnings of $24.0 million for the first quarter of 2002. Any negative change in the Company´s projected results of operations may also lead the company to reevaluate its current recorded balance of $35.2 million, which may result in additional impairment charges in the future.

Manufacturing and supply limitations

On August 1, 2002 we reached an agreement with Viasystems Group, Inc. to terminate an exclusive five-year supply agreement with them signed in April 2001 to manufacture our SpotLight products. We have resumed assembling and testing our SpotLight systems internally. Prior to our agreement with Viasystems, we had performed these functions in-house and believe that we have the expertise and resources to resume these functions. We anticipate that we will also depend on a limited number of suppliers to manufacture our SmartShare and SmartCell antenna components. In addition, components used in our products are available from a limited number of sources. The reliance on these sole or limited source suppliers involves certain risks and uncertainties, including the possibility of a shortage or discontinuation of certain key components or the financial health and continued operations of the supplier. Any reduced availability of these parts or components when required could materially impair the ability to manufacture and deliver our products on a timely basis and result in the cancellation of orders, which could significantly harm our business and operating results.

Intellectual property protection

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual property or technology. In the foreign markets in which we are active, such as Asia, intellectual property laws and their enforcement are weaker than in the United States. If our methods of protecting our intellectual property are not adequate, our competitors may misappropriate our technology and we could lose customers to these competitors. In addition, third parties may develop alternative wireless communication technologies or products that do not infringe on any of our patents or intellectual property. Moreover, competing dissimilar technologies, such as those using wireline communication or using new or different protocols, may be deployed which would cause us to lose customers. In addition, the licensing of our technology for embedded solutions requires closer collaboration with our partners and, consequently, greater disclosure of our trade secrets and other intellectual property. Although we take precautions to protect our intellectual property, such as confidentiality agreements and patent and copyright filings in the U.S. and foreign jurisdictions, this may not be sufficient to prevent unauthorized use of our intellectual property.

Patents and patent applications relating to products used in the wireless communications industry are numerous. Current and potential competitors and other third parties may have been issued or in the future may be issued patents, or may obtain additional proprietary rights relating to products used or proposed to be used by us. We may not be aware of all patents or patent applications that may materially affect our ability to make, use or sell any current or future products. From time to time, third parties have asserted patent, copyright and other intellectual property rights to technologies that are important to us. We expect that we will increasingly be subject to infringement claims as the number of products and competitors in the spectrum management market grows and the functionality of products overlaps. Third parties may assert infringement claims against us in the future, and such assertions could result in costly litigation, the diversion of management and engineering resources and require us to obtain a license to intellectual property rights of such parties. There can be no assurance that these licenses would be available on terms acceptable to us, if at all. Any failure to obtain a license from any third party asserting claims in the future or defense of any third party lawsuit could materially and adversely affect our business and operating results.

Cost reductions are necessary

We anticipate that average selling prices for our products may need to decrease in the future in response to competitive pricing pressures and new product introductions by competitors. If the price of base station equipment continues to decrease, the addition of new cell sites may be viewed as a more cost-effective alternative for wireless network operators seeking increased capacity. To lower average selling prices without adversely affecting gross profits, we will have to reduce the manufacturing costs of our smart antenna systems. We may not be able to achieve cost savings at a rate needed to keep pace with competitive pricing pressures.

Government regulation

Many of our products are required to comply with numerous domestic and international government regulations and standards, which vary by market. As standards for products continue to evolve, we will need to modify our systems or develop and support new versions of our systems to meet emerging industry standards, comply with government regulations and satisfy the requirements necessary to obtain approvals. Compliance with government regulations and industry standards can each be a lengthy process, taking from several months to longer than a year. It may be difficult for us to obtain additional necessary regulatory approvals or comply with new industry standards in a timely manner, if at all. Our inability to obtain regulatory approval and meet established standards in a timely manner could delay or prevent entrance into or force our departure from markets, which would harm our sales. In addition, compliance with U.S. export control regulations may delay or prevent the export of our products, data and technology to foreign customers, distributors and wireless equipment partners.

In addition, our customers' operations in the U.S. are subject to extensive federal, state and local regulations. For example, on the local level, our customers must obtain zoning approval from local authorities to place antennas on their towers. Delays in obtaining these approvals could delay installation of our products, and thus delay revenues. See "Delays in Product Installation and End-User Sales" for more information. To the extent that our customers are delayed in deploying their wireless systems as a result of existing or new standards or regulations, we could experience delays in orders. Any delay could contribute to fluctuations in our results of operations.

Governments currently limit the amount of spectrum each carrier is allowed in any market. Any increase in spectrum allowance by governments may adversely affect us. See "Business--Government Regulation" in Form 10-K as filed on April 15, 2002 for more information regarding the governmental control and approval of our business.

Future acquisitions

We may make additional acquisitions of businesses, products or technologies in the future. No assurance can be given as to our ability to successfully integrate additional businesses, products, technologies or personnel that might have been acquired or may be acquired in the future, and our failure to do so could significantly affect our business and operating results. Moreover, we may not be able to locate suitable acquisition opportunities to obtain access to technology that may be important to the development of our business.

Risks Related to Our Stockholders

Potential for Nasdaq delisting

On July 25, 2002 we were moved to the Nasdaq SmallCap Market from the Nasdaq National Market. The Company has until April 24, 2003 to trade above the $1.00 per share minimum bid requirement for 30 consecutive trading days to remain on the SmallCap Market. If we fail to do that, we would be delisted from Nasdaq and would most likely be quoted on the OTC Bulletin Board. If our stock is removed from the Nasdaq SmallCap Market, an investor could find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock. Additionally, our stock may be subject to “penny stock” regulations.

Stock price volatility

Our common shares have experienced, and may continue to experience, substantial price volatility, particularly as a result of variations between our actual or anticipated financial results and the published expectations of analysts and as a result of announcements by us. In addition, the stock market has experienced extreme price fluctuations that have affected the market price of many technology companies in particular and that have often been unrelated to the operating performance of these companies. A major decline in the capital markets generally, or in the market price of our securities, may negatively impact our ability to make future strategic acquisitions, raise capital, issue debt or convertible debt, or retain employees. These factors, as well as general economic and political conditions, may in turn have a material adverse effect on the market price of our common stock.

Risk of dilution

If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced, particularly due to the depressed price of our stock. If we raise capital through debt financing, we may be forced to accept restrictions affecting our liquidity, including restrictions on our ability to incur additional indebtedness or pay dividends. See Liquidity for further information on our working capital requirements and risks related to raising additional capital.

Preferred stock with preferential rights

The Company has 84,782 shares of Series A Preferred Stock and warrants to purchase an aggregate of 42,391 shares of Series A Preferred Stock outstanding. The shares are convertible to common stock at a ratio of 100 shares of common stock for each share of preferred stock. The Series A preferred stock has liquidation preferences and price-based antidilution protection. The liquidation preferences provide that upon any liquidation, sale or change of control of Metawave, holders of the Series A preferred stock will be entitled to receive the amount invested prior and in preference to any distribution to holders of Metawave's common stock. After the foregoing preference, holders of Series A preferred stock shall also participate with holders of the common stock in any distribution until the holders of Series A preferred stock have received three times their original investment amount in the aggregate. Thereafter, the holders of common stock shall receive the remaining funds; provided, however, that if holders of Series A preferred stock would have received more on an as-converted basis, the holders will be treated as if they had converted the shares of preferred stock into common stock whether or not the conversion had actually occurred. The Series A stockholders also have registration rights. We must register the shares of common stock to be received upon conversion of the Series A preferred stock upon the earlier of eighteen months after the closing date of the financing or expiration of sales restrictions on the Series A preferred stock. Additionally, the holders of the Series A preferred stock have the right to designate a member to the board of directors.

Management and a few stockholders beneficially own a substantial portion of our stock

As of December 31, 2001 our directors and executive officers and several large stockholders beneficially own approximately 40.3% of our outstanding common stock, on an as-converted basis. As a result of their ownership and positions, our directors and executive officers and these stockholders collectively are able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership may also have the effect of delaying or preventing a change in control of Metawave. In addition, sales of significant amounts of shares held by our directors and executive officers and these stockholders, or the prospect of these sales, could adversely affect the market price of our common stock.

Entities affiliated with one stockholder hold all of the outstanding shares of our Series A preferred stock and are entitled to elect one member of the board of directors. For a more detailed description of the risk associated with the outstanding Series A preferred stock, see the above risk factor titled “Preferred stock with preferential rights.”

Our directors and executive officers and several large stockholders beneficially own approximately 40.3% of our outstanding common stock, on an as-converted basis. As a result of their ownership and positions, our directors and executive officers and these stockholders collectively are able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership may also have the effect of delaying or preventing a change in control of Metawave. In addition, sales of significant amounts of shares held by our directors and executive officers and these stockholders, or the prospect of these sales, could adversely affect the market price of our common stock.

Entities affiliated with one stockholder hold all of the outstanding shares of our Series A preferred stock and are entitled to elect one member of the board of directors. For a more detailed description of the risk associated with the outstanding Series A preferred stock, see the prior risk factor titled "Preferred stock with preferential rights."

Charter and Anti-takeover provisions

Our Board of Directors has the authority to issue up to 9,872,827 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of common stock may be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of Metawave without further action by the stockholders and may adversely affect the voting and other rights of the holders of our common stock. Further, certain provisions of our charter documents, including provisions eliminating the ability of stockholders to take action by written consent and limiting the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice, may have the effect of delaying or preventing changes in control or management of Metawave, which could have an adverse effect on the market price of our stock. In addition, our charter documents do not permit cumulative voting, which may make it more difficult for a third party to gain control of our Board of Directors. Similarly, state laws in Washington related to corporate takeovers may prevent or delay a change of control of Metawave.

Item 3. Quantitative and Qualitative Disclosure of Market Risk

Interest rate risk

We do not use derivative financial instruments in our investment portfolio. We invest in high quality marketable securities, primarily U.S. Government obligations and corporate obligations with maturates of less than three months. Such securities are subject to interest rate risk and will rise and fall in value if market interest rates change, however, we do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is not material.

Foreign currency risk

Currently our export sales are denominated in U.S. Dollars. At this time, we do not believe there will be material risks related to fluctuations in foreign exchange rates.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures” is defined in Rules 13a-14 and 15d-14 of the Securities and Exchange Act of 1934 (Exchange Act). These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act are recorded, processed, summarized and reported within the required time periods. Our Chief Executive Officer and our Vice President of Finance (our principal financial and accounting officer) have evaluated the effectiveness of our disclosure controls and procedures as of a date within 90 days before the filing of this quarterly report (the Evaluation Date), and they have concluded that, as of the Evaluation Date, such controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.

(b) Changes in internal controls

We maintain a system of internal accounting controls that are designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our established policies and procedures are followed. For the quarter ended September 30, 2002, there were no significant changes in the Company´s internal controls or in other factors that could significantly affect internal controls.

PART II. Other Information

Item 1. Legal Proceedings

Beginning on March 18, 2002, a number of class action lawsuits have been filed against us and several former officers of the Company in the United States District Court for the Western District of Washington. The complaints were filed on behalf of persons who purchased our common stock between April 2001 and March 2002. The complaints allege that the Company made false and misleading statements or omissions in violation of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, and seek unspecified compensatory damages and other relief. Additional purchasers of our securities may assert claims similar to these in the future.

On November 6, 2001, a class action lawsuit was filed in the United States District Court for the Southern District of New York against us, certain officers and the directors of the Company and the underwriters who handled our April 26, 2000 initial public offering of common stock. The complaint was filed on behalf of persons who purchased our common stock during the time period beginning on April 26, 2000 and ending on December 6, 2000. The complaint alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 primarily based on the assertion that there was undisclosed compensation received by our underwriters in connection with our initial public offering. The individual defendants in this case were dismissed on October 9, 2002. The Company and the underwrighters remain defendants in this case.

On May 14, 2002, Hencorp Technology (Shanghai) Group Co., Inc., a former distributor of Metawave's Spotlight GSM systems in China, filed suit against Metawave Communications Corporation and its Chinese subsidiary, Metawave Communications and Trading (Shanghai) Co., Inc. in Shanghai No.1 Intermediate People's Court alleging that Metawave owes it approximately $600,000 as a result of certain verbal agreements regarding the purchase and sale of Spotlight GSM systems in China.

We intend to vigorously defend against these complaints. The results of litigation proceedings are inherently unpredictable, however, and we are unable to provide assurance regarding the outcome of these complaints or possible damages that may be incurred. The uncertainty associated with these substantial unresolved lawsuits could seriously harm our business and financial condition and affect our ability to continue operations as a going concern. In particular, the continued defense of the lawsuits could result in the diversion of our management's time and attention away from business operations, which could harm our business. In addition, negative developments with respect to the lawsuits or the investigation could cause our stock price to decline significantly. Moreover, although we are unable to determine the amount, if any, that we may be required to pay in connection with the resolution of these lawsuits by settlement or otherwise, any such payment could seriously harm our financial condition and affect our ability to continue business operations as a going concern. Our independent accountants have issued a "going concern" opinion in their report on our financial statements for the year ended December 31, 2001, citing the uncertainties regarding these legal proceedings and the resulting potential damages if the proceedings are successful. Accordingly, the uncertain outcome of these proceedings raises doubt about our ability to continue as a going concern.

During the first quarter of 2001, the Company entered into an exclusive, five-year supply agreement with Viasystems Group, Inc. (“Viasystems”) to outsource substantially all of its manufacturing operations to Viasystems, a provider of electronics manufacturing services. As of August of 2002 the Company and Viasystems have mutually agreed to terminate the remainder of the supply agreement. Under the provisions of this agreement we paid $3.5 million for all amounts owed to Viasystems, remaining inventory commitments, additional inventory purchases and the purchase of related fixed assets. In addition, Viasystems agreed to dismiss a lawsuit it filed against the Company in June 2002 in King County Superior Court seeking damages for various claims, including breach of contract.

         In addition, from time to time we are subject to various other legal proceedings that arise in the ordinary course of business. Although we cannot predict the outcomes of these proceedings with certainty, we do not believe that the disposition of these matters will have a material adverse effect on our financial position, results of operations or cash flows.

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

None

Item 5. Other Information

In accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002 (the "Act"), we are required to disclose the non-audit services approved by our Audit Committee to be performed by Grant Thorton LLP. our external auditor. Non-audit services are defined in the Act as services other than those provided in connection with an audit or a review of the financial statements of a company. Our Audit Committee has approved the engagement of Grant Thorton for the non-audit services of preparing and reviewing our federal and selected state income tax returns.

Item 6. Exhibits and Reports on Form 8-K

(a)         Exhibit Number

3.1*	Certificate of Incorporation of the Registrant.
3.2*	Bylaws of the Registrant
4.1*	Form of Stock Certificate.
10.37**	Amendment to Supply Agreement between the registrant and Crown Castle dated September 26, 2002.
99.1	Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

        *       Previously filed as an exhibit to Registrant’s registration statement on Form S-1, File No. 333-30568, originally filed with the Commission on February 17, 2000, as subsequently amended, and incorporated herein by reference.

        **       We have requested Confidential treatment with respect to certain portions of this exhibit.

(b)         Reports on Form 8-K

1. Report on Form 8-K, as filed with the SEC on October 11, 2002, announcing a restructuring and naming a new chief executive officer.

SIGNATURE

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

Date:	November 13, 2002	METAWAVE COMMUNICATIONS CORPORATION,
		/s/ Randy Scheer                   Randy (Larry R.) Scheer Vice President of Finance (Principal Financial and Accounting Officer)

CERTIFICATIONS

I, Gary S. Flood, certify that:
	1.	I have reviewed this quarterly report on Form 10-Q of Metawave Communications Corporation;
	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the quarterly report;
	4.	The registrant´s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
		a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b.	evaluated the effectiveness of the registrant´s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
	5.	The registrant´s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant´s auditors and the audit committee of the registrant´s board of directors:
		a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant´s ability to record, process, summarize and report financial data and have identified for the registrant´s auditors any material weaknesses in internal controls; and
		b.	evaluated the effectiveness of the registrant´s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date ”) and
	6.	The registrant´s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Gary S. Flood                 
Gary S.Flood
Chief Executive Officer

I, Randy Scheer, certify that:
	1.	I have reviewed this quarterly report on Form 10-Q of Metawave Communications Corporation;
	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the quarterly report;
	4.	The registrant´s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
		a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b.	evaluated the effectiveness of the registrant´s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
	5.	The registrant´s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant´s auditors and the audit committee of the registrant´s board of directors:
		a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant´s ability to record, process, summarize and report financial data and have identified for the registrant´s auditors any material weaknesses in internal controls; and
		b.	evaluated the effectiveness of the registrant´s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date ”); and
	6.	The registrant´s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Randy Scheer                 
Randy (Larry R.)Scheer
Vice President of Finance
(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

Exhibit Number

3.1*	Certificate of Incorporation of the Registrant.
3.2*	Bylaws of the Registrant
4.1*	Form of Stock Certificate.
10.37**	Amendment to Supply Agreement between the registrant and Crown Castle dated September 26, 2002.
99.1	Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002..
99.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

        *       Previously filed as an exhibit to Registrant’s registration statement on Form S-1, File No. 333-30568, originally filed with the Commission on February 17, 2000, as subsequently amended, and incorporated herein by reference.

        **       We have requested Confidential treatment with respect to certain portions of this exhibit.

Exhibit 10.37

FIFTH AMENDMENT TO
SMARTSHARE SYSTEM PURCHASE AGREEMENT

	This FIFTH AMENDMENT TO SMARTSHARE SYSTEM PURCHASE AGREEMENT (“Fifth Amendment”)
is made as of this 26 day of September, 2002, by and between METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation (“Metawave”), and CROWN CASTLE MW CORP., a Delaware corporation (“Crown”).

R E C I T A L S:

	WHEREAS, Metawave and Crown are parties to the SmartShare System Purchase Agreement, dated February 26,
2002 as amended pursuant to a First Amendment to SmartShare System Purchase Agreement dated June 28, 2002, the Second Amendment to SmartShare System Purchase Agreement dated July 3, 2002, the Third Amendment to SmartShare System Purchase Agreement dated July 16, 2002 and the Fourth Amendment to SmartShare System Purchase Agreement dated July 31, 2002 (the “Purchase Agreement”), which the parties seek to further amend.
	NOW, THEREFORE, in consideration of mutual promises, covenants and conditions, Metawave and Crown
agree as follows:
	1.	Except as modified herein, all defined terms used in the Fourth Amendment shall have the meaning ascribed to them in the Purchase Agreement.
	2.	In Section 2 of the Purchase Agreement, certain definitions shall be amended as follows:
			“ICP Delivery Date ” shall mean the date as to each ICP upon which Metawave delivers such ICP to
		Crown, which date shall be no later than October 15, 2002 with respect to the first 1+2 Product, November 10, 2002 with respect to the second 1+2 Product, December 15, 2002 for the PCS Product and February 15, 2003 for the 2+2 Product. Pursuant to Section 8.1, Metawave may inform Crown in writing that (a) the anticipated ICP Delivery Date for the 1+2 Product shall be on a date earlier than October 15, 2002 (or November 10, 2002 in the case of the second 1+2 Product), (b) the anticipated ICP Delivery Date for the PCS Product shall be on a date earlier than December 15, 2002, and (c) the anticipated ICP Delivery Date for the 2+2 Product shall be on a date earlier than February 15, 2003
			“Initial Orders” shall Purchase Orders issued by Crown pursant to section 8.1 of this Agreement and as
		shall mean the Purchase Orders issued by Crown pursuant to section 8.1 of this Agreement and as specifically reflected in Appendix 1. The reference to 1+2 Product, PCS Product or 2+2 Product for purposes of each Initial Order shall only include “Products” of such items. Notwithstanding the definition of “Products”, the Parties acknowledge that the Initial Orders, as defined hereby, may or may not include PCS Expansion Antennas and Tenant Expansion Kits, which may be ordered by Crown in its sole discretion.
			“Performance Evaluation Period” shall mean a period of fifteen (15) days that commences on the day
		after Crown notifies Metawave in writing that the Initial Commercial Products have been installed, (which shall be the date of installation of the first ICP with respect to the 1+2 Product), are operational for testing purposes and are ready for evaluation in accordance with the Product Performance Criteria set forth in Exhibits B and C.
			“ Prototype Evaluation Period” shall mean a period ending at the end of the day on September 26,
		2002 with respect to the 1+2 Product, and forty-five (45) days for each of the PCS Product or 2+2 Product during which period each such Product will be evaluated in accordance with the Specifications set forth in Exhibit B and Product Performance Criteria set forth in Section 5 of Exhibit C. Such period will commence on the Prototype Receipt Date.
			“1+2 Product Initial Order” shall mean the Purchase Order issued by Crown pursuant to Section 8.1
		of this Agreement for fifteen (15) 1+2 Products, to be delivered by Metawave to Crown over a thirty (30) day period commencing after the date of Performance Acceptance of the first 1+2 Product.
	3.	Section 8.1.1 of the Agreement is amended in its entirety to read as follows:
		8.1.1 1+2 Product Initial Order. Simultaneously with the execution of this Agreement and Exhibits D and E, Crown will issue the 1+2 Product Initial Order, which shall be subject to the terms and conditions of this Agreement. Crown´s obligations respecting the 1+2 Product Initial Order shall not commence until (i) Metawave notifies Crown of the ICP Delivery Date for such Product, and (ii) expiration of the Prototype Evaluation Period with respect to the 1+2 Product Prototype. On or before expiration of the Prototype Evaluation Period for the 1+2 Product, Crown shall either (i) indicate Crown´s acceptance of the anticipated ICP Delivery Date for the 1+2 Product, thereby waiving all rights to cancel or terminate the 1+2 Product Initial Order except as otherwise expressly permitted in this Agreement, or (ii) indicate Crown´s rejection of the anticipated ICP Delivery Date and cancel the 1+2 Product Initial Order and/or this Agreement (the “Crown ICP Date Termination”), in which event Crown shall not have liability to Metawave, including no liability for Metawave´s development, production or other costs associated with the 1+2 Product and/or this Agreement.
	4.	Section 8.2 shall be amended as follows:
	8.2 Performance Acceptance. The Performance Evaluation Period for each of the first 1+2 Product, PCS Product and 2+2 Product shall be subject to any postponements due to (i) Force Majeure or (ii) delays attributable to Metawave (including, without limitation, any delay in delivery of the second 1+2 Product ICP to Crown). In the event that the Performance Evaluation Period has not begun within thirty (30) days after the date the Initial Commercial Products are delivered to Crown (such delivery to be evidenced by the proof of delivery certificate supplied by Metawave´s shipping agent) and such delay is not due to an event of Force Majeure, a Metawave Event of Default or any other act or omission of Metawave (including, without limitation, any delay in delivery of the second 1+2 Product ICP to Crown), the Exclusivity Period (as defined in section 8.3 hereof) for the applicable Product shall be reduced by a number of days equal to the number of days of delay up to fifteen (15) days. If the Performance Evaluation Period has not begun within forty-five (45) days after the date the Initial Commercial Products are delivered to Crown and such delay is not due to an event of Force Majeure, a Metawave Event of Default or any other act or omission of Metawave, the 1+2 Initial Exclusivity Period, PCS Initial Exclusivity Period and the 2+2 Initial Exclusivity Period, for the applicable Product shall be cancelled in its entirety and no additional extensions of the Exclusivity Period for that Product (as set forth in section 8.3.1.1, 8.3.2.1 and 8.3.3.1) shall be available to Crown.
	Upon satisfaction of the Product Performance Criteria at any time during the Performance Evaluation Period for the Initial Commercial Products related to the first 1+2 Product, PCS Product or 2+2 Product, as the case may be, Crown and Metawave shall execute a certificate of Performance Acceptance (in the form set forth in Exhibit C). If Performance Acceptance has been certified, to the extent that there are no uncured Events of Default by either Party, both Parties will perform their obligations under the applicable Initial Order and Metawave shall issue an invoice to Crown for the amount due on the Initial Commercial Products related to the particular Product subject to Performance Acceptance, which amount will be based on the Purchase Prices set forth in Exhibit D. In the event that Performance Acceptance has not been certified by the end of a Performance Evaluation Period (without taking into account any extension relating to delay in delivery of the second 1+2 Product ICP to Crown), due to an Event of Default by Metawave or an act or omission of Metawave, Metawave shall incur an incremental late fee that will be assessed at the beginning of each week after the end of the applicable Performance Evaluation Period and calculated as a percentage of the value of the 1+2 Product Initial Order, PCS Product Initial Order or 2+2 Product Initial Order, as the case may be, subject to any changes made to the applicable Initial Order prior to the expiration of the Prototype Evaluation Period, as follows:

Late By	Weekly Incremental Late Fee
One week	XX
Two weeks	XX
Three weeks	XX
Four weeks	XX
Five weeks	XX
Six weeks	XX

As an example, if Performance Acceptance occurs at any time during the sixth week after the end of the Performance Evaluation Period for the PCS Product, Metawave shall be assessed a late fee equal to XX of the value of the PCS Product Initial Order subject to any changes made to the applicable Initial Order prior to the expiration of the Prototype Evaluation Period for any such Product. Any late fees that are assessed on Metawave pursuant to this Section 8.2 shall be credited to and allocated among the 1+2 Product Initial Order, PCS Product Initial Order or 2+2 Product Initial Order as Crown deems appropriate.
Furthermore, if Performance Acceptance has not occurred but Crown elects to accept delivery of the 1+2 Products, PCS Products or 2+2 Products from Metawave, as the case may be, the late fees referenced above shall accrue until the earliest of one of the following events occurs: (i) the end of the sixth week following the end of the Performance Evaluation Period for the particular Product, (ii) Performance Acceptance for such Product or (iii) any of the 1+2 Product, PCS Product or 2+2 Product, as applicable deployed by Crown for use by a customer generates rental revenues for Crown. Notwithstanding Crown´s acceptance of a Product during the period in which Performance Acceptance has not occurred, Crown shall have the right to terminate this Agreement as set forth in the following paragraph.
If Performance Acceptance does not occur by the end of the sixth week after the end of a Performance Evaluation Period for any of the first 1+2 Product, PCS Product or 2+2 Product, Crown may, in its sole discretion, (i) terminate this Agreement in its entirety, in which case Metawave shall pay to Crown the Liquidated Damages amount set forth in Section 14.4 (in lieu of late fees) within five (5) days from the termination of the Agreement, (ii) terminate this Agreement as to the specific Initial Order relating to the Product for which Performance Acceptance has not occurred, in which case Metawave shall pay to Crown the Liquidated Damages amount set forth in Section 14.4 (in lieu of late fees), within five (5) days from the date of termination of this Agreement with respect to any such specific Initial Order, or (iii) accept the accrued late fees and elect to purchase the 1+2 Product, PCS Products or 2+2 Products, as the case may be, under the applicable Initial Order until such date as Performance Acceptance for any such Product occurs; provided, that Crown shall continue to have the ability to terminate this Agreement with no liability to Crown during such time as the Performance Acceptance has not occurred. If Crown elects to not terminate the Agreement in its entirety or as to a specific Initial Order and proceed under clause (iii) above, Metawave shall have the right to terminate its obligation under this Agreement with respect to the specific Product for which Performance Acceptance has not occurred (with all other obligations under this Agreement to continue except that Metawave shall have the right to terminate this Agreement in its entirety if Crown elects to proceed under clause (iii) with respect to the 1+2 Product), provided, however, that Metawave shall pay to Crown the Liquidated Damages amount set forth in Section 14.4 within five (5) days from the termination of the Agreement under (i) and (ii) above. Termination of this Agreement as to any Product shall not terminate Crown´s prior obligations relating to any other Product after Performance Acceptance as to the unaffected Product.
If, however, the failure to achieve Performance Acceptance by the end of a Performance Evaluation Period for any of the 1+2 Product, PCS Product or 2+2 Product is the result of an Event of Default by Crown, or an act or omission of Crown or its test customer(s) participating in the testing of the applicable Initial Commercial Products which interrupts such testing, or an event of Force Majeure (a “Delay Event”), then such late fees shall not begin to accrue, they will be suspended during the period that such Delay Event is not cured. In addition, as soon as the Delay Event is discovered, any late fees that may have accrued during the Delay Event shall be cancelled for the period that the Delay Event was ongoing. The length of the Performance Evaluation Period shall be extended by the number of days of the Delay Event(s). Once such Delay Event is cured, such late fees shall begin to accrue, or continue to accrue, as the case may be. This process shall apply for each separate Delay Event.
If Crown chooses to terminate this Agreement pursuant to this Section, Metawave shall de-install any Initial Commercial Products at Metawave´s risk and expense and repair any reasonable damage to Crown´s equipment at the site caused by Metawave during installation and/or removal of the Initial Commercial Products. Metawave shall arrange for and pay the costs of shipping and assume the risk of loss and damage to the Initial Commercial Products during shipment back to its headquarters in Redmond, Washington or otherwise.
5.	Section 8.3.1 shall be amended as follows:
	8.3.1 Crown Exclusivity for the 1+2 Product. Except for the permitted actions contemplated in Section 8.3.4, Crown shall have the exclusive right to purchase the 1+2 Products (including Prototypes, Initial Commercial Product and Ancillary Products) from Metawave commencing on the Effective Date and terminating on the later of (i) fifteen (15) days after the date of Performance Acceptance of the first 1+2 Product (the “1+2 Initial Exclusivity Period”), (ii) twenty (20) days after delivery of the second 1+2 Product ICP to Crown or (iii) December 15, 2002.
6.	Section 14.4 shall be amended as follows:
	14.4 Liquidated Damages. To the extent that Crown terminates this Agreement pursuant to Sections 8.2 or 10.6.1 of this Agreement or Metawave terminates this Agreement as to a particular Product or in its entirety, as applicable, pursuant to Sections 8.2 or 14.3 (any such partial or total termination of this Agreement constituting a “Termination Event”), Metawave shall pay to Crown liquidated damages in an amount equal to XX of the 1+2 Product Initial Order and XX of the PCS Product Initial Order if such Termination Event occurs with respect to the 1+2 Product, XX of the PCS Product Initial Order if such Termination Event occurs with respect to the PCS Product only, or XX of the 2+2 Product Initial Order if such Termination Event occurs with respect to the 2+2 Product Initial Order only, as applicable, at the time of termination plus (i) in the event that a Termination Event occurs with respect to the 1+2 Product, the amount of XX or (ii) in the event a Termination Event occurs with respect to the PCS Product, the amount of XXX, as liquidated damages which shall be the maximum amount payable under this Section 14.4 (in each case, the “Liquidated Damages”), which amounts the Parties agree are reasonable and appropriate in light of the difficulty of calculating the total damages that may be suffered by Crown due to such termination. If a Termination Event has not occurred with respect to the 1+2 Product and the Initial Commercial Products related to a 1+2 Product has been delivered to Crown and has passed Performance Acceptance, then any Liquidated Damages applicable to the 1+2 Product Initial Order expire, and cannot be assessed against Metawave in the event a Termination Event occurs with respect to the PCS Product or 2+2 Product.
7.	Appendix 1 is replaced and substituted with an “Initial Order (Amended).”
8.	Except to the extent hereby specifically amended and revised, the Purchase Agreement is confirmed and remains in full force and effect in all respects. This Fifth Amendment shall be attached and become part of the Agreement. :

[signature page follows]

	IN WITNESS WHEREOF, the Parties hereto have caused this Fifth Amendment to Smartshare
System Purchase Agreement to be executed by their duly authorized representatives as of the date written above.
	CROWN CASTLE MW CORP.	METAWAVE COMMUNICATIONS CORP
	By: /s/ E. Blake Hawk	By: /s/ Richard Henderson
	Name: E. Blake Hawk	Name: Richard Henderson
	Title: Executive Vice President	Title: Vice President of Sales

>

APPENDIX 1
INITIAL ORDER (AMENDED)
[Replaces and substituted in its entirety for Initial Order]

BILL TO:	Crown Castle MW Corp. or its designee 510 Bering Drive suite500 Houston, Texas 77057	ORDER NO: DATE:	001B 9/17/02
VENDOR:	Metawave Communications Corporation	SHIP TO:	Crown Castle USA Inc. resource Center 2656 Idlewood Road Carnegie, PA 15106
ENTERED BY:	Julie Birch
TAKEN BY:
BUYER NAME:	Crown Castle MW Corp.	DELIVERY:	Crown Castle USA Inc. resource Center 2656 Idlewood Road Carnegie, PA 15106

Required Date	Ship Via	FOB	Terms	Order Req.#
12/15/02	Ground

ITM#	P/N	Description	AMT	UM	UNITCST	EXTENSION
1+2 2+2 PCS		1+2 Product Unit 2+2 Product Unit PCS Product Unit	15 150 150	$US $US $US	XXX XXX XXX	XXX XXX XXX

THIS PURCHASE ORDER IS SUBJECT TO ALL THE TERMS AND CONDITIONS OF THAT CERTAIN SMARTSHARE SYSTEM PURCHASE AGREEMENT DATED FEBRUARY 26, 2002 (THE "PURCHASE AGREEMENT") BY AND BETWEEN METAWAVE COMMUNICATIONS CORPORATION AND CROWN CASTLE MW CORP, AND IS INCORPORATED HEREIN FOR ANY AND ALL PURPOSES. THE PARTIES AGREE THAT ANY ADDITIONAL, DIFFERENT OR CONFLICTING TERMS AND CONDITIONS CONTAINED IN ANY QUOTE, SOLICITATION, PURCHASE ORDER, AGREEMENT OR DOCUMENTATION EXCHANGED BY THE PARTIES THAT CONFLICT WITH THE TERMS OF THE PUCHASE AGREEMENT SHALL NOT BE BINDING ON THE PARTIES AND ARE HEREBY REJECTED, UNLESS THE PARTIES EXPRESSLY AND SPECIFICALLY AGREE TO SUCH CHANGES.

	XXX
AUTHORIZED REPRESENTATIVE	TOTAL ORDER:
METAWAVE COMMUNICATIONS

Exhibit 99.1

Metawave Communications Corporation

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Metawave Communications Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary S. Flood, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gary S. Flood                                
Gary S. Flood
November 11, 2002

Exhibit 99.2

Metawave Communications Corporation

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Metawave Communications Corporation (the “Company”) on Form 10-Q
for the quarter ended June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Randy Scheer, Vice President of Finance (Principal Financial and Accounting Officer) of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/Randy Scheer                               
Randy (Larry R.) Scheer
Vice President of Finance (Principal Financial and Accounting Officer)
November 11, 2002