10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

OR

o 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 000-29053

PROXIM WIRELESS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 04-2751645 (I.R.S. Employer Identification No.)

2115 O’Nel Drive

San Jose, CA 95131

(Address of principal executive offices)

(408) 731-2700

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of each exchange on which registered
Common stock, par value $.01 per share	The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o No ý

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 ý No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o    Accelerated filer o     Non-accelerated filer o     Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No ý

As of June 29, 2007, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $41,774,711.  For purposes of this calculation only, shares of common equity held by each of the registrant’s directors and officers on that date and by each person who beneficially owned 10% or more of the outstanding common stock on that date have been excluded in that such persons may be deemed to be affiliates.  The aggregate market value has been computed based on a price per share of $2.17, which is the price at which the common equity was last sold on June 29, 2007.

As of March 14, 2008, the registrant had 23,519,069 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the registrant’s 2008 annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K.

PART I

This Annual Report on Form 10-K contains forward-looking statements as defined by federal securities laws.  Forward-looking statements are predictions that relate to future events or our future performance and are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results, outcomes, levels of activity, performance, developments, or achievements to be materially different from any future results, outcomes, levels of activity, performance, developments, or achievements expressed, anticipated, or implied by these forward-looking statements.  Forward-looking statements should be read in light of the cautionary statements and important factors described in this Form 10-K, including Item 1A—Risk Factors.  We undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances, or new information after the date of this Form 10-K or to reflect the occurrence of unanticipated or any other subsequent events.

Item 1.        Business.

Overview

Proxim Wireless Corporation (the “Company” or “Proxim Wireless”) provides high-speed wireless communications equipment and services in the United States and internationally.  Its systems enable service providers, enterprises, and governmental organizations to deliver high-speed data and voice connectivity enabling a broad range of applications.  The Company provides wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, and municipal networks.  The Company believes its fixed wireless systems address the growing need of our customers and end-users to rapidly and cost effectively deploy high-speed communication networks.

The Company offers broadband wireless equipment in several technology segments, including Wi-Fi®, Wi-Fi mesh, WiMAX, and point to point (PTP) which includes millimeter wave.  The Company offers products in three primary categories: (1) broadband wireless access (BWA), including proprietary point-to-multipoint (PMP), standards-based WiMAX, outdoor Wi-Fi mesh, and MeshMAX™ products; (2) enterprise Wi-Fi products primarily for use indoors, including our access points and Wi-Fi client devices; and (3) PTP products.  We serve our equipment customers primarily indirectly through a global network of distributors, value-added resellers, product integrators, and original equipment manufacturers, and to a lesser extent, directly through our internal sales force.

Proxim Wireless Corporation was incorporated as a Delaware corporation on May 5, 2003.

Over the years, our company has grown through a combination of organic growth and acquisitions.  Significant acquisitions are:

· Telaxis Communications Corporation – In April 2003, we (then a private company known as Young Design, Inc.) acquired Telaxis, a publicly traded company focused on developing high capacity millimeter wave wireless products, and thus became a publicly traded company.  Young Design, Inc. had developed, produced, and sold wireless data products, primarily in microwave frequencies.

· KarlNet, Inc. – In May 2004, we acquired KarlNet, a pioneer and leader in software development for operating and managing wireless networks.

· Terabeam Corporation – In June 2004, we acquired Terabeam Corporation, a developer and provider of wireless fiber solutions using high frequency millimeter wave (60 GHz radio frequency) and free space optics (transferring data through the air with light) technologies which had raised a substantial amount of cash as a private company.  In addition to the cash and wireless fiber solutions, the Terabeam Corporation acquisition provided us with the capability to pursue non-communication millimeter wave products business (such as radar systems and sub-systems) from military and non-military governmental and other customers through its Harmonix Division.

· Ricochet Networks – In June 2004, we acquired Ricochet Networks, Inc.  Ricochet was a wireless Internet service provider, originally formed to acquire certain assets from the bankruptcy estate of Metricom, that operated the Ricochet® wireless network in the Denver and San Diego metropolitan areas.

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· Proxim Corporation – In July 2005, we acquired substantially all of the assets and operations of Proxim Corporation (“Old Proxim”) from the bankruptcy estate of Old Proxim.  Old Proxim was the result of the merger between Western Multiplex Corporation and Proxim, Inc. in March 2002.  Both Western Multiplex and Proxim, Inc. were designers and manufacturers of broadband wireless systems.  In August 2002, Old Proxim acquired Agere Systems’ 802.11 wireless local area network equipment business, including its ORiNOCO® 802.11a and b product line.

On July 31, 2007, Ricochet Networks, Inc., a subsidiary of Proxim Wireless Corporation, sold the operations of the Ricochet wireless network in the greater Denver metropolitan area to Civitas Wireless Solutions, LLC (“Civitas”).  In addition, effective that same day, Ricochet Networks, Inc. ceased operations of the Ricochet network in the San Diego metropolitan area and is no longer in the business of providing wireless Internet services.  As a result, the services business we had entered as a result of the Ricochet Networks, Inc. acquisition was classified as discontinued operations effective in the third quarter of 2007, and the financial results of the services business has been excluded from the historical financial results of the Company’s continuing business.

Industry Background and Markets

We believe that there exists significant demand for high bandwidth data connectivity throughout the world.  In addition, we believe that the consumers of this data connectivity are placing an ever increasing premium on mobility and the ubiquity of the connectivity.  The often referred to “last mile” gap describes the disconnect between end users’ high bandwidth demands and the carriers’ ability to deliver this capacity where it is wanted.  Carriers typically have to overcome cost, time, technological, and other barriers when trying to close the last mile gap.

In the current economic climate, it is expected that network development, especially at the network edge, will focus on deployments where new capital expenditures will be closely followed by new revenue.  Connecting new subscribers to existing broadband at low incremental cost would fit well in this market reality.  A wireless complement would enable these connections.  We believe that our products are well suited to this market environment as they permit telecommunications carriers and other service providers to bring broadband connectivity to the network edge faster and cheaper than with new landline build-outs.

The rapidly expanding demand for mobile data applications, such as mobile e-mail, text messaging, digital cameras, smart phones and portable game players is creating a dramatic increase in data demand on networks originally designed and optimized for voice traffic.  In addition, Voice over Internet Protocol (VoIP) is gaining widespread acceptance as an alternative method for carrying voice traffic.  These factors, with others, have combined to create significant disruption and opportunity for our service provider customers.  Although we have a strong history in supplying carrier class products, with traditional telco interfaces, to service providers worldwide, we see a very strong trend towards Internet Protocol (IP) based networks.  Carriers and other service providers are also exploring new business models and opportunities to address growing trends such as the rapid proliferation of Wi-Fi Hot Spots and Community Access Networks.

In addition, the accelerating data requirements and VoIP opportunities have created enormous opportunities for our enterprise, government, education, public safety, alternative carrier, and municipal customers to build and operate wireless networks that enhance their operations and capabilities while often saving them money at the same time.

Hot Spots to Community Access Networks

The availability of Wi-Fi receivers in virtually all portable computers sold today, every portable game player (Nintendo DS, Sony PSP and Microsoft Zune) in addition to smartphones equipped with Wi-Fi from virtually every cellular phone manufacturer has led to the proliferation of Wi-Fi technology as a popular method of broadband Internet access.  The broad global acceptance of Wi-Fi as an access technology in enclosed spaces has led to service providers and municipalities pursuing the vision of outdoor metropolitan Wi-Fi networks in order to bridge the digital divide.  However, outdoor Wi-Fi networks require technologies beyond standard Wi-Fi to be truly effective.  We are seeing a progression from Hot Spots to Metro-scale Access Networks.

A Hot Spot is a geographical area in which end users utilizing a Wi-Fi device can access a broadband wireless connection for Internet connectivity.  The Hot Spot is usually offered by a telecommunications carrier for a fee or by the local venue owner/operator for a fee or as an amenity.  An increasing number of Hot Spots permitting

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free public access are being deployed by a variety of organizations including cities and towns.  The advantages of Hot Spots are broadband connectivity, ease of use, mobile operations, and roaming capabilities.  The primary disadvantage of Hot Spots is that their effective range of less than 300 feet greatly limits the benefit of a single Hot Spot and would require the deployment of a large number of Hot Spots to generate any meaningful level of coverage.  To date, the deployment of Hot Spots has been generally limited to high traffic areas such as airports, convention centers, hotels, and coffee shops.  This limited deployment has attracted limited attention from end-users who require a broader area of coverage to widely adopt the service.

The natural progress from Hot Spot (Wi-Fi in a limited area) is to Metro-scale Access Networks (Wi-Fi covering cities and towns).  These types of networks require Wi-Fi in combination with other technologies including mesh, point-to-multipoint or WiMAX, and point-to-point.  Wi-Fi mesh provides industry standard Wi-Fi connectivity to the end user but backhauls the data through a mesh of multiple radios to the final wireline point of connectivity.  The advantages of mesh architecture are enhanced reliability through redundancy and improved coverage and increased data rates by having multiple potential paths to the end users.  Also, the mesh network can be easily deployed and grow as required by increasing the number of mesh nodes in the network.  With Wi-Fi now installed in almost every new laptop, Wi-Fi phones, new cellular phones and other devices being bundled with Wi-Fi, we see the market from municipalities, carriers, and other service providers for such networks growing significantly in 2008 and future years.

Fixed Wireless Broadband for Urban and Rural Areas

Telecommunications carriers that do not have direct connectivity to the end customer through an existing medium such as copper, fiber, or cable cannot cost effectively create a new land line connection to that customer and are relegated to reselling the existing connectivity, possibly with enhancements, in some form or fashion.  As a reseller, the telecommunications carrier is subjected to the quality of service and support provided by the underlying operator of the network.  Extended range licensed or license-free fixed wireless broadband systems allow telecommunications carriers to establish an alternative network that they can own and control to enable them to offer superior connectivity head to head with the incumbent service provider.  Our products allow a telecommunications carrier to offer broadband connectivity to markets where no wireline broadband has been previously deployed or as a cost effective overlay to compete with existing broadband services.

Telecommunications carriers have been deploying proprietary broadband wireless systems around the world for several years.  The difficulty with proprietary systems is that the equipment may have difficulties interoperating with equipment from a different manufacturer.  Recently the Institute of Electrical and Electronics Engineers (IEEE) ratified the 802.16-2004 and 802.16-2005 standards, which are generally referred to as the WiMAX standards.  Now, equipment manufacturers can submit their products to the WiMAX Forum for testing relating to these standards.  WiMAX Forum certification means that the equipment meets specific performance, feature, and interoperability requirements.  With a standards-based BWA solution now available and the increasing belief that wireless can effectively compete with wireline technologies in both cost and performance, carriers around the world are accelerating BWA deployments.  We have products that have been certified by the WiMAX Forum as being compliant with IEEE 802.16-2004.

Many of our products operate in license-free portions of the radio frequency spectrum.  That means service providers, enterprises, and other customers don’t have to obtain licenses before they can start utilizing those products.  In addition only a limited number of licenses are available for sale, are very expensive and support limited capacity. This allows any customer to rapidly and cost effectively reach a new market of subscribers demanding broadband connectivity.  Many small to medium sized ISPs (Internet Service Providers) and Rural Local Exchange Carriers have no other viable means to offer high-speed Internet service to their customers other than using the license-free radio bands.  ISPs are increasingly offering wireless broadband connectivity and are known as WISPs (Wireless Internet Service Providers).  Our BWA systems have been deployed by over 2,000 WISPs, many of which are serving areas that had no broadband access prior to the roll outs incorporating our equipment.

Cellular Backhaul

We believe that the need for high-speed backhaul, the connections between cellular telephone towers and the rest of the cellular telephone network, will remain solid and even increase due to the increased capacity demands of existing cellular deployments as well as the deployment of new cellular systems.  The amount of data that needs to be backhauled from cellular systems should increase significantly as 2.5G, 3G and other high-data-rate cellular

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systems are developed and deployed and more data intensive applications are offered.  We believe that the backhaul data rates required for some individual cells will exceed the capabilities of the land line T-1/E-1 connections that are typically used today, thereby providing an attractive market for our Lynx, Tsunami, and other high-capacity products.

Private Enterprise Networks

Business, government and institutional enterprise network deployments are increasingly deploying high-speed connections between multiple buildings occupied by the same or affiliated businesses or other enterprises in a campus or business complex setting.  Enterprises are turning to wireless systems to connect their LANs together as a lower cost, faster to deploy alternative to fiber.  Our MP.11 and MP.16 product lines provide relatively low cost, high speed point-to-multipoint connectivity to address this market.  In addition, high-data-rate next generation wireless LAN systems such as IEEE 802.11n (a soon to be ratified next generation standard for wireless LAN interoperability at significantly higher data rates) are creating additional needs for LAN-to-LAN connectivity that can be met with our products, depending upon the data rate required.  The higher data rate capabilities within the LAN are generating demand for higher speed connections between LANs such as enabled by our GigaLink® products, with its Gigabit Ethernet (1.25 Gigabits per second) data rate capabilities.

Security and Surveillance

In the post 9/11 world, terrorism, law enforcement, border patrol, public safety, and monitoring challenges have forced government organizations and enterprises worldwide to elevate security and surveillance as a top priority.  These challenges have manifested as significant growth in the video surveillance market which in turn has created a significant opportunity for system integrators, equipment manufacturers, software vendors, and chip companies to compress, acquire, transport, and archive these large amounts of video traffic.  Technology advances in video, wireless, and software make it now possible to use cost-effective fixed and mobile wireless solutions for comprehensive security and surveillance applications.  Proxim’s wireless systems are designed to handle the high demands of IP video and have been deployed around the world.

The Desire for Redundancy and Reduced Vulnerability

In both government and commercial communications systems (including security and surveillance), there is now a strong emphasis on redundancy in networks, including the use of alternative media in achieving redundancy.  In addition, there is greater emphasis on distributed network infrastructures to prevent single node network failures.  These trends could favorably affect all of the market segments that we are addressing as our products provide a redundant path of wireless connectivity rather than the exclusive use of land-line-based connectivity.

Increasing Acceptance and Demand to Carry Voice over Internet Protocol (VoIP)

There has been an increasing demand for Voice over Internet Protocol as a low cost replacement for existing telephone voice connections.  VoIP permits a voice connection wherever an Internet connection exists.  VoIP operates best in a broadband environment due to its connectivity and latency requirements, and we believe that wireless systems, such as systems built with our products, provide an excellent infrastructure for VoIP capabilities.  A network providing high speed wireless data communications with our equipment could add VoIP capabilities with little or no recurring expense but greatly expand the network’s addressable market through the addition of the voice offering.  We support core to client Quality of Service (QoS) so VoIP calls have the highest quality and lowest delay.

Strategy

Our objective is to be a leading global provider of broadband wireless access and wireless networking systems.  Our strategy to accomplish this objective is to:

Capitalize on our technology expertise to introduce new products rapidly. Our team of engineers has multi-disciplinary technical capabilities, including radio frequency (RF) technology spanning from microwave to millimeter waves as well as digital signal processing, software, and networking expertise.  With the Old Proxim operation acquisition, we greatly enhanced our engineering capabilities.  Each of our major product categories has unique networking as well as RF requirements which require unique expertise.  We believe integrating these

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capabilities is highly complex, and we intend to continue to take advantage of our technology expertise to introduce product enhancements and new products in a rapid and cost effective manner.  We believe that our design center which expanded in India during 2007 has significantly increased our design capabilities and improved our time to market.  As systems become more complex and sophisticated and particularly as systems operate at higher data rates and frequencies, we believe that it will become increasingly difficult for organizations without our breadth of skills to be competitive in product development.

Leverage our channels of distribution.  We have established a significant distribution system around the world that addresses a very large reseller base.  We believe that the leverage afforded by these indirect channels provides us with the opportunity to present our company and our products to a much broader audience than we could do on our own.  Although we plan to continue to directly support and sell to major and strategic accounts, we are becoming more actively involved with partners who offer much greater exposure into opportunities than we could develop alone.  We are working with these partners to leverage our sales people and technical knowledge to pursue a greater number of opportunities for our solutions.

Expand our sales efforts and sales outside of the United States.  While our products are currently sold and approved for use in a number of countries around the world and we derive a significant percentage of our revenue from international sales, we intend to increase our international presence and further expand into new international markets where broadband wire line access is currently too expensive or unavailable.  We believe that markets outside of the United States offer more growth opportunities due to the low level or even complete lack of communications infrastructure throughout much of the world.  We intend to continue to expand our presence worldwide by expanding our international personnel, channels, and marketing efforts, obtaining regulatory approvals for deploying our systems in new international markets, increasing our total product offerings in both existing and new international markets, and establishing strategic alliances and partnerships.  We have introduced products specifically intended for international markets, such as our Tsunami MP.16 3500 product.

Capitalization of Assets.  Through our acquisition strategy, we have accumulated a broad range of assets and technologies.  Some of these assets and technologies may have greater value to other parties than to us due to the greater size or strategic direction of the other parties.  We will investigate opportunities that can allow us to create value from under-utilized assets of the Company.

Products

We classify our broadband wireless products primarily into three product lines: Broadband Wireless Access (BWA), Enterprise Wi-Fi, and Point-to-Point (PTP).  The BWA product line includes proprietary point-to-multipoint (PMP) Tsunami™ MP.11 products, PMP WiMAX Forum Certified™ Tsunami MP.16 products, outdoor Wi-Fi mesh, and MeshMAX™ products.  The Enterprise Wi-Fi product line includes ORiNOCO® 802.11 access point and client card products.  The PTP product line includes our Tsunami®, Lynx®, and GigaLink® products.  When possible, we design our products and systems generally to use common features, components, and software.

We also receive revenue from servicing, repairing, and providing extended and enhanced warranties for our products as well as sales of millimeter-wave components by our Harmonix Division of Terabeam Corporation, a subsidiary of ours.

Broadband Wireless Access Products

Our BWA point-to-multipoint systems enable service providers, businesses, and other enterprises to cost-effectively connect end-users to a central hub or connect multiple facilities within their private networks.  Our PMP systems are deployed in a hub and spoke configuration consisting of a single central hub (or base station) and equipment located at remote end users’ locations.  The base station wirelessly connects to the remote customer premises equipment, prioritizing transmissions and allocating slots of time to each end-user.  Base stations are capable of supporting multiple pieces of equipment at remote locations.  The base station in a service provider deployment is generally connected to the central office of a carrier or other service provider by a wired or wireless backhaul connection (such as our point-to-point products).

We have both proprietary PMP products and WiMAX standards-based PMP products.  The primary difference is that we developed the proprietary products based on our own standards while we developed our WiMAX PMP products to comply with the IEEE WiMAX standards.  Thus, our WiMAX products are designed to

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interoperate with other IEEE WiMAX products.  Our proprietary PMP products include our Tsunami MP.11 products, and our WiMAX PMP products include our MP.16 3500.

Tsunami MP.11.  This product line supports PMP applications in unlicensed frequency bands.  While not specifically designed for WiMAX standards compliance, the Tsunami MP.11 does offer WiMAX features including: scheduled media access controller (MAC), also known as polling, to enable a base station to hear all subscriber stations, preventing nodes from interfering with each other and thus increasing system throughput; and orthogonal frequency division multiplexing (OFDM), which enables near-line-of-sight connections. Additional features include: WiMAX Quality of Service (QoS); roaming with seamless handoffs at speeds up to 200 km/hour; and dynamic frequency selection (DFS) which has already received EN 301-893 v1.3.1 certification.

The MP.11 is capable of supporting converged voice, video, and data transmission in fixed and mobile applications, bringing capabilities of the WiMAX IEEE 802.16-2005 standard to market now, for the 2.4 GHz, 5.3 GHz, 5.4 GHz, and 5.8 GHz frequency bands available globally.

WiMAX.    This product line supports PMP applications in licensed frequency bands.  We have continued to be a pioneer in wireless networking equipment by deploying one of the world’s first WiMAX Forum Certified™ products, a point-to-multipoint base station based on the IEEE 802.16d-2004 standard.  In essence, WiMAX is a version of point-to-multipoint technology that is based on publicly available standards rather than the non-public standards that we and other vendors have developed on a proprietary basis.  In fact, we leveraged much of the expertise, field experience, and manufacturing capabilities of our existing products to launch our WiMAX product.  Our WiMAX solutions are designed for scalable system deployments, beginning with entry-level single-sector base stations and growing into multi-sector configurations.  This scalability lowers the barrier to deploy WiMAX systems and enables a wider variety of service providers to use this technology.  We believe our WiMAX solution is currently the only time division duplexing (TDD) system in the world using Intel® chips for both the base station and subscriber unit, providing optimal data rate connectivity and interoperability with Intel-based subscriber units.  Our WiMAX base station has received the WiMAX Forum certification of interoperability with equipment based on chipsets from three different vendors, providing greater levels of interoperability for service providers.

Wi-Fi Mesh.    Mesh is a protocol that allows the creation of self-configuring, self-healing wireless networks.  In a mesh network, data traffic has multiple potential paths from the end user to one or more nodes that are connected to a wired or wireless backhaul connection.  This allows the network to dynamically route around failures in the network and provide a much higher level of reliability than may be possible in a typical PTP or PMP network.  Mesh deployments are being used at an increasing amount in cities around the world because they are easy to deploy and they provide access to the current installed base of Wi-Fi–enabled devices while also providing redundancy in the network to ensure uptime.  Proxim supports mesh on both indoor and outdoor access points and uses the ORiNOCO Mesh Creation Protocol (OMCP) to create self-forming and self-healing non-line of sight (NLOS) mesh networks.  These products include a dual-radio configuration, which increases system capacity by allowing one radio to focus on Wi-Fi access and the other radio to perform mesh backhaul duties.  The products also provide Quality of Service (QoS) enabling voice and video capability and enterprise-class security features.  Our mesh product offerings include a 4.9 GHz outdoor mesh product which enables public safety applications using the dedicated FCC frequency band for public safety applications (police, fire, EMS).  This product can be used for fixed or mobile applications and is designed to support optimal video throughput in a mobile roaming application.

MeshMAX™.  In January 2007, we introduced a multi-radio product line that incorporates WiMAX, Wi-Fi mesh, and Wi-Fi access, called MeshMAX.  Service providers, municipalities, and other customers planning to deploy Wi-Fi mesh and WiMAX can benefit from both Wi-Fi mesh and WiMAX to provide their customers with the extensive broadband wireless coverage.  Though both technologies are distinct – each with unique characteristics – they often are deployed in tandem using WiMAX for backhaul and Wi-Fi mesh to provide access to the growing base of Wi-Fi enabled devices and multi-mode Wi-Fi phones.  Until the MeshMAX products, the only solution was to install two separate units, one WiMAX and one Wi-Fi mesh.  With MeshMAX, these technologies are now integrated in a single compact outdoor enclosure.  The MeshMAX product line supports licensed WiMAX frequencies in 3.3-3.6 GHz bands and unlicensed frequencies in 5.1-5.8 GHz bands for backhaul.  For mesh interconnect and Wi-Fi access, MeshMAX supports unlicensed mesh frequencies of 5.1-5.8 GHz and 2.4 GHz.  MeshMAX products minimize system latency and optimize Quality of Service (QoS) which is essential for services such as high speed broadband Internet access, video communication including security and surveillance, voice communication, and IPTV.

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Enterprise Wi-Fi Products

ORiNOCO Access Points.    Our family of ORiNOCO access points extends the range of wired Ethernet networks for enterprises and municipal area networks by creating indoor and outdoor wireless networks in small, medium, and large venues.  Corporate and other users can then access their wired Ethernet network wirelessly through the wireless network enabled by our products.  Because our ORiNOCO access points are available with either single or dual radios in the product, the ORiNOCO access points provide configuration flexibility and increased network capacity.  Our ORiNOCO access points also provide high-level security including WPA and WPA2.  Web enabled and SNMP network management allow for simple configuration and remote management of each ORiNOCO network.

ORiNOCO Client Cards.    Our ORiNOCO client cards deliver mobile convenience, easy installation, and a configuration utility that allows wireless users to connect quickly and simply.  ORiNOCO client cards for notebook and desktop computers work together with all ORiNOCO access points and other infrastructure products as well as with third party wireless products supporting the relevant 802.11 IEEE standards.  ORiNOCO client cards deliver the security levels enterprises desire with various levels of encryption including up to 152-bit WEP, WPA and WPA2 security.  Client cards can be connected to computers internally or externally via a number of adapters including USB, ISA, PCI, and Ethernet and Serial external adapters.

Point-to-Point Products

Our point-to-point systems enable a dedicated communication link between two locations.  Each link consists of radio equipment connected to the end user’s network at each of the two locations.  Each radio is then connected to an external or integrated antenna, which is usually mounted on a rooftop or tower.  The two antennae are then aimed at one another to create the dedicated wireless connection between the two locations.  By using multiple systems, end users can connect multiple locations to form a more extensive network.

Lynx products.  Our PTP Lynx products are primarily used by wireless cellular operators to connect their base stations to other base stations and to existing wire-line networks.  This is commonly known as providing backhaul for the wireless cellular networks.  In addition, these products are also used to establish campus and private networks and to provide fiber extension and last mile access.  Our Lynx products are offered in different frequency bands with a variety of data transmission speeds. Lynx products can be linked together within a network and managed with simple network management protocol, or SNMP, software.  SNMP is an industry standard set of rules that governs network management and monitors network devices and their functions.  Our Lynx products also include a separate control and diagnostic channel, which enables remote monitoring of the system’s status and performance without reducing its carrying capacity.

Tsunami products.  Our PTP Tsunami products primarily enable service providers, businesses, and other enterprises to expand or establish private networks by bridging Internet traffic among multiple facilities.  In addition, these products are also used to provide last mile access.  Tsunami products also are currently offered in a variety of license-exempt frequencies with a variety of data transmission speeds.  Like our Lynx products, our point-to-point Tsunami products offer a fully integrated design and a separate control and diagnostic channel.  In addition, our higher capacity point-to-point Tsunami systems include one or more additional T1 or E1 connections without reducing the carrying capacity of the system.  The additional T1 or E1 connection is a standard telecommunications interface that is not based on Internet Protocol and is typically used for voice and/or video.

Quickbridge 60250 product.  In November 2007, we announced our QuickBridge 60250 product, a PTP wireless hop-in-a-box that provides 200 Mbps of capacity in the 60 GHz unlicensed spectrum.  The QuickBridge 60250’s small form factor, alignment bracket, and alignment scope make it easy to deploy and install.  As a result, the QuickBridge 60250 is well suited to not only network operator, enterprise, and municipal applications but also for rapid construction of temporary networks for special events and when responding to disasters.  The QuickBridge 60250 is a complete hop-in-a-box containing all of the components, including radio units, mounting hardware, power injectors and cables, required to deploy a reliable wireless connection operating over distances of up to 500 meters.  Its low power consumption enables use of alternate power sources, such as solar power.  The QuickBridge 60250 offers very low latency, making it ideal for voice and video applications.  Our QuickBridge 60250 offers flexible management and easy administration.  Network managers can monitor the link’s status and traffic using a Web user interface or by integrating it into a network management tool via SNMP.

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GigaLink products.  Our GigaLink products primarily enable service providers, businesses, and other enterprises to wirelessly satisfy very high bandwidth data transmission needs over relatively short distances.  Given the high data transmission capabilities of these products (up to 1.25 Gigabits per second), we think of these products as fiber optic extension products.  The connectivity needs may include creating a wireless fiber-like backbone or connecting buildings or campuses together with the highest data rate wireless bridges. The GigaLink product is a compact product operating in the 60 GHz millimeter-wave band between 57 GHz and 64 GHz.  It enables fiberless transmission of data, voice and video communication at variable fiber optic data rates from OC-3 (155 Mbps) to OC-12 (622 Mbps) and Ethernet traffic at speeds up to 1.25 Gbps full duplex.  It is engineered to provide link distances of up to 1,000 meters with 99.99% availability, depending upon prevailing rainfall rates in the geographic regions where it will be used.  We have recently introduced GigaLink products operating in the newly allocated E-Band spectrum.  The E-Band spectrum is 71-78 GHz, 81-86 GHz, and 92-95 GHz.  The advantage is that the E-Band products offer longer distance links than the 60 GHz products.

Technology

We have developed or acquired a number of core technologies that form the basis of our current product offerings and which we expect to use in our future product development. Our primary areas of technology expertise are digital signal processing, media access control (MAC), networking, system software development, and RF technology.

Digital signal processing technology.    Our products use either proprietary or third-party, standards-based digital signal processing (DSP) technologies and designs that we either develop specifically for use in wireless systems or adapt to those same wireless systems.  Specifically, all of our ORiNOCO WLAN products utilize third-party chipsets that embody the requirements set forth by the 802.11a/b/g standards to ensure that we can achieve Wi-Fi standard certification.  Similarly, our Tsunami WiMAX MP.16 BWA products use third-party chipsets that embody the requirements set forth by the 802.16d-2004 standards to ensure that we can achieve WiMAX standard certification.  Currently, all of our Tsunami and Lynx PTP products are implemented using our internally developed, proprietary FPGA or ASIC DSP solutions.  We believe this combination of technologies and capabilities has enabled us to introduce a number of high-speed wireless products that we may not have been able to produce otherwise.  We believe we can develop flexible, innovative products more quickly than those competitors who do not have similar capabilities.

MAC.  All of our layer 2 designs are done in house.  We have customized standard Wi-Fi MAC solutions to provide advanced throughput and developed the majority of the layer 2 requirements for standard Wi-Fi devices while developing WiMAX 802.16-2004 and PTP solutions from the ground up.

Networking.  We develop in house all of our layer 3-7 protocols on all our products.  Our products features include NAT, VPN Passthru, firewalls, bandwidth management, QoS, routing, and security. We have developed certain unique networking capabilities that we believe deliver specific market advantage such as our Wireless Outdoor Routing Protocol (WORP) and ORiNOCO Mesh Control Protocol (OCMP).  All of our products support 3 management interfaces: SNMP, Web and CLI, and most of our products allow encryption to secure the management link via SNMPv3, SSL and SSH.  All of our products support advanced encryption over the wireless link and quality of service (QoS) to prioritize packets over the wireless medium.

System software.    Our products are networking products and follow closely the principles set forth in the Open Systems Interconnection or OSI 7 Layer Model which is a guideline for the logical partition of functionality within and between distributed computing machines.  Careful consideration is given to when to implement software to run on a host processor and when to implement it in firmware running in the DSP/ASIC/FPGA described above.  There are industry practices, trade secrets, and specific industrial knowledge that influence our thinking and guide us to create the software architectures that meet the specific system requirements.  We strive to leverage common software elements such as the VxWorks operating system and other third party components.

Radio frequency technology.    Microwave and millimeter wave technology is the technology used to wirelessly transmit data, voice and video.  Microwave technology uses radio frequencies ranging from 1 GHz up to 20 GHz.  Millimeter wave uses radio frequencies in excess of 20 GHz.  We have the ability to internally develop microwave and millimeter wave circuit board designs as well as qualify, direct, and utilize external partners.  We believe having both internal and external design capabilities provides us with higher performance, lower production

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costs, shorter development cycles, and the ability to customize our products so that they can more easily be integrated with our existing products and with the networks of our various customers and end users.

Research and Development

Our primary research and development resources are located in Hyderabad, India.  Our research and development efforts are focused on improving the functionality and performance of our existing products as well as developing new products to meet the changing needs of our diverse base of customers and end users.  We are currently pursuing the following research and development initiatives:

· advancing our broadband mesh and MeshMAX systems;

· advancing our point-to-multipoint systems;

· advancing our point-to-point systems;

· adapting our products to additional frequencies and interfaces;

· developing higher speed products;

· designing our products for lower cost, outsourced manufacturing, assembly, and testing.

We devote a substantial portion of our resources to developing new products, enhancing existing products, expanding and improving our core wireless technologies, and strengthening our technological expertise.  We have historically made and expect to continue to make significant investments in research and development.  We invested approximately $8.3 million, $14.2 million, and $7.5 million in research and development activities in 2007, 2006, and 2005, respectively.

Sales and Marketing

We sell our products worldwide to service providers, businesses, and enterprise customers, primarily indirectly through distributors, value-added resellers, product integrators, and to lesser extent, directly to end-users through our sales force.  We also sell through original equipment manufacturer (OEM) customers.  We sell our OEM customers branded products as private label models.  We also seek to stimulate market demand by increasing brand awareness and educating potential customers about the advantages of using our products.

Although our sales are generally made through distributors or value-added resellers and original equipment manufacturers, our sales force often develops direct relationships with end users either independently, in which case, the sales representative then brings in the distributor or value-added reseller to complete the sale, or together with the distributors or value-added resellers.  We have established relationships with large national and international distributors, local and specialized distributors, and value-added resellers.  The distributors sell our products, and the value-added resellers not only sell our products, but also assist their customers in network design, installation, and testing.  In some cases, both distributors and value-added resellers also assist their customers with financing, maintenance, and the purchase of ancillary equipment necessary for the installation and operation of a wireless network.

Any significant decline in direct sales to end-users or in sales to our distributors or value-added resellers, or the loss of any of our major distributors, value-added resellers or OEM customers, could materially adversely affect our revenue.

Our backlog at December 31, 2007, was approximately $9 million, compared with backlog of approximately $5.1 million at December 31, 2006.  Backlog includes orders confirmed with a purchase order.  Because of the generally short cycle between order and shipment and occasional customer changes in delivery schedules or cancellations of orders, we do not believe that our backlog as of any particular date is necessarily indicative of the potential actual net sales for any future period.  Accordingly, a significant component of our revenue expectations will be based almost entirely on internal estimates of future demand and not on firm customer orders and as a result may have higher risk of not occurring when forecasted.  Planned operating expense levels are

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relatively fixed in the short term and are based in large part on these estimates.  Because of the generally short order cycle, we need to maintain relatively significant quantities of inventory on hand and at our contract manufacturers.  If our estimates of expected demand for product are incorrect, we are exposed to excess and obsolete inventory costs.

During the year ended December 2007, there were three unrelated customers who each accounted for more than 10% of sales (19%, 13%, and 10%).  During the year ended December 31, 2006 three unrelated customers each accounted for more than 10% of sales (16%, 10% and 10%), and for the year ended December 31, 2005, no customer accounted for more than 10% of total sales. During the years ended December 31, 2007, 2006, and 2005, international sales accounted for approximately 55%, 58%, and 35%, respectively, of our total sales.  We expect that our revenue from shipments to international customers to vary but remain significant as a percentage of total revenue.

Currently, substantially all of our sales are denominated in U.S. dollars.  Accordingly, we are not directly exposed to material currency exchange risks other than the risk that exchange rate fluctuations may make our products more expensive for customers outside the United States and, as a result, could decrease international sales.  In addition, we face risks inherent in conducting global business such as the risk that a weakened US dollar could result in higher international sales and service expenses as well as higher contract manufacturing costs.  These risks, which are more fully described herein, include extended collection time for receivables, reduced ability to enforce obligations, potential supply constraints resulting in product delivery delays, and reduced protection for our intellectual property.

Customer Service

We are committed to providing our customers with a high level of service and support.  We provide training, technical assistance and customer support on the installation, management, use, and testing of our products.  We also provide warranties for our products which we believe are consistent with industry practices in our equipment markets, and we offer both in-warranty and out-of-warranty repair services.  Our repair center is staffed with technicians who work directly with our quality assurance team to identify potential problems and repair equipment.  In addition, we offer premium hardware and software support under our ServPak program.

Manufacturing

Our manufacturing strategy is to supply high quality products in a timely fashion to our customers, while making efforts to maximize our gross margins.  We perform those manufacturing tasks internally that we believe cannot be effectively outsourced, but we outsource activities which can be performed more effectively by specialized manufacturing partners.  Our ISO 9001-2000 certified manufacturing operation, based in our San Jose, California facility, consists primarily of pilot production, final product assembly and testing for our most complex products, primarily certain of our PTP products.  We manufacture and test our millimeter wave products at our Harmonix Haverhill, MA facility. For our higher-volume products, which represent the majority of our products and product revenue, we outsource manufacturing and procurement of component parts to domestic and international contract manufacturers with the expertise and ability to achieve the cost reductions and quick response times to orders that we require, while maintaining our quality standards.  This allows us to focus our internal resources on developing new products.

We depend on single or limited source suppliers for several of the key components used in our products.  Any disruptions in the supply of these components or assemblies could delay or decrease our revenues.  For example, we experienced product disruptions recently when one of our contract manufacturers changed the location of where our products are made to China from Taiwan.  In addition, even for components with multiple sources, we have experienced, and may continue to experience, shortages due to capacity constraints caused by high industry demand.  We do not have any long-term arrangements with our suppliers.  If, for any reason, a supplier fails to meet our quantity or quality requirements, or stops selling components to us or to our contract manufacturers at commercially reasonable prices, we could experience significant production delays and cost increases, as well as higher warranty expenses and product reputation problems.  Because the key components and assemblies of our products are complex, difficult to manufacture, and require long lead times, we may have difficulty finding alternative suppliers to produce our components and assemblies on a timely basis.  We have experienced shortages of some key components in the past, which delayed related revenue, and we may experience similar shortages in the future.  In addition, because the majority of our products have a short sales cycle of between 30 and 90 days, we

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may have difficulty in making accurate and reliable forecasts of product needs.  As a result, we have in the past and could in the future experience shortages in supply, which could delay or decrease revenue because they drive customer cancellations and can induce customers to choose our competitors for their future needs.

We have, by design, limited internal manufacturing capability.  There can be no assurance that we will be able to develop or contract for additional manufacturing capacity on acceptable terms on a timely basis if needed.  In addition, in order to compete successfully, we will need to continue to achieve continual product cost reductions.  Although we intend to achieve cost reductions through engineering improvements, production economies, and manufacturing at lower cost locations including some outside the United States, there can be no assurance that we will be able to do so.  In addition, our ability to achieve such cost reductions is dependent also on volumes.  In order to remain competitive, we must continue to introduce new products and processes into our manufacturing environment, and there can be no assurance that any such new products will not create obsolete inventories related to the older products being replaced.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in developing industries, particularly companies in relatively new and rapidly evolving markets. These risks include:

· an unpredictable customer demand environment;

· limited backlog;

· uncertain acceptance of new products and services;

· competition; and

· challenges in managing growth.

We cannot assure you that we will succeed in addressing these risks.  If we fail to do so, our revenue and operating results could be materially harmed.

Competition

The markets for all three of our product categories are extremely competitive, and we expect that competition will intensify in the future.  Increased competition could adversely affect our business and operating results through pricing pressures, the loss of market share, and other factors.  The principal competitive factors affecting wireless local area networking and fixed wireless markets include the following: price; data throughput; effective radio frequency coverage area; interference immunity; network security; network scalability; integration with voice technology; wireless networking protocol sophistication; ability to meet and support industry standards; roaming capability; power consumption; product miniaturization; product reliability; ease of use; product costs; product features and applications; product time to market; product certifications; changes to government regulations with respect to each country served and related to the use of radio spectrum; brand recognition; OEM partnerships; marketing alliances; manufacturing capabilities and experience; effective distribution channels; and company reputation.

Our primary competition in our BWA markets include Airspan, Alvarion, Aperto, Cisco, Motorola (Canopy), Redline, and Tropos.  Although we believe that our BWA products are well positioned and that our experience in this area is a competitive advantage in WiMAX development, it is difficult to ascertain what the actual impact of this technology to this business segment will be at this time.  In the Wi-Fi Mesh market, current competition comes primarily from nascent companies such as Belair, Strix, Firetide, Skypilot and Tropos.  Additionally, Cisco and Motorola have aggressively entered the market.  Although the entrance of major competitors like Cisco and Motorola represent a serious force to reckon with, we also believe that their entrance indicates an important validation of the industry.  Our intent to compete in the Wi-Fi Mesh market is to offer the most compelling solution in the market with attractive price points and a complete solution including our indoor WLAN, WiMAX or other PMP for distribution, and PTP backhaul solutions.  We believe that we can offer the most complete Wi-Fi Mesh wireless network solution in the market.

We have extensive competition in our Enterprise Wi-Fi business, including without limitation, Cisco (including LinkSys), D-Link, Netgear, SMC, Buffalo, Motorola (Symbol Technologies), Aruba, Trapeze Networks, Meru and 3Com Corporation.  Additionally, numerous Asia-based companies offer significant portfolios of low

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price IEEE 802.11a/b/g products.  We could also face future competition from companies that offer products which replace network adapters or offer alternative communications solutions, or from large computer companies, PC peripheral companies, as well as other large networking equipment companies.  Furthermore, we could face competition from certain of our OEM customers, which have, or could acquire, wireless engineering and product development capabilities, or might elect to offer competing technologies.  We can offer no assurance that we will be able to compete successfully against these competitors or those competitive pressures we face will not adversely affect our business or operating results.

With our PTP products, we face competition from Alcatel, Bridgewave, Ceragon Networks, Stratex Networks, Erricson, NEC, Redline, Motorola (Orthogon) and Nokia, many of which have broader distribution channels, brand recognition, and more diversified product lines with licensed solutions.

In addition, broadband wireless access solutions compete with other high-speed solutions such as cable modem technologies, satellite technologies, digital subscriber lines and fiber optic cables.  Many of these alternative technologies can take advantage of existing installed infrastructure and have achieved significantly greater market acceptance and penetration than broadband wireless access technologies.  Other factors that influence the choice between wireless and wire line products include reliability and security, speed and volume capacity, cost effectiveness, availability of sufficient frequencies and geographic suitability.  We expect to face increasing competitive pressures from both current and future technologies in the broadband access market.

Many of our present and potential competitors have substantially greater financial, marketing, technical and other resources with which to pursue engineering, manufacturing, marketing, and distribution of their products.  These competitors may succeed in establishing technology standards or strategic alliances in the markets in which we operate, obtain more rapid market acceptance for their products, or otherwise gain a competitive advantage.  We can offer no assurance that we will succeed in developing products or technologies that are more effective than those developed by our competitors.  Furthermore, we compete with companies that have high volume manufacturing and extensive marketing and distribution capabilities, areas in which we may not have as much experience.  We can offer no assurance that we will be able to compete successfully against existing and new competitors as wireless markets evolve and the level of competition increases.

Intellectual Property

Our success depends on the preservation and protection of our product and manufacturing process designs and other proprietary technology.  We use a variety of intellectual property in the development and manufacturing of our products, but do not believe that any of our intellectual property is individually critical to our current operations. Taken as a whole, however, we believe our intellectual property rights are significant.  In addition to our registered intellectual property, we also use proprietary technology in our business.  This technology includes internally developed proprietary error correction algorithms, fault tolerant systems, and comprehensive network management software and specialized knowledge and technical expertise that have been developed over time by our employees.

We rely on a combination of patents, trademarks, non-disclosure agreements, invention assignment agreements and other security measures in order to establish and protect our proprietary rights.  In order to maintain the confidential nature of this technology, we have chosen to protect it by generally limiting access to it, treating portions of it as trade secrets and obtaining confidentiality or non-disclosure agreements from persons who are given access to it.  All of our employees have signed a confidentiality agreement, which prohibits them from disclosing our confidential information, technology developments and business practices, as well as any confidential information entrusted to us by other parties.

In connection with our acquisition of substantially all the assets of Old Proxim, we were assigned three agreements previously between Old Proxim and Agere Systems Inc.  These agreements were originally entered into between Old Proxim and Agere on August 5, 2002 in connection with Old Proxim’s acquisition of assets primarily relating to the 802.11 WLAN equipment business of Agere, including its ORiNOCO product line.  The three agreements are:

· A three-year supply agreement pursuant to which Agere originally agreed to supply Old Proxim with chipsets, modules and cards at specified prices;

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· a perpetual license originally enabling Old Proxim to use Agere technology related to the wireless LAN equipment business; and

· a 7-1/2 year patent cross-license agreement for Old Proxim’s and Agere’s respective patent portfolios.

We also have two intellectual property license agreements with interWAVE Communications which grant us a non-exclusive royalty-free perpetual license to use some of its intellectual property, including patents, patent applications, copyrights, software, technology and proprietary information related to our RAN and Link EX, Link 4X, and Link CX products.

We increased our patent portfolio substantially through the acquisitions of Telaxis, Terabeam Corporation, Ricochet, and the operations of Old Proxim (which included Western Multiplex and Agere Systems ORiNOCO product line).  While we do not believe that any of these patents individually is critical to our current equipment business, we believe our patent portfolio is quite valuable.  Our patents generally are in the following areas:

· PTP radio transmission and circuit design

· WLAN and Mesh Layer 2 MAC

· PMP and WLAN Layer 3 Routing

· PMP and WLAN Mobility

· Wireless LAN Switch

· Optical Transmission

· Antenna Design

We continue work to procure additional patents that are beneficial to our business and are looking at ways to optimize the value of the patents that we have recently acquired.  We currently do not receive any material amounts from licensing any of our patents.

Government Regulation

Our products are subject to extensive telecommunications-based regulation by the United States and foreign laws and international treaties.  We must conform our products to a variety of regulatory requirements and protocols established to, among other things, avoid interference among users of radio frequencies and to permit interconnection of equipment.  Each country has different regulations and a different regulatory process.  In order for our products to be used in some jurisdictions, regulatory approval and, in some cases, specific country compliance testing and re-testing may be required.  The delays inherent in this regulatory approval process may force us to reschedule, postpone or cancel the installation of our products by our customers, which may result in significant reductions in our sales.

In the United States, we are subject to various Federal Communications Commission, or FCC, rules and regulations.  Current FCC regulations permit license-exempt operation in certain FCC-certified bands in the radio spectrum.  Our wireless products are certified for operation in certain licensed frequencies and license-exempt operation in different frequency bands.  Operation in these frequency bands is governed by rules set forth in Part 15 of the FCC regulations.  The Part 15 rules are designed to minimize the probability of interference to other users of the spectrum and, thus, accord Part 15 systems license-exempt status in the frequency band.  In the event that there is harmful interference caused by a Part 15 user, the FCC can require the Part 15 user to curtail transmissions that create interference.  In this regard, if users of our products experience excessive interference from primary users, market acceptance of our products could be adversely affected, which could materially and adversely affect our business and operating results.  The FCC, however, has established certain standards that create an irrefutable presumption of noninterference for Part 15 users and we believe that our products comply with such requirements.  There can be no assurance that the occurrence of regulatory changes, including changes in the allocation of available license-exempt frequency spectrum, changes in the use of allocated frequency spectrum, or modification to the

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standards establishing an irrefutable presumption of non-interference for unlicensed Part 15 users, would not significantly affect our operations by rendering current products obsolete, restricting the applications and markets served by our products or increasing the opportunity for additional competition.

Our products are also subject to regulatory requirements in international markets and, therefore, we must monitor the development of radio frequency regulations in certain countries that represent potential markets for our products.  While there can be no assurance that we will be able to comply with regulations in any particular country, we believe that we have designed our products to minimize the necessary design modifications required to meet various 2.4 GHz and 5 GHz international spread spectrum regulations, as well as in other frequency bands we may design our products to use.  In addition, we will seek to obtain international certifications for our product line in countries where there are substantial markets for wireless networking systems.  Changes in, or the failure by us to comply with, applicable domestic and international regulations could materially adversely affect our business and operating results.  In addition, with respect to those countries that do not follow FCC regulations, we may need to modify our products to meet local rules and regulations.

Regulatory changes by the FCC or by regulatory agencies outside the United States, including changes in the availability of spectrum, could significantly affect our operations by restricting our development efforts, rendering current products obsolete or increasing the opportunity for additional competition.  Several changes by the FCC were approved within the last eight years including changes in the availability of spectrum, as well as the granting of an interim waiver.  These approved changes could create opportunities for other wireless networking products and services.  There can be no assurance that new regulations will not be promulgated, that could materially and adversely affect our business and operating results.  It is possible that the United States and other jurisdictions will adopt new laws and regulations affecting the pricing, characteristics and quality of broadband wireless systems and products.  Increased government regulations could:

· decrease the growth of the broadband wireless industry;

· hinder our ability to conduct business internationally;

· reduce our revenues;

· affect the costs and pricing of our products;

· increase our operating expenses; and

· expose us to significant liabilities.

Any of these events or circumstances could seriously harm our business and results of operations.

We are also subject to U.S. government export controls.  We rely on our customers to inform us when they plan to deliver our products to other countries, and we regularly inform our customers of the export controls with which they must comply.  However, a violation of U.S. export controls could seriously harm our business.

Employees

As of December 31, 2007, we had 219 employees, including 71 in manufacturing and customer service, 43 in research and development, 80 in sales and marketing, and 25 in finance and administration.  We are not a party to any collective bargaining agreement in the United States.  We believe that relations with our employees are good.

Item 1A. Risk Factors.

General Overview

This Annual Report on Form 10-K contains forward-looking statements as defined by federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions and other

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statements which are other than statements of historical facts.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “contemplates,” “believes,” “estimates,” “predicts,” “projects,” and other similar terminology or the negative of these terms.  From time to time, we may publish or otherwise make available forward-looking statements of this nature.  All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this Form 10-K, including those set forth below, and any other cautionary statements which may accompany the forward-looking statements.  In addition, we undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances, or new information after the date of this Form 10-K or to reflect the occurrence of unanticipated or any other subsequent events, and we disclaim any such obligation.

You should read forward-looking statements carefully because they may discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information.  However, there may be events in the future that we are not able to accurately predict or control.  Forward-looking statements are only predictions that relate to future events or our future performance and are subject to substantial known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results, outcomes, levels of activity, performance, developments, or achievements to be materially different from any future results, outcomes, levels of activity, performance, developments, or achievements expressed, anticipated, or implied by these forward-looking statements.  As a result, we cannot guarantee future results, outcomes, levels of activity, performance, developments, or achievements, and there can be no assurance that our expectations, intentions, anticipations, beliefs, or projections will result or be achieved or accomplished.  In summary, you should not place undue reliance on any forward-looking statements.

Cautionary Statements

In addition to other factors and matters discussed elsewhere in this Form 10-K, in our other periodic reports and filings made from time to time with the Securities and Exchange Commission, and in our other public statements from time to time (including, without limitation, our press releases), some of the important factors that, in our view, could cause actual results to differ materially from those expressed, anticipated, or implied in the forward-looking statements include, without limitation, the following:

· We have been unable to increase our revenues and may be unable to grow our revenues in the future.  We have been unable to increase our revenues for a number of quarters in a row despite being in what are perceived as expanding markets.  This is having an adverse impact on our business, financial condition, and relations with customers, suppliers, employees, investors, and others.  Our continued inability to increase our revenues could have a material adverse affect on our ability to continue as a going concern.

· We cannot predict whether we will be able to achieve profitability, which could adversely affect our ability to continue as a going concern and our stock price.  We were profitable on an operating and GAAP basis in the fourth fiscal quarter of 2005.  We were not profitable in any quarter of 2006 or 2007.  We have made no predictions concerning our future profitability or lack of profitability.  Our inability to achieve profitability may affect our ability to continue as a going concern and cause the market price of our stock to decline or prevent it from rising.

· We currently have limited capital resources, which could adversely impact our operations, ability to grow our business, attractiveness as a supplier to customers, attractiveness to investors, and viability as an ongoing company.  We have a recent history of unprofitable operations, and our capital resources have been declining and are limited.  These factors could cause potential customers to question our long-term viability as a supplier and thus decide not to purchase products from us.  Further, our limited capital resources could inhibit our ability to grow our business because typically we have to pay our suppliers sooner than we receive payment from our customers.  These factors could cause potential investors to question our long-term viability or believe that we will need to raise additional capital on terms more favorable than a typical investor would obtain by simply buying our stock in the public markets and thus decide not to purchase our stock.  All these factors could have an adverse impact on our operations, financial results, stock price, and viability as an ongoing company.

· We have limited capital resources and our prospects for obtaining additional financing, if required, are uncertain.  Our future capital requirements will depend on numerous factors, including expansion of

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marketing and sales efforts, development costs of new products, the timing and extent of commercial acceptance for our products, and potential changes in strategic direction.  Additional financing may not be available to us in the future on acceptable terms or at all.  If funds are not available, we may have to delay, scale back, or terminate business or product lines or our sales and marketing, research and development, acquisition, or manufacturing programs.  Our inability to obtain capital could seriously damage our business, operating results, financial condition, viability as an ongoing company, and cause our stock price to decline.

· Our common stock may be delisted from the Nasdaq Capital Market, which could adversely affect our business and relations with employees, customers, and others.  Our common stock is currently traded on the Nasdaq Capital Market.  We have received notice from The Nasdaq Stock Market that our stock price (technically, the closing bid price) has failed to maintain the required minimum $1.00 per share.  We have been given until August 20, 2008 to achieve compliance with that rule by having the bid price of our stock close at $1.00 or more for at least ten consecutive business days.  If compliance with that rule is not be demonstrated by August 20, 2008, Nasdaq will determine whether we meet the initial listing criteria for the Nasdaq Capital Market, except for the bid price requirement.  If so, Nasdaq will notify us that we have been granted an additional 180 day compliance period.  There can be no assurance that we will be able to achieve compliance with this minimum bid price rule by August 20, 2008; that we would be granted an additional 180 day compliance period; or that we would be able to achieve compliance with the minimum bid price rule even if granted the additional compliance period.  While there are many actions that may be taken to attempt to increase the price of our stock, two of the possibilities are a reverse stock split and a stock repurchase.  At this time, we have limited capital available for any stock repurchase.  Any such actions (even if successful) may have adverse effects on us, such as adverse reaction from employees, investors and financial markets in general, adverse publicity, and adverse reactions from customers.  There are other requirements for continued listing on the Nasdaq Capital Market, and there can be no assurance that we will continue to meet these listing requirements.  Should our stock be delisted from the Nasdaq Capital Market, we may apply to have our stock traded on the Over-The-Counter Bulletin Board.  There can be no assurance that our common stock would be timely admitted for trading on that market.  This alternative may result in a less liquid market available for existing and potential stockholders to buy and sell shares of our stock and could further depress the price of our stock.

· We may raise additional capital on terms that we or our stockholders find onerous, which could adversely affect our financial results and stock price.  In the future, we may be able to raise additional debt or equity capital only on terms that we find onerous.  Alternatively, some of our stockholders may find the terms of our capital arrangements to be onerous.  For example, some of our stockholders expressed displeasure at our issuing shares in July 2007 in a private placement at a price below the current trading price of our stock.  We may also obtain funds through arrangements with partners or others that may require us to relinquish rights to certain of our technologies or potential products or other assets.  The terms of our capital arrangements or the perceived onerous nature of those arrangements could adversely affect our financial results and stock price.

· We may sell or otherwise dispose of portions of our business and assets for strategic reasons or to raise capital, which could adversely affect our business, financial results, and relationships.  As we analyze our company, strategic direction, and capital requirements, we may decide to sell some of our product lines, intellectual property, or other assets.  We may decide to do so for a variety of reasons, including to raise capital, to focus on certain portions of our current business, and to reduce our expenses.  Any such decisions could adversely impact our relationships with customers, employees, investors, and others for a variety of reasons depending on the actual decisions made.  For example, it may be perceived that such decisions are due to our questionable financial viability.  It may be perceived that we have decided to dispose of certain product lines that some people may believe have more potential than others.  Any such decisions and related consequences could have an adverse impact on our business, financial results, and relationships with third parties.

· Our lower stock price and weaker financial condition may make it harder to attract and retain qualified employees.  We operate in an industry where there are numerous employment opportunities.  As a result, our employees and people we may be looking to employ typically have choices as to where they want to work.  Our lower stock price, resulting decreased incentive impact of stock options, difficulties in growing our revenue, lower cash levels, and general weaker financial condition may make it harder for us

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to retain our current employees in light of other employment opportunities that may be available to them.  In addition, those same factors may make it harder for us to attract new employees.  These difficulties may be exacerbated in our international locations, including our Hyderabad, India research and development center, which are located further from our headquarters.  Our inability to retain current employees and attract new employees could have a material adverse impact on our business, financial condition, and relationships with third parties.

· The continuing uncertainty in the telecommunications industry and the global economy is adversely affecting our sales due in part to our being a smaller, younger company.  The overall economic climate in the United States and many other parts of the world has been in a downturn.  This downturn has resulted in our customers having less capital available from capital markets, and less willingness to spend internal capital, to purchase equipments such as ours.  As a result, potential customers may be less willing to spend their limited budgets on products from us, a relatively small, young company that may not survive the leaner economic times.  Also, it may be causing customers to pay us slower.  Because we do not have the financial resources or name recognition of larger companies, this economic cycle may adversely affect the growth and stability of our business and our financial condition and results of operations.

· The broadband wireless equipment industry in which we principally operate is intensely competitive which could negatively impact our financial results.  The telecommunications equipment industry in which we operate is intensely competitive.  Most of our products are intended for outdoor broadband wireless networks (generally our broadband wireless access and point-to-point products) or indoor wireless networks (generally our enterprise Wi-Fi products).  Competition is intense in this industry for a number of reasons.  For example, there are relatively few barriers to entry in this market.  Also, this industry has attracted substantial media and other attention in recent months in part due to the ability of this equipment to provide broadband Internet connectivity simply, quickly, and efficiently.  These same reasons, among others, have caused a number of companies to develop products that compete (or could be viewed as competing) with ours.  This large number of companies offering products that may be perceived to be similar or even interchangeable with our products can have the effect of reducing the prices at which we are able to sell our products.  In turn, this can reduce our gross margins and negatively impact our general financial results.

· We face substantial competition from a number of larger companies with substantially greater resources and longer operating histories, and we may not be able to compete effectively.  Many of our competitors or perceived competitors offer a variety of competitive products and services and some may offer broader telecommunications product lines.  These companies include AirSpan Networks, Alcatel, Alvarion, Aruba Networks, Business Networks AB, Ceragon, Cisco (including LinkSys), D-Link, Ericson, Fujitsu, Harris Corporation, Harris Stratex Networks, Intel Corporation, Motorola (including Orthogon and Symbol Technologies), NEC, Netgear, Nokia, Nortel, SMC, and 3Com Corporation.  Additionally, our millimeter wave radio products must compete with the existing and new fiber optic infrastructure and suppliers in the United States and elsewhere.  Many of these companies have greater customer recognition, installed bases, financial resources, and sales, production, marketing, manufacturing, engineering, and other capabilities than we do.

· We also face competition from private and start-up companies given the limited barriers to entry in our business.  We face actual and potential competition not only from established companies, but also from start-up and other private companies that are developing and marketing new commercial products and services.  Many of the products we sell are based on standards established by the Institute of Electrical and Electronics Engineers (IEEE) that require interoperability.  Also, there are not substantial technical development difficulties, manufacturing difficulties, prohibitive intellectual property rights, or high business start-up costs that may create greater barriers to entry in other businesses.  As a result, there are limited barriers to entry into a number of markets we serve.  This lack of significant barriers and the perceived attractiveness of some of these markets, among other reasons, have resulted in private companies entering these markets.  These private companies include Aperto, Belair Networks, Bridgewave, Buffalo, Colubris Networks, Firetide, Meru, Redline, Skypilot, Strix, Trango Broadband, Trapeze Networks, and Tropos.

· We may experience difficulty in differentiating our products from other broadband wireless products which may reduce our sales and gross margins.  We believe that some products in the

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broadband wireless equipment business in which we primarily operate have become commodities in which there is intense price competition, and we believe that trend will continue and intensify.  We need to carefully and clearly distinguish our products from competing products and technologies that may be able to provide wireless broadband access or connectivity.  Points of distinction include service and support offered for our products, operating range of our products, scalability of networks using our products, remote management and monitoring capabilities, durability and robustness of our products, data rate transmission capabilities of our products, ease and speed of installation of our products, markets served by our products, cost of our products, other features of our products, security and interference issues, and value proposition of our products for our customers.  Failure to distinguish our products for our customers, investors, and others could hinder market acceptance of our products, delay our obtaining customers for our products, force reductions in contemplated sales prices of our products, and reduce our overall sales and gross margins.  This ability to distinguish is becoming more important as we try to introduce more feature-rich products at higher prices.

· Potential customers may view price as the primary differentiator between our products and products of our competitors, which could reduce the price at which we can sell our products and negatively impact our financial results.  Because many products in our broadband wireless equipment business have to comply with specific public standards, at times potential customers may perceive there to be little other than price to differentiate our products from products of a competitor.  This intense customer focus on pricing can have the effect of reducing the prices at which we are able to sell our products.  In turn, this can reduce our gross margins and negatively impact our general financial results.

· Alternative broadband connectivity technologies may have advantages over our products and make our products less attractive to customers.  A number of competing technologies may be able to provide high-speed, broadband access or connectivity.  These competing technologies include digital subscriber lines, hybrid fiber coaxial cable, fiber optic cable, T-1/E-1 and other high-speed wire, laser (also known as free space optics), satellite, and other mesh wireless, point-to-multipoint wireless, and point-to-point wireless technologies.  Some of these technologies may have advantages over our products, such as lower cost, greater range, better security, and greater current market acceptance.

· New broadband connectivity technologies may be developed that have advantages over our products and make our products less attractive to customers.  New products or new technologies may be developed that supplant or provide lower-cost or better performing alternatives to our products.  For example, many of the products we sell are based on the IEEE 802.11a/b/g standards.  We believe products are being developed based on various new IEEE 802.11 standards, such as 802.11n (MIMO), 802.11r (fast roaming), and 802.11s (wireless mesh), and IEEE 802.16 (also known as WiMAX) standards which may have advantages over products based on the IEEE 802.11a/b/g standards, such as greater data transmission capabilities, greater quality of service, non-line of sight capabilities, and longer range.

· The actual or potential availability of new broadband connectivity technologies could cause our customers to delay buying decisions.  We operate in a business where there is rapid technological change, and new standards, products, and technologies are continually introduced to the market in actual or conceptual form.  These new products or technologies may have or appear or be described to have advantages over our products or other products then currently available.  Even though actual products may not be available until some (perhaps indefinite) time after initial introduction of the conceptual standard, product, or technology, the possibility of obtaining these new products could cause potential customers to delay their decision to buy products such as ours.  This delay could adversely impact our business, financial condition, and results of operations.

· The costs of developing products to operate in accordance with these new broadband connectivity technologies would be substantial and could adversely affect our operating results.  As a well-known supplier of broadband wireless equipment, we are expected to provide products on the cutting-edge of technology.  This means supplying products operating in accordance with new broadband connectivity technologies.  Developing these products is a time-consuming and expensive process.  These costs could adversely affect our operating results.  Alternatively, if we do not develop new products, customers may view us as not maintaining our technological leadership so be unwilling to purchase products from us.

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· We are selling into a market that has a broad range of desired product characteristics and features which may make it difficult for us to develop products that will address a broad enough market to be commercially viable.  We are selling into a market place that is experiencing a convergence of competing technologies.  The market that we currently serve is experiencing a convergence of voice driven telecommunications methodology and data centric networking based methodology.  As a result there exists a divergence of product requirements and corporate cultures for our customers and even within the same customer.  Typically, established telecommunications providers desire extremely robust products with the expectation of a relatively long effective life.  Networking providers on the other hand are looking for optimal performance at any given time with the assumption that they will be upgrading the equipment again in several years and therefore are extremely cost sensitive.  In addition, established telecommunications providers seek products that fit into their existing networks (T-1, E-1, OC-3, OC-12 interfaces and data rates) while networking based providers prefer ethernet interfaces and data rates.  If we are unable to satisfy one or more of the requirements of our current and prospective customers, we may lose, or fail to gain, meaningful market share.

· We may not develop products for the portions of the broadband connectivity and access markets that grow.  Predicting which segments of the broadband connectivity and access markets will develop and at what rate these markets will grow is difficult.  We may needlessly spend money and resources developing products for a market that does not develop.  On the other hand, we may miss market opportunities if we fail to act promptly and decisively to develop new products.  These issues may be exacerbated due to our primary research and development being done in Hyberabad, India.  Our business, financial condition, and results of operations will be materially adversely affected if we develop the wrong product or miss market opportunities.

· Our sales may decline if we are unable to keep pace with rapid technological changes and industry standards.  Our ability to succeed in our competitive market will depend upon successful development, introduction, and sale of new products and enhancements on a timely and cost-effective basis in response to changing customer requirements and competitors’ product developments.  We may not be successful in selecting, developing, manufacturing, and marketing new products or enhancements which could adversely affect our sales.  Our customers may believe that we are not investing sufficiently in research and development to maintain a strong pipeline of new products and therefore decide not to purchase current products from us.

· We believe that the prices for our products will decline over time which could hurt our financial results.  We believe that average selling prices for our products will tend to decline from the point at which a product is initially priced and marketed.  Reasons for this decline may include the maturation of such products, the effect of volume price discounts in existing and future contracts, technology changes, and the intensification of competition, including from lower-cost foreign suppliers.  This price decline could hurt our financial results.

· The expected price decline of our products will hurt our financial results unless we are able to offset those declines with cost savings or new product introductions.  We will attempt to offset expected price declines of our products by reducing our product costs and non-product costs and by introducing new products with higher gross margins.  If we are unable to offset declining selling prices by reducing direct materials and manufacturing expenses, our gross margins will decline.  If we cannot develop new products in a timely manner or we fail to achieve increased sales of new products at higher gross margins, our revenue and gross margins may decline.

· Our plans to continue to introduce new products will require capital and other investments that may not be recovered.  We devote significant resources to the development and marketing of new products and technologies and expect to continue to do so.  These investments include facilities, equipment, inventory, personnel, and other items to develop and produce these products and to provide marketing, sales, service and support, and administration organizations to service and support these products.  We anticipate many of these commitments and expenditures would be made in advance of realization of increased sales, which may not occur.  If sales do not increase as expected, our gross margins and general financial performance would be adversely affected.

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· Our financial results have fluctuated significantly, and we expect the fluctuations will continue for a variety of reasons, many of which are out of our control.  Our quarterly financial results have fluctuated significantly for a number of reasons including our acquisitions of the assets of Proxim Corporation in July 2005; Terabeam Corporation, Ricochet Networks, Inc., and KarlNet, Inc. in the second quarter of 2004; the combination of Telaxis and Young Design in April 2003; our limited long-term commitments from customers; the receipt of significant customer orders from time to time; timing of obtaining customers for any new products we may introduce; the mix of our product sales; our manufacturing capacity constraints and our ability to fulfill orders; our inability to obtain components in the quantities we need; new product introductions by us or by our competitors; seasonal factors that may affect capital spending by customers; and general economic conditions.  We expect that many of these and other factors will continue to affect our business and will cause our financial results to fluctuate in the future.

· Our past acquisition and disposition activity contributes to the difficulty in predicting our future financial performance.  The combination of Telaxis and Young Design in April 2003 resulted in changes in our financial performance.  The historically unprofitable financial results of Telaxis caused the operating results of the combined company to be unprofitable in the second quarter of 2003.  Although the combined company did briefly return to profitability, the acquisitions of the unprofitable Terabeam Corporation, KarlNet, Inc., and Ricochet Networks, Inc. in the second quarter of 2004 have caused the company to be unprofitable in later 2004 and early 2005.  However, the company’s balance sheet was significantly stronger given the addition of the assets from the acquired companies.  These additional assets enabled us to acquire the operations of Proxim Corporation in July 2005, which has significantly increased our revenue but also our expenses.  Then in July 2007, our Ricochet Networks subsidiary discontinued its operations in the San Diego metropolitan area and sold its operations in the Denver metropolitan area.  These acquisitions and dispositions have caused our financial results to fluctuate, sometimes dramatically.  These past transactions and potential future acquisition or disposition activity could contribute to fluctuations in our financial results and to difficulties in predicting our financial performance.

· We may not achieve the contemplated benefits of any acquisition we make which could materially and adversely affect our business.  We may not be able to achieve the expected synergies and other benefits of any acquisitions we make at all or to the extent and in the time periods expected.  We may not be able to integrate the operations in a cost-effective, timely manner without material liabilities or loss of desired employees, suppliers, or customers.  Our management may be distracted from our core business due to the acquisition.  The expected cost savings from the transaction may not be fully realized or may take longer to realize than expected.  The time and costs required to integrate, establish, manage, and operate the operations we acquire may be greater than we anticipated.  Our investors, competitors, customers, suppliers, employees, and others may react negatively to the acquisition.  We may make acquisitions in business areas in which we have little experience operating so may not fully benefit from the acquisition.  We may face unexpected difficulties, costs, and delays in implementing common internal controls, disclosure controls, systems, and procedures, including financial accounting systems, particularly in light of the enhanced scrutiny given to those items in the current environment.  Addition of these operations may increase the difficulty for us, financial analysts, and others to predict the combined company’s future business and financial performance.  These factors may cause us to want or need to raise additional debt or equity capital, which, if available at all, may be on terms deemed undesirable by investors, customers, suppliers, employees, or others.  These factors could materially and adversely affect our business, perception in our market, and financial results.  Should these factors materially and adversely affect our business, it could result in a material impairment charge to write-down goodwill.

· Our past acquisitions and dispositions have exposed us to risks and liabilities, which could have a material adverse affect on our business.  We have been and may be further exposed to lawsuits, risks, liabilities, or obligations imposed on or threatened against us arising from the various acquisition and disposition activities we have undertaken.  For example, we believe that Symbol Technologies, Inc. commenced its lawsuit against us as a result of our acquiring Proxim Corporation’s operations.  Our acquisition of Terabeam Corporation exposed us to a substantial number of leases for unused facilities, not all of which have been resolved to date.  The sale and transfer by our Ricochet Networks subsidiary of the operations of the Ricochet® network in the Denver metropolitan area could expose us to liabilities and obligations as not all the contracts relating to those Denver operations have been formally transferred to the buyer.  Under our agreement to buy KarlNet, Inc., we agreed to pay up to an additional $2.5 million if certain conditions were met.  Although it is our position that none of that amount is owed, we have received

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a letter from sellers demanding payment of a portion of this amount.  These contingencies and risks could result in obligations and liabilities for us, which could have a material adverse affect on our business.

· Purchase accounting treatment and the impact of amortization and impairment of intangible assets relating to the Proxim Corporation asset purchase and other acquisitions could cause our operating results to be adversely affected.  In accordance with generally accepted accounting principles, we accounted for the Proxim Corporation asset purchase using the purchase method of accounting.  We have allocated the cost of the individual assets acquired and liability assumed, including various identifiable intangible assets (such as acquired technology and acquired trademarks and trade names), based on their respective fair values at the date of the completion of the acquisition.  For example, in the third quarter of 2006, we recorded a charge of $4.8 million related to the developed technology acquired from Proxim Corporation.  Also, in the fourth quarter of 2007, we recorded a charge of $8.1 million for impairment of goodwill and intangible assets.  We may be required to further reduce the carrying value of these assets in the future which could adversely impact our financial results.

· The fact that we receive few long-term purchase commitments from customers contributes to the difficulty in predicting our future financial performance.  Due to the nature of our products and customers, we generally have a very short time between receiving an order and shipping the order.  Few of our customers provide us with long-term purchase commitments.  As a result, we generally have a relatively low backlog and have limited visibility of sales going forward.  This lack of visibility contributes to the difficulty in predicting our future financial performance by us, financial analysts, and investors.

· The fact that we receive few long-term purchase commitments from customers contributes to our inventory risk which could adversely affect our financial results.  Due to the nature of our products and customers, we generally have a very short time between receiving an order and shipping the order.  Few of our customers provide us with long-term purchase commitments.  As a result, we generally have limited visibility of sales going forward.  However, our customers generally demand relatively quick delivery of products.  This means that we have to estimate product demand.  If we under-estimate demand, we may lose sales.  If we over-estimate demand, we may end up with having to take charges for excess and/or obsolete inventory.  For example, in the fourth quarter of 2007, we recorded a charge of $2.5 million related to excess and obsolete inventory.  These factors could adversely affect our financial results.

· Receipt of significant customer orders have caused our financial results to fluctuate and contribute to the difficulty in predicting our future financial performance.  At times, we have received significant orders from customers that have caused our financial results to fluctuate.  For example, we received large orders from a single customer in 2003 that contributed positively to the financial results of several quarters in 2003.  The non-recurrence of those orders in 2004 made our financial results look worse in comparison.  We expect that at times we may get similar significant orders in the future which could cause significant fluctuations in sales, gross margins, and operating results.  These fluctuations contribute to the difficulty in predicting our future financial performance by us, financial analysts, and investors.

· Difficulties in obtaining the components we need to manufacture our products have caused our financial results to fluctuate and contribute to the difficulty in predicting our future financial performance.  At times we have been unable to obtain sufficient components to manufacture certain of our products.  We believe this shortage had a negative impact on our revenue and financial results for those quarters.  Given the number of components in our products, the age of some of our products, and the limited number of suppliers of some of these components, we may experience similar component shortages from time to time in the future.  These shortages could contribute to fluctuations in our financial results and to the difficulty in predicting our future financial performance.

· We expect that changes in stock option accounting rules will adversely impact our reported operating results and may adversely affect our competitiveness in the employee marketplace.  We have adopted FASB Statement No. 123R (“SFAS 123R”), Share-Based Payment, as our accounting method for stock options for accounting periods beginning January 1, 2006 and after.  SFAS 123R requires that all share-based payments to all employees, including grants of employee stock options, are to be included in the financial statements based on their fair values.  The adoption of SFAS 123R and resulting charges on our financial statements have significantly reduced our operating and net income and we expect will continue to do so.  These charges may result in our having operating and net losses rather than

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operating and net profits.  As a result of adopting the changes specified in SFAS 123R, it could negatively impact our use of employee stock plans to reward employees, putting us at a competitive disadvantage in attracting and retaining key employees.

· Our indirect sales model makes us dependent on third party distributors and resellers, which could adversely impact our financial results and reputation.  Most of our products are sold through both domestic and international distributors and resellers.  These distributors generally focus on selling to a specific market or geographic region.  These distributors and resellers carry and sell products from other suppliers in addition to our own.  We expect to continue to engage additional distributors and resellers to sell our products.  Use of distributors and resellers makes us dependent, to some extent, on those third parties who will have the relationships with the end customers.  We may not be successful in attracting qualified distributors and resellers.  Use of these distributors and resellers could cause significant fluctuation in and adversely impact our future revenue and operating results due to price, extended payment term, and other concessions demanded by our distributors, our limited relationships with actual end-users of our products, the time and costs associated with maintaining our distributor and reseller relationships, the time and costs associated with engaging new distributors and resellers, the possibility that they may give other suppliers’ products priority over our own, the possibility of channel and price conflict, the possibility of customer confusion and customer dissatisfaction, and potential accounting, operational, and financial results problems if they build excess inventory.

· We have a limited number of distributors so any decrease in business from them could cause a decline in our revenue.  The loss of business from any of our distributors or the delay of significant orders from our distributors could significantly reduce our revenue, even if it is only temporary.  We do not have long-term contracts with our distributors.  Our ability to accurately forecast our revenue hinges on the timing and size of future purchase orders taken by our distributors.  Any reduction in revenue could have a materially adverse affect on our operating results and financial condition.

· We may be unsuccessful in our efforts to obtain larger customers, and these efforts could adversely impact our current business.  We are trying to expand our customer base by obtaining larger customers.  Our efforts may not be successful.  For example, larger customers may not want to deploy products like many of ours that operate in unlicensed frequencies or they may seek products with feature sets that are different from what we offer.  Our efforts could adversely impact our current business due to diversion of efforts and attention, our current customers not being pleased by our customer expansion efforts, and other reasons.

· Our business depends in part on continued demand for broadband connectivity and access.  The future success of our business is dependent in part upon the continued and increasing demand for high-speed, broadband connectivity and access, particularly with regard to the Internet, and for high-speed telecommunications products.  The markets for such services may not grow at all or as expected.

· We depend on our senior employees who are extensively involved in many aspects of our business, and our business would likely be harmed if we lose their services and cannot hire additional qualified personnel.  Particularly because we are a relatively small company, our future operating results depend in significant part upon the continued contributions of senior management and key sales and technical personnel, many of who would be difficult to replace if their services become unavailable to us due to death, illness, or other reasons.  Future operating results also depend upon the ability to attract and retain qualified management, sales, and technical personnel.  Competition for these personnel is intense, and we may not be successful in attracting or retaining them.  Only a limited number of persons with the requisite skills to serve in these positions may exist, and it may be difficult for us to hire the skilled personnel we need.  We have experienced difficulty in attracting, hiring, and retaining experienced sales personnel with the right blend of skills for our company, and we may experience difficulty with other types of personnel in the future.

· We have no key-man life insurance on any of our executive officers or other employees.  Loss of the services of any of our key executive officers or other key employees could have a material adverse effect on our business, financial condition, and results of operations.  The lack of key man insurance means that we would receive no insurance proceeds to buffer any such adverse effects.

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· We do not currently have a succession plan in place.  We currently do not have a succession plan in place if our chief executive officer or other senior personnel were to become unable to perform their responsibilities due to illness, injury, termination of service, or other reasons.  Loss of the services of our chief executive officer or other senior personnel could have a material adverse effect on our business, financial condition, and results of operations.  Lack of a succession plan could exacerbate our difficulties in overcoming the issues created by the loss of services of our chief executive officer or other senior personnel due to uncertainty and responsibility transition issues.

· Our recent change of Chief Executive Officer may be viewed negatively and have an adverse impact on our business.  In January 2008, we announced that we had terminated our former Chief Executive Officer without cause and promoted our former President to the combined position of President and Chief Executive Officer.  In February 2008, we announced payments to our former Chief Executive Officer in connection with that termination of approximately $780,000 and other terms of his separation.  Investors, employees, customers, suppliers, and others could react negatively to the termination of our former Chief Executive Officer, the amounts paid to our former Chief Executive Officer, and the promotion of our former President.  The terms of his separation and these potential negative reactions could adversely impact our revenue, capital needs, ability to retain employees, relations with customers, suppliers, investors, and others, and business in general.

· Our limited internal manufacturing capacity may be insufficient to meet customers’ desires for our products, which could harm our sales and damage our reputation.  Our internal manufacturing capacity, by design, is limited.  At times, we have been unable to deliver certain internally-manufactured products as quickly and in the quantities that customers desire.  These inabilities could damage relationships with customers and have a material adverse effect on our reputation, business, financial condition, and results of operations.

· Our limited internal manufacturing capacity makes us dependent on contract manufacturers, which could harm our sales and damage our reputation.  Our internal manufacturing capacity, by design, is limited.  We currently expect to rely on domestic and international contract manufacturers to provide manufacturing of our complete products, components, and subassemblies.  Our failure to obtain satisfactory performance from any contract manufacturers could cause us to fail to meet customer requirements, lose sales, and expose us to product quality issues.  For example, a recent decision by one of our contract manufacturers to transition manufacturing to China has had a negative impact on our ability to obtain quality product in the quantities and at the times desired.  In turn, this could damage relationships with customers and have a material adverse effect on our reputation, business, financial condition, and results of operations.

· We may be unable to engage contract manufacturers to manufacture our products which could force us to increase our internal manufacturing capacity.  The technical nature of our products, the wide variety of our products, and the current uncertainty and historical fluctuation in our business may make contract manufacturers unwilling or reluctant to manufacture products for us at all or on acceptable terms.  It may be difficult and time-consuming to engage a third-party manufacturer or manufacturers.  If we are unable to engage a third-party manufacturer or manufacturers, we may have to increase our internal manufacturing capability.  We may be unable to do so at all or without significant expense.

· Interruptions in our manufacturing operations could have an adverse effect on our revenue.  Any interruption in our manufacturing operations could cause our product supply to be interrupted or lose market opportunities and have an adverse affect on our revenue, customer relationships, and operating results.  Interruptions could result from  introduction of new products or processes; timing, language, cultural, and other issues arising from the use of contract manufacturers located outside the U.S.; terminations of relationship with manufacturers; not producing products at adequate capacity; delays in shipments of our products due to changes in demand; or insufficient quality or quantity of products.

· Because many of our components or products are provided by limited or single-source suppliers, we may not be able to obtain sufficient quantities to meet our business needs.  Many of the components, subassemblies, and services necessary for the manufacture of our systems are obtained from a sole supplier or a limited group of suppliers.  We generally do not have any committed long-term supply agreements with these vendors.  We have from time to time experienced an inability to obtain an adequate supply of

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required components and subassemblies.  Our inability to obtain these components in the quantities and at the times we desire could halt production, reduce our ability to meet customer demands, and reduce our sales.

· Because many of our components or products are provided by limited or single-source suppliers, we may not be able to obtain sufficient quantities at prices to make our products profitably.  Many of the components, subassemblies, and services necessary for the manufacture of our systems are obtained from a sole supplier or a limited group of suppliers.  Our inability to obtain these items at the prices we desire could hurt our sales and lower our margins.

· Because many of our components or products are provided by limited or single-source suppliers, we may have to purchase extra inventory that ultimately may not be used.  Many of the components, subassemblies, and services necessary for the manufacture of our systems are obtained from a sole supplier or a limited group of suppliers.  A supplier may decide to end the manufacture of a product and provide us with an opportunity to make a last-time buy of the product.  In that situation, we have to estimate our future needs for that product.  If we underestimate, we would have an insufficient supply to manufacture our products.  If we overestimate, we may end up purchasing inventory that is not used or becomes obsolete and that ultimately we have to write off.  That loss could adversely affect our financial results.

· Our inability to receive sufficient quantities of limited or single source components or products could make us develop alternative sources, which could reduce our sales and may be time consuming and expensive if it can be done at all.  In the event of a reduction or interruption in the supply of a key component, we may have to develop alternative sources for the component.  We may not be able to locate an alternative supplier of certain products or components at all or at acceptable prices.  Our inability to develop alternative sources for components could result in delays or reductions in product shipments, increase our costs, and reduce or eliminate our profit margins.  Even if we are successful at developing alternative sources, a significant amount of time could be required to receive an adequate flow of components from the alternative source.

· Our inability to receive sufficient quantities of limited or single source components or products could make us reconfigure our products, which could reduce our sales and may be time consuming and expensive if it can be done at all.  In the event of a reduction or interruption in the supply of a key component, we may have to reconfigure our products to work with different components.  Reconfiguration of our products to adapt to new components could entail substantial time and expense.  We may be unable to reconfigure our products to work with new components.  Even if we are successful at reconfiguring our products, a significant amount of time could be required to receive an adequate flow of replacement components.

· Our reliance on limited or single-source suppliers makes us vulnerable to difficulties at those suppliers.  The production of our products is vulnerable to production difficulties, quality variations, work stoppages, acts of God such as weather and fire, and other events beyond our control at our suppliers.  All of these events could adversely affect the cost and timely delivery of our products.

· Failure to maintain adequate levels of inventory could result in a reduction or delay in sales and harm our results of operations.  In a competitive industry such as the wireless telecommunications equipment industry, the ability to effect prompt turnaround and delivery on customer orders can make the difference in maintaining an ongoing relationship with our customers.  This competitive market condition requires us to keep some inventory of certain products on hand to meet such market demands.  Given the variability of customer requirements and purchasing power, it is difficult to predict the amount of inventory needed to satisfy demand.  If we over- or under-estimate inventory requirements to fulfill customer needs, our results of operations could be adversely affected.  If market conditions change swiftly, it may not be possible to terminate purchasing contracts in a timely fashion to prevent excessive inventory increases.  In particular, increases in inventory could materially adversely affect operations if such inventory is ultimately not used or becomes obsolete.

· Our failure to effectively manage our recent and anticipated future growth could strain our management, infrastructure, and other resources and adversely affect our results of operations.  We expect our recent and anticipated future growth to present management, infrastructure, systems, and other

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operating issues and challenges.  These issues include controlling expenses, the development, introduction, marketing, and sales of new products, the development and application of consistent internal controls and reporting processes, the integration and management of a geographically and ethnically diverse group of employees, and the monitoring of third-party manufacturers and suppliers.  Any failure to address these issues at a pace consistent with our business could cause inefficiencies, additional operational expenses and inherent risks, greater risk of billing delays, inventory write-downs, and financial reporting difficulties.

· Difficulties in reducing our operating expenses could harm our results of operations.  A material portion of our operating expenses is fixed.  If we experience a material reduction or delay in sales, we may find it difficult to reduce our operating expenses on a timely basis.  Difficulties of this nature would adversely affect our financial condition and harm our operating results.

· War in Iraq and the war on terrorism could adversely affect domestic and international demand for our products.  The war in Iraq and on terrorism has led to economic uncertainty at home and abroad which could impact the demand for our products.  Customers as a result may reduce their spending on our products coupled with the increased shipping costs and delays due to heightened security, which could have a material adverse affect on our operating results.

· We typically permit flexible purchase order changes that may adversely affect our margins and operating results.  We have typically permitted purchase orders to be modified or canceled with limited or no penalties.  Any inability or failure to reduce actual costs or cancel supplier and contract manufacturing commitments in response to a customer modification or cancellation could adversely affect our gross margins and operating results.

· Our business and financial results could be adversely affected by warranty claims.  Products as complex as ours frequently contain undetected errors or defects, especially when first introduced or when new versions are released.  This is especially a concern for us given our anticipated continuing introduction of new products.  The occurrence of such errors or defects could result in products being returned under warranty for repair or replacement with us having to bear the associated expense.  Although we maintain what we believe to be appropriate overall warranty reserves based on historical repair occurrences, an unanticipated high repair occurrence related to a specific product or number of products could make the reserves inadequate at any specific time and adversely affect our financial results.

· Our business and financial condition could be adversely affected by product liability claims.  Products as complex as ours frequently contain undetected errors or defects, especially when first introduced or when new versions are released.  This is especially a concern for us given our anticipated continuing introduction of new products.  The occurrence of such errors or defects could result in product liability claims being brought against us.  Although we have not had any material product liability claims brought against us to date, such claims may be brought in the future and could adversely affect our financial results.

· Our international business activities expose us to a number of risks not present in our United States operations, which we have limited experience addressing.  Our international business activities may carry additional costs, risks and difficulties, including complying with complex foreign laws and treaties applicable to doing business and selling our products in other countries; availability of suitable export financing; timing and availability of export licenses; tariffs and other trade barriers; difficulties in staffing and managing foreign operations; difficulties in complying with foreign customs and general ways of doing business; and political and economic instability which may be more pronounced in less-developed areas.  We have limited experience in facing many of these issues and may not be able to address the issues in a manner to enable us to expand our international sales and operations.

· Because of international sales and operations, we may be exposed to currency risk that could adversely affect our financial condition and results of operations.  Particularly following our acquisition of the operations of Proxim Corporation, a significant portion of our sales to date have been made to customers located outside the United States, and we expect that a significant portion of our future sales will continue to be to customers outside the United States.  We are currently trying to increase our sales to customers outside the United States.  Historically, our international sales have been denominated in United States dollars.  For international sales that are denominated in United States dollars, a decrease in the relative value of foreign currencies could make our products less price-competitive and could have an

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adverse effect on our financial condition and results of operations.  For any international sales denominated  in foreign currencies, a decrease in the value of the foreign currencies relative to the United States dollars could result in decreased margins from those transactions.

· Given the extent of our international operations, the decline in the value of the dollar has increased our expenses.  We have significant international operations and employees located in countries outside the United States.  Often salaries of those employees and other expenses of our international operations are paid in local currency of the applicable countries.  The value of the dollar has declined recently relative to the value of many currencies of other countries.  This decline has had the impact of increasing the net expense to us of our international operations.  Given the relatively fixed nature of these expenses, it is difficult to reduce these expenses quickly.  Continued decline in the value of the dollar will continue to increase the net expense of our international operations.  These increased expenses can adversely affect our results of operations and overall financial condition.

· The laws and legal systems of foreign governments may limit our ability to enforce our rights against our customers.  Our customer purchase and other agreements may be governed by foreign laws, which may differ significantly from United States laws.  Also, the court systems and procedures in foreign countries may differ significantly from United States courts.  Therefore, we may be limited in our ability to collect our accounts receivable, to enforce our other rights under such agreements, and to collect damages, if awarded.

· Lack of relationships in foreign countries may limit our ability to expand our international operations and sales.  In many cases, regulatory authorities in foreign countries own or strictly regulate local telephone companies.  Established relationships between government-owned or government-controlled telephone companies and their traditional indigenous suppliers of telecommunications equipment often limit access to those markets.  The successful expansion of our international operations in some markets will depend in part on our ability to form and maintain strong relationships with established companies providing communication services and equipment or other local partners in those regions.  The failure to establish regional or local relationships could limit our ability to successfully market or sell our products in international markets and expand our international operations.

· Governmental regulation affecting markets in which we compete or products we make or services we offer could adversely affect our business and results of operations.  Radio communications and services are extensively regulated by the United States and foreign governments as well as by international treaties.  To operate in a jurisdiction, we must obtain regulatory approval for our products and comply with differing and evolving standards and regulations.  The delays inherent in this approval process may cause the cancellation, postponement, or rescheduling of the installation of communications systems by us and our customers.  The failure to comply with regulations in a jurisdiction could result in the suspension or cessation of our ability to operate in that jurisdiction.  New regulations or changes in the interpretation of existing regulations could require us to modify our products or services and incur substantial costs to bring our products or services into compliance.

· Our products typically require regulatory approval before they can be commercially deployed.  Our products must typically receive regulatory approvals before they can be commercially deployed.  As a result, customers may require that we obtain these approvals before buying or agreeing to buy our products.  Obtaining these approvals can be a long, expensive process.  Delays in obtaining the necessary approvals could hinder market acceptance of our products, delay sales of our products, and adversely affect our ability to market those products.

· New regulations could have an adverse impact on our ability to supply products and our financial results.  New regulations could be enacted that adversely impact our business.  For example, the directive on the restriction on the use of certain hazardous substances in electrical and electronic equipment (RoHS directive) limits the use of substances (such as lead and mercury) in products sold in the European Union marketplace.  Also, the directive on waste electronic and electrical equipment (WEEE) imposes obligations on suppliers of electronic equipment sold in the European Union marketplace.  New regulations such as these may disrupt our supply of components needed to supply our products at the times and in the quantities desired by our customers.  They may also require that we revise the design of some of our products and have some of our products re-qualified with our customers or regulatory agencies.  The new

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regulations may increase the costs of supplying products.  These results could adversely impact our product supply capabilities, relationships with customers, and financial results.

· Changes in governmental regulation could adversely affect our competitive position.  Governmental laws and regulations applicable to our products and services evolve and change frequently.  These changes could hurt our competitive position.  For example, a point we often use in marketing our equipment products is that our products have been approved by the United States Federal Communications Commission, which sometimes can be a long, expensive process.  The Federal Communications Commission may relax this approval process and potentially allow more products to operate as approved products.  If enacted, these regulations could make it easier for competitive products to qualify as products approved by the Federal Communications Commission.  Conversely, if the Federal Communications Commission made the certification process more difficult, it could impede our ability to bring products to market in a timely manner.  In either case, this could adversely affect our competitive position.  Similarly, changes in the laws and regulations applicable to our service business could adversely affect our competitive position in that business.

· We are subject to domestic and international authorities’ allocations of the radio frequency spectrum.  Equipment to support new systems and services can be marketed only if suitable frequency allocations are made available to telecommunications service providers.  The process of allocating frequencies to service providers is typically expensive, complex, and lengthy.  If service providers and others are delayed in deploying new systems and services, we could experience lack of orders or delays in orders.  Similarly, failure by regulatory authorities to allocate suitable frequency spectrum could have a material adverse effect on our results.

· At time we rely on a limited number of customers for a material portion of our sales, which exposes us to risks relating to the loss of sales and credit risk.  For the year ended December 31, 2007, three unrelated customers each accounted for more than 10% of our sales.  In addition, we have a number of other substantial customers.  We are currently attempting to increase our number of substantial customers which could increase our customer concentration risks.  Our ability to maintain or increase our sales in the future will depend in part upon our ability to obtain additional orders from these customers.  Our customer concentration also results in concentration of credit risk.  An acquisition of one of our significant customers could cause any current orders to be delayed or canceled and no new orders being placed with us and could further concentrate our customer base.  Adverse developments such as these with our significant customers could adversely impact our sales and financial results.

· The continuing uncertainty in the telecommunications industry has caused us to maintain tight credit limits, which may be adversely affecting our sales.  Many of our potential customers have faced or are facing financial difficulties due to the industry-wide uncertainty and depressed conditions.  As a result, we have maintained what we believe to be stringent policies concerning the extension of credit to potential customers.  We believe that these tight credit policies may be limiting our sales.  As a result, we may loosen our credit policies, which may increase our sales but may also increase the likelihood of having bad debts from customers who can’t or won’t pay.

· Given the relatively small size of some of our customers, they may not be able to pay for the products they purchase from us in the time period we expect or at all.  We are subject to credit risk in the form of trade accounts receivable.  We could face difficulties in receiving payment in accordance with our typical policies allowing payment within 30 days, although we have granted longer terms to some customers.  Some of our customers are new and smaller service providers which do not have the financial resources of existing, larger service providers.  Any delay, inability, or refusal to pay for purchases of our products may materially adversely affect our business.  Difficulties of this nature have occurred in the past, and we believe they will likely occur in the future.

· Our failure or inability to protect our intellectual property could adversely affect our business and operations, particularly in our equipment business which has otherwise relatively low barriers to entry.  Our ability to compete depends in part on our ability to protect our intellectual property.  The steps we have taken to protect our technology may be inadequate to prevent misappropriation of our technology and processes.  Existing trade secret, trademark, and copyright laws offer only limited protection.  Our patents could be invalidated or circumvented.  Inability or failure to protect our intellectual property could

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remove a barrier to a competitor entering our broadband wireless equipment business, which in general has lower barriers to entry than other businesses.

· Laws of foreign countries where we do business may provide less intellectual property protection for our products, which could adversely affect our ability to compete in our price-sensitive business.  The laws of certain foreign countries in which our products are or may be developed, manufactured, or sold may provide less protection for the intellectual property contained in our products.  We may not seek to obtain patents and other forms of intellectual property rights in certain foreign countries to the same extent we seek United States patents and other forms of intellectual property protection, which could reduce our international protection.  This may make the possibility of piracy of our technology and products more likely.  This piracy could result in cheaper copies of our products being available on the market, which could adversely affect our business and financial results.

· Our intellectual property rights do not prevent other companies from developing similar technology, which could be superior to ours.  Other companies could develop products that use similar and perhaps superior technology.  This technology could be developed in a way to not violate or infringe our intellectual property rights.  As a result, our intellectual property rights provide no assurance that competing and perhaps superior products won’t be developed, even if we are able to protect our intellectual property rights.

· We may engage in litigation to protect our intellectual property, which could be costly, long, and distracting even if ultimately successful.  If we believe our intellectual property rights are being infringed, we may commence litigation or take other actions to enforce our patents, protect our trade secrets and know-how, or determine the scope and validity of the patents or intellectual property rights of others.  There can be no assurance that we would be successful in any such litigation.  Further, any lawsuits we commence would increase the likelihood of counterclaims being brought against us by the companies we sue.  Any litigation could result in substantial cost and divert the attention of our management, which could harm our operating results and future operations.

· Much of our material intellectual property is not protected by patents, which may reduce the extent to which we can protect our intellectual property.  We rely primarily on trade secret laws, confidentiality procedures, patents, copyrights, trademarks, and licensing arrangements to protect our intellectual property.  While we do have a number of patents, the patents alone do not provide significant protection for much of our intellectual property used in our current equipment products.  A significant portion of our proprietary technology is know-how, and employees with know-how may depart before transferring their know-how to other employees.  The fact that much of our intellectual property is not covered by patents could reduce the extent to which we can protect our rights in that intellectual property.

· Our products and operations could infringe on the intellectual property rights of others, which could have an adverse impact on our business.  We would have to address any such infringements by seeking licenses, altering our products, or no longer selling the products.  Any licenses we may be required to seek may be expensive or otherwise onerous.  Similarly, changing our products may be costly, time-consuming, and impractical and could detract from the value of our products.  A party making a claim of infringement could secure a judgment against us that requires us to pay substantial damages.  A judgment could also include an injunction or other court order that could prevent us from selling our products.  Any claim of infringement by a third party also could cause us to incur substantial costs defending against the claim, even if the claim is invalid, and could distract the attention of our management.  Any of these events could seriously harm our business.

· Our settlement of the litigation commenced against us by Symbol Technologies adversely impacts our financial results.  In February 2006, we settled the lawsuit that had been brought against us by Symbol Technologies, Inc. alleging that certain of our products violated certain of their patents.  Symbol had successfully sued Proxim Corporation alleging that certain of Proxim Corporation’s products infringed two of the Symbol patents that Symbol asserted against us.  As part of the settlement, we agreed to pay Symbol fixed royalties totaling $4.3 million through the second quarter of 2009.  We will have to pay these royalties even if we discontinue the sale of products alleged by Symbol to violate their patents.  Additionally, we may end up paying Symbol more fixed royalties than we would have paid if we had negotiated a royalty based on product sales or some other contingent basis.  As a result, the settlement of

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the Symbol litigation adversely impacts our financial results, and the impact may be more adverse than if we had attempted to and had been successful in settling the litigation on some other basis.  Additionally, our willingness to settle these claims brought by Symbol may increase the likelihood that other companies will commence similar claims against us.

· The pending intellectual property infringement litigation could have an adverse impact on our business.  On June 1, 2007, Linex Technologies, Inc. filed suit against us seeking damages for alleged infringement by our mesh products of two United States patents purportedly owned by Linex.  This matter is at an extremely early stage, and there can be no assurance that the outcome of these claims will be favorable for us.  Even if we are completely successful in defending the claims asserted against us in this lawsuit, we expect we will incur significant defense costs and that management, technical, and other personnel will be distracted and diverted by this lawsuit.  If we are unsuccessful in defending against this lawsuit, we may be required to pay damages to Linex for past infringement as well as a royalty on future product sales.  All of these issues could have an adverse impact on our ability to sell our products, operating results, need for capital, and business in general.

· Compliance with new governmental regulations, such as Section 404 of the Sarbanes-Oxley Act, could increase our costs and adversely impact our financial results.  Increasing amounts of time and resources are being spent on complying with ever-changing governmental regulations and public disclosure requirements.  Specifically, Section 404 of the Sarbanes-Oxley Act currently requires that management and independent public accountants review and evaluate annually internal control systems of companies subject to that section and attest to their effectiveness.  We are not currently subject to the auditor review portions of Section 404 and do not know when or if we will be required to comply with the requirements of that section or what the requirements will be if and when we become subject to that section.  However, in anticipation of becoming subject to that section, we have begun our compliance efforts and are expending related time and costs.  The costs and time required to become Section 404 compliant could be substantial, even assuming we are completely successful.  In addition, even before becoming subject to Section 404, we are being billed significantly increased independent auditor fees, we believe largely due to the Sarbanes-Oxley Act and other regulations.  Compliance with the Sarbanes-Oxley Act and other regulations could cause us to increase our legal, accounting, other personnel, and other costs as more time and personnel would be needed to help maintain compliance.  These costs of compliance could adversely impact our financial results.

· We are a defendant in pending stockholder litigation that could materially and adversely affect our business.  We are a party to four purported securities class action lawsuits.  These lawsuits relate to the underwriters’ alleged unlawful activities in connection with our initial public offering in February 2000.  The lawsuits have been assigned along with approximately 1,000 other lawsuits making substantially similar allegations against hundreds of other publicly traded companies and their public offering underwriters to a single federal judge for consolidated pre-trial purposes.  A tentative settlement of these lawsuits had been reached between the plaintiffs and affected companies, but that proposed settlement was terminated due to higher court rulings.  With the termination of that proposed settlement, we continue to defend the litigation vigorously.  These lawsuits are at a relatively early stage and involve substantial uncertainty and, accordingly, we cannot predict the outcome.  Defending lawsuits of this nature can be a lengthy and expensive process, and we may not prevail.  Even if we prevail or the action is settled, the costs associated with these lawsuits could be substantial.  In addition, these lawsuits could have other material adverse impacts on us, such as management distraction, adverse publicity, and adverse reaction from the financial markets, from our customers, or from actual or potential strategic partners.  The difficulties and uncertainties relating to these lawsuits very likely may be increased and complicated because of the large number of pending similar cases and other parties involved.  The outcome of these lawsuits could materially compromise our ability to continue to operate our business.

· Proceeds under our directors’ and officers’ insurance policies may be unavailable or insufficient to cover our exposure arising from the pending stockholder litigation.  We have a total of $15 million in directors and officers insurance coverage applicable to this pending stockholder litigation.  We currently believe that this insurance coverage would be sufficient to cover our exposure arising from that litigation.  However, the insurance proceeds may be unavailable if the companies issuing those policies experience financial difficulties or are otherwise unable or unwilling to pay under those policies.  Also, there can be no

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assurance that proceeds under those policies would be sufficient to cover our exposure arising from this litigation.

· Our stock price has been volatile and may continue to be volatile.  The market price of our common stock has been volatile and is likely to remain volatile.  Some of the reasons for the volatility are within our control, but many are beyond our control and unrelated to our operating performance.  We believe the following factors, among others, have contributed to our stock price volatility:

o Our financial performance and results

o Announcements by us concerning our relationships with our existing or new customers

o Announcements by us concerning our completed and contemplated acquisitions and other strategic growth plans

o Announcements by our customers

o Our integration of Telaxis Communications and Young Design following the April 2003 combination of the two companies

o Our integration of Terabeam Corporation, Ricochet Networks, Inc. and KarlNet, Inc. following the second quarter 2004 acquisition of those companies

o Our integration of the assets of Proxim Corporation, acquired in the third quarter of 2005

o Sales of shares of our stock that we issued in connection with our completed acquisitions or the perception that such shares may be sold

o The relatively low number of shares of our stock that trade on an average day

o The introduction of new products by us

o The financial performance of our competitors

o The introduction of new products by our competitors

o Other announcements by our competitors

o General conditions of the financial markets

We expect these factors and others to continue to contribute to the volatility of our stock price.

· Two stockholders own a significant beneficial interest in our common stock which could allow them to influence matters requiring stockholder approval.  As of March 14, 2008, we believe that Lloyd I. Miller, III, directly and indirectly, and Robert E. Fitzgerald, our former chief executive officer, directly and through Concorde Equity II, LLC (a company controlled by him), controlled approximately 15% and 11%, respectively, of our common stock.  As a result of their ownership these stockholders may be able to exert influence over actions, which require stockholder approval, for example, certain types of changes in control or amendments to our certificate of incorporation.

· Future actual or potential stock sales by Robert Fitzgerald and Concorde Equity II could cause our stock price to fall or prevent it from increasing.  Our stock held by Robert Fitzgerald and Concorde Equity II is currently subject to restrictions on sale or transfer due to Mr. Fitzgerald having been our chief executive officer until mid-February 2008.  However, portions of this stock can be (and have been) sold in the open market.  Given that Mr. Fitzgerald is no longer our chief executive officer, he may engage in more aggressive stock sales than he did while he was our chief executive officer.  Generally, these sales would require public filings.  Certain of our other stockholders and other third parties could view these stock sales negatively because they would be made, directly or indirectly, by our former chief executive officer.  These actual or potential sales of our stock could cause our stock price to fall or prevent it from increasing for numerous other reasons.  For example, a substantial amount of our common stock becoming available (or being perceived to become available) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing, particularly given the relatively low trading volumes of our stock.

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· Future actual or potential stock sales by Lloyd I. Miller, III could cause our stock price to fall.  Mr. Miller controlled approximately 15% of our outstanding common stock on March 14, 2008.  Because Mr. Miller owns directly or indirectly more than 10% of our outstanding common stock, any sales or distributions by Mr. Miller are required to be reported publicly shortly after they occur.  Actual or potential sales of this stock by Mr. Miller could cause our stock price to fall or prevent it from increasing for numerous reasons.  For example, a substantial amount of our common stock becoming available (or being perceived to become available) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing, particularly given the relatively low trading volumes of our stock.  Also, Mr. Miller recommended that two people be placed on our current board of directors so sales by Mr. Miller could be viewed as being based on knowledge gained from those directors.

· Future actual or potential sales of the stock we issue upon exercise of stock options could cause our stock price to fall.  As of February 29, 2008, we had options outstanding to buy approximately 3,007,357 shares of our common stock and may grant options or other stock grants relating to an additional approximately 299,134 shares of our common stock.  We have filed registration statements with the SEC relating to the shares of our common stock that may be issued pursuant to the exercise of those outstanding stock options and stock options or other stock grants that we may grant in the future.  In many cases, holders of those options could decide to exercise the options and immediately sell the shares.  A substantial amount of this common stock becoming available (or being perceived to become available) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing, particularly given the relatively low trading volumes of our stock.  Further, actual or potential sales of this stock could be viewed negatively by other investors because some of these stock options are held by our directors and senior executives.

· Future actual or potential sales of the stock we issue upon exercise of stock warrants could cause our stock price to fall.  On February 29, 2008, we had warrants outstanding to purchase approximately 980,000 shares of our common stock at a weighted average purchase price of $2.33 per share.  Shares of our common stock received upon exercise of those warrants may, depending on the method of exercise, be immediately available for public sale.  A substantial amount of this common stock becoming available (or being perceived to become available) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing, particularly given the relatively low trading volumes of our stock.

· If we acquire other companies or product lines by issuing stock, the result may be dilutive to existing stockholders.  In the second quarter of 2004, we acquired three companies and issued approximately 12.6 million shares in connection with those acquisitions.  We may acquire other companies, businesses, and product lines in the future and may issue shares of our stock in connection with any such acquisitions.  Any such issuances could significantly dilute the holdings of our current stockholders, particularly given the lower current trading price of our common stock.

· If we raise additional capital by issuing stock, the result may be dilutive to existing stockholders.  Our board of directors may decide to issue additional equity securities in many situations without the need for any stockholder vote.  Given the recent prices for our common stock, significant dilution to our stockholders could result if we raise additional funds by issuing equity securities.  Further, these issuances may also involve issuing stock at a price per share below the current trading prices.  For example, in July 2007, we issued 4.3 million shares of our common stock in a private placement at a price of $1.75 per share.  That price was an approximately 14% discount from the last sale price of our common stock on the date the documentation was signed of $2.04 per share.

· The terms of any equity securities we may issue in the future may be better than the terms of our common stock.  Our board of directors is authorized to create and issue equity securities that have rights, privileges, and preferences senior to those of our common stock.  In many situations, our board could take these actions without the need for any stockholder vote.  For example, we have 4.5 million shares of “blank check” preferred stock which the board could issue, in many cases without any stockholder vote.  The board could establish voting rights, dividend rights, liquidation rights, conversion rights, and other rights and preferences of this preferred stock senior and better than the rights associated with our common stock.

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· The equity issuance we completed in July 2007 could have adverse impacts on us.  In July 2007, we issued 4,300,000 shares of our common stock and warrants to purchase an additional 2,150,000 shares of our common stock in a private placement to institutional and other accredited investors.  We have filed a registration statement covering those shares which enables the public resale of that stock.  We believe approximately 115,000 shares of our stock issued in this private placement transaction have been publicly resold.  Taking into account the 2,335,300 shares of our stock we agreed to repurchase and related cancellation of warrants to purchase 1,225,000 shares of our common stock, we believe this registration statement now covers 1,850,000 shares of our outstanding common stock and 925,000 shares of our common stock which may be acquired upon the exercise of warrants.  This registration could cause our stock price to fall or prevent it from increasing.  Also, a substantial amount of this common stock being sold or becoming available (or being perceived to become available) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing, particularly given the relatively low trading volumes of our stock.  Customers, investors, employees, competitors, and others may react negatively to this stock sale and warrant issuance, the price at which the stock was sold and warrants may be exercised, the dilution resulting from the sale and issuance, and other ramifications of these transactions.  Our stock price has declined significantly since this transaction was announced and may decline further.  The investors in this private placement have specified rights to participate in future equity financings which could hurt our ability to raise additional capital.

· The equity repurchase we completed in November 2007 could have material adverse impacts on us.  In November 2007, we agreed to repurchase 2,335,300 shares of our common stock that had been issued in the July 2007 private placement at a price of $1.70 per share, which price was higher than the then-current market value of our common stock.  As part of this repurchase transaction, those selling participants also surrendered to us for cancellation warrants to purchase an aggregate of 1,225,000 shares of our common stock.  We used approximately $4.0 million of our cash on hand for this repurchase, out of approximately $11.5 million cash as of September 30, 2007.  This reduced level of cash could increase our need or desire to raise additional capital through business line or asset dispositions, bank financings, equity issuances, or other means.  This reduced level of cash may change the terms on which third parties, including suppliers, may want to do business with us.  Investors, suppliers, employees, customers, competitors, and others may react negatively this stock repurchase and other ramifications of these transactions.  These transactions could result in increased liabilities and other adverse consequences for us.

Possible Implications of Cautionary Statements

The items described above, either individually or in some combination, could have a material adverse impact on our reputation, business, need for additional capital, ability to obtain additional debt or equity financing, current and contemplated products gaining market acceptance, development of new products and new areas of business, cash flow, results of operations, financial condition, stock price, viability as an ongoing company, results, outcomes, levels of activity, performance, developments, or achievements.  Given these uncertainties, investors are cautioned not to place undue reliance on any forward-looking statements.

Item 1B.  Unresolved Staff Comments.

Not applicable.

Item 2.    Properties.

We lease multiple facilities for our operations in multiple different geographic locations.

Our headquarters is an approximately 95,000 square foot facility located in San Jose, California.  This facility accommodates the following departments: senior management, administration, finance, marketing, manufacturing, sales, and research and development.  The term of the lease for this facility expires on June 30, 2008, and the company is in active negotiations to secure an alternative leased facility in the local area which meets our future operational requirements.  We believe we will be able to locate suitable new space without undue difficulty.

We lease an approximately 17,000 square foot facility located in Haverhill, Massachusetts.  This facility accommodates engineering, development, manufacturing, and associated staff for our Harmonix Division.  The term of the lease for this facility expires on October 31, 2015, subject to our early termination right.  At any time after

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October 7, 2010, we may terminate this lease with eight (8) months advance written notice and payment of specified amounts.

Our India subsidiary leases an approximately 13,000 square foot facility located in Hyderabad, India.  This facility accommodates engineering, research and development, quality assurance, and related support functions for our India operations.  The term of the lease for this facility expires in July 2013, subject to each party’s right to terminate the lease early on three months notice.

We lease five facilities in Europe and Asia to accommodate our international sales and operations staff.

Our Young Design, Inc. subsidiary leases an approximately 15,000 square foot facility located in Falls Church, Virginia.  The term of the lease for this facility expires on December 31, 2010.  This facility is currently under-utilized and partially subleased.

There are a small number of facilities leased by Terabeam Corporation prior to our acquiring that company that are not presently being used and that we have no present plans to use.

Item 3.    Legal Proceedings.

IPO Litigation

During the period from June 12 to September 13, 2001, four purported securities class action lawsuits were filed against Telaxis Communications Corporation, a predecessor company to Proxim Wireless Corporation, in the U.S. District Court for the Southern District of New York: Katz v. Telaxis Communications Corporation et al., Kucera v. Telaxis Communications Corporation et al., Paquette v. Telaxis Communications Corporation et al., and Inglis v. Telaxis Communications Corporation et al.  The lawsuits also named one or more of the underwriters in the Telaxis initial public offering and certain of its officers and directors.  On April 19, 2002, the plaintiffs filed a single consolidated amended complaint which supersedes the individual complaints originally filed.  The amended complaint alleges, among other things, violations of the registration and antifraud provisions of the federal securities laws due to alleged statements in and omissions from the Telaxis initial public offering registration statement concerning the underwriters’ alleged activities in connection with the underwriting of Telaxis’ shares to the public.  The amended complaint seeks, among other things, unspecified damages and costs associated with the litigation.  These lawsuits have been assigned along with, we understand, approximately 1,000 other lawsuits making substantially similar allegations against approximately 300 other publicly-traded companies and their public offering underwriters to a single federal judge in the U.S. District Court for the Southern District of New York for consolidated pre-trial purposes.  We believe the claims against us are without merit and have defended the litigation vigorously.  The litigation process is inherently uncertain, however, and there can be no assurance that the outcome of these claims will be favorable for us.

On July 15, 2002, together with the other issuer defendants, Telaxis filed a collective motion to dismiss the consolidated amended complaint against the issuers on various legal grounds common to all or most of the issuer defendants.  The underwriters also filed separate motions to dismiss the claims against them.  In October 2002, the court approved a stipulation dismissing without prejudice all claims against the Telaxis directors and officers who had been defendants in the litigation.  On February 19, 2003, the court issued its ruling on the separate motions to dismiss filed by the issuer defendants and the underwriter defendants.  The court granted in part and denied in part the issuer defendants’ motions.  The court dismissed, with prejudice, all claims brought against Telaxis under the anti-fraud provisions of the securities laws.  The court denied the motion to dismiss the claims brought under the registration provisions of the securities laws (which do not require that intent to defraud be pleaded) as to Telaxis and as to substantially all of the other issuer defendants.  The court denied the underwriter defendants’ motion to dismiss in all respects.

 In June 2003, along with virtually all of the other non-bankrupt issuer defendants, we elected to participate in a proposed settlement agreement with the plaintiffs in this litigation.  If the proposed settlement had been approved by the court, it would have resulted in the dismissal, with prejudice, of all claims in the litigation against us and against the other issuer defendants who elected to participate in the proposed settlement, together with the current or former officers and directors of participating issuers who were named as individual defendants.  This proposed settlement was conditioned on, among other things, a ruling by the court that the claims against us and against the other issuers who had agreed to the settlement would be certified for class action treatment for purposes

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of the proposed settlement, such that all investors included in the proposed classes in these cases would be bound by the terms of the settlement unless an investor opted to be excluded from the settlement.

On December 5, 2006, the U.S. Court of Appeals for the Second Circuit issued a decision in In re Initial Public Offering Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against us may not be certified as class actions due, in part, to the Appeals Court’s determination that individual issues of reliance and knowledge would predominate over issues common to the proposed classes.  On January 8, 2007, the plaintiffs filed a petition seeking rehearing en banc of the Second Circuit Court of Appeals’ decision. On April 6, 2007 the Court of Appeals denied the plaintiffs’ petition for rehearing of the Court’s December 5, 2006 ruling but noted that the plaintiffs remained free to ask the District Court to certify classes different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its December 5, 2006 decision.  The plaintiffs have since moved for certification of different classes in the District Court.

In light of the Court of Appeals’ December 5, 2006 decision regarding certification of the plaintiffs’ claims, the District Court entered an order on June 25, 2007 terminating the proposed settlement between the plaintiffs and the issuers, including us. Because it is expected that any possible future settlement with the plaintiffs, if such a settlement were ever to be agreed to, would involve the certification of a class action for settlement purposes, the impact of the Court of Appeals’ class certification-related rulings on the possible future settlement of the claims against us cannot now be predicted.

On October 1, 2007, the plaintiffs submitted their briefing in support of their motions to certify different classes in the six focus cases.  The issuer defendants and the underwriter defendants filed separate oppositions to those motions on December 21, 2007.  The motions to certify classes in the six focus cases remain pending.  In addition, on August 14, 2007, the plaintiffs had filed amended complaints in the six focus cases.  On November 13, 2007, the issuer defendants moved to dismiss the claims against them in the amended complaints in the six focus cases.  The underwriter defendants have also moved to dismiss the claims against them in the amended complaints in the six focus cases.  Those motions to dismiss remain pending.

With the termination of the proposed settlement, we intend to continue to defend the litigation vigorously.  The litigation process is inherently uncertain and unpredictable, however, and there can be no guarantee as to the ultimate outcome of this pending lawsuit.  Moreover, we believe that the underwriters may have an obligation to indemnify us for the legal fees and other costs of defending these suits.  While there can be no assurance as to the ultimate outcome of these proceedings, we currently believe that the final result of these actions will have no material effect on our consolidated financial condition, results of operations, or cash flows. 

Linex Technologies Litigation

On June 1, 2007, Linex Technologies, Inc. filed suit against Proxim Wireless Corporation for alleged patent infringement in the United States District Court for the Eastern District of Texas, Marshall Division.  Other named defendants in this lawsuit are Belair Networks, Inc., Cisco Systems, Inc., Firetide, Inc., and Skypilot Networks, Inc.  This lawsuit generally alleges that Proxim’s mesh products infringe two United States patents purportedly owned by Linex.  Linex is seeking damages allegedly caused by the alleged infringement of its two patents. This matter is at an early stage.  We believe the claims against us are without merit and intend to defend the litigation vigorously.  The litigation process is inherently uncertain, however, and there can be no assurance that the outcome of these claims will be favorable for us.

General

We are subject to potential liability under contractual and other matters and various claims and legal actions which are pending or may be asserted against us or our subsidiaries, including claims arising from the termination of the operations of Ricochet Networks, Inc. in the San Diego metropolitan area and the transfer of the operations of Ricochet Networks, Inc. in the Denver metropolitan area to Civitas Wireless Solutions, LLC.  These matters may arise in the ordinary course and conduct of our business.  While we cannot predict the outcome of such claims and legal actions with certainty, we believe that such matters should not result in any liability which would have a material adverse affect on our business.

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

No matters were submitted to a vote of stockholders during the three months ended December 31, 2007.

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PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is currently traded on the Nasdaq Capital Market under the symbol “PRXM.”  The table below shows, for the calendar year quarters indicated, the high and low sale prices of our common stock as reported by the Nasdaq Capital Market.  In each case, this information is based on published financial sources.

	Proxim Common Stock
	High		Low
2006
First Quarter	$	5.19	$	2.59
Second Quarter	$	3.96	$	1.97
Third Quarter	$	2.40	$	1.75
Fourth Quarter	$	3.00	$	1.95
2007
First Quarter	$	2.50	$	1.86
Second Quarter	$	2.95	$	1.92
Third Quarter	$	2.36	$	1.54
Fourth Quarter	$	1.58	$	0.81

As of March 14, 2008, the number of stockholders of record of our common stock was approximately 217 A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers, and other financial institutions.  We have never declared or paid any cash dividends on any class of our common equity.  We currently intend to retain any future earnings to fund the development and growth of our business and currently do not anticipate paying cash dividends in the foreseeable future.

Equity Compensation Plan Information

The following table and narrative provide information about our equity compensation plans as of December 31, 2007.  More information about our stock options is contained in our financial statements, including the notes thereto, included in this Annual Report on Form 10-K.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (a)	Weighted-average exercise price of outstanding options, warrants and rights (1)(b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)(c)
Equity compensation plans approved by security holders	3,156,215	$2.98	141,823 (2)
Equity compensation plans not approved by security holders	15,000	$2.12	-
Total	3,171,215	$2.97	141,823

____________

(1) This column does not reflect the warrants outstanding on December 31, 2007 to purchase 55,000 shares of our common stock at an exercise price of $0.40 per share that we assumed in connection with our acquisition of Terabeam Corporation in June 2004 or the warrants outstanding on December 31, 2007 to purchase 925,000 shares

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of our common stock at an exercise price of $2.45 per share that we issued in connection with a private placement of our stock in July 2007.

(2) Consists of shares available for future issuance under our 2004 Stock Plan.

On July 17, 2001, our board of directors adopted our 2001 Nonqualified Stock Plan and reserved 375,000 shares of our common stock for issuance pursuant to that plan.  The 2001 plan provided for the grant of non-qualified stock options, performance share awards, and stock awards (restricted or unrestricted) to directors, officers, and employees.  The compensation committee of the board of directors generally administers the 2001 plan and recommended to the board of directors or decided itself the terms of stock rights granted, including the exercise price, the number of shares that may be purchased under individual option awards, and the vesting period of options.  The board of directors may amend, modify, or terminate the 2001 stock plan at any time as long as the amendment, modification, or termination does not impair the rights of plan participants under outstanding options or other stock rights.  Effective September 9, 2004, the 2001 plan was amended to reduce the number of shares of our common stock issuable thereunder to 175,764, which was the number of shares subject to outstanding options as of that date.  No further grants or awards will be made pursuant to the 2001 plan.

Stock Repurchases in Fourth Quarter of 2007

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month #1 (October 1, 2007 – October 31, 2007)	0	N/A	N/A	N/A
Month #2 (November 1, 2007 – November 30, 2007)	2,335,300 (1)	$1.70	0	0
Month #3 (December 1, 2007 – December 31, 2007)	0	N/A	N/A	N/A
Total	2,335,300	$1.70	0 (2)	0 (2)

________________

(1)  As more fully discussed in the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on November 6, 2007, on November 1, 2007 and November 2, 2007, we signed substantially similar purchase and release agreements pursuant to which we agreed to repurchase 1,780,300 and 555,000, respectively, shares of our common stock from seven private investors.  These 2,335,300 shares were issued to those investors in a private placement in July 2007.  The aggregate purchase price for this stock was $3,970,010.  In connection with these purchases, the investors agreed to surrender to us for cancellation warrants to purchase an aggregate of 1,225,000 shares of our common stock.

(2)  We have not publicly announced any plan or program to repurchase any of our common stock.

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Item 6.   Selected Financial Data.

The following selected historical consolidated financial data was derived from our historical financial statements.  The financial statements for the fiscal years ended December 31, 2002 through 2007 were audited by Fitzgerald, Snyder, & Co., P.C., an independent registered public accounting firm.  This information should be read in conjunction with our management discussion and analysis of financial condition and results of operations and our financial statements, including the related notes, contained elsewhere in this annual report on Form 10-K.

	2003		2004			2005			2006			2007
Consolidated Statements of Operations Data:
Revenue, net	$	27,241	$	21,614		$	56,133		$	72,707		$	66,280
Gross profit		11,527		9,196			24,337			30,645			28,969
Selling and marketing expense		2,204		2,328			9,539			17,668			20,152
General and administrative expense		7,090		8,830			10,828			11,616			12,298
Research and development expense		1,704		2,657			7,464			14,151			8,313
Restructuring and impairment costs		-		-			5,608			8,990			8,234
Income (loss) from continuing operations		300		37			(8,672	)		(21,315	)		(17,398	)
Extraordinary item		4,347		-			-			-			-
Discontinued operations		-		(1,383	)		(2,488	)		(1,848	)		(1,666	)
Net income (loss) applicable to common shareholders		4,647		(1,346	)		(11,160	)		(23,163	)		(19,064	)
Basic earnings (loss) per share from continuing operations	$	0.02	$	0.00		$	(0.40	)	$	(0.99	)	$	(0.75	)
Basic – Extraordinary gain	$	0.35	$	-		$	-		$	-		$	-
Basic –Discontinued operations	$	-	$	(0.07	)	$	(0.11	)	$	( 0.09	)	$	(0.07	)
Basic earnings (loss) per share	$	0.37	$	(0.07	)	$	(0.51	)	$	(1.08	)	$	(0.82	)
Diluted earnings (loss) per share from continuing operations	$	0.02	$	0.00		$	(0.40	)	$	(0.99	)	$	(0.75	)
Diluted – Extraordinary gain	$	0.34	$	-		$	-		$	-		$	-
Diluted–Discontinued operations	$	-	$	(0.07	)	$	(0.11	)	$	(0.09	)	$	(0.07	)
Diluted earnings (loss) per share	$	0.36	$	(0.07	)	$	(0.51	)	$	(1.08	)	$	(0.82	)
Shares used in computing basic earnings per share		12,571		19,792			21,801			21,523			23,278
Shares used in computing diluted earnings per share		12,841		19,792			21,801			21,523			23,278

	2003		2004		2005		2006		2007
Consolidated Balance Sheet Data:
Cash and cash equivalents and short term investments	$	8,990	$	40,737	$	14,393	$	10,458	$	6,329
Working capital		12,577		41,532		14,802		10,432		6,472
Total assets		20,719		77,284		74,758		49,875		36,410
Long-term obligations, less current portion		1,298		1,270		2,956		2,088		1,023
Total stockholders’ equity	$	16,185	$	65,991	$	52,718	$	30,834	$	17,337

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Our Quarterly Financial Data

Quarter (in thousands, except per share data)
2007	First			Second			Third			Fourth
Revenue	$	16,674		$	18,116		$	16,903		$	14,587
Gross profit		7,634			8,249			8,286			4,800
Net income (loss) from continuing operations		(2,726	)		83			(1,658	)		(13,097	)
Net income (loss) from discontinued operations		(260	)		(422	)		(1,078	)		94
Net income (loss)		(2,986	)		(339	)		(2,736	)		(13,003	)
Basic and diluted earnings (loss) per share	$	(0.14	)	$	(0.02	)	$	(0.11	)	$	(0.52	)

Quarter (in thousands, except per share data)
2006	First			Second			Third			Fourth
Revenue	$	17,646		$	20,037		$	17,322		$	17,702
Gross profit		7,369			8,554			6,502			8,220
Net income (loss) from continuing operations		(4,205	)		(2,563	)		(13,079	)		(1,468	)
Net income (loss) from discontinued operations		(278	)		(422	)		(585	)		(563	)
Net income (loss)		(4,483	)		(2,985	)		(13,664	)		(2,031	)
Basic and diluted earnings (loss) per share	$	(0.21	)	$	(0.14	)	$	(0.64	)	$	(0.09	)

Quarter (in thousands, except per share data)
2005	First			Second			Third			Fourth
Revenue	$	5,908		$	6,475		$	12,382		$	31,368
Gross profit		3,111			3,257			5,276			12,693
Net income (loss) from continuing operations		(379	)		(491	)		(9,415	)		1,613
Net income (loss) from discontinued operations		(591	)		(496	)		(598	)		(803	)
Net income (loss)		(970	)		(987	)		(10,013	)		810
Basic and diluted earnings (loss) per share	$	(0.04	)	$	(0.04	)	$	(0.47	)	$	0.04

Earnings (loss) per share calculations for each of the quarters are based on the weighted average shares outstanding for each period.  The sum of the quarters may not necessarily be equal to the full year earnings per share amounts.

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

Overview

We provide high-speed wireless communications equipment and services in the United States and internationally.  Our systems enable service providers, enterprises, and governmental organizations to deliver high-speed data connectivity enabling a broad range of applications.  These applications include security, surveillance, mobile communications, and backhaul.   We provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, and municipal networks. We believe our fixed wireless systems address the growing need of our customers and end-users to rapidly and cost effectively deploy high-speed broadband communication networks.

We changed our corporate name to “Proxim Wireless Corporation” from “Terabeam, Inc.” effective September 10, 2007.  This name change was effected by means of merging Proxim Wireless Corporation, which was a wholly owned subsidiary of Terabeam, Inc., with and into Terabeam, Inc. with Terabeam, Inc. being the surviving company but with a corporate name of “Proxim Wireless Corporation.”  Effective that same date, our stock ticker symbol was changed to “PRXM” from “TRBM.”

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Proxim Wireless operates in the broadband wireless equipment market place.  Proxim Wireless is a designer, manufacturer, and seller of wireless telecommunications equipment (“Equipment”) which generated the substantial majority of the Company’s revenues and expenses during the twelve months ended December 31, 2007.

Prior to the third quarter of 2007, Proxim Wireless and its subsidiaries also operated in the services business.  This services business (“Services”) was acquired with the acquisition of Ricochet Networks, Inc. during the second quarter of 2004 and was conducted through that Ricochet Networks subsidiary.  The Company announced the sale on July 31, 2007 of the Ricochet wireless network and operations for greater Denver metropolitan area to Civitas Wireless Solutions, LLC (“Civitas”). In addition, we announced that Ricochet Networks, Inc. ceased operations of the San Diego network and is no longer in the business of providing wireless internet services.  As a result, the Services business was classified as discontinued operations effective in the third quarter of 2007, and the financial results of the Services business has been excluded from the historical financial results of the Company’s continuing business beginning in the third quarter of 2007.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net revenue and expenses during the reporting period, and related disclosure of contingent assets and liabilities for the period reported and as of the date of the financial reports. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and such differences could be material.

We believe the accounting policies described below are the ones that most frequently require us to make estimates and judgments, and therefore are critical to the understanding of our financial condition and results of operations:

Revenue Recognition

Product revenue is generally recognized upon shipment in accordance with Staff Accounting Bulletin 104 (“SAB 104”), when persuasive evidence of an arrangement exists, the price is fixed or determinable, and collect ability is reasonably assured. The company offers most stocking distributors a stock rotation right pursuant to which they may return products that have been recently purchased provided they place an equal value order for new products from us and the value of the returned products is a small fraction  of the value of products purchased from us in the preceding quarter. In general, we also offer most stocking distributors price protection on products in their inventory or recently purchased from us in cases where we reduce prices on these products. In both cases , the distributors would receive a credit which can be used for purchase of additional products from us. In a small number of cases, we have agreed to accept return of discontinued or obsolete products. For other customers, we provide quarterly or annual rebates based on achievement of performance targets, loyalty discounts, and/or sales discounts.  We apply SFAS No. 48,”Revenue Recognition When Right if Return Exists,” in determining when to recognize revenue.  Under SFAS No. 48 revenue can be recognized if all of the following conditions are met:

1. price is fixed and determinable at the date of sale;

2. buyer’s payment obligation is not contingent on resale;

3. buyer’s payment obligation would not be changed in the event of theft or physical damage of the product;

4. buyer acquiring the product for resale has economic substance apart from that provided by the seller;

5. seller does not have significant obligations for future resale of the product; and

6. the amount of future returns can be reasonably estimated.

Based on our application of the SFAS No. 48 principles to our different customers, we currently recognize some revenue on a “sell in” basis and some on a deferred “sell through” basis.  Generally factors 2 through 5 are satisfied upon our delivery of the products to our customer. The estimation of future returns depends on contractual terms and our historical experience with the customer.

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Proxim revenue consists of direct shipments to customers or other equipment manufacturers (OEM), and distributors who resell our products to third party customers.

In the case of direct customers or OEM manufacturers we recognize revenue at point of shipment from either Proxim’s facility or from our contract manufacturer’s facilities when the product is shipped from the respective docks since title and acceptance are passed to the end customer. We meet the conditions of SAB 104, and SFAS 48 for revenue recognition at point of shipment for direct customer and OEM sales.

In the case of Proxim products which are sold to distributors we generally recognize revenue to most distributors on a “sell in” basis at point of shipment since we have met all of the conditions specified in SAB104, and SFAS 48 at point of shipment to the distributors.

As mentioned previously we offer most stocking distributors a stock rotation right pursuant to which they may rotate products for comparable value in their inventory that have been recently purchased from us and the value of the returned product is a relatively small percentage of the product purchased from us in the preceding quarter. In addition, we also offer most stocking distributors price protection on products in their inventory and recently purchased from us in cases where we have reduced prices on those products. These stock rotations and price discounts must be claimed and exercised within a one to two quarter time frame to be valid.

In the case of our three largest stocking distributors, although they have comparable distribution contracts to the smaller distributors, we have historically deferred revenue for shipments which are either in transit to them, or are included in their period ending inventory reports. This revenue deferral practice for larger distributors has been applied historically by Proxim. These larger distributors have historically returned more product and requested larger stock rotations and price discounts versus the smaller distributors which was the primarily reason that we have historically recognized their revenue using the “sell through” methodology. Under the “sell through” methodology we recognize revenue when our products are sold by these three largest stocking distributors.

For our services business, prior to discontinuing the service operations on July 31, 2007, we recognized revenue when the customer paid for and then had access to our network for the current fiscal period. Any funds the customer paid for future fiscal periods were treated as deferred revenue and recognized in future fiscal periods for which the customer was granted access to our network.  The Company did not have revenue from multiple deliverable arrangements during the years ended December 31, 2007, 2006, and 2005.

Accounts Receivable Valuation

We maintain allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We assess the customer’s ability to pay based on a number of factors, including past transaction history with the customer as well as their creditworthiness. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of any of our customers were to deteriorate in the future, resulting in an impairment of their ability to make payments, or they express unwillingness to pay for whatever reason, additional allowances may be required. We reserve 100% of outstanding receivable balances (a) from insolvent customers and (b) from customers which are delinquent by six months or more. We reserve 50% of outstanding receivable balances that are between 3 months to 6 months delinquent and subject to adjustments, as considered appropriate for specific situations.

Inventory Valuation

Inventories are stated at the lower of standard cost, which approximates actual cost under the first-in, first-out method, or market value. We perform a detailed assessment of inventory at each year-end balance sheet date, which includes, among other factors, a review of component demand requirements, product lifecycle and product development plans, and quality issues.  Manufacturing inventory includes raw materials, work-in-process, and finished goods. Inventory valuation provisions are based on an excess obsolete report which captures all obsolete parts and products and all other inventory, which have quantities in excess of one year’s projected demand, or in the case of service inventories demand of up to five years.  As a result of this assessment, we write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated liquidation value based upon assumptions about future demand and market conditions. If actual

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demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.  In addition, on an annual basis we conduct a lower of cost or market evaluation which may necessitate additional inventory provisions.

Goodwill

The carrying values of goodwill and other intangible assets are reviewed for possible impairment in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”  Proxim’s accounting policy for goodwill impairment requires annual testing for impairment of goodwill and intangible assets with indefinite lives in accordance with SFAS 142 guidelines. Goodwill and intangible assets are also subject to review for impairment when circumstances or events occur during the year which indicates that the asset may be impaired.

Assessing goodwill for impairment involves the two steps:

a. Determine whether impairment exists. The first step of the impairment test is to determine whether impairment exists by comparing the fair value of the reporting unit with its carrying value (including goodwill).  If the fair value is not impaired, the second step of impairment is not necessary. If the fair value is less than the recorded amount, impairment exists and the second step of the test is performed.

b. Measure the amount of the impairment loss. The second step of the impairment test measures the amount of impairment loss by comparing the fair value of reporting unit goodwill to its carrying amount. If the carrying amount of the reporting unit goodwill is greater than the implied fair value, an impairment loss equal to the difference is recognized and goodwill is written down. The implied fair value of the reporting unit goodwill is the excess of the fair value of reporting unit over the amounts assigned to the assets and liabilities.

Proxim determines for each of its reporting units if there are any impairment charges for these units using the fair value approach, incorporating the discounted cash flow method and a market approach using the public company method. In performing this analysis, Proxim uses its historical operating results, a review of the marketplace and industries in which it operates, and its expectations of future operations. Based on SFAS 142 guidelines, impairment loss shall be recognized if the carrying amount of a long-lived asset is recoverable and exceeds its fair value.

Capitalized Software

We capitalize certain software development costs in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. We begin capitalizing software development costs upon the establishment of technological feasibility, which is established upon the completion of a working model or a detailed program design. Costs incurred prior to technological feasibility are charged to expense as incurred. Capitalization ceases when the product is considered available for general release to customers. Capitalized software development costs are amortized to costs of revenues over the estimated economic lives of the software products based on product life expectancy. Generally, estimated economic lives of the software products do not exceed three years.

Valuation of Stock-based Awards

As of December 31, 2007, we have one active stock-based employee compensation plan and four inactive (legacy) plans, which are described more fully in Note 14.

As of January 1, 2006 we account for stock-based compensation in accordance with the fair value recognition provisions of SFAS No. 123R. Under SFAS No. 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period of the individual equity instrument. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. The computation of the expected volatility assumption used in the Black-Scholes calculation for option grants is based on historical volatility as options on our stock are not traded.  The Company uses the “simplified” method to determine the expected term for the “plain vanilla” options.  We are also required to estimate the expected forfeiture

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of stock options in recognizing stock-based compensation expense. Further, we have elected to use the straight-line method of amortization for stock-based compensation related to stock options granted after January 1, 2006

Prior to January 1, 2006, we accounted for stock-based employee compensation plans under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations, as permitted by FASB Statement (SFAS) 123, “Accounting for Stock-Based Compensation”.

Warranties

Proxim’s standard warranty term is one year on the majority of our products and up to two years on a select group of products. At times we provide longer warranty terms.  Proxim provides an estimated cost of product warranties at the time revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and costs per claim for repair or replacement. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service labor costs incurred in correcting a product failure. Should actual product failure rates, material usage, service labor or delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.

Result of Operations

Comparison of Fiscal Year 2007 and 2006

The following table provides statement of operations data as a percentage of sales for the periods presented.

	2007			2006
	% of Net			% of Net			Annual Dollar			Annual
	Revenue			Revenue			Change (in 000s)			% Change
Net revenues		100	%		100	%	$	(6,427	)		(9	%)
Cost of sales		56			58			(4,751	)		(11	)
Gross profit		44			42			(1,676	)		5
Operating expenses
Selling and marketing expense		30			24			2,484			14
Restructuring and impairment costs		12			12			(756	)		(8	)
Research and development expense		13			20			(5,838	)		(41	)
General and administrative		19			16			682			6
Total operating expenses		74			72			(3,428	)		(7	)
Operating income (loss)		(30	)		(30	)		1,752			(8	)
Other income		4			1			2,281			428
Income tax expense (benefit)		-			-			116			171
Income (loss) from continuing operations		(26	)		(29	)		3,917			18
Discontinued operations		(3	)		(3	)		182			10
Net income (loss)		(29	)%		(32	)%		4,099			18	%

Sales

Sales for the year ended December 31, 2007 were $66.3 million as compared to $72.7 million for the same period in 2006, a decrease of $6.4 million or 9%.  Our revenue declined primarily due to disappointing sales results in the Americas and Asia Pacific regions.

For the years ending December 31, 2007 and 2006, international sales, excluding Canada, approximated  $36.5 million and $42.2 million, respectively, comprising 55% and 58% of our total sales.  International sales remained relatively even on a year to year basis.

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Cost of goods sold and gross profit

Cost of goods sold and gross profit for the years ended December 31, 2007 were approximately $37.3 million and $29.0 million, respectively.  For the same period in 2006, costs of goods sold and gross profit were $42.1 million and $30.6 million, respectively.  This is consistent with the overall decrease in revenue level for 2007.  The cost of goods sold for the years ended December 31, 2007 and 2006 included restructuring provisions for excess and obsolete inventory totaling $2.5 million and $1.5 million, respectively.  Gross profit margin, as a percentage of sales, for the year ended December 31, 2007 was 44% with the restructuring provision and 47% without restructuring charges compared to a 42% net gross margin and 44% gross margin before restructuring costs for the same period in 2006.  The increase in net gross margin percentage was primarily due to the product mix in the current year as compared to the prior year and the higher margins recognized on our newer broadband products.

The product lines and the agreements with contract manufacturers acquired from Old Proxim brought significant production efficiencies by reducing labor costs as well as material costs due to the large volumes of raw material purchases larger contract manufacturers negotiated. As we increase our sales efforts for our new products to our customers in 2008, we believe that providing very high quality products combined with being early to market with new technologies will reduce the pressure to compete principally on price.

Sales and Marketing Expenses

Selling and marketing expenses consist primarily of employee salaries and associated costs for selling, marketing, and customer support.  Selling and marketing expenses increased to $20.2 million for the year ended December 31, 2007, from $17.7 million for the year ended December 31, 2006 representing a 14% increase from the prior year.  Sales and Marketing expenses as a percentage of sales increased to 30% in 2007 as compared to 24% in the previous year.  This increase was due primarily to increased headcount and higher related expenses due to higher travel, commission and new account development costs.

Restructuring charges related to realignment of business groups

During the year ended December 31, 2007 we recorded approximately $91,000 of restructuring charges to operating expense.  These charges consisted of one-time termination benefits related to a reduction in force, implemented in an effort to streamline operations in response to the first quarter financial results.  During the years ended December 31, 2006 and 2005, we recorded restructuring charges of $116,000 and $944,000, respectively.  These charges consisted of operating lease commitments related to facilities which were closed during the year and severance payments to employees laid off subsequent to the Old Proxim acquisition.

Restructuring charges related to the impairment of goodwill and purchased intangibles

During the year ended December 31, 2007, we recorded a charge for the impairment of amortizable intangible assets totaling $0.2 million and impairment to goodwill for $7.9 million.

During the year ended December 31, 2006, the Company recorded an $8.9 million charge for the impairment of intangible assets for the period.

Research and Development Expenses

Research and development expenses consist primarily of personnel salaries and fringe benefits and related costs associated with our product development efforts.  These include costs for development of products and components, test equipment and related facilities.  Research and development expenses decreased to $8.3 million for the year ended December 31, 2007, from $14.2 million for the year ended December 31, 2006, a $5.9 million favorable reduction in our operating expenses.  Research and development expenses decreased to 13% as a percentage of sales in 2007 compared to 20% in 2006.  The decrease in research and development expenses was primarily due to reduction in headcount costs as significant R&D activities were transferred from San Jose, California to Hyderabad, India combined with $0.8 million reduction in expenses related to software capitalization.

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General and Administrative Expenses

General and administrative expenses consist primarily of employee salaries, benefits and associated costs for information systems, finance, legal, and administration of a public company.  General and administrative expenses increased to $12.3 million for the year ended December 31, 2007, from $11.6 million for the year ended December 31, 2006, a $0.7 million or 6% increase. The increase is primarily the result of higher costs for salaries, benefits and associated costs for information systems. Higher general and administrative expenses can also be attributed to increased spending for finance, legal, amortization of intangibles, administration, insurance and audit fees.  General and administrative expenses as a percentage of sales during 2007 increased to 19% as compared to 16% in 2006.

Other income (expenses)

Other income and expenses totaled approximately $2.8 million for the year ended December 31, 2007, as compared to $0.5 million for the year ended December 31, 2006.  The $2.3 million increase in other income recognized for the year ended December 31, 2007 resulted primarily from a $2.4 million gain recorded from the sale of patents combined with a gain on the sale of marketable securities of $99,000.  This was partially offset by a decrease in interest income net of interest expense by $96,000.

Adoption of New Accounting Policies

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004) Share-Based Payment (“SFAS 123R”), which requires the measurement and recognition of compensation cost at fair value for all share-based payments, including stock options. Stock-based compensation for the years ended December 31, 2007, 2006 and 2005 totaled approximately $2.0 million, $1.3 million and $ 0, respectively for these three years.  Stock based compensation expense is included in operating results for the fiscal years ended December 31, 2007 and 2006 but is excluded from the results of operations for the year ended December 31, 2005.

For the years ended December 31, 2007 and December 31, 2006, the operating losses were approximately $2.0 million and $1.3 million higher due to the adoption of SFAS 123R. Likewise, the basic and diluted loss per share for fiscal year 2007 and fiscal year 2006 were $0.09 and $0.06 higher due to the adoption of SFAS 123R using the fair value method for determining compensation cost.  Net cash used in operating activities and net cash provided by financing activities were not changed by the adoption of SFAS 123R.

Comparison of Fiscal Year 2006 and 2005

The following table provides statement of operations data as a percentage of sales for the periods presented.

	2006			2005
	% of Net			% of Net			Annual Dollar			Annual
	Revenue			Revenue			Change (in 000s)			% Change
Net revenues		100	%		100	%	$	16,574			30	%
Cost of sales		58			57			10,266			32
Gross profit		42			43			6,308			26
Operating expenses
Selling and marketing expense		24			17			8,129			85
Restructuring and impairment costs		12			10			3,382			60
Research and development expense		20			13			6,687			90
General and administrative		16			19			788			7
Total operating expenses		72			59			18,986			57
Operating income (loss)		(30	)		(16	)		(12,678	)		(139	)
Other income		1			1			18			3
Income tax expense (benefit)		-			-			84			(525	)
Minority interest in net income (loss) of Merry Fields		-			-			101			100
Income (loss) from continuing operations		(29	)		(15	)		(12,643	)		(146	)
Discontinued operations		(3	)		(5	)		640			26
Net income (loss)		(32	)%		(20	)%		(12,003	)		(108	)

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Sales

Sales for the year ended December 31, 2006 were $72.7 million as compared to $56.1 million for the same period in 2005, an increase of $16.6 million or 30%.  The primary reason for the increase in sales was the acquisition of the Old Proxim product lines and distribution channels on July 27, 2005. Sales through the new distribution channels totaled approximately $34.2 million for the year ended December 31, 2005.

For the years ending December 31, 2006 and 2005 international sales, excluding Canada, approximated 58% and 35%, respectively, of total sales.  The reason for the increase in international sales as a percent of sales was because a significant percentage of the sales from Old Proxim acquired products were ultimately to international customers.

Cost of goods sold and gross profit

Cost of goods sold and gross profit for the year ended December 31, 2006 were $42.1 million and $30.6 million, respectively.  Of the $42.1 million cost of goods sold, $1.5 million was a restructuring provision for excess and obsolete inventory.  The excess inventory charges were due principally to management’s decision to discontinue certain older Proxim product lines subsequent to the acquisition of the Old Proxim product lines and distribution channels.  For the same period in 2005, costs of goods sold and gross profit were $31.8 million and $24.3 million, respectively.  Gross profit, as a percentage of sales, for the years ended December 31, 2006 and 2005, was 42% and 43%, respectively.

Sales and Marketing Expenses

Selling and marketing expenses consist primarily of employee salaries and associated costs for selling, marketing, and customer support.  Selling and marketing expenses increased to $17.6 million for the year ended December 31, 2006, from $9.5 million for the year ended December 31, 2005, which is a $8.1 million increase.  Sales and Marketing expenses as a percentage of sales increased to 24% in 2006 as compared to 17% in the previous year.   This increase was due primarily to the following factors: increased sales and marketing headcount due to the acquisition of the Old Proxim sales and distribution channels in the third quarter of 2005, higher commission costs related to our higher revenue and increased salaries and increased travel by sales personnel as compared to the prior fiscal year.

Restructuring and impairment charges

During the year ended December 31, 2006 we recorded restructuring charges of approximately $116,000.  These charges consisted of one-time termination benefits related to a reduction in force, implemented in an effort to streamline operations in response to the first quarter financial results.   In comparison, for the year ended December 31, 2005 we recorded restructuring charges for severance and excess facilities of approximately $944,000.  These charges consisted of operating lease commitments related to facilities which were closed during the year, and severance payments to Terabeam employees laid off subsequent to the Old Proxim acquisition.

During the year ended December 31, 2006, we recorded a charge for the impairment of amortizable intangible assets totaling $7.8 million.  The charges consisted of:

· A charge of $881,000 from the write off of intangibles related to the acquisition of Karlnet, Inc.

· A $2.1 million charge related to the developed components technology acquired in the acquisition of Terabeam Corporation.

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· A charge of $4.8 million related to the developed technology acquired in the acquisition of Old Proxim in 2005.

In addition, we tested goodwill and other non-amortizable assets in the third quarter of 2006, and based on an independent third party valuation, we recorded a $1.1 million charge related to the Proxim trade name.  The revised valuation is $1.0 million, and has an indefinite useful life.

The total charge for impairment of amortizable and indefinite-lived intangible assets in the accompanying financial statements for the year ended December 31, 2006 is approximately $8.9 million.

During the year ended December 31, 2005, and subsequent to the Old Proxim acquisition, the restructuring of the Company and the Company’s product lines affected the carrying value of certain intangible assets, and the Company recorded a charge for the impairment of intangible assets in the accompanying 2005 financial statements totaling $4.7 million.  These charges consisted of:

· A $3.6 million impairment charge related to the Terabeam trade name in accordance with SFAS 142.  Subsequent to the Old Proxim acquisition, the Company chose to sell its wireless equipment products under the go to market name of Proxim Wireless.  Since there will be no future revenue stream based on the Terabeam name, the Company determined that the fair value of the Terabeam trade name was de minimis.

· A $1.1 million charge related to the write off of certain software development costs that had been previously capitalized.

Research and Development Expenses

Research and development expenses consist primarily of personnel salaries and fringe benefits and related costs associated with our product development efforts.  These include costs for development of products and components, test equipment and related facilities.  Research and development expenses increased to $14.2 million for the year ended December 31, 2006, from $7.5 million for the year ended December 31, 2005, a $6.7 million , a 90% increase to 20% of our revenue.  This increase was due primarily due to increased amortization costs, the addition of research and development engineering personnel through the acquisition of Old Proxim’s operations as well as additional prototype material and other related support costs required for our new product development, certification, and product introduction efforts.

General and Administrative Expenses

General and administrative expenses consist primarily of employee salaries, benefits and associated costs for information systems, finance, legal, and administration of a public company.  General and administrative expenses increased to $11.6 million for the year ended December 31, 2006 from $10.8 million for the year ended December 31, 2005, a $0.8 million or 7% increase. The increase is principally a result of additional headcount and related general and administrative expenses due to the acquisition of Old Proxim’s operations. However, general and administrative expenses as a percentage of sales during 2006 were reduced to 16% as compared to 19% in 2005.

Other income (expenses)

Other income and expenses totaled approximately $533,000 for the year ended December 31, 2006, as compared to $515,000 for the year ended December 31, 2005.   There was a decrease in interest income of $327,000 due to reduced cash balances primarily due to the cash used to acquire Old Proxim’s operations and ongoing operating losses.  This decrease was offset by gains on the settlement of certain old Terabeam Corporation leases and property taxes, and the sale of certain Ricochet intellectual property during 2006.

Adoption of SFAS 123R

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004) Share-Based Payment (“SFAS 123R”), which requires the measurement and recognition of compensation cost at fair value for all share-based payments, including stock options. Stock-based compensation for

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the year ended December 31,  2006 includes compensation expense, recognized over the applicable vesting periods, for new share-based awards and for share-based awards granted prior to, but not yet vested, as of December 31, 2005 (modified prospective application).

Liquidity and Capital Resources

General

We currently are meeting our needs for working capital through cash on hand, as well as internally generated cash from operations and other activities.  The following table shows our capital resources (in thousands):

	December 31,
	2007		2006
Working capital		6,472		10,432
Cash and cash equivalents		6,329		10,290
Short term investments		-		168
Restricted cash		76		76

For the year ended December 31, 2007, cash used by continuing operations was approximately $4.4 million.  Cash required by continuing operations includes a net loss of $17.4 million and an increase in working capital requirements of $4.2 million, partially offset by $17.3 million of non-cash items.  The non-cash items included $8.1 million of restructuring charges for the impairment of goodwill and intangible assets, $3.6 million in depreciation and amortization, $2.5 million excess and obsolete inventory charge, $2.0 million in stock compensation expense, and $1.0 million in allowances and reserves provisions.  Operating cash used for discontinued operations was $1.0 million for the year ended December 31, 2007.

Net cash used in continuing operating activities decreased by $1.6 million to $4.4 million from $6.0 million for the same period in 2006.  Accounts receivable used $4.7 million of operating cash in 2007 compared to providing $2.7 million of operating cash in 2006.  Accounts receivable increased significantly in fiscal year 2007 as we extended our payment terms to key customers. These additional uses of operating cash were partially offset by $1.9 million of working capital generated by deferred revenue increase.  Accounts payable used $0.8 million of working capital in 2007 compared to requiring $1.7 million in 2006 as a result of costs due at the close of year-end 2007.  Net cash used in discontinued operations was $1.0 million, a favorable decrease from $1.5 million used in fiscal year 2006.  This reflects that our discontinued operations had decreased activity for the first seven months of this year and was sold during the third quarter.

Net cash used in investing activities from continuing operations was $1.4 million for the year ended December 31, 2007, compared with $4.6 million provided by continuing investing activities for the year ended December 31, 2006. Net cash used for investments for continuing operations in 2007 included $1.0 million for the purchase of property and equipment and $0.8 million for the purchase of capitalized software. This was partially offset by $0.3 million received from the sale of securities and $0.2 million received on the transfer of certain assets upon the sale of our discontinued operations.

Cash generated by continuing financing activities was approximately $2.6 million for the year ended December 31, 2007 as a result of issuing $7.5 million of common stock, partially offset by the repurchase of $4.0 million of common stock in the fourth quarter. License agreement payments used $0.9 million of operating cash in 2007, a $0.1 million favorable reduction from 2006 activity. There was no financing cash provided or used from discontinued operations in fiscal year 2007.

We believe that our cash on hand with cash flow from operations should be sufficient to meet the operating cash requirements over the next twelve month period. Our long-term financing requirements depend upon our results of operations and growth strategy both domestically and internationally in broadband equipment. Although the acquisition of Old Proxim’s operations in 2005 significantly increased our revenues compared to prior years, it also significantly increased both our domestic and international operating expenses and as a result our cash usage

49

from operating losses has also increased. For fiscal 2008, we must continue to grow our revenues and adjust our operating expenses to levels that will at a minimum produce breakeven cash flow and bring us to operating profitability. Due to the fluctuations in quarterly revenue and extended payment terms, management is closely monitoring revenue trends and operating expenses, and reviewing its long term business strategy to evaluate whether there will be a requirement for external financing to fund our operations. Accordingly, our current resources may have to be supplemented through new bank debt financing, public debt or equity offerings, asset or product line dispositions, or other means due to a number of factors, including our acquisition of Old Proxim’s operations and our desired rate of future growth.  See Item 1A – Risk Factors above for a more detailed discussion of risk factors.

Contractual Obligations

We have the following contractual obligations and commercial commitments as of December 31, 2007:

	Payments due by period (numbers in thousands)
	Total		Less than 1 year		1 -3 years		4 – 5 years		After 5 years
Operating leases – buildings – in use		3,717		1,531		1,174		552		460
Operating leases – buildings – not in use		520		177		322		21		-
Purchase commitments and other		2,200		1,150		1,050		-		-
Operating leases – equipment		296		131		165		-		-
Employment Contracts		1.019		1,019		-		-		-
Total contractual cash obligations		7,752		4,008		2,711		573		460

Recently Issued Accounting Standards

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109”, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 was effective beginning Q1 2007.  The Company has performed a preliminary analysis under FIN 48 for the year ended December 31, 2007 and believes that any unrecognized benefits or potential interest and penalties are not material to the financial statements..

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements in financial statements, but standardizes its definition and guidance in GAAP. Thus, for some entities, the application of this statement may change current practice. SFAS 157 is effective for the Company beginning on January 1, 2008. The Company is currently evaluating the impact that the adoption of this statement may have on its financial position and results of operations.

In February, 2007, the FASB issued SFAS 159 (“SFAS 159”) “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial position and results of operations.

In December, 2007, the FASB issued SFAS 141R (“SFAS 141[R]”) Business Combinations: Applying the Acquisition Method (SFAS 141[R]). SFAS 141[R] retains the fundamental requirements of SFAS 141, but provides guidance on applying the acquisition method when accounting for similar economic events including: recognition and measurement of assets acquired, liabilities assumed and equity interests. Recognition and measurement of goodwill acquired, and gains from bargain purchase options. SFAS 141[R] is effective for years beginning on or after December 15, 2008. The Company is currently assessing the impact of SFAS 141[R] on its consolidated financial position and results of operation.

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In December, 2007 the FASB issued SFAS 160, Non Controlling Interests in Consolidated Financials, an Amendment of ARB No. 51 (SFAS 160). SFAS 160 provides guidance for accounting and reporting of noncontrolling interests in consolidated financial statements, including:

· Ownership interest in subsidiaries held by parties other then the parent should be clearly identified, labeled and presented in the consolidated financial statements with equity separate from the parent company.

· The amount of consolidated net income attributable to the parent and to the noncontrolling interest should be clearly identified and presented on the face of the consolidated income statement.

· Changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for consistently, i.e., as equity transactions.

· When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be initially measured at fair value.

· Disclosure requirements that clearly identify and distinguish between the interests of the parent and those of the noncontrolling owners.

SFAS 160 is effective for years beginning on or after December 15, 2008. The Company is currently assessing the impact of SFAS 160 on its consolidated financial position and results of operation.

Detailed information regarding the impact of new accounting standards adopted during 2007 can be found under the caption: “Note 2: Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements appearing in Item 8 of this report.

Disclosures About Market Risk

The following discusses our exposure to market risks related to changes in interest rates, equity prices and foreign currency exchange rates.  This discussion contains forward-looking statements that are exposed to risks and uncertainties, many of which are out of our control.  Actual results could vary materially as a result of a number of factors, including those discussed in Item 1A – Risk Factors.

As of December 31, 2007, we had bank balances of cash and cash equivalents of approximately $6.3 million and restricted cash of approximately $0.1 million.  All these funds are on deposit in short-term accounts with two major domestic and two major international organizations.  Therefore, we do not expect that an increase in interest rates would materially reduce the value of these funds.  The primary risk to loss of principal is the fact that these balances are only insured by the Federal Deposit Insurance Corporation up to $100,000 per bank.  At December 31, 2007, the uninsured portion totaled approximately $5.9 million.

In the past three years, all sales to international customers were denominated in United States dollars and, accordingly, we were not exposed to foreign currency exchange rate risks except for operating expenses incurred in foreign currency.  Additionally, we import from other countries.  Our sales and product supply may therefore be subject to volatility because of changes in political and economic conditions in these countries.

We presently do not use any derivative financial instruments to hedge our exposure to adverse fluctuations in interest rates, foreign exchange rates, or fluctuations in commodity prices or other market risks; nor do we invest in speculative financial instruments.

Due to the nature of our short-term investments, we have concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.

Item 7A.      Quantitative and Qualitative Disclosures about Market Risk.

See Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Disclosures about Market Risk.

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Item 8.           Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	53
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets	54
Consolidated Statements of Operations	55
Consolidated Statement of Changes in Stockholders’ Equity	56
Consolidated Statements of Cash Flows	57
Notes to Consolidated Financial Statements	59
Schedule II – Valuation and Qualifying Accounts	80

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Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS

PROXIM WIRELESS CORPORATION

San Jose, California

We have audited the accompanying consolidated balance sheets of PROXIM WIRELESS CORPORATION (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2007, 2006 and 2005.  We also have audited the related financial statement Schedule II for the years ended December 31, 2007, 2006 and 2005.  These consolidated financial statements and financial statement Schedule II are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement Schedule II based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PROXIM WIRELESS CORPORATION as of December 31, 2007 and 2006 and the results of its operations and cash flows for the years ended December 31, 2007, 2006 and 2005 in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related financial statement Schedule II for the years ended December 31, 2007, 2006 and 2005, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Fitzgerald, Snyder & Co., P.C.

McLean, Virginia

March 27, 2008

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PROXIM WIRELESS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	6,329		$	10,290
Investment securities – available-for-sale		-			168
Accounts receivable, net of  allowances for doubtful accounts, returns and discounts  of  $2,044  for 2007 and $3,608 for 2006		10,010			5,539
Inventory		7,154			10,142
Prepaid expenses		1,029			1,246
Total current assets		24,522			27,385
Property and equipment, net		2,542			2,660
Other Assets:
Restricted cash		76			76
Goodwill		-			7,922
Intangible assets, net		9,015			11,545
Deposits and prepaid expenses		255			287
Total other assets		9,346			19,830
Total assets	$	36,410		$	49,875
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	12,984		$	13,887
Deferred revenue		4,001			2,198
License agreement payable - current maturities		1,065			868
Total current liabilities		18,050			16,953
License agreement payable, net of current maturities		1,023			2,088
Total liabilities		19,073			19,041
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; 4,500,000 shares authorized, none issued at December 31, 2007 and December 31, 2006		-			-
Common stock, $0.01 par value, 100,000,000 shares authorized, 23,519,069 issued and outstanding at December 31, 2007 and 21,552,572 issued and outstanding at December 31, 2006		235			216
Additional paid-in capital		63,451			57,976
Accumulated deficit		(46,349	)		(27,285	)
Accumulated other comprehensive income:
Net unrealized loss on available-for-sale securities		-			(73	)
Total stockholders’ equity		17,337			30,834
Total liabilities and stockholders’ equity	$	36,410		$	49,875

See accompanying notes to consolidated financial statements.

54

PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands, except per share data)

	For the Years Ended December 31,
	2007			2006			2005
Revenues	$	66,280		$	72,707		$	56,133
Cost of goods sold		34,844			40,560			29,653
Restructuring provision for excess and obsolete inventory		2,467			1,502			2,143
Gross profit		28,969			30,645			24,337
Operating expenses:
Selling costs		20,152			17,668			9,539
Restructuring charges		91			116			944
Restructuring charge for impairment of intangibles assets and goodwill		8,143			8,874			4,664
Impairment of service reporting unit goodwill		-			-			-
General and administrative		12,298			11,616			10,828
Research and development		8,313			14,151			7,464
Total operating expenses		48,997			52,425			33,439
Operating loss		(20,028	)		(21,780	)		(9,102	)
Other income (expense):
Interest income (expense)		208			368			695
Interest expense		(126	)		(190	)		(161	)
Gain on sale of  assets		23			202			-
Other income (expense)		2,709			153			(19	)
Total other income (expense)		2,814			533			515
Loss from continuing operations before income taxes and minority interest		(17,214	)		(21,247	)		(8,587	)
Provision (benefit) for income taxes		184			68			(16	)
Loss from continuing operations before minority interest		(17,398	)		(21,315	)		(8,571	)
Minority interest in net income of Merry Fields		-			-			(101	)
Loss from continuing operations		(17,398	)		(21,315	)		(8,672	)
Loss from discontinued operations, net of  income taxes		(1,666	)		(1,848	)		(2,488	)
Net income (loss)	$	(19,064	)	$	(23,163	)	$	(11,160	)
Weighted average shares - basic and diluted		23,278			21,523			21,801
Net loss per share from continuing operations- basic and diluted		(0.75	)		(0.99	)		(0.40	)
Net loss per share from discontinued operations- basic and diluted		(0.07	)		(0.09	)		(0.11	)
Net loss per share - basic and diluted	$	(0.82	)	$	(1.08	)	$	(0.51	)

See accompanying notes to consolidated financial statements.

55

PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

	Common Stock
	Shares			Amount			Additional Paid-in Capital			Retained Earnings (Deficit)			Treasury Stock			Minority Interest			Accumulated Other Comprehensive (Loss) Income			Total
Balances, December 31, 2004		22,345,847		$	228		$	59,637		$	7,277		$	(1,155	)	$	-		$	4		$	65,991
Treasury stock purchased		(1,033,750	)		(15	)		(3,207	)		-			1,155			-			-			(2,067	)
Exercise of stock options and warrants		134,120			1			188			-			-			-			-			189
Merry Fields, loss of control		-			-			20			(239	)		-			219			-			-
Minority interest in net income of Merry Fields		-			-			-			-			-			101			-			101
Deconsolidation of Merry Fields		-			-			-			-			-			(320	)		-			(320	)
Comprehensive income:
Net income (loss)		-			-			-			(11,160	)		-			-			-			(11,160	)
Unrealized gain (loss) on investments, net of reclassification adjustments		-			-			-			-			-			-			(16	)		(16	)
Total comprehensive income (loss)		-			-			-			(11,160	)		-			-			(16	)		(11,176	)
Balances, December 31, 2005		21,446,217		$	214		$	56,638		$	(4,122	)	$	-		$	-		$	(12	)	$	52,718
Exercise of stock options and warrants		106,355			2			79			-			-			-			-			81
Employee stock option amortization		-			-			1,259			-			-			-			-			1,259
Comprehensive income:
Net income (loss)		-			-			-			(23,163	)		-			-			-			(23,163	)
Unrealized gain (loss) on investments, net of reclassification adjustments		-			-			-			-			-			-			(61	)		(61	)
Total comprehensive income (loss)		-			-			-			(23,163	)		-			-			(61	)		(23,224	)
Balances, December 31, 2006		21,552,572		$	216		$	57,976		$	(27,285	)	$	-		$	-		$	(73	)	$	30,834
Exercise of stock options and warrants		1,797						3			-			-			-			-			3
Common stock issued		4,300,000			43			7,425			-			-			-			-			7,468
Common stock retired		(2,335,300	)		(24	)		(3,946	)		-			-			-			-			(3,970	)
Employee stock option amortization		-			-			1,993			-			-			-			-			1,993
Comprehensive income:
Net income (loss)		-			-			-			(19,064	)		-			-			-			(19,064	)
Unrealized gain (loss) on investments, net of reclassification adjustments		-			-			-			-			-			-			73			73
Total comprehensive income (loss)		-			-			-			(19,064	)		-			-			73			(18,991	)
Balances, December 31, 2007		23,519,069		$	235		$	63,451		$	(46,349	)	$	-		$	-		$	-		$	17,337

See accompanying notes to consolidated financial statements.

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PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For The Years Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net Income (loss)	$	(19,064	)	$	(23,163	)	$	(11,160	)
Less: Net Income from discontinued operations		( 1,666	)		(1,848	)		(2,488	)
Net income (loss) from continuing operations		(17,398	)		(21,315	)		(8,672	)
Depreciation and amortization		3,619			5,050			2,857
(Gain) loss on disposal of equipment and long-term assets		150			-			-
Loss (gain) on disposal of available-for-sale securities		(99	)		30			120
Bad debt allowance		244			95			415
Inventory allowance		754			(1,190	)		-
Employee stock option amortization		1,993			1,259			-
Restructuring charge for impairment of intangible assets		220			8,874			4,664
Restructuring provision for excess and obsolete inventory		2,467			1,502			2,143
Restructuring provision for impairment of goodwill		7,922			-
Impairment of service unit goodwill		-			-			200
Changes in assets and liabilities affecting operations:
Restricted cash		-			-			60
Accounts receivable, net		(4,731	)		2,668			(1,607	)
Inventory		(766	)		(611	)		(33	)
Deposits		1			(431	)		(181	)
Prepaid expenses  and other assets		172			61			(770	)
Refundable income taxes		(37	)		-			151
Accounts payable and accrued expenses		(769	)		(1,695	)		3,145
Deferred revenue		1,885			(283	)		2,366
Net cash provided by (used in) continuing operating activities:		(4,373	)		(5,986	)		4,858
Net cash provided by (used in) discontinued operating activities		(995	)		(1,512	)		(1,858	)
Net cash provided by (used in) operating activities		(5,368	)		(7,498	)		3,000
Cash flows from investing activities:
Release of restricted cash		-			5,000			-
Proceeds on disposal of property and other assets		-			-			169
Purchase of securities		-			-			(241	)
Purchase of property and equipment		(978	)		(445	)		(293	)
Investment in capitalized software		(788	)		-			(382	)
Proceeds from the sale of securities		340			-			5,214
Cash used for acquisitions		-			-			(24,300	)
Cash received from the acquisition of a business		-			-			384
Net cash provided by (used in) continuing investing activities:		(1,426	)		4,555			(19,449	)
Net cash provided by  (used in) discontinued investing activities		200			-			-
Net cash provided by (used in) investing activities		(1,226	)		4,555			(19,449	)
Cash flows from financing activities:
Retirement of common stock		(3,970	)		-			(2,069	)
Issuance of common stock		7,468			-			-
Exercise of stock options and warrants		3			81			189
Repayment of license agreement payable		(868	)		(962	)		-
Repayment of notes payable		-			-			(2,906	)
Net cash provided by (used in) continuing financing activities:		2,633			(881	)		(4,786	)
Net cash provided by (used in) discontinued financing activities		-			(19	)		-
Net cash provided by (used in) financing activities		2,633			(900	)		(4,786	)
Net increase (decrease) in cash and cash equivalents		(3,961	)		(3,843	)		(21,235	)
Cash and cash equivalents, beginning of period		10,290			14,133			35,368
Cash and cash equivalents, end of period	$	6,329		$	10,290		$	14,133

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Supplemental disclosure of cash flow information:
Cash paid for interest	$	126	$	119	$	160
Income taxes paid	$	196	$	68	$	-
Deconsolidation of subsidiary:  Property and equipment removed	$	-	$	-	$	1,455
Note payable removed	$	-	$	-	$	1,194
Acquisition of license agreement in exchange for license agreement payable	$	-	$	-	$	2,956

See accompanying notes to consolidated financial statements.

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PROXIM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.           Organization

We provide high-speed wireless communications equipment and services in the United States and internationally.  Our systems enable service providers, enterprises, and governmental organizations to deliver high-speed data connectivity enabling a broad range of applications.  We also provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, and municipal networks.  We believe our fixed wireless systems address the growing need of our customers and end-users to rapidly and cost effectively deploy high-speed broadband communication networks.  The Company’s service business segment that was conducted through the Ricochet Networks, Inc. subsidiary was discontinued in the third quarter of 2007.  The Company now operates only one business segment, broadband wireless equipment.

2.           Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Proxim Wireless Corporation and its wholly owned subsidiaries.  Material inter-company transactions and balances have been limited in consolidation.  Through June 30, 2005, the financial statements of Merry Fields, LLC, a former affiliate, were consolidated with the financial statements of Proxim. 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Revenue Recognition

Product revenue is generally recognized upon shipment in accordance with Staff Accounting Bulletin 104 (“SAB 104”), when persuasive evidence of an arrangement exists, the price is fixed or determinable, and collect ability is reasonably assured. The Company offers most stocking distributors a stock rotation right pursuant to which they may return products that have been recently purchased provided they place an equal value order for new products from us and the value of the returned products is a small fraction  of the value of products purchased from us in the preceding quarter. In general, we also offer most stocking distributors price protection on products in their inventory or recently purchased from us in cases where we reduce prices on these products. In both cases , the distributors would receive a credit which can be used for purchase of additional products from us. In a small number of cases, we have agreed to accept return of discontinued or obsolete products. For other customers, we provide quarterly or annual rebates based on achievement of performance targets, loyalty discounts, and/or sales discounts.  We apply SFAS No. 48,”Revenue Recognition When Right if Return Exists,” in determining when to recognize revenue.  Under SFAS No. 48 revenue can be recognized if all of the following conditions are met:

1. The price is fixed and determinable at the date of sale;

2. The buyer’s payment obligation is not contingent on resale;

3. The buyer’s payment obligation would not be changed in the event of theft or physical damage of the product;

4. The buyer acquiring the product for resale has economic substance apart from that provided by the seller;

5. The seller does not have significant obligations for future resale of the product; and

6. The amount of future returns can be reasonably estimated.

Based on our application of the SFAS No. 48 principles to our different customers, we currently recognize some revenue on a “sell in” basis and some on a deferred “sell through” basis.  Generally factors 1 through 5 are satisfied

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upon our delivery of the products to our customer. The estimation of future returns depends on contractual terms and our historical experience with the customer.

Proxim revenue consists of direct shipments to customers or other equipment manufacturers (OEM), and distributors who resell our products to third party customers.

In the case of direct customers or OEM manufacturers we recognize revenue at point of shipment from either Proxim’s facility or from our contract manufacturer’s facilities when the product is shipped from the respective docks since title and acceptance are passed to the end customer. We meet the conditions of SAB #104, and SFAS 48 for revenue recognition at point of shipment for direct customer and OEM sales.

In the case of Proxim products which are sold to distributors we generally recognize revenue to most distributors on a “sell in” basis at point of shipment since we have met all of the conditions specified in SAB104, and SFAS 48 at point of shipment to the distributors.

As mentioned previously we offer most stocking distributors a stock rotation right pursuant to which they may rotate products for comparable value in their inventory that have been recently purchased from us and the value of the returned product is a relatively small percentage of the product purchased from us in the preceding quarter. In addition, we also offer most stocking distributors price protection on products in their inventory and recently purchased from us in cases where we have reduced prices on those products. These stock rotations and price discounts must be claimed and exercised within a one to two quarter time frame to be valid.

In the case of our three largest stocking distributors, although they have comparable distribution contracts to the smaller distributors, we have historically deferred revenue for shipments which are either in transit to them, or are included in their period ending inventory reports. This revenue deferral practice for larger distributors has been applied historically by Proxim. These larger distributors have historically returned more product and requested larger stock rotations and price discounts versus the smaller distributors which was the primarily reason that we have historically recognized their revenue using the “sell through” methodology. Under the “sell through” methodology we recognize revenue when our products are sold by these three largest stocking distributors.

For our services business, prior to discontinuing the service operations on July 31, 2007, we recognized revenue when the customer paid for and then had access to our network for the current fiscal period. Any funds the customer paid for future fiscal periods were treated as deferred revenue and recognized in future fiscal periods for which the customer was granted access to our network.  The Company did not have revenue from multiple deliverable arrangements during the years ended December 31, 2007, 2006, and 2005.

Cash Investments

The Company considers cash on hand, deposits in banks, money market accounts and investments with an original maturity of three months or less to be cash or cash equivalents.  Investments consist of investments in investment-grade marketable equity securities.  The Company classifies the investments as available-for-sale.  Such securities are stated at fair value using published market prices, with any material unrealized holding gains or losses reported, net of any tax effects, as accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity.  Realized gains and losses and declines in value judged to be other than temporary, if any, are included in operations.

Accounts Receivable Valuation

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We assess the customer’s ability to pay based on a number of factors, including past transaction history with the customer as well as their creditworthiness. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of any of our customers were to deteriorate in the future, resulting in an impairment of their ability to make payments, or they express unwillingness to pay for whatever reason, additional allowances may be required. We reserve 100% of outstanding receivable balances (a) from insolvent customers and (b) from customers which are delinquent by six months or more. We reserve 50% of outstanding

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receivable balances that are between 3 months to 6 months delinquent subject to adjustments as considered appropriate for specific situations.

Inventory Valuation

 Inventories are stated at the lower of standard cost, which approximates actual cost under the first-in, first-out method, or market value. We perform a detailed assessment of inventory at each year-end balance sheet date, which includes, among other factors, a review of component demand requirements, product lifecycle and product development plans. Manufacturing inventory includes raw materials, work-in-process, and finished goods. Inventory valuation provisions are based on an excess obsolete report which captures all obsolete parts and products and all other inventory, which have quantities in excess of one year’s projected demand, or in the case of service inventories demand of up to five years. Individual line item exceptions are identified for either inclusion or exclusion from the inventory valuation provision.  As a result of this assessment, we write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.  In addition, on an annual basis we conduct a lower of cost or market evaluation which may necessitate additional inventory provisions.

Warranty Provision

Proxim’s standard warranty term is one year on the majority of our products and up to two years on a select group of products.  At times we provide longer warranty terms.  Proxim provides an estimated cost of product warranties at the time revenue is recognized.  Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and costs per claim for repair or replacement. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service labor costs incurred in correcting a product failure. Should actual product failure rates, material usage, service labor or delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.

Property and Equipment

Property and equipment is recorded at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which range from two to seven years for personal property and 39 years for real property.

Goodwill

The carrying values of goodwill and other intangible assets are reviewed for possible impairment in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Proxim’s accounting policy for goodwill impairment requires annual testing for impairment of goodwill and intangible assets with indefinite lives in accordance with SFAS 142 guidelines. Goodwill and intangible assets are also subject to review for impairment when circumstances or events occur during the year which indicates that the asset may be impaired.

Assessing goodwill for impairment involves the following two steps:

a. Determine whether impairment exists. The first step of the impairment test is to determine whether impairment exists by comparing the fair value of the reporting unit with its carrying value (including goodwill).  If the fair value is not impaired, then the second step of impairment is not necessary. If the fair value is less than the recorded amount, impairment exists and the second step of the test is performed.

b. Measure the amount of the impairment loss. The second step of the impairment test measures the amount of impairment loss by comparing the fair value of reporting unit goodwill to its carrying amount. If the carrying amount of the reporting unit goodwill is greater than the implied fair value, an impairment loss equal to the difference is recognized and goodwill is written down. The implied fair value of the reporting unit goodwill is the excess of the fair value of reporting unit over the amounts assigned to the assets and liabilities.

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Proxim determines for each of its reporting units if there are any impairment charges for these units using the fair value approach, incorporating the discounted cash flow method and a market approach using the public company method. In performing this analysis, Proxim uses its historical operating results, a review of the marketplace and industries in which it operates, and its expectations of future operations. Based on SFAS 142 guidelines, impairment loss shall be recognized if the carrying amount of a long-lived asset is recoverable and exceeds its fair value.

Intangible Assets

Intangible assets are accounted for in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets” and SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”  Intangible assets with finite lives are amortized over the estimated useful lives using the straight-line method.  The carrying values of purchased intangible assets are reviewed for possible impairment when events or changing circumstances indicate that the carrying amount of such assets may not be recoverable. We test our intangible assets annually during the second half of the year unless there are indications during an interim period that such assets may have become impaired. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities may signal that an intangible asset has become impaired.  An impairment loss on purchased intangibles with finite lives is recognized if the carrying amount of the asset is not recoverable and its carrying amount exceeds its fair value.  For either type of asset, after a loss is recognized, the adjusted carrying amount of the intangible asset becomes its new accounting basis.

Capitalized Software

We capitalize certain software development costs in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed . We begin capitalizing software development costs upon the establishment of technological feasibility, which is established upon the completion of a working model or a detailed program design. Costs incurred prior to technological feasibility are charged to expense as incurred. Capitalization ceases when the product is considered available for general release to customers. Capitalized software development costs are amortized to costs of revenues over the estimated economic lives of the software products based on product life expectancy. Generally, estimated economic lives of the software products do not exceed three years.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes.”  Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized.  The principal differences are net operating loss carry forwards, property and equipment, allowance for doubtful accounts, inventory reserves, and accruals.

Stock based compensation

Beginning in 2006, we account for stock-based compensation in accordance with the fair value recognition provisions of SFAS No. 123R. Under SFAS No. 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period of the individual equity instrument. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. The computation of the expected volatility assumption used in the Black-Scholes calculation for option grants is based on historical volatility as options on our stock are not traded.  The Company uses the “simplified” method to determine the expected term for “plain vanilla” options.  In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual forfeitures differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

For the year ended December 31, 2007 and December 31, 2006, the loss before income taxes and the net loss was $2.0 million and $1.3 million higher due to the recognition of stock-based compensation expense under SFAS123R.  The basic and diluted loss per share for the years endings December 31, 2007 and 2006 were $0.09

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and $0.06 higher, respectively, due to the adoption of SFAS 123R.  Net cash used in operating activities and net cash provided by financing activities were not changed by the adoption of SFAS 123R.

Prior to 2006, in accordance with SFAS 123, “Accounting for Stock-Based Compensation” and Statement of Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” the Company applied APB Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” in accounting for its stock option plans. Under APB No. 25, no stock-based compensation cost was reflected in net income for grants of stock prior to fiscal year 2006 because the Company grants stock options with an exercise price equal to or greater than the underlying common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share for the fiscal year 2005 if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation to the prior-year periods (dollars in thousands, except per share data).

Pro-Forma Expense for 2005	Year End
	2005
Net (loss) attributable to common shareholders as reported	$	(11,160	)
Less: Total stock based compensation expense determined
under the fair value method for all awards		(2,017	)
Pro forma net (loss) per common share, as reported		(13,177	)
Denominator for diluted loss per share		21,801
Basic net (loss) per common share, as reported	$	(0.51	)
Basic net (loss) per common share, pro forma	$	(0.60	)
Diluted net (loss) per common share, as reported	$	(0.51	)
Diluted net (loss) per common share, pro forma	$	(0.60	)

Per Share Amounts

Basic net income per common share and diluted net income per common share are presented in conformity with SFAS No. 128, Earnings per Share (“SFAS No. 128”), for all periods presented. Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Basic per share amounts are computed by using the weighted average number of shares of common stock outstanding during the period less the weighted average number of common shares subject to repurchase. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding, including dilutive common shares subject to repurchase and potential shares assuming the (i) exercise of dilutive stock options and warrants using the treasury stock method and (ii) issuance of committed but un-issued stock awards.

Under the treasury stock method, outstanding options are assumed to be exercised if their exercise price is below the average fair market value of our common stock for a given period, and the proceeds from the exercise of such options are assumed to be used by us to repurchase shares of our common stock on the open market.

Advertising

Advertising costs are expensed when incurred, and the amounts were not material for all periods presented.

Shipping and Handling Costs

Shipping and handling are charged to customers and included in both revenue and costs of goods sold on the Consolidated Statements of Operations.

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Comprehensive Income

The Company reports comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income.”  The Company had zero, $61,000, and $16,000 of unrealized losses on available-for-sale investments, net of income taxes for the years ended December 31, 2007, 2006, and 2005, respectively.  The Company recorded realized gains or (losses) of $73,000, ($32,000), and ($120,000) in 2007, 2006 and 2005, respectively, that were reclassified from accumulated other comprehensive income.  The unrealized losses represent reclassification adjustments for gains realized in net income.

Foreign Currency Transactions

The functional currency of the Company's operations in all countries is the U.S. dollar. Sales and purchase transactions are generally denominated in U.S. dollars. Foreign currency transaction gains and losses are included in the statement of operations and were not material for each period presented.

Fair Value of Financial Instruments

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and license agreements payable approximate fair value.  Investment securities available for sale are recorded at estimated fair value based on quoted market prices where available.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109”, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 is effective beginning Q1 2007.  The Company evaluated the impact of implementation on the consolidated financial statements. The Company has performed a preliminary analysis under FIN 48 for the year ended December 31, 2007 and believes that any unrecognized benefits or potential interest and penalties are not material to the financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements in financial statements, but standardizes its definition and guidance in GAAP. Thus, for some entities, the application of this statement may change current practice. SFAS 157 is effective for the Company beginning on January 1, 2008. The Company is currently evaluating the impact that the adoption of this statement may have on its consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS 159 (“SFAS 159”) “The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial position and results of operations.

In December, 2007, the FASB issued SFAS 141R (“SFAS 141[R]”) Business Combinations: Applying the Acquisition Method (SFAS 141[R]). SFAS 141[R] retains the fundamental requirements of SFAS 141, but provides guidance on applying the acquisition method when accounting for similar economic events including: recognition and measurement of assets acquired, liabilities assumed and equity interests. Recognition and measurement of goodwill acquired, and gains from bargain purchase options. SFAS 141[R] is effective for years beginning on or after December 15, 2008. The Company is currently assessing the impact of SFAS 141[R] on its consolidated financial position and results of operation.

In December, 2007 the FASB issued SFAS 160, Non Controlling Interests in Consolidated Financials, an Amendment of ARB No. 51 (SFAS 160). SFAS 160 provides guidance for accounting and reporting of noncontrolling interests in consolidated financial statements, including:

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· Ownership interest in subsidiaries held by parties other then the parent should be clearly identified, labeled and presented in the consolidated financial statements with equity separate from the parent company.

· The amount of consolidated net income attributable to the parent and to the noncontrolling interest should be clearly identified and presented on the face of the consolidated income statement.

· Changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for consistently, i.e., as equity transactions.

· When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be initially measured at fair value.

· Disclosure requirements that clearly identify and distinguish between the interests of the parent and those of the noncontrolling owners.

SFAS 160 is effective for years beginning on or after December 15, 2008. The Company is currently assessing the impact of SFAS 160 on its consolidated financial position and results of operation.

3.           Inventory and Restructuring Provision for Excess and Obsolete Inventory

Inventory consisted of the following:

(in thousands)
	December 31,			December 31,
	2007			2006
Raw materials	$	6,748		$	8,247
Work in process		374			480
Finished goods		7,531			11,068
		14,653			19,795
Allowance for excess and obsolescence and other reserves		(7,499	)		(9,653	)
Net Inventory	$	7,154		$	10,142

During the year ended December 31, 2007, the Company recorded a $2.5 million inventory restructuring provision for excess and obsolete inventory related to certain under-performing product lines.

During the year ended December 31, 2006, the Company recorded a $1.5 million restructuring provision for excess and obsolete inventory as part of the Company's restructuring activities. The excess inventory charges were due principally to management’s decision to discontinue certain older Proxim product lines subsequent to the acquisition of the Old Proxim product lines and distribution channels.

During the quarter ended September 30, 2005, the Company recorded a $2.1 million restructuring provision for excess and obsolete inventory as part of the Company’s restructuring activities.  The excess inventory charges were due principally to management’s decision to discontinue certain older Proxim product lines subsequent to the acquisition of the old Proxim product line and distribution channels.

4.            Restructuring Charges for Severance and Excess Facilities

The Company accounts for restructuring charges under the provisions of Statement of Financial Accounting Standards No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities”.

During the year ended December 31, 2007, the Company recorded restructuring charges of approximately $91,000.  These charges consisted of one-time termination benefits related to a reduction in force, implemented in an effort to streamline operations in response to the first quarter financial results.

During the year ended December 31, 2006, and subsequent to the Old Proxim acquisition, the Company recorded restructuring charges of approximately $116,000.  These charges consisted of one-time termination benefits related to a reduction in force subsequent to the Old Proxim acquisition.

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During the year ended December 31, 2005, and subsequent to the Old Proxim acquisition, the Company recorded restructuring charges of approximately $944,000.  These charges consisted of operating lease commitments related to facilities where were closed during the quarter and severance payments to Terabeam employees laid off subsequent to the Old Proxim acquisition.

5. Intangible Assets and Goodwill

The following table presents details of the Company’s intangible assets with indefinite and definite useful lives (in thousands):

Schedule of Non-amortizable (Indefinite life) Assets:

	December 31,
	2007			2006
	(in thousands)
Trade names – indefinite useful life	$	2,250		$	2,250
Less: Impairment charges and disposals		(1,470	)		(1,100	)
Trade names – indefinite useful life, net	$	780		$	1,150

Schedule of Amortizable (Definite life) Assets:

	December 31,
	2007			2006
	(in thousands)
Patents, customer relationships and other technologies with identifiable useful lives	$	11,308		$	14,521
Total amortizable intangible assets		11,308			14,521
Less:  accumulated amortization		(3,073	)		(4,126	)
Amortizable intangible assets, net	$	8,235		$	10,395

Amortization expense for years ended December 31, 2007, 2006 and 2005, totaled approximately $2.1 million, $3.4 million and $2.6 million, respectively.  The weighted average estimated useful life is 4.7 years.  There is no estimated residual value.  Estimated amortization expense is $2.1 million, $1.9 million, $1.7 million, $1.1 million and $1.4 million, respectively, for the calendar years 2008 through 2014.

Schedule of Goodwill

At December 31, goodwill consisted of the following (in thousands):

Acquisition	2007		2006
KarlNet	$	-	$	2,491
Terabeam		-		3,322
Old Proxim		-		2,109
Goodwill	$	-	$	7,922

Restructuring Provision for Impairment of Goodwill and Intangible Assets

During the years ended December 31, 2007, 2006 and 2005, in accordance with the guidance contained in the Financial Accounting Standards Board Statement of SFAS No. 142, “Goodwill and Other Intangible Assets”, and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tested goodwill and certain intangible assets for impairment where management has assessed that certain indicators (e.g.

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market conditions, sales level, product viability) has suggested that these assets might be impaired.  An impairment loss on such assets is recognized if the carrying amount of goodwill or an intangible asset is not recoverable and its carrying amount exceeds its fair value.

2007 Assessment:

During the fourth quarter 2007, the Company recorded a charge for the impairment of amortizable intangible assets totaling $ 220,000 for the partial impairment of the Proxim trade name.  A charge of $7.9 million related to goodwill from three acquisitions in which the carrying value of the goodwill was considered non -recoverable.

2006 Assessment:

During the third quarter 2006, the Company recorded a charge for the impairment of amortizable and non-amortizable intangible assets totaling $8.9 million.  This restructuring expense consisted of:

A $2.1 million charge related to the developed components technology acquired in the acquisition of Old Proxim in 2004.

A $4.8 million charge related to the developed technology acquired with the purchase of  Old Proxim.

A $1.1 million charge related to impairment identified with the Proxim trade name and $0.9 million charge identified to the impairment of Karlnet customer relationship from discontinued products.

2005 Assessment:

A $3.6 million impairment charge related to the Terabeam trade name.   Subsequent to the Old Proxim acquisition, the Company chose to sell its wireless equipment products under the go to market name of Proxim Wireless.

A $1.1 million charge related to the write off of certain software development costs previously capitalized.  The Company abandoned development of its Logan software development project after acquiring similar software in the Proxim acquisition due to market timing issues.

6.            Investment Securities

Cost basis of investments are determined for securities purchased through a securities broker at cost of the security plus acquisition costs.  Cost basis of securities acquired with the purchase of a company, such as with Proxim Wireless, are based on quoted market prices on the date of acquisition.  Gain or loss on securities is computed using cost basis of first-in, first-out (FIFO) basis.

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Investment securities are summarized as follows (in thousands):

	December 31,
	2007				2006
	Cost Basis		Carrying Value		Cost Basis		Carrying Value
Available-for-sale:		-		-		-		-
Equity investments	$	-	$	-	$	240	$	168
Total	$	-	$	-	$	240	$	168

The net realized gains (losses) on investment securities included in earnings are as follows (in thousands):

	2007		2006			2005
Equity securities	$	99	$	(30	)	$	(120	)

7.            Property and Equipment

Property and equipment consisted of the following balances for the dates indicated (in thousands):

	December 31,
	2007			2006
Building and improvements	$	580		$	469
Capitalized software		1,663			1,033
Equipment		3,997			4,065
		6,240			5,567
Less:  accumulated depreciation		(3,698	)		(2,907	)
Property and equipment, net	$	2,542		$	2,660

Depreciation expense totaled approximately $1.5 million, $1.7 million, and $0.9 million, respectively, for the periods ended December 31, 2007, 2006, and 2005.

8.            Allowance for Bad Debt, Sales Returns and Discounts

The following is a summary of the movements in allowance for bad debt, sales returns and discounts during the year ended December 31, 2007 and 2006 (in thousands):

	Bad Debt Reserve						Allowances And Returns						Total Reserves and Allowances
	2007			2006			2007			2006			2007			2006
Balance as of January 1	$	1,663		$	7,342		$	1 ,945		$	1,786		$	3,608		$	9,128
Increase (decrease) to the provision		244			95			6,280			8,746			6,524			8,841
Charge offs and other adjustments made during the  period		(991	)		(5,774	)		(7,097	)		(8,587	)		(8,088	)		(14,361	)
Balance as of December 31	$	916		$	1,663		$	1,128		$	1,945		$	2,044		$	3,608

For the years ended December 31, 2007, 2006 and 2005, the increase to the bad debt provision, returns and discounts were approximately $6.6 million, $8.8 million and $9.2 million, respectively.

9.            Allowance for Product Warranty Costs

The following table presents a summary of the changes to product warranty costs during the year ended December 31, 2007 and 2006 (in thousands):

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	Product Warranty Costs
	2007			2006
Balance as of January 1	$	1,102		$	1,366
Warranty claims provided for		567			575
One time reduction of excess warranty reserve		(539	)		-
Settlements and other provision adjustments		(433	)		(839	)
Balance as of December 31	$	697		$	1,102

Warranty costs were significantly reduced for the twelve months ended December 31, 2007 versus the comparable period ended December 31, 2006. This reduction was due to an analysis performed by the Company of allowance for product warranty costs utilizing updated information of actual costs and changes that have been made to the  Company’s warranty policy. The Company booked a change in estimate of allowance for product warranty cost of goods sold during the quarter ended March 31, 2007.

10.           Patent License Agreement – License Agreement Payable

In February 2006, Proxim Wireless Corporation and its subsidiaries entered into a settlement agreement with Symbol Technologies, Inc. and its subsidiaries (“Symbol”) resolving all outstanding litigation between the companies.

The Company recorded an intangible asset related to the license at December 31, 2005, based on the present value of the scheduled payments, and will amortize the intangible asset over the useful life of the patents through 2014.   The Company also recorded a license payable equal to the present value of the scheduled payments. License agreements payable consisted of the following at December 31 (in thousands):

	December 31,
	2007		2006
Current portion of payable		1,065		868
Long term portion of payable		1,023		2,088
Total license Agreement Payable	$	2,088	$	2,956

Payouts of License Agreements are as follows as of December 31, (in thousands):

2008	$	1,065
2009	$	1,023
2010 and beyond	$	-

11.           Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2007, 2006, and 2005, respectively, is (in thousands):

	December 31,
	2007		2006		2005
Current tax expense (benefit)
Federal	$	-	$	-	$	-
State		6		68		(16	)
Foreign		178		-		-
	$	184		68		(16	)
Deferred tax expense (benefit)
Federal		-		-		-
State		-		-		-
Foreign		-		-		-
Total Deferred		-		-		-
Total Provision	$	184	$	68	$	(16	)

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A reconciliation of income taxes at the statutory federal income tax rate to net income taxes included in the accompanying statements of operations is as follows:

	December 31,
	2007			2006			2005
Tax expense (benefit) at U.S. statutory rate	$	(6,608	)	$	(8,107	)	$	(3,906	)
State income taxes		6			(927	)		(446	)
Change in valuation allowance		3,236			1,917			5,430
Permanent tax differences		-			7,185			(1,073	)
Non deductible impairment charges		2,850			-			-
Non deductible stock compensation expense		698			-			-
Other differences		2			-			(21	)
Provision (benefit) for income taxes	$	184		$	68		$	(16	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of the Company’s deferred tax assets are as follows (in thousands):

	December 31,
	2007			2006
Deferred Tax Asset:
Federal and State Net Operating Loss	$	8,700		$	7,560
Inventory valuation allowance		1,200			1,335
Allowance for bad debt		1,100			(32	)
Accruals		1,300			(91	)
Total Deferred Tax Assets		12,300			8,772
Valuation allowance		(12,300	)		(8,772	)
Net Deferred Tax Assets	$	-		$	-
Long Term Deferred Tax Assets:
Intangible and depreciable assets	$	200		$	89
Valuation allowance		(200	)		(89	)
Net deferred tax asset (liabilities)	$	-		$	-

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.  Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.  The Valuation Allowance increased by $3.6 million, $1.9 million, and $5.4 million for the periods ended December 31, 2007, 2006 and 2005, respectively.

As of December 31, 2007, the Company had a federal net operating loss carry forward of approximately $24 million. The net operating loss is currently expiring and will continue to do so through 2027, if not utilized.

As of December 31, 2007 the Company had state net operating loss carry forwards of approximately $12.0 million.  The net operating losses will begin expiring in 2009, if not utilized.

Utilization of the Company’s net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions.  Such an annual limitation could result in the expiration of the net operating loss before utilization.

The Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007. As a result of the implementation of FIN 48, the Company did not recognize any adjustment to the liability for uncertain tax positions and therefore did not record any adjustment to the beginning balance of retained earnings on the consolidated balance sheet. As of the date of adoption and at December 31, 2007, the Company had

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no unrecognized tax benefits and we do not expect any material change during the next year.  Interest and penalties are zero, and our policy is to account for interest and penalties in tax expense in the income statement.

We file U.S and state income tax returns with varying statutes of limitations. The tax years from 1999 forward remain open to examination due to the carryover of unused net operating losses or tax credits.

The following table summarizes the activity related to our unrecognized tax benefits:

	Total
	(In thousands)
Balance at January 1, 2007	$	-
Increases related to current year tax positions		-
Balance at December 31, 2007	$	-

12.           Commitments and Contingencies

Leases

The Company has various operating leases for equipment, office and production space.  These leases generally provide for renewal or extension at market prices.

Rent expense for the years ended December 31, 2007, 2006 and 2005 was approximately $ 2.1 million, $2.8 million, and $1.9 million, respectively.

Schedule of Contractual Commitments

Aggregate maturities of the operating leases and other contractual commitments are as follows as of December 31, 2007 (in thousands):

2008	$	4,008
2009		1,918
2010		793
2011		312
2012		261
Thereafter		460
Total	$	7,752

In addition, the Company has accrued liabilities of $1.1 million relating to real estate leases for currently unutilized space.  This amount relates to five remaining real estate leases acquired in connection with the acquisition of Terabeam Corporation.

13.           401(k) – Retirement Plan

The Company has a 401(k) retirement plan covering all employees who meet certain minimum eligibility requirements.  Each year employees can elect to defer the lesser of 15% of earned compensation or the maximum amount permitted by the Internal Revenue Code.  The Company makes contributions to the plan at its discretion.  The Company made no contribution to the plan for the periods ended December 31, 2007, 2006 or 2005.

14.           Stockholders’ Equity

Stock Warrants

The Company issued 2,150,000 new stock warrants with an exercise price of $2.45 per share in connection with a private placement of the Company’s common stock in July 2007.  In November 2007, 1,225,000 of those

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warrants were cancelled.  The remaining 925,000 warrants remain outstanding and will expire on July 23, 2012. In summary, the Company has issued warrants for its common stock as follows:

	Warrants Outstanding
	Number of Shares			Per Share Exercise Price
Outstanding December 31, 2004		841,465		$	0.40 – 17.05
Warrants issued		-		$	-
Warrants exercised		(31,948	)	$	2.08 – 2.08
Warrants expired/canceled		(371,047	)	$	0.40 – 17.05
Outstanding December 31, 2005		438,470		$	0.40 – 5.68
Warrants issued		-		$	-
Warrants exercised		(69,287	)	$	2.08 – 2.27
Warrants expired/canceled		(215,806	)	$	2.08 – 5.68
Outstanding December 31, 2006		153,377		$	0.40 – 2.27
Warrants issued		2,150,000		$	2.45
Warrants exercised		-		$	-
Warrants anti-dilution adjustment		3,244		$	-
Warrants expired/canceled		(1,326,621	)	$	2.02 - $2.45
Outstanding December 31, 2007		980,000		$	0.40-$2.45

Expiration dates of warrants are as follows:

Expiration Date	Number of Warrants
2008		55,000
2012		925,000

Stock Options Issued

The Company has stock option plans that provide for the granting of options to employees, directors, and consultants.  The Company has one active stock plan pursuant to which stock options and stock awards may be granted and four historical stock plans pursuant to which stock options are currently outstanding but under which no more stock options or other stock awards will be issued.  The active stock plan permits the granting of options at various prices and requires that the options be exercisable at the prices and at the times as determined by the Board of Directors, not to exceed ten years from date of issuance.  As of December 31, 2007, (a) 141,823 options were available for issuance under the active stock plan; (b) 2,982,142 options were outstanding under the active stock plan; and (c) 189,073 options were outstanding under the historical stock plans.

A summary of the option activity is as follows:

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	Options Outstanding
	Number of Shares			Per Share Exercise Price
Balance at December 31, 2004		1,171,634		$	0.92 – 161.00
Options granted		1,488,000		$	2.35 – 3.34
Options exercised		(102,172	)	$	1.60 – 2.47
Options expired/canceled		(514,416	)	$	1.60 – 161.00
Balance at December 31, 2005		2,043,046		$	0.92 – 161.00
Options granted		1,118,750		$	1.81 – 5.06
Options exercised		(37,068	)	$	1.60 – 4.00
Options expired/canceled		(532,636	)	$	1.32 – 17.88
Balance at December 31, 2006		2,592,092		$	0.92 – 161.00
Options granted		1,154,350		$	1.07 – 3.96
Options exercised		(1,797	)	$	1.60
Options expired/canceled		(573,430	)	$	1.44 – 6.35
Outstanding December 31, 2007		3,171,215		$	0.92 – 161.00

A summary of the stock options outstanding and exercisable as of December 31, 2007 is as follows:

Options Outstanding							Options Exercisable
	Number Outstanding		Weighted Average Remaining		Weighted- Average		Number Exercisable		Weighted- Average
Range of Exercise Price	(in thousands)		Contractual Life		Exercise Price		(in thousands)		ExercisePrice
$   0.92 – $ 1.44		462,000		4.9		1.36		49,166	$	1.04
$   1.63 – $ 1.98		349,733		4.3		1.83		32,739		1.93
$   2.12 – $ 2.31		256,250		2.3		2.27		84,916		2.26
$   2.35 – $ 2.50		351,968		2.7		2.43		303,622		2.43
$   2.53 – $ 2.72		350,000		3.2		2.5		199,994		2.58
$   2.73 – $ 3.03		318,148		3.1		2.80		192,590		2.75
$   3.34 – $ 3.34		500,000		2.2		3.34		400,000		3.34
$   3.76 – $ 3.96		219,793		3.8		3.87		61,742		3.78
$   4.00 – $ 5.76		282,226		3.3		4.97		164,897		4.97
$   6.35 – $ 161.00		81,097		1.3		12.61		73,133		13.25
Total		3,171,215		3.4	$	2.97		1,562799	$	3.49

We used the following assumptions to estimate the fair value of options granted and shares purchased under its employee stock plans and stock purchase plan for year ended December 31, 2007, 2006 and 2005:

	2007			2006			2005
Expected volatility		157% - 240	%		250% - 284	%		111	%
Expected dividends		-			-			-
Expected term (in years)		2.5 – 4.0			4			5
Risk-free rate		4.3 % - 4.8	%		4.5% - 5.0	%		3.6 % - 3.6	%

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The weighted average grant date fair value of stock options granted to employees was $1.73, $2.49 and $2.38 per share during the years ended December 31, 2007, 2006 and 2005, respectively.

As of December 31, 2007, $2.5 million of total unrecognized compensation costs related to non-vested awards is expected to be recognized over the respective vesting terms of each award through 2010.  The weighted average term of the unrecognized stock-based compensation expense is 1.8 years.

We received approximately $2,900, $80,000 and $189,000 in cash from option exercises under all stock-based compensation plans for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company uses the “simplified” method to determine the expected term for “plain vanilla” options.  

We historically relied exclusively on the historical prices of our common stock in the calculation of expected volatility. Upon adoption of SFAS No. 123R on January 1, 2006 and each quarter end thereafter, we updated this estimate to reflect the volatility of our stock options at the date of grant using a combination of historical and implied volatilities. Historical volatilities are calculated based on the historical prices of our common stock over a period equal to the expected term of our option grants, while implied volatilities are derived from publicly traded options of our common stock.

15.           Earnings (Loss) per Share

	December 31,
	2007			2006			2005
	(in thousands, except per share data)
Numerator
Net loss from continuing operations	$	(17,398	)	$	(21,315	)	$	(8,672	)
Net loss from discontinued operations		(1,666	)		(1,848	)		(2,488	)
Net loss	$	(19,064	)	$	(23,163	)	$	(11,160	)
Denominator – weighted average shares:
Denominator for basic earnings loss per share		23,278			21,523			21,801
Dilutive effect of stock options		-			-			-
Denominator for diluted loss per share		23,278			21,523			21,801
Basic and diluted loss per share from continuing operations		(0.75	)		(0.99	)		(0.40	)
Basic and diluted loss per share from discontinued operations		(0.07	)		(0.09	)		(0.11	)
Basic and diluted loss per share	$	(0.82	)	$	(1.08	)	$	(0.51	)

16.           Concentrations

The Company maintained approximately $6.3 million of cash, cash equivalent, and restricted cash balances in several banks, primarily in the U.S. The balances are insured by the Federal Deposit Insurance Corporation up to $100,000 per bank.  At December 31, 2007 and 2006, the uninsured portion totaled approximately $5.9 million and $10.1 million, respectively.

As of year ending December 31, 2007, we had two customers each accounting for more than 10% of total accounts receivable for the period.

During 2007 there were three unrelated customers who each accounted for more than 10% of sales (19%, 13% and 10%).  During the years ended December 31, 2006 three unrelated customers each accounted for more than 10% of sales (16%, 10% and 10%).

For the years ended December 31, 2007, 2006, and 2005 sales to customers outside of the United States and Canada accounted for approximately 55%, 58%, and 35%, respectively, of revenues.  As of December 31, 2007, the Company had 219 employees in five leased facilities, with minor assets located outside of the United States.

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	% of Company Sales
Region	2007			2006			2005
U.S  and Canada		45	%		42	%		65	%
Latin America (Mexico, Central, South America, and Caribbean) and Canada		9	%		13	%		8	%
Asia Pacific (China, Taiwan, Japan, other Pacific territories, Australia, New Zealand)		16	%		17	%		11	%
Europe, Middle East and Africa (E.M.E.A.)		30	%		28	%		16	%

During 2007, there were two contract manufacturers who accounted for more than half our annual production volume.

17.           Related Party Transactions

Our Young Design, Inc. subsidiary leases a facility in Falls Church, Virginia.  The property lease for the approximately 15,000 square foot facility commenced on January 1, 2001 and terminates on December 31, 2010.  The lease provides for base monthly rent payments of $20,625 with a 3% fixed annual increase after the base year.  There were no amounts due at year end 2007 and 2006, and payments under the lease totaled approximately $249,000 and $287,000 for the years ended December 31, 2007 and 2006, respectively.

This lease was entered into at a time when Young Design, Inc. was a private company owned by two stockholders – Concorde Equity, LLC and Michael Young.  Concorde Equity was controlled by Robert Fitzgerald, who then was Chief Executive Officer of Young Design and who then became our Chief Executive Officer from April 2003 through January 2008.  In August 2000, the shareholders of Young Design formed another company owned by them called Merry Fields, LLC.  Merry Fields then purchased a building and leased the building to Young Design.  Merry Fields needed to obtain bank financing to purchase the building and, as a condition to making the loan, the bank required that Young Design guarantee Merry Fields’ loan obligations to the bank.

Proxim then acquired Young Design in April 2003. Because Proxim at the time was publicly traded, equity ownership of the company was more widely held than just the two stockholders of Young Design (who were the two equity holders of Merry Fields). Therefore, Proxim wanted the guarantee by Young Design of Merry Fields’ obligations released. In the third quarter of 2005, Young Design (then a subsidiary of Proxim) was successful in convincing the bank to release the Young Design guarantee of Merry Fields’ obligations. Once the Young Design bank guarantee was released in 2005, Proxim no longer had the obligation to bear expected losses of Merry Fields. Further Merry Fields paid off the bank loan in full in approximately June 2006.

In accordance with FIN 46R, through June 30, 2005, Merry Fields was a variable interest entity and the Company was determined to be the primary beneficiary of Merry Fields.  During the year ended December 31, 2005, the Company ceased to guarantee the Merry Fields note payable and was no longer the primary beneficiary of Merry Fields.  Through June 30, 2005, the financial statements of Merry Fields were consolidated with the financial statements of the Company.  Effective with the quarter ended September 30, 2005, the financial statements of Merry Fields are no longer consolidated with the financial statements of the Company.

18.           Discontinued Operations

The Company’s Services business was discontinued in the third quarter of 2007.  That business was acquired with the acquisition of Ricochet Networks, Inc. during the second quarter of 2004 and was conducted through that Ricochet Networks subsidiary.  The Company announced the sale on July 31, 2007 of the Ricochet® wireless network and operations for greater Denver metropolitan area to Civitas Wireless Solutions, LLC (“Civitas”).  RNI received (a) the assumption by Civitas generally of obligations relating to the operation of the Ricochet® wireless network in the Denver, Colorado metropolitan area, (b) a cash payment of $200,000, (c) 15% equity ownership in Civitas, and (d) potential future payments contingent on certain future potential business of Civitas.  Ricochet Networks generally retained the obligations relating to the operation of the Ricochet network in the San Diego, California metropolitan area, the operation of which Ricochet Networks discontinued on July 31, 2007.  In addition, substantially all of Ricochet Networks’ employees were terminated effective July 31, 2007 and subsequently re-hired by Civitas.

As a result, Ricochet Networks is no longer in the business of providing wireless Internet services.  The sale of the Denver metropolitan business to Civitas, as well as reserve for closure of the San Diego network,

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amounted to a loss of $1.7 million for the twelve months of 2007.  Accordingly, the Services business segment is being accounted for as a discontinued operation and the results of the operations of the Services segment have been removed from the Company’s financial statements for its continuing operations for all periods and are being presented as a separate line item in the consolidated statement of operations for discontinued operations.

(in thousands)	December 31, 2007			December 31, 2006
Revenue from discontinued operations	$	2,181		$	2, 677
Loss on disposal of assets from discontinued operations		(581	)		-
Operating loss from discontinued operations		(1,085	)		(1,848	)
Net loss from discontinued operations	$	(1,666	)	$	(1,848	)

Included in Proxim’s Consolidated Balance Sheet for fiscal years ended 2007 and 2006 were assets and liabilities from discontinued operations as follows (in thousands):

(in thousands)	December 31, 2007			December 31, 2006
Current assets	$	69		$	680
Property, plant and equipment		-			171
Other long-term assets		11			191
Current liabilities		(33	)		(212	)
Net assets of discontinued operations	$	47		$	830

19.          Quarterly Financial Data – Unaudited

The Company operates and reports financial results ending on the last calendar date of the three month period of the quarter reported and at December 31 for our fiscal year end.  Accordingly, we have indicated in our filings that our fiscal quarters end March 31, June 30, September 30 and December 31.

Quarter Results (Unaudited) (in thousands, except per share data)
2007	First			Second			Third			Fourth
Revenue	$	16,674		$	18,116		$	16,903		$	14,587
Gross profit		7,634			8,249			8,286			4,800
Net income (loss) from continuing operations		(2,726	)		83			(1,658	)		(13,097	)
Net income (loss) from discontinued operations		(260	)		(422	)		(1,078	)		94
Net income (loss)		(2,986	)		(339	)		(2,736	)		(13,003	)
Basic and diluted earnings (loss) per share	$	(0.14	)	$	(0.02	)	$	(0.11	)	$	(0.52	)

Quarter Results (Unaudited)  (in thousands, except per share data)
2006	First			Second			Third			Fourth
Revenue	$	17,646		$	20,037		$	17,322		$	17,702
Gross profit		7,369			8,554			6,502			8,220
Net income (loss) from continuing operations		(4,205	)		(2,563	)		(13,079	)		(1,468	)
Net income (loss) from discontinued operations		(278	)		(422	)		(585	)		(563	)
Net income (loss)		(4,483	)		(2,985	)		(13,664	)		(2,031	)
Basic and diluted earnings (loss) per share	$	(0.21	)	$	(0.14	)	$	(0.63	)	$	(0.09	)

 Earnings (loss) per share calculations for each of the quarters are based on the weighted average shares outstanding for each period.  The sum of the quarters may not necessarily be equal to the full year earnings per share amounts.

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20.           Commitment and Contingencies

IPO Litigation

During the period from June 12 to September 13, 2001, four purported securities class action lawsuits were filed against Telaxis Communications Corporation, a predecessor company to Proxim Wireless Corporation, in the U.S. District Court for the Southern District of New York: Katz v. Telaxis Communications Corporation et al., Kucera v. Telaxis Communications Corporation et al., Paquette v. Telaxis Communications Corporation et al., and Inglis v. Telaxis Communications Corporation et al.  The lawsuits also named one or more of the underwriters in the Telaxis initial public offering and certain of its officers and directors.  On April 19, 2002, the plaintiffs filed a single consolidated amended complaint which supersedes the individual complaints originally filed.  The amended complaint alleges, among other things, violations of the registration and antifraud provisions of the federal securities laws due to alleged statements in and omissions from the Telaxis initial public offering registration statement concerning the underwriters’ alleged activities in connection with the underwriting of Telaxis’ shares to the public.  The amended complaint seeks, among other things, unspecified damages and costs associated with the litigation.  These lawsuits have been assigned along with, we understand, approximately 1,000 other lawsuits making substantially similar allegations against approximately 300 other publicly-traded companies and their public offering underwriters to a single federal judge in the U.S. District Court for the Southern District of New York for consolidated pre-trial purposes.  We believe the claims against us are without merit and have defended the litigation vigorously.  The litigation process is inherently uncertain, however, and there can be no assurance that the outcome of these claims will be favorable for us.

On July 15, 2002, together with the other issuer defendants, Telaxis filed a collective motion to dismiss the consolidated amended complaint against the issuers on various legal grounds common to all or most of the issuer defendants.  The underwriters also filed separate motions to dismiss the claims against them.  In October 2002, the court approved a stipulation dismissing without prejudice all claims against the Telaxis directors and officers who had been defendants in the litigation.  On February 19, 2003, the court issued its ruling on the separate motions to dismiss filed by the issuer defendants and the underwriter defendants.  The court granted in part and denied in part the issuer defendants’ motions.  The court dismissed, with prejudice, all claims brought against Telaxis under the anti-fraud provisions of the securities laws.  The court denied the motion to dismiss the claims brought under the registration provisions of the securities laws (which do not require that intent to defraud be pleaded) as to Telaxis and as to substantially all of the other issuer defendants.  The court denied the underwriter defendants’ motion to dismiss in all respects.

In June 2003, along with virtually all of the other non-bankrupt issuer defendants, we elected to participate in a proposed settlement agreement with the plaintiffs in this litigation.  If the proposed settlement had been approved by the court, it would have resulted in the dismissal, with prejudice, of all claims in the litigation against us and against the other issuer defendants who elected to participate in the proposed settlement, together with the current or former officers and directors of participating issuers who were named as individual defendants.  This proposed settlement was conditioned on, among other things, a ruling by the court that the claims against us and against the other issuers who had agreed to the settlement would be certified for class action treatment for purposes of the proposed settlement, such that all investors included in the proposed classes in these cases would be bound by the terms of the settlement unless an investor opted to be excluded from the settlement.

On December 5, 2006, the U.S. Court of Appeals for the Second Circuit issued a decision in In re Initial Public Offering Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against us may not be certified as class actions due, in part, to the Appeals Court’s determination that individual issues of reliance and knowledge would predominate over issues common to the proposed classes.  On January 8, 2007, the plaintiffs filed a petition seeking rehearing en banc of the Second Circuit Court of Appeals’ decision. On April 6, 2007 the Court of Appeals denied the plaintiffs’ petition for rehearing of the Court’s December 5, 2006 ruling but noted that the plaintiffs remained free to ask the District Court to certify classes different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its December 5, 2006 decision.  The plaintiffs have since moved for certification of different classes in the District Court.

In light of the Court of Appeals’ December 5, 2006 decision regarding certification of the plaintiffs’ claims, the District Court entered an order on June 25, 2007 terminating the proposed settlement between the plaintiffs and the issuers, including us. Because it is expected that any possible future settlement with the plaintiffs, if such a

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settlement were ever to be agreed to, would involve the certification of a class action for settlement purposes, the impact of the Court of Appeals’ class certification-related rulings on the possible future settlement of the claims against us cannot now be predicted.

On October 1, 2007, the plaintiffs submitted their briefing in support of their motions to certify different classes in the six focus cases.  The issuer defendants and the underwriter defendants filed separate oppositions to those motions on December 21, 2007.  The motions to certify classes in the six focus cases remain pending.  In addition, on August 14, 2007, the plaintiffs had filed amended complaints in the six focus cases.  On November 13, 2007, the issuer defendants moved to dismiss the claims against them in the amended complaints in the six focus cases.  The underwriter defendants have also moved to dismiss the claims against them in the amended complaints in the six focus cases.  Those motions to dismiss remain pending.

With the termination of the proposed settlement, we intend to continue to defend the litigation vigorously.  The litigation process is inherently uncertain and unpredictable, however, and there can be no guarantee as to the ultimate outcome of this pending lawsuit.  Moreover, we believe that the underwriters may have an obligation to indemnify us for the legal fees and other costs of defending these suits.  While there can be no assurance as to the ultimate outcome of these proceedings, we currently believe that the final result of these actions will have no material effect on our consolidated financial condition, results of operations, or cash flows. 

Linex Technologies Litigation

On June 1, 2007, Linex Technologies, Inc. filed suit against Proxim Wireless Corporation for alleged patent infringement in the United States District Court for the Eastern District of Texas, Marshall Division.  Other named defendants in this lawsuit are Belair Networks, Inc., Cisco Systems, Inc., Firetide, Inc., and Skypilot Networks, Inc.  This lawsuit generally alleges that Proxim’s mesh products infringe two United States patents purportedly owned by Linex.  Linex is seeking damages allegedly caused by the alleged infringement of its two patents. This matter is at an early stage.  We believe the claims against us are without merit and intend to defend the litigation vigorously.  The litigation process is inherently uncertain, however, and there can be no assurance that the outcome of these claims will be favorable for us.

KarlNet

On May 13, 2004, Proxim Wireless Corporation acquired KarlNet.  The definitive acquisition agreement contained provisions that provided for certain contingent consideration after the initial acquisition date.  Proxim Wireless Corporation may pay up to an additional $2.5 million over the two years following closing based on achievement of certain milestones and compliance with other conditions.  Although the Company has received a letter from sellers demanding payment of the first $1.0 million contingent payment, it is the Company’s position that, as of December 31, 2007, no events have occurred that have triggered the obligation to pay any of the contingent consideration.

General

We are subject to potential liability under contractual and other matters and various claims and legal actions which are pending or may be asserted against us or our subsidiaries, including claims arising from the termination of the operations of Ricochet Networks, Inc. in the San Diego metropolitan area and the transfer of the operations of Ricochet Networks, Inc. in the Denver metropolitan area to Civitas Wireless Solutions, LLC.  These matters may arise in the ordinary course and conduct of our business.  While we cannot predict the outcome of such claims and legal actions with certainty, we believe that such matters should not result in any liability which would have a material adverse affect on our business.

21.           Subsequent Events

Pankaj Manglik was promoted to President and Chief Executive Officer of Proxim Wireless Corporation, succeeding Robert Fitzgerald, Proxim’s previous Chief Executive Officer, effective January 16, 2008.  With this move, Proxim has consolidated the position of Chief Executive Officer and President into a single position to streamline operations and decision making.  In conjunction with this action Proxim has an obligation to pay approximately $0.5 million in severance related costs during Q1, 2008.

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On February 22, 2008, Proxim received a notice from The NASDAQ Stock Market stating that, for the last 30 consecutive business days, the bid price of the Company’s common stock closed below the minimum $1.00 per share requirement for continued inclusion under NASDAQ Marketplace Rule 4310(c)(4).

The NASDAQ notice also stated that:

· If, at any time before August 20, 2008, the bid price of the company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ will provide written notification that the company complies with NASDAQ Marketplace Rule 4310(c)(4).

· If compliance with that rule cannot be demonstrated by August 20, 2008, NASDAQ will determine whether the company meets the NASDAQ Capital Market initial listing criteria set forth in NASDAQ Marketplace Rule 4310(c), except for the bid price requirement.  If the company meets the initial listing criteria, NASDAQ will notify the company that it has been granted an additional 180 calendar day compliance period.

· If the company is not eligible for an additional compliance period, NASDAQ will provide written notification that the company’s securities will be delisted.  In that event, the company could appeal NASDAQ’s determination to delist its securities to a NASDAQ Listing Qualifications Panel.

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Schedule II

Valuation and Qualifying Accounts

For The Years Ended December 31, 2007, 2006 and 2005

(in thousands)

	Balance at the beginning of the period		Additions		Deductions			Balance at the end of the period
December 31, 2005:
Allowance for uncollectible accounts, returns and discounts	$	590	$	9,245	$	(707	)	$	9,128
Inventory allowance		600		10,701		(2,334	)		8,967
Deferred tax allowance		1,514		5,430		-			6,944
December 31, 2006:
Allowance for uncollectible accounts, returns and discounts	$	9,128	$	8,841	$	(14,361	)	$	3,608
Inventory allowance		8,967		1,920		(1,234	)		9,653
Deferred tax allowance		6,944		1,917		-			8,861
December 31, 2007:
Allowance for uncollectible accounts, returns and discounts	$	3,608	$	6,524	$	(8,088	)	$	2,044
Inventory allowance		9,653		3,221		(5,375	)		7,499
Deferred tax allowance		8,861		3,639		-			12,500

At December 31, 2005, the additions to the allowance for uncollectible accounts include $9.0 million related to Old Proxim reserves as adjusted, and the additions to the inventory allowance account include $7.0 million related to the Old Proxim allowance as adjusted.

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our CEO and CFO, our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.  Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2007.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting is the process designed by and under the supervision of our CEO and CFO to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America.  Management has evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.

Under the supervision and with the participation of our CEO and CFO, our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 and concluded that it is effective.

Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of our CEO and CFO, our management has evaluated changes in our internal control over financial reporting that occurred during our last fiscal quarter.  Based on that evaluation, our CEO and CFO did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Important Considerations

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud.  Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time.  Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

Item 9B.  Other Information.

Not applicable.

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PART III

Item 10.          Directors, Executive Officers and Corporate Governance.

Information responsive to this Item in our definitive proxy statement for our 2008 annual meeting of stockholders (the “2008 Proxy Statement”) is hereby incorporated by reference.

Code of Ethics

We have adopted a statement of business conduct and code of ethics that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, and principal accounting officer and controller.  This statement has been posted on our website (http://www.proxim.com/about/investor/code_ethics.aspx).

Item 11.          Executive Compensation.

Information responsive to this Item in our 2008 Proxy Statement is hereby incorporated by reference.

Item 12.          Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information responsive to this Item in our 2008 Proxy Statement is hereby incorporated by reference.

Information relating to our equity compensation plans as of December 31, 2007 appears above under Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in this Annual Report on Form 10-K.

Item 13.          Certain Relationships and Related Transactions, and Director Independence.

Information responsive to this Item in our 2008 Proxy Statement is hereby incorporated by reference.

Item 14.          Principal Accountant Fees and Services.

Information responsive to this Item in our 2008 Proxy Statement is hereby incorporated by reference.

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PART IV

Item 15.          Exhibits and Financial Statement Schedules.

(a)       Documents filed as part of this Form 10-K:

1.      Financial Statements

See Index to Financial Statements under Item 8—Financial Statements and Supplementary Data.

2.      Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts

All other financial statement schedules have been omitted because they are not required, not applicable, or the information to be included in the financial statement schedules is included in the financial statements or the notes thereto.

3.      Exhibits

See Exhibit Index.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Proxim Wireless Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROXIM WIRELESS CORPORATION
Date:  March 28, 2008	By:	/s/ Pankaj S. Manglik
		Pankaj S. Manglik,
		Chief Executive Officer

Each person whose signature appears below hereby constitutes and appoints each of Pankaj S. Manglik and Brian J. Sereda his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his own name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing as he could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Proxim Wireless Corporation and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Pankaj S. Manglik Pankaj S. Manglik	Chief Executive Officer, President, and Director (principal executive officer)	March 28, 2008
/s/ Brian J. Sereda Brian J. Sereda	Chief Financial Officer and Treasurer (principal financial and accounting officer)	March 28, 2008
/s/ Daniel A. Saginario Daniel A. Saginario	Director	March 28, 2008
/s/ John W. Gerdelman John W. Gerdelman	Director	March 28, 2008
/s/ J. Michael Gullard J. Michael Gullard	Director	March 28, 2008
/s/ Alan B. Howe Alan B. Howe	Director	March 28, 2008
/s/ Robert A. Wiedemer Robert A. Wiedemer	Director	March 28, 2008

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EXHIBIT INDEX

Exhibit Number	Description of Document
2.1	Asset Purchase Agreement by and between the Registrant and Proxim Corporation, Proxim Wireless Networks, Inc., and Proxim International Holdings, Inc. dated as of July 18, 2005 (1)
2.2	Agreement and Plan of Merger by and among the Registrant, T-Rex Acquisition Corporation, and Terabeam Corporation dated as of April 14, 2004 (2)
2.3	Agreement and Plan of Merger by and among the Registrant, KFire Merger Corporation, KarlNet, Inc., Douglas J. Karl, and Elise L. Karl dated as of May 13, 2004 (3)
3.1	Certificate of Incorporation of the Registrant as filed with the Delaware Secretary of State on May 5, 2003 (4)
3.2	Certificate of Merger of Telaxis Communications Corporation with and into YDI Wireless, Inc. as filed with the Delaware Secretary of State on July 7, 2003 (4)
3.3	Certificate of Ownership and Merger as filed with the Delaware Secretary of State on November 3, 2005 (5)
3.4	Certificate of Ownership and Merger as filed with the Delaware Secretary of State on September 4, 2007 (6)
3.5	By-laws of the Registrant (4)
3.6	Amendment 1 to By-laws of Registrant (7)
4.1	Form of certificate evidencing ownership of common stock of the Registrant
4.2	Rights Agreement by and between the Registrant and Registrar and Transfer Company, as Rights Agent dated as of May 18, 2001 (8)
4.3	Amendment No. 1 to Rights Agreement by and between the Registrant and Registrar and Transfer Company, as Rights Agent dated as of September 9, 2002 (9)
4.4	Amendment No. 2 to Rights Agreement by and between the Registrant and Registrar and Transfer Company, as Rights Agent dated as of March 17, 2003 (10)
4.5	Amendment No. 3 to Rights Agreement by and between the Registrant and Registrar and Transfer Company, as Rights Agent dated as of May 15, 2003 (4)
10.1*	1996 Stock Plan of the Registrant (11)
10.2*	Amendment No. 1 to 1996 Stock Plan of the Registrant (12)
10.3*	1997 Stock Plan of the Registrant (11)
10.4*	Amendment No. 1 to 1997 Stock Plan of the Registrant (12)
10.5*	1999 Stock Plan of the Registrant (11)
10.6*	Amendment No. 1 to 1999 Stock Plan of the Registrant (12)
10.7*	2001 Nonqualified Stock Plan of the Registrant (13)
10.8*	Amendment No. 1 to 2001 Nonqualified Stock Plan of the Registrant (12)
10.9*	Young Design, Inc. 2002 Stock Incentive Plan (14)
10.10*	2004 Stock Plan of the Registrant (12)
10.11*	Amendment No. 1 to 2004 Stock Plan of the Registrant (15)
10.12*	Amendment No. 2 to 2004 Stock Plan of the Registrant (16)

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Exhibit Number	Description of Document
10.13*	Form of Non-Qualified Stock Option Agreement to be issued to Directors of the Registrant upon Initial Election or Appointment to Board of Directors (17)
10.14*	Form of Non-Qualified Stock Option Agreement to be issued to Incumbent Directors of the Registrant on an Annual Basis (17)
10.15*	Form of Incentive Stock Option Agreement for Executive Officers (18)
10.16*	Form of Indemnification Agreement, a substantially similar version of which was entered between the Registrant and each of Messrs. Fitzgerald, Saginario, Wiedemer, and Renauld (19)
10.17*	Policy Statement Concerning the Compensation of Directors of the Registrant who are not Insiders, dated February 9, 2005 (17)
10.18*	Employment Agreement between the Registrant and Pankaj S. Manglik dated as of January 16, 2008 (20)
10.19*	Form of Incentive Stock Option Agreement between the Registrant and Pankaj S. Manglik dated as of May 19, 2006 (16)
10.20*	Non-Qualified Stock Option Agreement between the Registrant and Pankaj S. Manglik dated as of January 28, 2008 (21)
10.21*	Amended and Restated Employment Agreement between the Registrant and David L. Renauld dated as of October 25, 2007 (22)
10.22*	Letter Employment Agreement between the Registrant and Brian J. Sereda dated August 2, 2006 (18)
10.23*	Employment Agreement by and between Proxim Wireless Corporation and Geoff Smith dated December 8, 2005 (23)
10.24*	Employment Agreement between the Registrant and Robert E. Fitzgerald dated as of February 9, 2005 (17)
10.25*	Non-Qualified Stock Option Agreement between the Registrant and Robert E. Fitzgerald dated as of February 9, 2005 (17)
10.26*	Separation Agreement and Release between the Registrant and Robert E. Fitzgerald dated as of February 25, 2008 (24)
10.27*	Letter Employment Agreement between the Registrant and Len Eisenstein dated May 24, 2006 (25)
10.28*	Employment Agreement by and between the Registrant and David F. Olson dated July 27, 2005 (26)
10.29*	Amended and Restated Employment Agreement by and between Proxim Wireless Corporation and David F. Olson and consented to by the Registrant, dated December 8, 2005 (23)
10.30	Secured Promissory Note from KarlNet, Inc. in favor of the Registrant dated May 13, 2004 (3)
10.31	Security Agreement between KarlNet, Inc. and the Registrant dated as of May 13, 2004 (3)
10.32	Lease Agreement by and between Young Design, Inc. and Merry Fields, LLC dated as of August 24, 2000 (4)
10.33	Office Lease by and between Ricochet Networks, Inc. and 1400 Glenarm Place Venture dated as of February 1, 2005, with related Guaranty by the Registrant in favor of 1400 Glenarm Place Venture (27)

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Exhibit Number	Description of Document
10.34	Intellectual Property Agreement by and between Agere Systems, Inc. and Proxim Corporation dated August 5, 2002 (26)
10.35	Patent License Agreement by and between Agere Systems Guardian Corporation, Agere Systems, Inc. and Proxim Corporation dated August 5, 2002 (26)
10.36	Supply Agreement by and between Agere Systems, Inc. and Proxim Corporation dated August 5, 2002 (26)
10.37	Lease, dated as of May 10, 2005, by and between CarrAmerica Realty Operating Partnership, L.P. and Proxim Corporation (28)
10.38	First Amendment to Lease by and between the Registrant and CarrAmerica Realty Operating Partnership, L.P. dated as of October 31, 2005 (29)
10.39	Lease Agreement by and between the Registrant and Adom Realty Trust dated October 7, 2005 (30)
10.40	Settlement Agreement between the Registrant and Symbol Technologies, Inc. dated as of February 24, 2006 (31)
10.41	Assignment Agreement dated as of April 24, 2007 between the Registrant and SPH America, LLC (32)
10.42	Assignment Agreement dated as of April 24, 2007 among the Registrant and SPH America, LLC (32)
10.43	Purchase Agreement dated as of July 19, 2007 among the Registrant and each investor named therein (33)
10.44	Registration Rights Agreement dated as of July 23, 2007 among the Registrant and each investor named therein (33)
10.45	Form of warrant issued July 23, 2007 (33)
10.46	Purchase and Release Agreement dated as of November 1, 2007 among the Registrant and SRB Greenway Capital (Q.P.), L.P., SRB Greenway Capital, L.P., and SRB Greenway Offshore Operating Fund, L.P. and Steven R. Becker (34)
10.47	Purchase and Release Agreement dated as of November 2, 2007 among the Registrant and Clarion Capital Corporation, Clarion World Offshore Fund, Ltd., The Amended & Restated Declaration of Trust of Morton A. Cohen, Dated May 9, 2005, and Shaker Investments Tower, L.P. and Morton A. Cohen and Edward Hemmelgarn (34)
21.1	Subsidiaries of the Registrant
23.1	Consent of Fitzgerald, Snyder & Co., P.C.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
32.1	Certification Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)
99.1	Form of Noncompetition Agreement, a substantially similar version of which was entered between the Registrant and each of Douglas J. Karl and Elise L. Karl dated as of May 13, 2004 (3)
99.2	Stock Purchase Agreement by and between the Registrant and Ricochet Investments, LLC dated as of June 25, 2004 (35)
99.3	Non-Competition and Confidentiality Agreement by and among Victor Mitchell, Ricochet Networks, Inc., and the Registrant dated as of June 25, 2004 (35)
99.4	Guarantee from Victor Mitchell in favor of the Registrant dated as of June 25, 2004 (35)
99.5	Asset Purchase Agreement dated as of July 31, 2007 between Ricochet Networks, Inc. and Civitas Wireless Solutions, LLC and joined in by Judi A. Evans (36)

87

Exhibit Number	Description of Document
99.6	Intellectual Property Transfer and License Agreement dated as of July 31, 2007 between the Registrant and Civitas Wireless Solutions, LLC (36)
99.7	License Agreement dated as of July 31, 2007 between the Registrant and Civitas Wireless Solutions, LLC (36)

______________

All non-marked exhibits are filed herewith.

* Management contract or compensatory plan.

(1)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on July 22, 2005.
(2)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on April 16, 2004.
(3)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 20, 2004.
(4)	Incorporated herein by reference to the exhibits to Form 10-Q filed with the SEC on August 14, 2003.
(5)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on November 4, 2005.
(6)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 6, 2007.
(7)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 29, 2007.
(8)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 21, 2001.
(9)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 12, 2002.
(10)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on March 20, 2003.
(11)	Incorporated herein by reference to the exhibits to Form S-1 filed with the SEC on September 27, 1999 (File No. 333-87885).
(12)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 15, 2004.
(13)	Incorporated herein by reference to the exhibits to Form 10-Q filed with the SEC on August 10, 2001.
(14)	Incorporated herein by reference to the exhibits to Form S-8 filed with the SEC on April 11, 2003 (File No. 333-104481).
(15)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 27, 2005.
(16)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 25, 2006.
(17)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 15, 2005.
(18)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 4, 2006.
(19)	Incorporated herein by reference to the exhibits to Form 10-Q filed with the Commission on November 14, 2000.
(20)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on January 16, 2008.
(21)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 1, 2008.
(22)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on October 30, 2007.
(23)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on December 12, 2005.
(24)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 28, 2008.
(25)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on July 31, 2006.
(26)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 2, 2005.
(27)	Incorporated herein by reference to the exhibits to Form 10-K filed with the SEC on March 31, 2005.
(28)	Incorporated herein by reference to the exhibits to Form 10-Q filed with the SEC on August 15, 2005.
(29)	Incorporated herein by reference to the exhibits to Form 10-K filed with the SEC on March 30, 2006.
(30)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on October 26, 2005.
(31)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 28, 2006.
(32)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on April 30, 2007.
(33)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on July 24, 2007.
(34)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on November 6, 2007.
(35)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on July 8, 2004.
(36)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 6, 2007.

88

EX-4.1

	Exhibit 4.1
COMMON STOCK	COMMON STOCK

NUMBER	[LOGO]	SHARES
	PROXIM WIRELESS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE	PROXIM WIRELESS CORPORATION	CUSIP 744285 10 7 See reverse for certain definitions

THIS CERTIFIES THAT

is the record holder of

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF

PROXIM WIRELESS CORPORATION

transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of the Certificate properly endorsed.  This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Certificate of Incorporation and By-laws of the Corporation, as now or hereafter amended. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

DATED:
	PROXIM WIRELESS CORPORATION
/s/ David L. Renauld	CORPORATE SEAL	/s/ Pankaj S. Manglik
Secretary	2003	President
	DELAWARE

COUNTERSIGNED AND REGISTERED:

REGISTRAR AND TRANSFER COMPANY

BY                                           TRANSFER AGENT

                                               AND REGISTRAR

AUTHORIZED SIGNATURE

PROXIM WIRELESS CORPORATION

THIS CORPORATION IS AUTHORIZED TO ISSUE COMMON STOCK AND PREFERRED STOCK WHICH MAY HAVE DIFFERENT PREFERENCES, VOTING POWERS, AND OTHER RIGHTS AND ATTRIBUTES, ALL AS SET FORTH IN THIS CORPORATION'S CERTIFICATE OF INCORPORATION AS IN EFFECT FROM TIME TO TIME.  THIS CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES, AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM - as tenants in common	UNIF GIFT MIN ACT - _________Custodian________ (Cust)                        (Minor) under Uniform Gifts to Minors Act _______________ (State)
TEN ENT - as tenants by the entireties
JT TEN _ as joint tenants with right	UNIF TRF MIN ACT - _____Custodian (until age ___) (Cust) __________ under Uniform Transfers (Minor) to Minors Act _______________                    (State)

Additional abbreviations may also be used though not in the above list.

For value received, _______________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE

Shares of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

DATED: _______________________

X

NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed:

By:__________________________________

THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C RULE 17Ad-15.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

Name of Subsidiary	Jurisdiction of Incorporation
Terabeam International Holdings, Inc.	Delaware
Proxim International Operations, Inc.	Delaware
Proxim Professional Services, Inc.	Delaware
Proxim Europe B.V.	Netherlands
Proxim Hong Kong Limited	Hong Kong
Terabeam Proxim Wireless Private Limited	India
Terabeam Corporation	Washington
Ricochet Networks, Inc.	Delaware
KarlNet, Inc.	Delaware
Young Design, Inc.	Virginia

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-30450, 333-65568, 333-73318, 333-104481, 333-121445 and 333-134907) and in the Registration Statement on Form S-3 (No. 333-145533) of Proxim Wireless Corporation of our report dated March 27, 2008, relating to the consolidated financial statements and financial statement schedule of Proxim Wireless Corporation as of December 31, 2007 and 2006, which appears in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

/s/ Fitzgerald, Snyder & Co., P.C.

McLean, Virginia

March 27, 2008

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Pankaj S. Manglik, Chief Executive Officer of Proxim Wireless Corporation, certify that:

1.           I have reviewed this annual report on Form 10-K of Proxim Wireless Corporation;

2.           Based on my knowledge, this 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 report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b)           designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

(a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2008	/s/ Pankaj S. Manglik
	Pankaj S. Manglik
	Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Brian J. Sereda, Chief Financial Officer of Proxim Wireless Corporation, certify that:

1.           I have reviewed this annual report on Form 10-K of Proxim Wireless Corporation;

2.           Based on my knowledge, this 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 report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b)           designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

(a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2008	/s/ Brian J. Sereda
	Brian J. Sereda
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Proxim Wireless Corporation (the “Company”) for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned Pankaj S. Manglik, Chief Executive Officer, and Brian J. Sereda, Chief Financial Officer and Treasurer, of the Company certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(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/ Pankaj S. Manglik	/s/ Brian J. Sereda
Pankaj S. Manglik	Brian J. Sereda
Chief Executive Officer	Chief Financial Officer and Treasurer
Date:  March 28, 2008	Date:  March 28, 2008