form10q-91477_prxm.htm

10-Q 1 form10q-91477_prxm.htm FORM 10-Q form10q-91477_prxm.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

S	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008

£	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	04-2751645
(State or other jurisdiction of incorporation or organization)	(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)

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 S No £

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.

	Large accelerated filer £		Accelerated filer £

	Non-accelerated filer £ (Do not check if a smaller reporting company)		Smaller reporting company S

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

As of May 12, 2008, there were 23,519,069 shares of the registrant’s common stock outstanding.

PROXIM WIRLESS CORPORATION

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		PAGE NO.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007	4

	Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 (unaudited)	5

	Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2008 (unaudited)	6

	Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

Item 4T.	Controls and Procedures	23

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	26

Item 6.	Exhibits	31

SIGNATURE		31

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PART I – FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q 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-Q, including Part II, 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-Q or to reflect the occurrence of unanticipated or any other subsequent events.

Item 1. Financial Statements.

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PROXIM WIRELESS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	March 31,			December 31,
	2008			2007
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	7,838		$	6,329
Accounts receivable, net		8,077			10,010
Inventory		7,817			7,154
Prepaid expenses		1,020			1,029

Total current assets		24,752			24,522

Property and equipment, net		2,418			2,542
Other Assets:
Restricted cash		76			76
Intangible assets, net		8,487			9,015
Deposits and prepaid expenses		255			255

Total other assets		8,818			9,346

Total assets	$	35,988		$	36,410

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	12,161		$	12,984
Line of credit payable		3,000			-
Deferred revenue		6,562			4,001
License agreement payable - current maturities		1,128			1,065

Total current liabilities		22,851			18,050

License agreement payable, net of current maturities		752			1,023

Total liabilities		23,603			19,073

Commitments and contingencies

Stockholders’ Equity
Preferred stock, $0.01 par value; authorized 4,500,000, none issued at March 31, 2008 and December 31, 2007		-
Common stock, $0.01 par value, 100,000,000 shares authorized, 23,519,069 issued and outstanding at March 31, 2008, and December 31, 2007		235			235
Additional paid-in capital		63,771			63,451
Retained earnings (accumulated deficit)		(51,621	)		(46,349	)
Accumulated other comprehensive income:		-			-

Total stockholders’ equity		12,385			17,337

Total liabilities and stockholders’ equity	$	35,988		$	36,410

See accompanying notes

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PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Revenues	$	11,247		$	16,674

Cost of goods sold		6,152			9,040

Gross profit		5,095			7,634

Operating expenses:
Selling costs		5,027			4,654
General and administrative		3,411			3,008
Research and development		1,641			2,730

Total operating expenses		10,079			10,392

Operating loss		(4,984	)		(2,758	)

Other income (expenses):
Interest income		13			44
Interest expense		(39	)		(35	)
Other income (loss)		(139	)		24
Gain (loss) on sale of assets		-			23

Total other income (expenses)		(165	)		56

Loss before income taxes		(5,149	)		(2,702	)
Benefit (provision) for income taxes		72			24

Loss from continuing operations	$	(5,221	)	$	(2,726	)

Loss from discontinued operations	$	(51	)	$	(260	)

Net Income (loss)	$	(5,272	)	$	(2,986	)

Weighted average number of shares - basic and diluted used in computing net earnings (loss) per share		23,519			21,553

Basic net earnings (loss) per share:

Continuing operations	$	(0.22	)	$	(0.13	)

Discontinued operations	$	(0.00	)	$	(0.01	)

Total	$	(0.22	)	$	(0.14	)

See accompanying notes

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PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2008

(In thousands, except share data)

(Unaudited)

										Accumulated
					Additional		Retained			Other
	Common Stock				Paid-in		Earnings			Comprehensive
	Shares		Amount		Capital		(Deficit)			Income (Loss)		Total
Balances, January 1, 2008		23,519,069	$	235	$	63,451	$	(46,349	)	$	-	$	17,337
Exercise of stock options and warrants		-		-		-		-			-		-
Employee stock option amortization		-		-		320		-			-		320
Common stock and warrants issued		-		-		-		-			-		-
Comprehensive income:		-		-		-		-			-		-
Net income (loss)		-		-		-		(5,272	)		-		(5,272	)
Unrealized gain (loss) on investments		-		-		-		-			-		-
Total comprehensive income (loss)		-		-		-		(5,272	)		-		(5,272	)
Balances, March 31, 2008		23,519,069	$	235	$	63,771	$	(51,621	)	$	-	$	12,385

See accompanying notes

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PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Cash flows from operating activities:
Net Income (loss)	$	(5,272	)	$	(2,986	)
Less: Loss from discontinued operations		(51	)		(260	)
Loss from continuing operations		(5,221	)		(2,726	)
Depreciation and amortization		810			976
(Gain) loss on disposal of equipment and long-term assets		151			-
Bad debt allowance (recovery)		179			(14	)
Inventory allowance		1,983			(926	)
Employee stock option amortization		321			477
Changes in assets and liabilities affecting operations:
Accounts receivable, net		1,754			(994	)
Inventory		(2,646	)		1,530
Deposits		-			1
Prepaid expenses and other assets		9			(293	)
Accounts payable and accrued expenses		(793	)		18
Deferred revenue		2,561			569

Net cash provided by (used in) continuing operating activities		(892	)		(1,382	)

Net cash provided by (used in) discontinued operating activities		(63	)		(438	)

Net cash provided by (used in) operating activities		(955	)		(1,820	)

Cash flows from investing activities:
Purchase of property and equipment		(102	)		(107	)
Investment in capitalized software		(226	)		(271	)

Net cash provided by (used in) continuing investing activities		(328	)		(378	)

Net cash provided by (used in) discontinued investing activities		-			32

Net cash provided by (used in) investing activities		(328	)		(346	)

Cash flows from financing activities:
Exercise of stock options and warrants		-			1

Proceeds from bank financing		3,000			-

Repayment of license agreement payable		(208	)		(213	)

Net cash provided by (used in) continuing financing activities		2,792			(212	)

Net cash provided by(used in) discontinued financing activities		-			-

Net cash provided by (used in) financing activities		2,792			(212	)

Net increase (decrease) in cash and cash equivalents		1,509			(2,378	)

Cash and cash equivalents, beginning of period		6,329			10,290

Cash and cash equivalents, end of period	$	7,838		$	7,912

Supplemental disclosure of cash flow information:

Cash paid for interest	$	26		$	37

Income taxes paid	$	74		$	24

See accompanying notes

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PROXIM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation

The consolidated financial statements of Proxim Wireless Corporation (the “Company” or “Proxim Wireless”) for the three month period ended March 31, 2008 and 2007 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the financial position and results of operations for the periods then ended. All such adjustments are of a normal recurring nature except for the reporting of discontinued operations related to Ricochet Networks, Inc. (see Note 11). These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

The Company provides high-speed wireless communications equipment in the United States and internationally. Its systems enable service providers, enterprises, and governmental organizations to deliver high-speed data 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 changed its corporate name to “Proxim Wireless Corporation” from “Terabeam, Inc.” effective September 10, 2007. Effective that same date, the Company’s stock ticker symbol was changed to “PRXM” from “TRBM.”

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 all of the Company’s revenues and expenses during the first three months of 2008.

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. There are no significant inter-company transactions which affect the revenue or expenses of either segment. 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. The Company now operates only one business segment, broadband wireless equipment.

The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

2.	Stock Based Compensation

Prior to 2006, the Company accounted for its stock-based compensation under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations (“APB 25”). Under APB 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 market value of the underlying common stock on the date of grant.

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

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compensation cost at fair value for all share-based payments, including stock options. Stock-based compensation for 2007 and 2008 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). Stock-based compensation for the three-month periods ended March 31, 2008 and March 31, 2007 totaled approximately $320,000 and $480,000, respectively

For the quarter ended March 31, 2008, the operating loss from continuing operations was $320,000 higher, and the basic and diluted loss per share were $0.01 higher, 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.

The fair value of each option grant has been estimated as of the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions for 2008 and 2007: risk-free interest rate of 4.26% - 5.02% and 4.50% - 4.81%, expected life of four years for both years, volatility, calculated using historical volatility, of 157% - 284% and 235% - 240% and dividend rate of zero percent, respectively. Using these assumptions, the weighted average fair value of the stock options granted in the quarter ended March 31, 2008 was $0.82, and the weighted average fair value of the stock options granted in the same time period in 2007 was $2.09. The fair value of the stock options granted will be amortized as compensation expense over the vesting period of the options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company under SFAS 123R.

No tax effects are recognized currently for the granting of share-based compensation arrangements as the Company currently cannot estimate the realizability of related tax benefits as the Company is in a net operating tax loss position with tax NOL as described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC.

3.	Comprehensive Loss

The Company reports comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income.” During the three months ended March 31, 2008 and 2007, the Company had comprehensive losses from continuing operations of $5.2 million and $2.7 million, respectively, including approximately $ 0 and $34,000, respectively, of unrealized (losses) gains on available-for-sale investments, net of income taxes of $0 for each period.

Inventory

Inventory consisted of the following at the indicated dates (in thousands):

	March 31,			December 31,
	2008			2007
	(unaudited)
Raw materials	$	3,846		$	6,748
Work in process		648			374
Finished goods		8,839			7,531
		13,333			14,653
Allowance for excess and obsolescence		(5,516	)		(7,499	)
Net Inventory	$	7,817		$	7,154

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5.	Intangibles

Schedule of Non-Amortizable Assets

	March 31,		December 31,
	2008		2007
	(in thousands)
Trade names – indefinite useful life	$	780	$	780
	$	780	$	780

Schedule of Amortizable Assets

	March 31,			December 31,
	2008			2007
	(in thousands)
Patents, customer relationships and other technologies with identifiable useful lives	$	11,308		$	11,308
Less: accumulated amortization		(3,601	)		(3,073	)
Amortizable intangible assets, net	$	7,707		$	8,235

Amortization is computed using the straight-line method over the estimated useful life, based on the Company’s assessment of technological obsolescence of the respective assets. Amortization expense for the three months ended March 31, 2008 totaled approximately $0.5 million. The weighted average estimated useful life is 4.5 years. There is no estimated residual value.

6.	Property and Equipment

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

	December 31,
	March 31,			December 31,
	2008			2007
Building and improvements	$	484		$	580
Capitalized Software		1,246			1,663
Equipment		4,667			3,997
		6,397			6,240
Less: accumulated depreciation		(3,979	)		(3,698	)
Property and equipment, net	$	2,418		$	2,542

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7.	Earnings per share

	Three Months Ended March 31,
	2008			2007
	(in thousands, except per share data) (unaudited)

Numerator

Income (loss) from continuing operations	$	(5,221	)	$	(2,726	)

Income (loss) from discontinued operations		(51	)		(260	)

Net Income (loss)	$	(5,272	)	$	(2,986	)

Denominator- weighted average shares:

Denominator for basic earnings per share for continuing and discontinued operations		23,519			21,553

Denominator for diluted earnings per share		23,519			21,553

Basic & diluted earnings (loss) per share from continuing operations	$	(0.22	)	$	(0.13	)

Basic & diluted earnings (loss) per share from discontinued operations	$	(0.00	)	$	(0.01	)

Basic & diluted earnings (loss) per share	$	(0.22	)	$	(0.14	)

At March 31, 2008 and 2007, stock options and warrants to purchase shares of common stock were outstanding but not included in the computation of diluted earnings for the three month periods ended March 31, 2008 and 2007 because there was a net loss for each of the applicable periods, and the effect would have been anti-dilutive.

8.	Concentrations

During the three months ended March 31, 2008, there were two customers who accounted for approximately 21% of consolidated sales, and in the corresponding three months of 2007 these same customers accounted for 29% of consolidated sales.

The Company maintains the majority of its cash, cash equivalent, and restricted cash balances at two major US banks. The balances are insured by the Federal Deposit Insurance Corporation up to $100,000 per bank. At March 31, 2008 and 2007, the uninsured portion totaled approximately $7.8 million and $7.5 million, respectively.

9.	Patent License Agreement – License Agreement Payable

In February 2006, the Company 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 amortization expense recorded for the three months ended March 31, 2008 totaled approximately $105,000. The Company also recorded a license payable equal to the present value of the scheduled payments. License agreements payable consisted (in thousands):

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	March 31, 2008		December 31, 2007
Current portion of payable	$	1,128	$	1,065
Long term portion of payable		752		1,023
Total License Agreement Payable	$	1,880	$	2,088

Payouts of License Agreements are as follows as of March 31, 2008, for the twelve months ended (in thousands):

2008		$	1,128
2009		$	752

10.	Allowance for Product Warranty Costs

Warranty costs for the three months ended March 31, 2008 were below the comparable quarter ended March 31, 2007. This reduction was due to an increase in the number of parts having exhausted their warranty coverage without offsetting new reserve requirements.

	March 31, 2008			December 31, 2007
Balance at January 1, 2008 and October 1, 2007	$	697		$	599
Settlements		118			116
Other Provision Adjustments		(190	)		(18	)
Balance at March 31, 2008 and December 31, 2007	$	625		$	697

11.	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, was recorded during the third quarter of 2007, and amounted to a loss of $51,000 for the quarter ended March 31, 2008. 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 is being presented as a separate line item in the consolidated statement of operations for discontinued operations.

(in thousands)	Three Months Ended March 31, 2008
Revenue from discontinued operations	$	-
Net loss from discontinued operations	$	(51	)

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12.	Security Agreement –Line of Credit

On March, 28, 2008, the Company entered into a loan and security agreement (the “Loan Agreement”) with a major multinational bank. The Loan Agreement provides for a $7.5 million revolving line of credit and includes sublimits for letters of credit, credit card services, and foreign exchange contracts. However, the aggregate outstanding amount may not exceed Proxim’s borrowing base as established under the Loan Agreement. Proxim’s borrowing base generally is an amount equal to 80% of Proxim’s eligible accounts receivable subject to adjustment by the bank (the current percentage being 70%). As of March 31, 2008, Proxim had an outstanding loan balance of $3 million under this loan agreement. As a continuing financial covenant, the Company must maintain a ratio of cash plus eligible accounts receivable to current liabilities less deferred revenue of at least 1.05 to 1.00. At the end of the first quarter of 2008, the Company was not in compliance with that financial covenant and has sought and obtained a waiver of that non-compliance from the bank. The Loan Agreement may be amended to revise that financial covenant and possibly add other financial and other covenants. Any failure to negotiate acceptable amended covenants could jeopardize our ability to satisfy our capital requirements and therefore our ability to continue as a going concern. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. No adjustments have been made as if the Company were unable to continue as a going concern.

13.	Recent Accounting Pronouncements

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. The provisions of SFAS 157 did not have a material impact on our consolidated financial statements.

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. The provisions of SFAS 159 did not have a material impact on our consolidated financial statements.

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 non-controlling 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 non-controlling 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 non-controlling 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 non-controlling owners.

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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.

14.	Commitments 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

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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 August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The issuer defendants and the underwriter defendants separately moved to dismiss the claims against them in the amended complaints in the six focus cases. On March 26, 2008, the District Court issued an order in which it denied in substantial part the motions to dismiss the amended complaints in the six focus cases. In addition, 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.

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, Inc. 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 extremely 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 March 31, 2008, 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

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claims and legal actions with certainty, we currently believe that such matters should not result in any liability which would have a material adverse affect on our business.

15.	Subsequent Events

We received notification prior to the end of the quarter that one of our customers in Latin America intended to return equipment previously recognized in revenue in the prior year. As a result we reversed approximately $0.5 million in revenue, and $0.1 million in cost associated with this return. The physical return occurred during April, 2008 and was related to the customer’s inability to pay their outstanding balance. We successfully negotiated for return of their surplus inventory in exchange for forgiveness of their trade receivable outstanding.

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

Overview

We provide high-speed wireless communications equipment in the United States and internationally. Our systems enable service providers, enterprises, and municipal and other governmental organizations to deliver high-speed data connectivity enabling a broad range of voice and data 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.”

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

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us 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 amounts of revenues and expenses during the reporting periods. We are required to make judgments and estimates about the effect of matters that are inherently uncertain. Actual results could differ from our estimates. The most significant areas involving our judgments and estimates are described below.

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 collection 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:

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

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

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

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

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

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 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 No. 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 No. 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, and 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.

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

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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 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.

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 in our Annual Report on Form 10-K filed with the SEC on March 28, 2008.

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As of January 1, 2006 we account for stock-based compensation in accordance with the fair value recognition provisions of SFAS 123R. Under SFAS 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 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”.

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.

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.

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Results of Operations

For the three months ended March 31, 2008 and 2007

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

	Three Months Ended March 31,
	2008		2007
Sales		100%		100%

Cost of goods sold		55		54

Gross profit		45		46

Operating expenses
Selling costs		45		28
General and administrative		30		18
Research and development		15		16

Total operating expenses		90		62

Operating (loss) income		(45)		(16)
Other income (expenses)		(2)		-
Income taxes		1		-

Loss from continuing operations		(46)%		(16)%

Loss from discontinued operations		(1)%		(2)%

Net loss		(47)%		(18)%

Sales

Sales for continuing operations for the three months ended March 31, 2008 were $11.2 million as compared to $16.7 million for the same period in 2007 for a decrease of $5.5 million or 33%. Revenues from our broadband wireless access business continue to grow as a percentage of revenue when compared to the comparable quarter in 2007.

For the quarters ending March 31, 2008 and 2007, international sales, excluding Canada, approximated 59% and 50%, respectively, of total sales.

Cost of goods sold and gross profit

Cost of goods sold and gross profit for the three months ended March 31, 2008 were $6.2 million and $5.1 million, respectively. For the same period in 2007, costs of goods sold and gross profit were $9.0 million and $7.6 million, respectively. Gross profit margin, as a percentage of sales, for the three months ended March 31, 2008 and 2007 was 45% and 46%, respectively. The slight decrease in gross margin percentage was primarily due to the product mix in the current quarter compared to the first quarter of the prior year.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of employee salaries and associated costs for selling, marketing, customer and technical support as well as field support. Sales and marketing expenses for the three months ended March 31, 2008 were $5.0 million, an increase of $0.4 million over $4.6 million for the same period in 2007. In order to drive various sales initiatives in our multi-tier distribution model, we have increased our selling and marketing expenses by adding additional headcount in the areas of sales management, and technical sales personnel, and related marketing expenses due to increased trade show presence. A key focus of the additional sales and marketing efforts has been to expand our presence in the municipal security and surveillance, mobile communications, last mile access, voice and backhaul market applications. We continue to monitor the effectiveness of our selling and marketing expenses as a percentage of our overall operating expense.

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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, amortization of intangible assets, and administration, insurance, and auditing of a public company. General and administrative expenses of continuing operations were $3.4 million for the quarter ended March 31, 2008, and $3.0 million for the same period in 2007. The increase of $0.4 million or 13% was primarily due to additional compensation and benefit costs associated with the departure of Proxim’s former CEO in February 2008. In addition, there were additional fees related to public company compliance costs.

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 software and components, test equipment and related facilities. Research and development expenses decreased to $1.6 million for the three months ended March 31, 2008 from $2.7 million for the three months ended March 31, 2007, an approximate decrease of $1.1 million or 41%. The decrease in research and development expenses was primarily due to a reduction in headcount and related costs at our San Jose, California location as significant R&D activities were transitioned from California to Hyderabad, India beginning in the second half of fiscal 2007.

Discontinued Operations

During the third quarter 2007, Ricochet Networks, Inc. sold the Ricochet® network operations for the Denver, Colorado metropolitan market to Civitas Wireless Solutions, LLC and ceased operations of the San Diego network. The net loss from discontinued operations in the first quarter of fiscal 2008 was $0.1 million. This compares to a net loss generated by discontinued operations of $0.3 million in the comparable quarter of 2007. The decrease was due to the fact that the operations of that business were ended in the second half of 2007.

Liquidity and Capital Resources

At March 31, 2008, we had cash, cash equivalents, and investments available-for-sale of $7.8 million. This excludes restricted cash of $0.1 million. For the three months ended March 31, 2008, cash used by operations was approximately $1.0 million. We currently are meeting our working capital needs through cash on hand as well as internally generated cash from operations and other activities and our bank line of credit.

For the three months ended March 31, 2008, cash provided by financing activities was approximately $3.0 million due to a credit line with a multi national bank secured by certain portions of our accounts receivable balance at March 31, 2008.

We believe that cash flow from operations, along with our cash on hand, should be sufficient to meet the operating cash requirements over the next twelve month period as currently contemplated. Our long-term financing requirements depend upon our growth strategy, which relates primarily to our desire to increase revenue both domestically as well as internationally. However, although the acquisition of Old Proxim’s operations in 2005 significantly increased both our domestic and international revenue, we incurred operating losses totaling $5.0 million in the first three months of 2008, a increase of $2.2 million over the same period of 2007. During the second quarter of 2008, we must continue our efforts to increase revenues and adjust operating expenses to levels that will produce positive cash flows and return us to operating profitability.

Due to the fluctuations in quarterly revenue we have experienced since the Old Proxim acquisition in 2005, management is closely following 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. One significant constraint to our equipment business growth is the rate of new product introduction. New products or product lines may be designed and developed internally or acquired from existing suppliers to reduce the time to market and inherent risks of new product development. Our current resources may have to be supplemented through additional bank debt financing, public debt or equity offerings, product line or asset sales, or other means due to a number of factors, including our ability to replace revenues lost through the discontinuation of our services business

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and our desired rate of future growth. See Item 1A – Risk Factors below and the more detailed discussion of risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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 below in Item 1A – Risk Factors.

As of March 31, 2008, we had cash and cash equivalents of $7.8 million. The majority of total cash and cash equivalents were on deposit in short-term accounts with two major US banking 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 March 31, 2008, the uninsured portion totaled approximately $7.8 million. Although an immediate increase in interest rates would not have a material effect on our financial condition or results of operations, declines in interest rates over time would reduce our interest income.

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. However, we may make sales denominated in foreign currencies in the future. 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. Our selling costs internationally are based in local currency primarily where our sales and technical personnel reside. Our selling expenses have been adversely impacted by the devaluation of the US dollar relative to other major international currencies.

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

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

Item 4T. 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 quarterly report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2008.

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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, in connection with the preparation of our annual report on Form 10-K, assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 and concluded that it is effective.

This quarterly report does not, and our annual report on Form 10-K that we filed with the Securities and Exchange Commission on March 28, 2008 did not, include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in that annual report.

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.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

IPO Litigation

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Linex Technologies Litigation

General

Item 1A. Risk Factors.

General Overview

This Quarterly Report on Form 10-Q contains forward-looking statements as defined by federal securities laws that 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 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

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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-Q, 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-Q 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 of General Applicability

In addition to other factors and matters discussed elsewhere in this Form 10-Q, 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 downturn and continuing uncertainty in the telecommunications industry and global economy; the intense competition in the broadband wireless equipment industry and resulting pressures on our pricing, gross margins, and general financial performance; difficulties in differentiating our products from competing broadband wireless products and other competing technologies; the impact, availability, pricing, and success of competing technologies and products; possible delays in our customers making buying decisions due to the actual or potential availability of new broadband connectivity technologies; difficulties in developing products that will address a sufficiently broad market to be commercially viable; our developing products for portions of the broadband connectivity and access markets that do not grow; our inability to keep pace with rapid technological changes and industry standards; expected declining prices for our products over time; our inability to offset expected price declines with cost savings or new product introductions; our inability to recover capital and other investments made in developing and introducing new products; lack of or delay in market acceptance and demand for our current and contemplated products; difficulties or delays in developing, manufacturing, and supplying products with the contemplated or desired features, performance, price, cost, and other characteristics; difficulties in estimating costs of developing and supplying products; difficulties in developing, manufacturing, and supplying products in a timely and cost-effective manner; difficulties or delays in developing improved products when expected or desired and with the additional features contemplated or desired; decisions we may make to delay or discontinue efforts to develop and introduce certain new products; negative reactions to any such decisions; costs and accounting impacts from any such decisions; our fluctuating financial results, which may be caused at times by receipt of large orders from customers; our limited ability to predict our future financial performance; our possible desire to make limited or no public predictions as to our expected future financial performance; the expected fluctuation in customer demand and commitments; difficulties in predicting our future financial performance, in part due to our past and possible future acquisition activity; our inability to achieve the contemplated benefits of our July 2005 acquisition of Proxim Corporation’s operations and any other acquisitions we may contemplate or consummate; management distraction due to those acquisitions; the ability of the companies to integrate in a cost-effective, timely manner without material liabilities or loss of desired employees or customers; the risk that the expected synergies and other benefits of the transactions will not be realized at all or to the extent expected; the risk that cost savings from the transactions may not be fully realized or may take longer to realize than expected; reactions, either positive or negative, of investors, competitors, customers, suppliers, employees, and others to the transactions; the risk that those transactions will, or could, expose us to lawsuits or other liabilities; obligations arising from contractual obligations of Proxim Corporation that we assumed; litigation risks, obligations, and expenses arising from contractual obligations of Proxim Corporation that we assumed; management and other

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employee distraction due to any litigation arising from contractual obligations of Proxim Corporation that we assumed; adverse impacts of purchase accounting treatment and amortization and impairment of intangible assets acquired in any acquisitions; our general lack of receiving long-term purchase commitments from our customers; cancellation of orders without penalties; the ability of our customers to return to us some or all of the products they had previously purchased from us with the resulting adverse financial consequences; costs, administrative burdens, risks, and obligations arising from terms and conditions that we find onerous but that are imposed upon us by certain customers as a condition of buying products from us; our not selling products to certain customers due to our refusal to accept their terms and conditions of sale that we find onerous; difficulties or delays in obtaining raw materials, subassemblies, or other components for our products at the times, in the quantities, and at the prices we desire or expect, particularly those that are sole source or available from a limited number of suppliers; inability to achieve and maintain profitability; purchases of excess inventory that ultimately may not be used; difficulties or delays in developing alternative sources for limited or sole source components; our having to reconfigure our products due to our inability to receive sufficient quantities of limited or sole source components; adverse impact of stock option and other accounting rules; our reliance on third party distributors and resellers in our indirect sales model; our dependence on a limited number of significant distributors; our inability to obtain larger customers; dependence on continued demand for broadband connectivity and access; difficulties in attracting and retaining qualified personnel; our dependence on key personnel; competition from companies that hire some of our former personnel; lack of key man life insurance on our executives or other employees; lack of a succession plan; inability of our limited internal manufacturing capacity to meet customers’ desires for our products; our substantial reliance on contract manufacturers to obtain raw materials and components for our products and to manufacture, test, and deliver our products; interruptions in our manufacturing operations or the operations of our contract manufacturers or other suppliers; interruptions or delays in obtaining products in sufficient quantities and with acceptable quality from our contract manufacturers due to changes in the country, the factory, or the assembly line where our products are manufactured or other factors; additional costs resulting from changes in the country, the factory, or the assembly line where our contract manufacturers manufacture our products or other factors; customer dissatisfaction resulting from increased costs or delays in our products due to changes in the country, the factory, or the assembly line where our contract manufacturers manufacture our products or other factors; possible adverse impacts on us of the directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (the RoHS directive), including, without limitation, adverse impacts on our ability to supply our products in the quantities desired and adverse impacts on our costs of supplying products; possible adverse impacts on us of the waste electrical and electronic equipment directive (the WEEE directive), including, without limitation, adverse impacts on our ability to supply our products in the quantities desired and adverse impacts on our costs of supplying products; our failing to maintain adequate levels of inventory; costs and accounting impacts associated with purchasing inventory that is later determined to be excess or obsolete; our failure to effectively manage our growth; difficulties in reducing our operating expenses; adverse impacts of the war in Iraq and the war on terrorism generally; the potential for intellectual property infringement, warranty, product liability, and other claims; risks, obligations, and expenses arising from litigating or settling any such intellectual property infringement, warranty, product liability, and other claims; management and other employee distraction due to any such intellectual property infringement, warranty, product liability, and other claims; risks associated with foreign sales such as collection, currency, and political risk; limited ability to enforce our rights against customers in foreign countries; lack of relationships in foreign countries which may limit our ability to expand our international sales and operations; difficulties in complying with existing governmental regulations and developments or changes in governmental regulation; difficulties or delays in obtaining any necessary Federal Communications Commission and other governmental or regulatory certifications, permits, waivers, or approvals; possible adverse consequences resulting from marketing, selling, or supplying products without any necessary Federal Communications Commission or other governmental or regulatory certifications, permits, waivers, or approvals; changes in governmental regulations which could adversely impact our competitive position; our maintaining tight credit limits which could adversely impact our sales; difficulties in our customers or ultimate end users of our products obtaining sufficient funding; difficulties in collecting our accounts receivable; failure or inability to protect our proprietary technology and other intellectual property; possible decreased ability to protect our proprietary technology and other intellectual property in foreign jurisdictions; ability of third parties to develop similar and perhaps superior technology without violating our intellectual property rights; the costs and distraction of engaging in litigation to protect our intellectual property rights, even if we are ultimately successful; adverse impacts resulting from our settlement of litigation initiated by Symbol Technologies, Inc.; time, costs, political considerations, typical multitude of constituencies, and other factors involved in evaluating, equipping, installing, and operating municipal networks; costs of complying with governmental regulations such as Section 404 and other provisions of the Sarbanes-Oxley Act; the expense of

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defending and settling and the outcome of pending and any future stockholder litigation; the expense of defending and settling and the outcome of pending and any future litigation against us; the expected volatility and possible stagnation or decline in our stock price, particularly due to the relatively low number of shares that trade on a daily basis and public filings regarding sales of our stock by one or more of our significant stockholders; future stock sales by our current stockholders, including our current and former directors and management; future actual or potential sales of our stock that we issue upon exercise of stock options or stock warrants; possible dilution of our existing stockholders if we issue stock to acquire other companies or product lines or to raise additional capital; possible better terms of any equity securities we may issue in the future than the terms of our common stock; our reliance on the line of credit we recently established; the possibility that we may be required to repay amounts drawn under that line of credit earlier than we have anticipated; investment risk resulting in the decrease in value of our investments; and risks, impacts, and effects associated with any acquisitions, investments, or other strategic transactions we may evaluate or in which we may be involved. Many of these and other risks and uncertainties are described in more detail in our annual report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

Specific Cautionary Statements Relating to Revenues

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. We may not be able to increase revenues in the future. Our continued inability to increase our revenues could have a material adverse affect on our ability to continue as a going concern.

Specific Cautionary Statements Relating to Capital Resources

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 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. We may raise additional capital on terms that we or our stockholders find onerous. Any equity, debt, or convertible securities that we may issue in the future may have better terms than the terms of our common stock. We may sell or otherwise dispose of portions of our business and assets for strategic reasons or to raise capital. Investors, customers, employees and others may react negatively to any business or asset dispositions we may effect. These factors could seriously damage our business, operating results, financial condition, viability as an ongoing company, and cause our stock price to decline.

Specific Cautionary Statements relating to Bank Line of Credit

At the end of the first quarter of 2008, the Company was not in compliance with the financial covenant contained in the loan agreement the Company recently executed with a bank. The Company sought and obtained a waiver of that non-compliance from the bank. Failure to satisfy that covenant in the future could have a material adverse effect on the ability of the Company to continue as a going concern if the bank decided to require the Company to repay the $3.0 million outstanding under that loan agreement, particularly given the limited cash on hand at the Company. The Company and the bank are also discussing amending the loan agreement to change the existing financial covenant and possibly to add other financial and other covenants. Those additional covenants could create restrictions on our ability to conduct operations in our normal course. Failure to reach agreement on revised terms of the loan agreement could result in the bank requiring the repayment of the $3.0 million outstanding under that loan agreement if the Company fails to comply with the existing terms, which could have a material adverse effect on the ability of the Company to continue as a going concern, particularly given the limited cash on hand at the Company.

Specific Cautionary Statements Relating to Nasdaq Delisting Possibility

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

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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.

Specific Cautionary Statements relating to Intellectual Property Litigation

Specific Cautionary Statements relating to Ricochet Actions

In August 2007, Ricochet Networks, Inc., a subsidiary of Proxim Wireless Corporation, announced that it had discontinued operation of the Ricochet® network in the San Diego metropolitan area and sold the operations of the Ricochet network in the Denver metropolitan area. There can be no assurance whatsoever that we will realize the expected benefits of these actions at all or to the extent anticipated. Other risks associated with these actions include the risk that cost savings from these actions may not be fully realized or may take longer to realize than expected; the possibilities that these actions could result in increased liabilities and other adverse consequences; reactions, positive or negative, of customers, investors, employees, contract counterparties, competitors, and others to these actions; the uncertain impact of these actions on the trading market, volume, and price of Proxim Wireless Corporation’s stock; the time and costs of discontinuing the operations of the Ricochet network in the San Diego metropolitan area; exposure to costs and liabilities relating to the Ricochet network in the Denver metropolitan area; legal, financial statement, and accounting ramifications resulting from these actions; and management and board interest in and distraction due to these actions. These risks relating to the Denver Ricochet network may have increased due to the fact that the buyer of the Ricochet network in the Denver metropolitan area has recently discontinued operations.

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, sales, 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.

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Item 6. Exhibits.

See Exhibit Index.

SIGNATURE

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

	Proxim Wireless Corporation

Date: May 15, 2008	By:	/s/ Brian J. Sereda
		Brian J. Sereda,
		Chief Financial Officer
		(principal financial and accounting officer)

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EXHIBIT INDEX

Exhibit Number		Description
10.1		Employment Agreement between the Registrant and Pankaj S. Manglik dated as of January 16, 2008 (1)

10.2		Non-Qualified Stock Option Agreement between the Registrant and Pankaj S. Manglik dated as of January 28, 2008 (2)

10.3		Separation Agreement and Release between the Registrant and Robert E. Fitzgerald dated as of February 25, 2008 (3)

10.4		Loan and Security Agreement between Comerica Bank and the Registrant dated as of March 28, 2008 (4)

10.5		Lease dated April 15, 2008 by and between OA Oakcreek, LLC and the Registrant together with First Addendum to Lease also dated April 15, 2008 (5)

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).

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All non-marked exhibits are filed herewith.

(1)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on January 16, 2008.
(2)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 1, 2008.
(3)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 28, 2008.
(4)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on April 3, 2008.
(5)	Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 1, 2008.